Ovo Energy is reportedly planning to make a bid to buy 1.4 million household energy customers from Shell’s UK supply business as the oil company prepares to leave the retail market.
Ovo is expected to put forward a takeover offer that would swell its business to 5.4 million customers, according to Sky News, once again making it the second-largest energy supplier in the UK market.
If it goes ahead, the Shell takeover would be Ovo’s second recent high-profile acquisition after it struck a deal in 2019 to take on 3.5 million SSE customers and became the largest supplier behind British Gas.
Ovo lost that No 2 position late last year to Octopus Energy after the latter agreed to buy Bulb, which had collapsed into administration a year earlier. The deal took its customer base to 5 million homes.
The Guardian understands that Shell has hired the financial services firm Lazard to oversee the sale of the business, with Octopus Energy also considering putting in a bid.
It comes after Shell decided in January to undertake a “strategic review” of the household energy supply business, which it set up less than five years ago with the acquisition of First Utility. That review is expected to take “a number of months” and has not yet concluded.
Ovo and Shell declined to comment on the Sky report.
Shell’s move into supplying gas and electricity directly to households had formed part of its ambition to widen the scope of its business from producing and selling fossil fuels to becoming the world’s biggest electricity company.
Its entry into the British energy market coincided with a period of intense political scrutiny on UK energy companies, which have struggled to make a profit from supplying energy to households under the government’s energy price cap and soaring wholesale market prices.
The decision to review the business underlines the difficulties in the UK’s energy market, which has been dogged by a string of company failures and increasingly poor customer service. About 30 energy supply companies have gone bust, triggering a wave of consolidation across the market as larger energy suppliers pick up the customer books of the failed operators.
The collapse of Bulb and purchase by Octopus has sparked a bitter legal battle between the government and energy suppliers including E.ON, Scottish Power and Centrica, which were also eager to snap up the supplier from a special administration process.
The rival bidders have argued in a judicial review that Octopus was given preferential treatment in its deal-making with the government. Octopus has countered that it was more “nimble” and “saw an opportunity that others missed”.