Scottish Power and Ovo Energy in Talks to Create UKs Third Largest Energy Provider

In a significant development for the British energy sector, Spanish energy giant Iberdrola, the owner of Scottish Power, has initiated preliminary discussions with Ovo Energy regarding a potential merger that could reshape the UK’s energy landscape.

The proposed merger would consolidate the companies’ combined customer base of 6.4 million households, positioning the new entity as a formidable competitor to industry leaders British Gas and Octopus Energy. Ovo Energy, which entered the market in 2009 as a challenger to the traditional “big six”, has grown substantially since acquiring SSE for £500 million in 2020, now serving 4 million customers despite facing regulatory scrutiny over customer service issues.

Scottish Power, acquired by Iberdrola in 2007 for £11 billion, currently provides energy to 2.4 million households. The proposed structure would see both Ovo’s shareholders and Iberdrola maintaining stakes in the merged organisation, with the Spanish company potentially injecting additional capital into the venture.

The timing of these discussions aligns with Ovo’s recent appointment of Rothschild bankers to secure hundreds of millions in fresh investment. The company’s shareholders, including Mitsubishi, Mayfair Equity Partners, and Morgan Stanley Investment Management, are open to either a sale or new investment partnerships.

Under the leadership of chairman Justin King, former Sainsbury’s chief, and CEO David Buttress, previously of Just Eat, Ovo appears poised for strategic expansion. Meanwhile, Scottish Power has increasingly focused on renewable energy, establishing itself as one of Britain’s leading wind power providers.

While sources suggest no immediate announcement is forthcoming, and the deal’s completion remains uncertain, such a merger would significantly alter the competitive dynamics of the UK energy market.