Energy supplier OVO to explore options including sale
Britain’s fourth-biggest household energy supplier is lining up bankers to explore options including bringing in a new investor or a sale, 15 years after it launched in a bid to challenge the industry’s oligopoly.
Sky News has learnt that OVO Group, which was founded by Stephen Fitzpatrick, is close to hiring Rothschild to assist with a strategic review of the business.
City sources said this weekend that a range of possibilities would be considered during the process, which is expected to take several months.
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These are likely to include a refinancing – with talks already underway about OVO’s existing borrowings – as well as issuing new shares to prospective investors, or a partial or full sale by some of the company’s shareholders.
An outright sale of the business is considered by insiders to be unlikely at this point, but is expected to be explored as part of the strategic review.
OVO, which has about four million customers, sits behind Centrica, the owner of British Gas, Octopus Energy and E.ON Next in the rankings of Britain’s leading gas and electricity suppliers, according to market share data provided by Ofgem, the industry regulator.
Under Mr Fitzpatrick, who launched OVO in 2009, the company positioned itself as a challenger brand offering superior service to the industry’s established players.
OVO’s transformational moment came in 2020, when it bought the retail supply arm of SSE, transforming it overnight into one of Britain’s leading energy companies.
Its growth has not been without difficulties, with insiders referring to a challenged relationship with Ofgem and a torrent of customer complaints about overcharging.
Stephen Fitzpatrick launched OVO in 2009. Pic: OVO
In recent months, OVO’s shareholders have reshaped its leadership team, bringing in the former J Sainsbury chief executive Justin King as its chairman.
In May, Mr King recruited David Buttress, the former Just Eat boss who was briefly Boris Johnson’s cost-of-living tsar, as the energy group’s new chief executive.
Mr Buttress replaced Raman Bhatia, who left to join Starling Bank.
He is expected to focus on sharpening the company’s customer service performance as well as exploring ways to further diversify its products and services.
Key to OVO’s valuation will be the growth of its technology platform, Kaluza, which was set up to license its software to other energy suppliers, and provides customers with smart electric vehicle charging and heat pumps.
OVO recently announced that AGL Energy, one of Australia’s biggest energy suppliers, had bought a 20% stake in Kaluza at a $500m valuation.
Kaluza is understood to be exploring further expansion opportunities in Europe, Japan and the US.
OVO has also entered the electric vehicle car charging sector under the brand Charge Anywhere, adding 34,000 public charging points across the UK.
In 2022, OVO Group made an unadjusted loss of £1.3bn, which it blamed on a decline in the value of energy it had bought in advance to meet future supply commitments.
It said this had “no cash impact” in a corporate filing, and that this value would rise as customers used the energy it had bought.
Last summer, the company announced a £200m secondary share sale which saw existing investors Mayfair Equity Partners and Morgan Stanley Investment Management increasing their stakes in the company.
Other investors include Mitsubishi Corporation, the Japanese conglomerate.
Mayfair is thought to hold a stake of over 30%, while Mitsubishi owns approximately 20%.
Mr Fitzpatrick also remains a significant shareholder.
This weekend, it was unclear which of OVO’s investors might seek a disposal of their interests, although insiders acknowledged that a sizeable proportion of the company’s shares could end up changing hands.
Like its rivals, OVO has been contending with the impact of the industry price cap after a period of enormous price spikes which sent customers’ bills soaring.
Last month, Ofgem said the cap would fall in the quarter from July to September by the annualised equivalent of £122, to £1568.
Other big players in the sector include EDF and Scottish Power, which is owned by Spain’s Iberdrola.
In recent months, Octopus Energy, run by Greg Jackson, has crystallised a valuation of over £7bn by selling stakes to a number of new investors.
Centrica has a market valuation on the London Stock Exchange of £7.3bn.
OVO, whose valuation in any major transaction was unclear this weekend, declined to comment.
Santander is to buy TSB, becoming the UK’s third biggest bank in the process.
