Ovo Energy is preparing a bid for rival energy supplier Bulb in a move that would consolidate the Bristol-based company’s position as one of the biggest electricity and gas providers in Britain.
Lossmaking Bulb is racing to secure its future as Britain’s energy supply sector battles against record wholesale gas and power prices.
Ten smaller competitors have collapsed since the start of August, with further consolidation expected in the coming weeks as companies that are inadequately hedged or funded struggle to buy the energy they have committed to provide to customers, as well as meeting other financial commitments.
The Financial Times reported last month that Bulb has been working with its bankers at Lazard to explore new sources of funding or a deal with a rival supplier.
The preparation of an offer for Bulb comes as Ovo, founded 12 years ago by former City trader Stephen Fitzpatrick to challenge what were known as the “Big Six” energy suppliers, remains hungry for further expansion, people familiar with the matter said.
Technology-focused Ovo was last year propelled into the top flight of energy companies when it acquired the British household supply business of SSE.
A deal for Bulb, which serves more than 1.5m households, would push Ovo’s customer numbers to about 6m, second only to Centrica.
Ovo, whose investors include Japan’s Mitsubishi, declined to comment on a potential bid for Bulb.
The company on Monday released its financial highlights for 2020 ahead of its full accounts being published at Companies House. Fitzpatrick stressed that Ovo had made strong progress in integrating the SSE business, saying: “We are now well advanced in building a technology-led, low-cost platform serving one in seven households in the UK.”
The company’s revenues surged last year to £4.5bn from £1.4bn in 2019. However, it made a £141m loss for the year after booking £110m of acquisition and restructuring costs. In May last year it said it would shed 2,600 jobs.
At the operating level, which excludes factors such as one-off costs, Ovo’s losses improved to £7m from £103m in 2019 and the company insisted it was “projected to continue on this trajectory into a strong profit in 2021”.
But a bid from Ovo is not the only option on the table for Bulb, according to people familiar with the discussions, who said Bulb was still exploring other potential fundraising opportunities.
Octopus Energy, which has also been connected with Bulb, is among several companies to have requested access to a data room set up by Lazard.
However, people familiar with the discussions said Octopus chief executive Greg Jackson, who last week secured a $600m investment from Al Gore’s sustainable investment fund, was unlikely to table a formal offer.
Bulb reiterated that it would “from time to time” look to “explore various opportunities to fund our business plans”.
“Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business,” it added.
Ovo’s interest in Bulb was first reported by The Sunday Telegraph.
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