Powergen redirects the mail to Business Post

Powergen, the country's second biggest energy supplier with six million domestic gas and electricity customers, has deserted Royal Mail and switched to Business Post, one of its privately owned rivals.

Powergen, the country's second biggest energy supplier with six million domestic gas and electricity customers, has deserted Royal Mail and switched to Business Post, one of its privately owned rivals.

Business Post said yesterday that its new UK Mail division expected to handle about 30 million to 35 million items for Powergen this year, mainly bills and advertising literature.

The giant utility is one of two large business customers it has signed up since it began operating in May. The other is understood to be Singlepoint, the mobile phone network which Vodfaone bought last year from John Cauldwell, the Phones4U entrepreneur. Paul Carvell, UK Mail's chief executive, said it was handling about 150,000 items a night and had carried 3.5 million letters since it launched services nine weeks ago. Volumes are expected to increase to 450,000 by the end of August as new customers come on stream. UK Mail is targeting telecoms and utilities firms, government agencies and direct mail companies.

UK Mail collects bulk mail from its customers, sorts the letters and then delivers them to one of Royal Mail's 71 inward mail centres.

It plans to take the process one stage further, sorting collected mail into local post codes and then depositing it at one of Royal Mail's 1,400 local delivery offices.

Mr Carvell said he expected UK Mail to generate £13m-£15m of revenues this year from a standing start two months ago. The business is budgeted to make a loss on operations of around £500,000. By the end of its third year of operation, Business Post expects UK Mail to be turning over £150m a year, giving it some 3 per cent of the domestic postal market.

In a trading update yesterday, Business Post said volumes and yields in the first quarter were ahead of the same period last year and further "good progress" was expected for the remainder of the year.

Business Post shares climbed 7.5p to 539p.