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Utility group Telecom Plus is vying to take a stake in UK energy provider Ovo, in what would mark the latest shake-up of a sector under pressure to meet the regulator’s new capital requirements.
The FTSE 250 company, which trades as Utility Warehouse, is one of multiple businesses in discussions over a deal for the Ovo retail energy business that supplies about 4mn homes, according to people familiar with the matter. The business could be worth more than £400mn, they added.
Ovo is evaluating the proposals alongside a separate plan from the company’s founder, Stephen Fitzpatrick, to inject £200mn into the business, which the Financial Times reported on Wednesday. The proposal by Fitzpatrick, backed by other investors, would allow him to retake majority control of Ovo for the first time since 2022.
The household business subject to the deal talks is part of the Ovo Group that also includes energy software company Kaluza, which is licensed to other providers around the world such as France’s Engie.
Ovo, chaired by Jayne-Anne Gadhia, has been trying to raise investment for much of this year to meet the capital buffer requirements put in place by energy regulator Ofgem to try and stabilise the sector.
Ovo and Utility Warehouse declined to comment.
More than 30 UK energy companies of various sizes collapsed in 2021 and 2022 as they were unable to withstand a surge in wholesale gas and electricity prices linked to a rise in demand after the pandemic and the run-up to Russia’s full-scale invasion of Ukraine.
Ovo revealed in September that it had not yet met Ofgem’s target to hold a certain amount of cash or other assets per customer, and warned that uncertainty over its capitalisation plan raised questions over its ability to continue as a going concern.
The business was founded by Fitzpatrick in 2009 as part of a new breed of companies set up to challenge the dominance of the Big Six providers such as EDF and Centrica.
A decade later it became one of Britain’s largest household energy suppliers when it bought FTSE 100 company SSE’s retail energy supplier.
The sector is heavily regulated with standard default tariffs subject to a price cap limiting the amount companies can charge customers. Companies are also under pressure to fulfil government policies such as installing smart meters.
Some executives have complained of small margins. Shell sold its UK household energy division to Octopus Energy in 2023.
Telecom Plus has a market capitalisation of more than £1bn and supplies energy, broadband, mobile coverage and insurance to about 1.4mn customers. In its latest results, for the six months ending September 30, it reported revenues of £744.5mn and statutory pre-tax profit of £24.6mn.