After what has seemed like an eternity, SSE (LSE: SSE) looks to be finally able to draw a line under its attempts to offload its consumer business. An upstart challenger, Ovo, run by 41-year old Stephen Fitzpatrick has agreed to buy SSE’s retail business for £500m.
Once the deal is completed, which is expected to be completed by early next 2020 at the latest, Ovo will leapfrog many of the Big Six energy companies to become the UK’s second largest energy supplier.
Ovo, which only came into existence a decade ago, already had 1.5m customers. This will now expand by 3.5m when SSE’s customer base is included.
A previous attempt by SSE to merge with Npower, earlier this year, was called off because of challenging market conditions. The company has been looking to get rid of the consumer arm to concentrate on the networks and energy production side of the business which includes activities such as running wind farms.
Announcing the sale of the business to Ovo, 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.
“I’m confident that this is the best outcome for the SSE Energy Services business.”
The founder and chief executive of Ovo, Stephen Fitzpatrick, described the deal as a “significant moment for the energy industry”.
“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.”
According to the London Evening Standard, Fitzpatrick first approached SSE’s finance chief Gregor Alexander “almost straight away” after SSE scrapped its plan to merge its retail business with rival Npower last December.
RBC analyst John Musk said the deal “leaves SSE with a cleaner structure, allowing it to focus on two core segments of networks and renewables”.