Ovo investors up stake as firm records £1.3bn loss

Two of Ovo’s major investors have increased their shareholding in the company after it posted a £1.3 billion loss for 2022.

Following what was described by company chief executive Raman Bhatia as “one of the most challenging years for the sector” Mayfair Equity Partners and Morgan Stanley Investment Management upped their stake in a transaction worth £200 million.

Ovo has since been transferred to a newly incorporated entity, Energy Transitions Holdings, of which founder Stephen Fitzpatrick is a shareholder as is Mayfair, Morgan Stanley and Mitsubishi Corporation.

Announcing its results for year ending 31 December the company, one of Britain’s largest energy retailers, actually saw its revenues increase by more than £2 billion to £6.7 billion.

Yet profits plummeted from £335 million in 2021 to a loss of £1.275 billion.

Ovo attributed the loss in part to falling wholesale prices which resulted in the value of its hedges decreasing. While this results in a large loss for 2022, the company said it will reverse once customers begin using the energy in the future.

The company blamed its adjusted operating loss of £96 million on the absorption of customer costs during a period of record high energy prices, including £50 million in support that it administered.

Last year reports emerged in the Financial Times that Ovo had feared breaching its financial covenants prior to government support being announced for the sector, with worries about a build-up of customer bad debt.

In its financial report however, the company said it “has remained compliant with all of its financial covenants under its financing arrangements and energy trading arrangements”.

Responding to the results Bhatia said: “2022 was one of the most challenging years for the sector. We saw unprecedented volatility in energy prices that resulted in higher bills for customers.

“Despite these challenges, we continued to prioritise our customers who need us most with a £50 million customer support package. We have also made significant progress integrating SSE Energy Services customers onto our Kaluza technology platform, giving them a better online experience.

“We are in a solid position to create further value for customers, with a focus on continuing to invest in the technology and services that customers really need to decarbonise their homes.”

Daniel Sasaki, managing partner at Mayfair Equity Partners, said: ”While Ovo has become one of the UK’s largest independent energy suppliers, it maintains a challenger mindset, which is underpinned by the culture and capabilities of a world class technology business.

“We are happy to extend our partnership with Ovo as it continues to innovate and redefine the energy market.”

Vikram Raju, head of private equity climate investing at Morgan Stanley Investment Management, added: “Ovo has played a pivotal role in transforming the UK energy sector by bringing the green transition to the British consumer and meaningfully reducing CO2e emissions as we rapidly approach a 2050 net zero target.

“We look forward to continuing to contribute to the decarbonisation of the energy system by extending our partnership with Ovo.”

Bhatia added: “Mayfair Equity Partners and Morgan Stanley Investment Management’s increased investment and ongoing support mark an important moment for OVO.

“Despite the challenges of the energy market, it highlights the potential for growth while we focus our efforts on delivering value to UK energy customers while helping them to decarbonise.

“We are delighted that Mayfair Equity Partners and Morgan Stanley Investment Management have chosen to support OVO’s strategy as we grow, innovate, and deliver best-in-class customer service.”