Energy giant SSE has agreed to sell its household supply business to independent provider Ovo Group in a £500m deal.
The takeover move by the smaller rival, first revealed by Daily Week News last month, is expected to be finalised later this year or early in 2020.
It paves the way for SSE’s exit from the challenged UK energy retail market and catapults Ovo into the big league of British power suppliers.
SSE says it will do all it can to ‘ensure a smooth transition’ for customers and staff
It makes Ovo, founded just a decade ago, the biggest energy supplier in the UK after British Gas, with around five million customers.
The sale comes after SSE said it would seek “an alternative transaction” for its energy services business after scrapping a merger with its rival “big six” supplier npower.
Gas and electricity suppliers have come under intense pressure in the UK following the introduction of the cap on standard variable tariffs, as well as increasing competition from a number of smaller players.
SSE said that, should the deal with Ovo go through, it will do “all it can to ensure a smooth transition for customers and employees”.
SSE chief executive Alistair Phillips-Davies said: “We have long believed that a dedicated, focused and independent retailer will ultimately best serve customers, employees and other stakeholders – and this is an excellent opportunity to make that happen.
“Ovo shares our relentless focus on customer service and has a bold vision for how technology can reshape the future of the industry.
“I’m confident that this is the best outcome for the SSE Energy Services business.”
Stephen Fitzpatrick, founder and chief executive of Ovo, hailed the deal as a “significant moment for the energy industry”.
He said: “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 in a changing market.
“SSE and Ovo are a great fit. They share our values on sustainability and serving customers. They’ve built an excellent team that I’m really looking forward to working with.”
The sale comes after a tough year for SSE, which admitted upon reporting its annual results recently that its wider business “fell well short” of its hopes in 2018-19 and warned its 2019-20 earnings would also be hit.
Stephen Murray, energy expert at MoneySuperMarket said: “It’s well known that SSE has been looking to offload its retail energy arm for a while, so today’s news comes as no surprise.
“Its planned merger with npower fell by the wayside at the end of last year and in Ovo it now seems to have found a potential solution.
“The likes of Ovo, Shell, Bulb and Octopus mean there’s a base of emerging suppliers who are continuing to challenge the big six in the domestic energy market and can fill the void left by SSE deciding to focus on other parts of its business.”