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Image: OVO.
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Tomorrow’s world: OVO, supplier convergence and the future of the Big Six

Image: OVO.

Given the ever-changing regulatory hurdles, enormously competitive market landscape and the need to satiate an increasingly demanding customer, it’s a wonder any business would take a look at the UK’s energy retail market and conclude; “yes, that’s our major play”.

But major plays are becoming common place in the UK energy supply, and OVO’s bid to buy up the retail division of SSE - or, perhaps more realistically, it’s 5.7 million customers - was the curious kind of story which was both surprising but unsurprising in equal measure.

SSE has been trying to relieve itself of its retail division for some time. It aborted an attempt to combine it with innogy’s npower - more on that company later - late last year, before Ofgem scuppered the deal with the terms of its SVT price cap. OVO’s bid for the unit, rumoured to be in the region of £250 million, could well have been music to SSE’s ears.

That’s not to say there isn’t value in SSE, of course. If it completes, the transaction will be transformative for OVO and propel it not just into the ranks of the Big Six, but the combined entity will become the second-largest supplier in the UK, second only to Centrica’s British Gas (again, more on that company to come). OVO, as well as its tech arm Kaluza, has long been the subject of more than a few watching eyes in the energy sector. The firm celebrates its 10th birthday next month and what it does next will likely be of considerable interest.

OVO’s not the only challenger. Octopus, which this week has been linked with a bid for Co-op Energy’s retail unit, confirmed that it remains in talks with “many companies” over any period of time. Bulb too has continued its meteoric rise, and you’d be remiss to count them out of any discussion on what tomorrow’s retail market may look like.

There’s a palpable sense of interest, intrigue and almost braggadocios confidence amongst the challenger suppliers at the moment, one that just can’t be replicated in the boardrooms of most of the Big Six.

Indeed, Centrica and its British Gas business continue to be a compelling story, one that gained another chapter when chief executive Iain Conn effectively lost his job last month. Yet another profit collapse and subsequent nosedive in the share price was eventually too much for Centrica’s board to countenance and whoever replaces Conn in the hot seat has a mammoth job on their hands to turn those travails into triumphs.

But, Centrica may remark, at least it’s not npower. Innogy’s UK-facing retail arm lost another £75 million in the first half of this year, a result so bad that its parent company had to effectively argue that the group results had to be viewed in a different context. Now that the proposed merger with SSE is off the table, the future is far from certain.

ScottishPower, meanwhile, fresh from a pivot to renewables and other clean technologies, is still basking in the kind of glow that only a near-trebling of earnings can deliver.

With Shell chomping at the bit, BP-backed Pure Planet keeping a watching brief and the continued rumours surrounding Telco interest in energy supply, the Big Six are facing a critical juncture at a time when regulatory obstacles are only tightening. For that reason, the future of the Big Six simply has to be up for debate.

Many in the industry will argue that to be no bad thing.

Liam Stoker's photo
Editorial

Liam Stoker Editor-in-chief, Current±

Liam is editor-in-chief at Solar Media, the publisher of Current± and other titles including Solar Power Portal. Liam edits the UK-facing titles and has done since 2015, having joined the publisher as a reporter the same year. Previously, Liam has held positions at other London-based B2B publishers such as Pageant Media and Progressive Media.

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