Ovo Energy Faces Cost Cutting Plan Amidst Ofgem Regulations and Investor Concerns

Ovo Energy is initiating significant reductions to its expenditure in a bid to secure its financial position as the company confronts heightened regulatory pressures imposed by Ofgem. The energy supplier, which ranks as Britain’s fourth-largest with a customer base of four million, will implement sweeping cost cuts affecting various sectors, notably advertising and brand promotion. This strategy aims to satisfy new industry requirements stipulating that major suppliers retain substantial cash reserves proportional to their number of customers.

Following the introduction of these stricter financial regulations, Ovo is responsible for holding cash reserves totalling hundreds of millions of pounds. Stephen Fitzpatrick, founder of Ovo, has sought to raise £300 million in fresh investment. Rothschild, acting on behalf of Ovo, has engaged leading UK energy companies as prospective investors. Despite these efforts, substantial regulatory challenges have deterred new investment, leading to persistent doubts regarding Ovo’s long-term viability.

In its latest financial accounts, the company cautioned that “material uncertainty” surrounds its future. Shortfalls in new funding have necessitated dramatic cost reductions to satisfy Ofgem’s liquidity requirements, prompting scrutiny of Ovo’s expenditure on high-profile partnerships such as its association with the Wembley Ovo Arena.

The current business plan is under review, with approval being actively negotiated between Ovo’s executive team and Ofgem. Leadership changes have accompanied the company’s strategic shift; Chris Houghton is now chief executive following David Buttress’s departure, and Dame Jayne-Anne Gadhia serves as chairman, having succeeded Justin King earlier in the year. Mayfair Equity Partners, Ovo’s second-largest shareholder, is reportedly seeking to divest its 30 percent holding, underlining the uncertainty facing Ovo’s ownership structure.

Ovo has struggled for months to secure new backers. Potential deals have included discussions with Iberdrola, parent company of Scottish Power, about a possible merger, and interest from Verdane, a Norwegian investment group, which ultimately declined to invest. The wider UK energy market remains turbulent, highlighted by the recent collapse of Rebel Energy and Tomato Energy, impacting over one hundred thousand customers and drawing attention to systemic difficulties across the sector.

To further address its financial needs, Ovo recently announced a doubling in electricity rates for electric vehicle customers, from 7p to 14p per kilowatt hour. The new sustained rate can only be avoided through enrolling in a specific monthly plan costing no less than £27.50. This decision has attracted criticism from customers, who attribute the increased charges to Ovo’s financial positions, though the company maintains that the price change was made in response to customer requests for a more streamlined payment structure.

Despite recording losses of £135 million in 2024 and issuing warnings regarding its ability to continue trading, Ovo authorised £27 million in payments to a company owned by its founder last year. Substantial royalty fees channelled to Stephen Fitzpatrick have since been reduced following new Ofgem financial oversight. Mayfair Equity Partners has publicly reiterated support for Ovo’s leadership and long-term strategy in comments to media outlets. Neither Ovo nor Ofgem have issued additional statements on the matter.