Ovo Energy is set to become the second-largest energy supplier in the UK after closing a deal to buy SSE Energy Services, the retail arm of SSE.
The two companies have confirmed that Ovo will pay £500 million to acquire SSE’s GB household energy and services business that serves around 3.5 million customers. The deal comes almost a year after a proposed merger between SSE’s and Npower’s retail business units fell apart.
Ovo currently serves around 1.5 million customers and said that the deal would accelerate its ambitions. “This transaction marks a significant moment for the energy industry,” said Stephen Fitzpatrick, CEO and founder of Ovo. “Advances in technology, the falling cost of renewable energy and battery storage, the explosion of data and the urgent need to decarbonise are completely transforming the global energy system.
“For the past three years OVO has been investing heavily in scalable operating platforms, smart data capabilities and connected home services, ensuring we’re well positioned to grow and take advantage of new opportunities in a changing market.”
Ovo will pay £400 million in cash plus £100 million in loan notes for SSE’s retail unit, which provides energy, telecoms and home services.
SSE said that the sale of its domestic retail unit will enable it to focus on renewable energy generation and regulated network assets.
Ovo was launched in 2009 and has a market share of five per cent. The purchase of the SSE retail unit will increase its market share to 18 per cent, just behind Centrica-owned British Gas, with 19 per cent.
Last year Ovo announced an investment in German start-up energy supplier, 4hundred, marking a move into Europe’s energy markets.
Earlier this year Ovo secured investment from Japan’s Mitsubishi Corporation in exchange for a 20 per cent stake to help it fund future growth.