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Ovo Energy plans takeover of Shell gas and electricity arm – Sky News

Mar 30th, 2023
by John Donovan.

REUTERS

Ovo Energy plans takeover of Shell gas and electricity arm – Sky News

March 29 (Reuters) – Ovo Energy is planning a takeover of Shell Plc’s (SHEL.L) UK gas and electricity business, a move that would allow the British retail energy supplier to reclaim the No. 2 spot in the British supply market, Sky News reported on Wednesday.

Ovo is expected to propose an indicative offer for Shell Energy Retail Ltd’s (SERL) UK operation, the report added, citing sources. Shell Energy Retail has about 1.4 million customers.

In January, Shell had said it was considering exiting its home energy retail businesses in Britain, the Netherlands and Germany in the wake of “tough market conditions”.

Ovo and Shell declined to comment.

Retail energy suppliers in Europe have struggled over the past year with soaring wholesale prices forcing governments to shield consumers from rising bills.

A successful deal would raise Ovo’s customer base from about 4 million UK households to 5.4 million households, based on information available on Ovo and Shell websites.

This would put Ovo ahead of Octopus Energy, currently the UK’s second-largest supplier, which has nearly 5 million household customers after its takeover of energy supplier Bulb.

It was unclear if Ovo would fund a takeover of the business from existing financial resources or whether it would need to raise new equity or debt, according to the Sky report.

The report said British Gas owner Centrica (CNA.L), the UK’s biggest retail supplier, had also been exploring an offer for the SERL arm, citing industry executives.

Centrica declined to comment.

Shell’s shares were up 1.5% as of 1050 GMT.

Reporting by Muhammed Husain in Bengaluru; Editing by Rashmi Aich and Jane Merriman

skynews

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

Stephen Fitzpatrick, Ovo’s founder, is plotting a takeover of Shell Energy Retail that would see it leapfrog rival Octopus Energy and regain the number two slot in the UK domestic supply market, Sky News can reveal.

Mark Kleinman

City editor @MarkKleinmanSky

Wednesday 29 March 2023 11:48, UK

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.

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.

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