Household services deal
Ovo moves into big energy league after £500m deal with SSE
Ovo has become Britain’s biggest energy supplier in the UK after British Gas after sealing a deal to acquire Perth-based SSE’s household retail business.
The ‘challenger’ energy company will pay SSE £500 million, of which £400m is cash, and will have around seven million customers.
About 8,000 staff will transfer to the new owner. Completion is expected by the end of this year or early in 2020.
SSE Energy Services is the third-largest supplier in the GB energy market, supplying energy and related services to around 3.5 million household customers across GB. As well as electricity and gas, the business provides telephone, broadband, metering, boiler installation and maintenance services.
In the 12 months to 31 March 2019, SSE Energy Services made an adjusted operating profit of £89.6m, with reported pre-tax profit at £35.3m.
Ovo was established in 2009 and has grown to become the UK’s largest independent energy supplier, now serving 1.5 million customers. In the last year, OVO has grown significantly, increasing its UK customer base by 50% and opening operations in France and Spain. It employs around 2,000 people.
SSE said it “will do all it can to ensure a smooth transition for customers and employees.”
Talks between the two companies were announced in August.
We have a clear strategy around developing, operating and owning renewable energy– Alistair Phillips-Davies
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.
“Following the transaction, SSE will be able to give an even greater focus to delivering the low carbon infrastructure needed to help the UK reach net zero emissions. We have a clear strategy around developing, operating and owning renewable energy and electricity network assets, along with growing businesses complementary to this core.
“With a large and growing renewable energy pipeline and a leading position in the electricity networks needed to deliver low-carbon energy reliably to homes and businesses in an increasingly electrified economy, we are well placed to create value from the low-carbon transition.”
Stephen Fitzpatrick, CEO and founder of OVO said: “This transaction marks a significant moment for the energy industry. Advances in technology, the falling cost of renewable energy and battery storage, the explosion of data and the urgent need to decarbonise are completely transforming the global energy system.
“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.”
SSE said its financial strategy remains the same with the board committed to delivery of the remaining four years of its five-year dividend plan to March 2023.
It still intends to recommend a full year dividend of 80p per share for the year ending 31 March 2020 and is targeting annual increases that keep pace with RPI for the three years after that, to March 2023.