Ovo Energy, one of Britain’s biggest domestic gas and electricity suppliers, is preparing to take an axe to its workforce next week as part of efforts to convince regulators that it has a viable turnaround plan.
Sky News has learnt that Ovo, which serves about four million customers across the UK, is drawing up proposals to cut hundreds of jobs as early as Wednesday in a bid to save millions of pounds in costs.
The redundancies – the precise scale of which could not be ascertained this weekend – are said to form part of a revised business plan submitted to Ofgem, the energy watchdog, which is focused on boosting the company’s profitability.
That plan is likely to include restrictions on taking on new customers while Ovo’s finances are placed on a sustainable footing, according to industry sources.
One insider suggested that “several hundred” jobs would be lost next week, although a spokeswoman for the company declined to quantify either the scale of the cuts or the size of Ovo’s existing workforce.
The redundancies will come less than a month after Ovo’s chief executive, David Buttress, stepped down in the middle of a search for investors willing to pump hundreds of millions of pounds into the company.
Mr Buttress, the former Just Eat chief who served a brief period as Boris Johnson’s cost-of-living tsar, has been replaced by Chris Houghton, a former Ovo boss who worked alongside its founder, Stephen Fitzpatrick.
Former Virgin Money chief Dame Jayne-Anne Gadhia was recently named chair of Ovo’s retail energy arm.
Ovo’s customer base places it behind Octopus Energy and Centrica-owned British Gas in the household energy supply market, but it remains one of the most important companies in the sector.
Its quest to raise roughly £300m of new equity has been ongoing for months, with bankers at Rothschild engaging in talks with numerous financial investors.
Last month, Sky News revealed that a Norwegian investment group had abandoned talks about an investment amid concern that the industry’s regulatory regime is obstructing efforts to attract new capital.
Verdane, which is based in Oslo, had been in detailed talks as recently as this month about injecting a substantial sum into Ovo in return for a large stake in the business, while Iberdrola, the owner of Scottish Power, has also held tentative discussions about a possible tie-up.
Investor uncertainty has been heightened by the energy regulator Ofgem’s capital adequacy rules, with Ovo acknowledging recently that it – alongside larger rival Octopus Energy – had yet to fully comply with the regime, saying: “We have taken proactive measures to align with Ofgem’s new capital rules, working constructively to meet the requirements.”
Sky News reported this month that Ovo was not technically in breach of the capital adequacy regime because it had agreed a route with Ofgem to fulfilling its obligations.
Ovo, which is backed by investors including Japan’s Mitsubishi and the London-based investor Mayfair Equity Partners, disclosed in accounts published recently that there was “material uncertainty” over its future.
The company has separately engaged advisers at Arma Partners to explore the sale of a stake in Kaluza, its software arm, echoing a similar move by Octopus Energy’s Kraken division.
Alongside Mr Fitzpatrick, the entrepreneur who now owns London’s Kensington Roof Gardens, Ovo’s other shareholders include Morgan Stanley Investment Management.
Launched in 2009, the company positioned itself as a challenger brand offering superior service to the industry’s established players.
Ovo’s transformational moment came in 2020, when it bought the retail supply arm of SSE, transforming it overnight into one of Britain’s leading energy companies.
Its growth has not been without difficulties, however, particularly in relation to its challenged relationship with Ofgem and a torrent of customer complaints about overcharging.
