Shell’s £500m deal to sell homes gas and electricity

Oil major buys Britain’s biggest independent power supplier

OIL major Shell has bought electricity and gas supplier First Utility in a major shake-up of the energy market.

The company is paying an undisclosed sum for the UK’s seventh-largest supplier, which has around 800,000 customers and is thought to be worth in the region of £500m.

It sets up a major battle between Shell and established major electricity suppliers such as British Gas and SSE.

The industry is already under growing pressure from challengers and is braced for a price cap. Meanwhile, German-owned Npower is due to merge with the household supply business of SSE.

Stephen Murray, energy expert at price comparison website MoneySupermarket, said the deal would help First Utility strengthen its position as a challenger to the larger firms.

He added: ‘ We need strong energy providers that have genuine ability to negotiate in the open market and deliver great deals for consumers. Competition is key.’

The deal means Shell, founded more than 100 years ago, will supply electricity to homes for the first time in its long history.

The company is attempting to adapt to a world moving away from fossil fuels.

Shell’s Mark Gainsborough said: ‘Our belief is that more and more of the energy system will be electric, and so we need to find a way into that.’

In October Shell bought motorway car-charging network New Motion amid predictions that demand for cars fuelled by electricity, rather than petrol, is set to soar.

But it also predicts a future in which more people will charge their cars at home, one reason for its interest in residential supply.

First Utility and its German subsidiary will become part of Shell’s New Energies division, which focuses on biofuels and renewable energies.

Shell’s budget for renewable energies is £1.8bn, just a small fraction of its overall funds.

Founded in 2008, First Utility has grown rapidly amid anger at high bills charged by larger energy suppliers.

It was valued at around £500m when it initially considered floating in 2012.

However, it has had a rockier time of late amid growing competition. More than 40 small, new firms are now competing for UK households, many offering knockdown tariffs.

Last year First Utility made a loss of £9.6m after tax, although its turnover climbed from £847m to £908m.

The firm already buys wholesale gas and electricity from Shell.

Last night, Darren Braham, the firm’s co- founder and chief finance officer, said: ‘This move will help us to capitalise on all the opportunities provided by digitalisation, decarbonisation, and the move to battery technology and electric vehicles.’

Major UK energy suppliers are under increasing pressure from challengers as well as a planned price cap on energy bills.

Centrica’s shares plunged to record lows last month as it warned on profits, while Npower is on course to make its third annual loss on a row.

Emma Bush, an energy expert at website uSwitch.com said: ‘ We’ll have to wait and see whether this move will further shake up what is already a very competitive market.’