Ovo Energy plots takeover of Shell arm in bid to reclaim number two spot

Published

1 year ago

March 29, 2023

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Ovo Energy is plotting a takeover of Shell’s UK domestic gas and electricity business in a move that would see it reclaim the number two slot in the British market.

Sky News has learnt that Ovo is expected to table an indicative offer for Shell Energy Retail Limited’s (SERL) UK operation, which has 1.4m energy customers.

Sources said that a bid would be tabled on Wednesday to meet an informal deadline set by Lazard, which is overseeing the process on Shell’s behalf.

If successful, it would grow Ovo’s customer base from about 4m UK households to 5.4m households, edging it ahead of Octopus Energy, which – following its takeover of the nationalised supplier Bulb – now has close to 5m household customers.

Industry executives said that Centrica, the owner of British Gas, had also been exploring an offer for the SERL arm.

Such a move would be controversial because it would see the industry’s largest player substantially grow its market share.

Centrica has also been embroiled in a scandal over the forced installation of pre-payment meters during the cost-of-living crisis, sparking fury among politicians about both the company’s conduct and regulator Ofgem’s oversight of the practices.

Octopus Energy is said to be a less likely bidder for SERL, although an offer from it would not be inconceivable.

The industry’s biggest players have been caught up in a bitter row over the takeover of Bulb in recent months, with a group of suppliers led by Centrica mounting a legal challenge to the sale to Octopus.

The bailout of Bulb is now expected to cost far less than the multibillion pound bill originally envisaged as wholesale gas prices have continued to fall.

Ovo was among the rival bidders for Bulb, the collapse of which in November 2021 was the most significant among dozens of supplier failures.

Ofgem has faced heavy criticism for its approach to licensing new entrants to the market and has promised to overhaul the regime.

Shell said in January that it was launching a review of its household energy supply business in the UK, Germany and Netherlands.

Its presence in the latter two markets is much smaller than in the UK.

Shell is also keen to offload its broadband customer book in the UK, which has about 500,000 customers, according to insiders.

Ovo Energy does not have a presence in the UK broadband market and would want to offload that part of the Shell business to a partner.

When Ovo’s founder, Stephen Fitzpatrick, struck a deal to transform his company by acquiring the domestic energy arm of SSE in 2019, he sold its broadband customer base to TalkTalk.

It was unclear on Wednesday whether Ovo would fund a takeover of Shell’s UK arm from existing financial resources or whether it would need to raise new equity or debt.

Ovo recently became the first major supplier to pass on savings to customers and offer a fixed tariff below the level of the industry price cap.

It also launched what is said to be the cheapest electric vehicle tariff available, at 3p-per-mile.

An Ovo spokeswoman declined to comment on its interest in acquiring the Shell business.

Centrica and Shell also declined to comment.

Business

Ex-Post Office boss Paula Vennells admits removing reference to Horizon IT system from Royal Mail prospectus

Published

14 hours ago

May 24, 2024

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Ex-Post Office boss Paula Vennells admits removing reference to Horizon IT system from Royal Mail prospectus

Former Post Office boss Paula Vennells has admitted to amending the legal document Royal Mail issued to would-be investors before it became publicly owned to remove mention of the flawed Horizon IT system.

Data from the accounting software created by Fujitsu was used to prosecute more than 700 sub-postmasters for theft and false accounting.

Many more victims lost their homes, livelihoods and good reputation to repay non-existent shortfalls.

Now the inquiry set up to establish a clear account of the introduction and failure of Horizon has heard during Ms Vennells’s third and final day of questioning that she removed “at the very last minute” reference to Horizon from the prospectus Royal Mail issued before it was listed on the London Stock Exchange.

A prospectus is a legal and financial document detailing key information for potential company investors.

It was the first time the issue was raised with Ms Vennells.

She said: “It was flagged to me that in the IT section of the Royal Mail prospectus, there was reference to – I can’t remember the words now – but risks related to the Horizon IT system… the line that was put in said that no systemic issues had been found with the Horizon system.”

Ms Vennells wanted the reference removed as, “the Horizon system was no longer anything to do with the Royal Mail group” she said, and contacted the company secretary to have the reference removed.

Based on this action Ms Vennells wrote to a colleague “I have earned my keep on this”.

She was at the top of Post Office for 12 years and served as its chief executive for seven of those, from 2012 to 2019.

