Britain’s fourth-largest domestic energy supplier is enlisting bankers to explore options, including bringing in a new investor or a sale, 15 years after it was launched in a bid to challenge the industry’s oligopoly.
Sky News has learned that OVO Group, founded by Stephen Fitzpatrick, is close to hiring Rothschild to help with the strategic review of the business.
City sources said this weekend that a number 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 negotiations already underway on OVO’s existing loans – as well as the issuance of new shares to potential investors, or a partial or full sale by some of the company’s shareholders.
An outright sale of the business is considered unlikely at this time, but is expected to be explored as part of the strategic review.
OVO, which has around four million customers, is behind Centrica, owner of British Gas, Octopus Energy and E.ON Next, in the ranking of Britain’s main gas and electricity suppliers, according to data of market share provided by Ofgem, the industry regulator.
Under Fitzpatrick, who launched OVO in 2009, the company has positioned itself as a challenger brand, offering a superior service to established industry 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 citing a challenging relationship with Ofgem and a torrent of customer complaints about excessive charges.
In recent months, OVO shareholders have reshuffled its leadership team, bringing in former J Sainsbury chief executive Justin King as its chairman.
In May, King recruited David Buttress, the former Just Eat boss who was briefly Boris Johnson cost of living czar as the energy group’s new chief executive.
Buttress replaced Raman Bhatia, who left to join Starling Bank.
He is expected to focus on improving the company’s customer service performance, as well as exploring ways to further diversify its products and services.
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Key to OVO’s valuation will be the growth of its technology platform, Kaluza, which was created to license its software to other energy suppliers and provides customers with smart charging of electric vehicles and heat pumps.
OVO recently announced that AGL Energy, one of Australia’s largest energy suppliers, has purchased a 20% stake in Kaluza at a valuation of $500 million (£395 million).
Kaluza is believed to be exploring new expansion opportunities in Europe, Japan and the US.
OVO has also entered the electric vehicle charging sector under the Charge Anywhere brand, adding 34,000 public charging points across the UK.
In 2022, OVO Group recorded an unadjusted loss of £1.3 billion, which it attributed to the decline in the value of the energy it purchased in advance to meet future supply commitments.
It said this had “no financial impact” in a corporate document and that this value would increase as customers used the energy it had purchased.
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Last summer, the company announced a £200m secondary share sale which saw existing investors Mayfair Equity Partners and Morgan Stanley Investment Management increase their stakes in the company.
Other investors include Mitsubishi Corporation, the Japanese conglomerate.
Mayfair is believed to hold a stake of more than 30%, while Mitsubishi holds approximately 20%.
Fitzpatrick also remains a significant shareholder.
This weekend, it was unclear which of OVO’s investors might seek a divestiture of their interests, although insiders acknowledged that a sizable proportion of the company’s shares could end up changing hands.
Like its rivals, OVO has struggled with the impact of industry price limit after a period of huge price spikes that caused customer bills to skyrocket.
Last month, Ofgem said the cap would fall in the July to September quarter by the annualized equivalent of £122, to £1,568.
Other major 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 crystallized a valuation of more than £7 billion by selling stakes to several new investors.
Centrica has a market valuation on the London Stock Exchange of £7.3 billion.
OVO, whose valuation on any major transaction was unclear this weekend, declined to comment.
This story originally appeared on News.sky.com read the full story
