SSE to sell household supply arm to rival Ovo
SWALEC parent company SSE has agreed to sell its struggling household supply arm to smaller rival Ovo Group in a £500m deal.
The takeover will see Ovo add SSE’s 3.5 million households to its existing 1.5 million-strong customer base, catapulting it into the Big Six league of providers and second only to energy giant British Gas.
Around 8,000 staff working for the SSE energy services unit will also transfer to Ovo, which currently employs around 2,000.
SSE said it will do “all it can to ensure a smooth transition for customers
and employees”, should the deal get the go-ahead from regulators.
It is expected to complete later this year or early in 2020.
Shares in SSE rose up to 2% after the deal was announced.
It comes after SSE was forced to scrap its merger with Big Six rival npower last December after the government’s energy price cap plans sent shockwaves through the industry.
SSE said there would be no immediate impact for consumers and they would continue to see SSE branding on their bills in the meantime.
Ovo – which was founded 10 years ago – has agreed to use the SSE brand under licence for a period of time while it transfers over the bought business.
Ovo founder and chief executive Stephen Fitzpatrick said the deal was a “bold move” but insisted the group and its systems were ready.
He said: “There’s a lot of work to do, but it feels like, for us, this is the start of a new exciting chapter.
“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.”
He declined to comment on whether Ovo would cut costs across the SSE retail business after the deal.
While it will transform Ovo into one of the UK’s largest energy suppliers overnight, it will also see it take on a business that has been struggling.
SSE – currently the third-largest supplier in the UK energy market recently revealed its energy services arm suffered a 68% drop in underlying earnings to £89.6 million for the year to March 31.
Gas and electricity suppliers have come under intense pressure in the UK following this year’s introduction of the cap on standard variable tariffs, as well as increasing competition from smaller players.
In May, SSE announced plans to offload its energy services segment after more than half a million household accounts switched to a new supplier in the year to March.
The company vowed to sell or float its energy services arm by the second half of 2020.