Ovo Energy is said to be looking to purchase 1.4 million household customers from Shell’s UK supply company. This comes as Shell prepares to exit the retail market.
According to Sky News Ovo will make a takeover proposal that would increase its customer base to 5.4million, making it once again the UK’s second largest energy supplier.
If it goes ahead, the Shell takeover would be Ovo’s second recent high-profile acquisition decided to conduct a “strategic assessment” of its household energy supply company, which was established less than five years ago through the acquisition of First Utility. The review is expected to take “a few months” and hasn’t yet been completed.
Ovo and Shell did not respond to the Sky report.
Shell’s decision to supply gas and electricity directly from households was part of its ambitions to expand its business beyond selling and producing fossil fuels.
Its entry to the British energy market came at a time of intense political scrutiny for UK energy companies. They have struggled to make profits from supplying energy to homes under the government’s energy price caps and rising wholesale market prices.
The UK’s energy market is in serious trouble due to a string of business failures and poorer customer service. This decision to review the company highlights the problems. A wave of consolidation has triggered by the collapse of around 30 energy supply companies, as large energy suppliers take over the customer lists of these failed firms.
The government and suppliers of energy, including E.ON and Scottish Power, have been locked in a bitter legal battle since the collapse of Bulb. They also wanted to purchase the supplier through a special administration process.
In a judicial review, the rival bidders argued that Octopus received preferential treatment in its contract-making with government. Octopus countered by claiming that it was “more agile” and that it saw an opportunity that others missed.