In at times emotional testimony, Ms Vennells said she “loved the Post Office” and worked “as hard as I possibly could to deliver the best Post Office for the UK”.

Business

Energy price cap: Average bills to fall by more than £100 – but predictions say they will rise again

Published

18 hours ago

May 24, 2024

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Energy price cap: Average bills to fall by more than £100 - but predictions say they will rise again

The average annual energy bill will be £506 cheaper than a year ago from July, the sector’s regulator has announced.

The energy price cap – which limits what can be charged per unit of energy – is due to fall from the month after next.

It means the average annual bill will be £1,568 a year, 7% less than at present.

But while the July figure is a reduction, bills are still more expensive than before.

Before the energy price shock, caused primarily by Russia’s invasion of Ukraine in February 2022, a standard 12-monthly bill was £1,084.

Money latest: Energy bills fall – but predictions say they will rise again

So compared with three years ago, energy is costing homes an extra £484.

During the current period from 1 April to 30 June, the energy price cap is set at £1,690 per year for a typical bill.

Energy regulator Ofgem sets the cap four times a year, with the latest announcement applying from July to September.

The overall rate of inflation came down in April – in large part thanks to the current higher cap which came into effect that month and brought prices down for energy users, according to the Office for National Statistics.

However, many households are in debt to energy providers.

“The fall in the energy price cap reduces bills slightly, but our data tells us millions have fallen into the red or are unable to cover their essential costs every month,” said Dame Clare Moriarty, the chief executive of Citizens Advice.

“People cannot rely on lower energy prices alone to escape the financial issues they’ve been experiencing. That’s why we need better targeted energy bill support for those really struggling to keep the lights on or cook a hot meal.”

More expense to come

Latest forecasts suggest bills will increase again coming into winter as wholesale gas costs are on the rise.

Respected research firm Cornwall Insight said it expects the fall announced today “may be temporary”.

It predicts a typical bill will increase to £1,762 from October and remain around this level until the end of March.

Gas prices reached four-month highs earlier this week on concerns that Russia could halt gas flows to Austrian multinational oil, gas and petrochemical company OMV and that US exports to Europe may be damaged by a contractor at a Texas terminal filing for bankruptcy protection.

Business

General election 2024: Evidence of weakening in economic recovery as campaigning begins

Published

1 day ago

May 23, 2024

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General election 2024: Evidence of weakening in economic recovery as campaigning begins

Growth in the UK’s powerhouse services sector has cooled by more than expected to its weakest level in six months, according to a closely-watched survey of businesses.

As campaigning got under way for a general election that is widely expected to be dominated by the economy, the S&P Global UK Composite Purchasing Managers’ Index (PMI) suggested an overall slowing in the pace of business activity.

The index, in which any reading above 50 represents growth, came in at 52.8 for May – down on the 54.1 score achieved the previous month.

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The survey of purchasing managers, which takes in responses from services and manufacturing firms, had been forecast by economists to have been almost flat on April’s figure.

The report said a recovery in factory activity, which recorded its best monthly performance in two years, was more than offset by the weakening of momentum in services which suffered from a slowdown in new orders.

Its authors said the survey data was consistent with gross domestic product (GDP) rising by around 0.3% in the second quarter of the year to the end of June.

The Office for National Statistics has previously indicated an early estimate for growth during the first quarter of the year of 0.6%.

If realised, the PMI prediction for second quarter growth would represent a significant slowdown though it is in line with recent annual forecasts – such as from the Bank of England and International Monetary Fund.

The new year has marked the end of a six-month recession for the UK economy – a downturn that was largely blamed on the effects of interest rate rises by the Bank to tame inflation.

The official rate of inflation is currently just above its target rate of 2% but April’s figure came in slightly hotter than had been expected, prompting financial markets to shift their bets for a first interest rate cut from June to August.

The calling of the election for 4 July means Rishi Sunak’s Conservatives, if that market mood is right, will not benefit at the polls from any cheer over a cut to borrowing costs.

The PMI survey suggested some concerns for the Bank around inflation would be soothed by its findings.

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Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “With companies now reporting the slowest price growth in over three years, and headline inflation falling close to target, the PMI data support the view that the Bank of England will start cutting interest rates in August providing the data continue to move in the right direction over the summer.

“Such speculation of rate cuts has already fed through to improved business confidence, with optimism for the year
ahead lifting higher in May, adding to hopes that the battle against inflation can be won without the UK having
suffered a serious recession.”