OVO Group, the fourth-largest household energy supplier in Britain, is reportedly considering potential options such as bringing in a new investor or selling the company. This comes 15 years after the company was founded by Stephen Fitzpatrick in an effort to disrupt the oligopoly of the energy industry.
According to sources in the city, OVO is in talks with Rothschild to conduct a strategic review of the business. The review is expected to take several months and will explore a range of possibilities, including refinancing, issuing new shares, or a partial or full sale by some of the company’s shareholders.
While an outright sale of the company is unlikely at this point, it is expected to be considered as part of the strategic review. OVO currently has about four million customers and ranks behind Centrica, Octopus Energy, and E.ON Next in market share data provided by Ofgem, the industry regulator.
Under the leadership of Stephen Fitzpatrick, OVO positioned itself as a challenger brand that offered superior service compared to established energy players. In 2020, OVO made a major move by acquiring the retail supply arm of SSE, instantly becoming one of the leading energy companies in Britain.
However, the company has faced challenges, including a strained relationship with Ofgem and numerous customer complaints regarding overcharging. In response, OVO’s shareholders have recently made changes to its leadership team, appointing former J Sainsbury CEO Justin King as chairman and bringing in former Just Eat boss David Buttress as the new chief executive.
Buttress, who replaced Raman Bhatia, is expected to focus on improving customer service and exploring opportunities to diversify OVO’s products and services. One key factor in OVO’s valuation will be the growth of its technology platform, Kaluza, which provides customers with smart electric vehicle charging and heat pumps.
Recently, OVO announced that AGL Energy, one of Australia’s largest energy suppliers, had acquired a 20% stake in Kaluza at a valuation of $500 million. Kaluza is also looking to expand into other markets such as 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, the company reported an unadjusted loss of £1.3 billion, which it attributed to a decline in the value of energy it had purchased in advance to meet future supply commitments.
Last summer, OVO announced a £200 million secondary share sale, with existing investors Mayfair Equity Partners and Morgan Stanley Investment Management increasing their stakes in the company. Other investors include Mitsubishi Corporation, who holds approximately 20% of the company, and Mayfair, who is thought to have a stake of over 30%. Stephen Fitzpatrick also remains a significant shareholder.
It is unclear at this time which of OVO’s investors may pursue a disposal of their interests, but sources suggest that a significant portion of the company’s shares could change hands. Like its competitors, OVO has also been impacted by the industry price cap, which has led to a decrease in customers’ bills.
Other major players in the energy sector include EDF and Scottish Power, owned by Spain’s Iberdrola. In recent months, Octopus Energy, led by Greg Jackson, has achieved a valuation of over £7 billion by selling stakes to new investors. Centrica, with a market valuation of £7.3 billion on the London Stock Exchange, is also a significant competitor.
OVO declined to comment on its valuation or any potential transactions.