Once completed, the combined bank will have the third-largest number of personal account balances in the UK, and be fourth in terms of mortgage lending, with a total of nearly 28 million customers, Santander said.
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The deal is still subject to approval by regulators and shareholders of TSB’s parent company, Banco Sabadell, but is expected to conclude in the first three months of 2026.
It could mean the TSB brand is no longer visible on the high street, as Santander said it “intends to integrate TSB in the Santander UK group”.
Job losses may also result.
Santander‘s interest in tabling a bid for TSB was first reported by Sky News.
TSB has five million customers, offers business and personal accounts, and is the UK’s tenth largest lender for mortgages and deposits. After cutting jobs and branches last year, it currently employs roughly 5,000 staff and operates 175 branches, the seventh largest network in the UK.
It comes just months after speculation that Santander would leave the UK market, despite denials from the Spanish-owned lender.
File pic: iStock
In recent months, it had rejected takeover attempts from rivals NatWest and Barclays.
Barclays had also bid for TSB.
Banco Sabadell said it was selling TSB “to focus our strategy on Spain”, its chief executive, Cesar Gonzalez-Bueno, said.
Santander has agreed to pay an initial £2.65bn for TSB, with the final price expected to rise to £2.9bn when yet-to-be-announced financial results are factored in.
The price is 1.5 times the value of TSB’s assets.
“This is an excellent deal for customers, combining two strong and complementary banks, creating one of the most substantial banks in the UK and materially enhancing the competitiveness of the industry,” said Mike Regnier, CEO of Santander UK.
A major component within household energy bills is set to rise sharply from next year to help pay for efforts to maintain energy security during the transition to green power.
The industry regulator Ofgem’s draft determination on how much it will allow network operators to charge energy suppliers from 1 April 2026 to 31 March 2031 would push up network costs within household bills by £24 a year.
These charges currently account for 22% of the total bill.
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The findings, which will be subject to consultation before a final determination by the end of the year, reflect demands on network operators to make power and gas networks fit for the future amid expansion in renewable and nuclear energy to meet net zero ambitions.
Ofgem says the plans it has given provisional approval for amount to a £24bn investment programme over the five-year term – a four-fold increase on current levels.
A total of 80 major projects includes upgrades to more than 2,700 miles of overhead power lines.
If rubber stamped as planned, the resulting network cost increases threaten further upwards pressure on bills from next April – a month that has now become synonymous with rising essential bills.
The watchdog revealed its plans as the 22 million British households on the energy price cap benefit from the first decline for a year.
It is coming down from an annual average £1,849 between April and June to £1,720 from July to September.
That’s on the back of easing wholesale costs seen during the spring – before the temporary surge in wholesale gas prices caused by the recent instability in the Middle East.
A new forecast released by industry specialist Cornwall Insight suggested households were on track to see a further, but slight, decline when the cap is adjusted again in October.
At the current level it is 28% lower than at the height of the energy-led cost of living crisis – but 10% higher than the same period last year.
The price cap does not limit total bills because householders still pay for the amount of energy they consume.
Ofgem is continuing to recommend consumers shop around for fixed rate deals in the market as they can offer savings compared with the price cap and shield homes from any price shocks seen within their fixed terms.
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Jonathan Brearley, the regulator’s chief executive, said: ”Britain’s reliance on imported gas has left us at the mercy of volatile international gas prices which during the energy crisis would have caused bills to rise as high as £4,000 for an average household without government support.
“Even today the price cap can move up or down by hundreds of pounds with little we can do about it.
“This record investment will deliver a homegrown energy system that is better for Britain and better for customers. It will ensure the system has greater resilience against shocks from volatile gas prices we don’t control.
“These 80 projects are a long-term insurance policy against threats to Britain’s energy security and the instability of prices. By bringing online dozens of homegrown, renewable generation sites and modernising our energy system to the one we will need in the future we can boost growth and give ourselves more control over prices too.
“Doing nothing is not an option and will cost consumers more – this is critical national infrastructure. The sooner we build the network we need, and invest to strengthen our resilience, the lower the cost for bill payers will be in the future.”
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