A Norwegian investment group has abandoned talks about an investment in Ovo, one of Britain’s biggest energy suppliers, amid concern that the industry’s regulatory regime is obstructing efforts to attract new capital.
Sky News has learnt that 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.
Sources said on Tuesday, however, that Verdane had withdrawn from the talks partly as a result of uncertainty prompted by the energy regulator Ofgem’s capital adequacy rules.
Ovo acknowledged earlier this month 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.”
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The quest to raise roughly £300m of new equity at Ovo has been ongoing for months, with bankers at Rothschild engaging in talks with numerous financial investors.
In June, Sky News revealed that Iberdrola, the owner of Scottish Power, had also held tentative discussions about a possible tie-up.
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Other parties are said to remain in talks.
Ovo, which is backed by investors including Japan’s Mitsubishi and the London-based investor Mayfair Equity Partners, disclosed in accounts published last month 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.
A spokesperson for Ofgem said: “Regulation needs to be backing growth, not blocking it.
“We are focused on creating a consistent and predictable regulatory environment that will attract investment and further increase the stability of the energy market.”
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A person close to the situation said 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 has just under 4m retail customers, making it one of the UK’s biggest householder energy suppliers.
The company recently named Dame Jayne-Anne Gadhia, the former boss of Virgin Money, as the independent chair of its retail arm.
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Founded by Stephen Fitzpatrick, the entrepreneur who now owns London’s Kensington Roof Gardens, Ovo’s other shareholders include Morgan Stanley Investment Management.
Under Mr Fitzpatrick, who launched Ovo 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.
The group is now run by David Buttress, who was briefly Boris Johnson’s cost-of-living tsar after leaving the top job at Just Eat, as its chief executive.
Ovo and Verdane both declined to comment.
