Ovo Buys SSE To Become Britain’s 2nd Largest Energy Supplier – BinaryOptions

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Bristol’s Ovo Energy to become second largest energy supplier in UK

Ovo Energy, a Bristol-based company, is to buy a second energy firm’s household arm, delivering them an additional 3.5m customers as well as 8,000 new staff.

This follows discussions between energy company SSE and Ovo Energy, where it has been agreed that SSE’s household arm will be purchased for £500m.

The deal means Ovo Energy will become the second largest energy supplier in the UK, with only British Gas supplying more customers. The company is already the UK’s largest independent energy supplier.

Ovo Energy was founded in Bristol a decade ago by former city trader, Stephen Fitzpatrick, 41. As Chief Executive, Stephen made headlines lambasting the ‘Big Six’ energy companies to a Parliamentary select committee.

SSE is selling its household arm following an attempted merger with Npower that was abandoned in December last year.

The government’s price caps on energy bills and intense competition have been cited by SSE as a reason for the attempt to move away from its supply arm.

In the year ending March 2020, SSE saw 500,000 customers move away to different energy suppliers. SSE’s adjusted operating profits have also fallen. They totalled £297m two years ago but last year they fell to £90m.

The Bristol-based move will see Ovo Energy take over SSE’s household arm with £400m paid in cash and the remaining £100m paid in loan notes.

Ovo buys SSE retail business to create home energy giant

Ovo will become the UK’s second largest domestic energy supplier after £500m deal

Big Six energy provider SSE has agreed to sell its household supply arm to smaller rival Ovo Group in a £500m deal.

Ovo’s offer to take over SSE’s energy services business comprises of £400m in cash and £100m in loan notes and is expected to complete later this year or early next year. It will turn Ovo into the UK’s second largest domestic energy suppliers after British Gas, having been founded just 10 years ago.

SSE is the third largest supplier in the UK energy market, with around 3.5m household customers and 8,000 staff. Independent provider Ovo has around 1.5m customers and about 2,000 employees.

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The deal comes after SSE was forced to scrap its merger with Big Six rival npower last December after the Government’s energy price cap sent shockwaves through the industry.

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Energy price cap

Gas and electri city suppliers have come under intense pressure in the UK following this year’s introduction of the cap on standard variable tariffs, as well as increasing competition from a swathe of smaller players.

In May, SSE announced plans to offload its energy services segment after more than half a million households switched to a new supplier in the year ending March 2020. The Big Six company vowed to sell or float its energy services arm by the second half of 2020.

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Stephen Fitzpatrick, founder and chief executive of Ovo, hailed the deal as a “significant moment for the energy industry”.

He said: “For the past three years Ovo has been investing heavily in scalable operating platforms, smart data capabilities and connected home services, ensuring we’re well positioned to grow and take advantage of new opportunities in a changing market. SSE and OVO are a great fit. They share our values on sustainability and serving customers. They’ve built an excellent team that I’m really looking forward to working with.”

Alistair Phillips-Davies, chief executive of SSE, said: “We have long believed that a dedicated, focused and independent retailer will ultimately best serve customers, employees and other stakeholders – and this is an excellent opportunity to make that happen. Ovo shares our relentless focus on customer service and has a bold vision for how technology can reshape the future of the industry.

“I’m confident that this is the best outcome for the SSE Energy Services business.”

SSE added that, should the deal with Ovo go through, it will do “all it can to ensure a smooth transition for customers and employees”.

Ovo will also retain the SSE brand under licence for a period and will ensure a phased and “carefully-managed” transfer.

Tough year for SSE

But it comes after a difficult 12 months for SSE, which admitted on reporting its annual results recently that its wider business “fell well short” of its hopes in 2020-19 and warned that 2020-20 earnings would also be hit. The group’s annual underlying pre-tax profits fell 38 per cent to £725.7m.

The figures came on the back of a tough year for SSE following the collapse of its npower merger. It was also fined £700,000 by industry watchdog Ofgem in April for missing last year’s target to install gas smart meters for customers.

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OVO Energy to break into Britain’s Big Six suppliers with SSE deal

LONDON (Reuters) – Relative newcomer OVO Energy is set to become one of Britain’s Big Six energy suppliers after striking a 500 million pound ($622.65 million) deal to buy SSE’s retail arm, announced on Friday.

The 10-year old independent company has flourished in a market which has seen more than ten small energy suppliers collapse over the past year, hurt by fierce competition and a regulator-imposed cap on prices.

“Our focus was always to deliver cheaper, greener, simpler energy and provide good service for customers,” OVO Chief Executive and founder Stephen Fitzpatrick said in an interview.

SSE had been looking for a buyer for its retail arm following a failed merger with Innogy, which collapsed after the companies failed to agree on new commercial terms in light of a government cap on energy bills.

Amid fierce competition from smaller, nimbler rivals who were often able to offer cheaper prices, SSE’s retail arm struggled to retain customers. Operating profit at the division fell 68% in the year to March 2020.

SSE’s retail energy business is one of the “Big Six” in the British market, supplying energy and related services to around 3.5 million household customers.

With its existing customers OVO will be supplying 5 million homes once the deal concludes. Britain’s largest energy supplier is Centrica’s British Gas with around with around 7.2 million UK energy supply customers.

Fitzpatrick set up OVO in 2009 after a successful five years on the trading floor. His aim was to make enough money to set up a new business, he said, and focused on energy because he saw the sector was ripe for a shake-up.

He said the firm had been the first in Britain to supply its customers with coal-free electricity, adding that its focus on new technology, such as smart chargers for electric vehicles, has set it apart from rivals.

OVO grew steadily at first, but found a catalyst for rapid expansion earlier this year when Japan’s Mitsubishi Corporation took a 20% stake in a transaction valuing OVO at around 1 billion pounds.

“We picked up the phone to SSE within a week of that deal,” Fitzpatrick said.

SSE shares were buoyed by the deal, and hit their highest in over four months after the announcement. The stock was 1.2% higher at 1,180 pence by 1104 GMT.

“We see this deal as positive for SSE as it gets rid of a business unit which has been a drag on the overall group and helps to refocus attention on the core business of Networks and Renewables,” Bernstein analysts said.

Proceeds from the sale, which involves 400 million pounds in cash and 100 million pounds in loan notes, will be used to reduce SSE’s net debt, the company said on Friday.

The deal is expected to be completed in late 2020 or early 2020, subject to regulatory approvals. All of SSE Energy’s near 8,000 employees will transfer to OVO, SSE said.

Jefferies analysts said the disposal represents an important step forward in SSE’s strategy to re-orientate the business towards networks and renewables.

The deal also comes after the company kicked off the process to sell its 140 million cubic feet per day portfolio of North Sea gas fields in a single package, a sale document seen by Reuters showed last month.

Britain’s other four Big Six suppliers are Iberdrola Scottish Power, Innogy’s npower, E.ON and EDF’s EDF Energy.

($1 = 0.8096 pounds)

(Reporting by Susanna Twidale in London, Noor Zainab Hussain in Bengaluru; Editing by Arun Koyyur, Keith Weir and Jan Harvey)

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