Goldman Sachs to plough £250m into energy gatecrasher OVO

Friday 30th April 2021 15:45 BST

Sky News has learnt that a private investment division of Goldman's asset management business is in advanced negotiations to inject the capital into the group.

City sources said on Friday that the deal was subject to being finalised by Goldman executives but that it could be announced within weeks.

Once confirmed, it will conclude a process that kicked off last autumn for OVO to raise capital to accelerate its expansion.

Insiders said the exact sum being raised would be between £250m and £300m, and was likely to result in Goldman owning a substantial minority stake in OVO.

The proceeds will be used to fund the company's residential decarbonisation agenda as well as grow its software platform, Kaluza, internationally.

The capital injection will represent another big bet on the vision of Stephen Fitzpatrick, OVO's founder, who established the company in 2009.

He has grown it from a standing start into one of the UK's biggest domestic utilities, with more than 5 million customers and about 8,000 employees.

OVO's growth took a decisive step forward last year when Mr Fitzpatrick finalised the £500m takeover of SSE's domestic gas and electricity supply arm.

That deal catapulted OVO into the top ranks of UK residential energy suppliers, rivalling the likes of Centrica's British Gas and Scottish Power.

Like Octopus Energy, OVO is one of a new cluster of companies which have emerged in recent years as serious challengers to a long-established industry oligopoly.

The valuation attached to Goldman's investment is expected to be between £2bn and £3bn.

It is the first external capital-raising by OVO since Japan's Mitsubishi Corporation bought a 20% stake in OVO in early 2019.

People close to the company said it would help OVO expand Kaluza, which recently announced a joint venture with AGL, Australia's biggest energy retailer and generator.

Kaluza is an intelligent energy platform which helps to optimises power usage by using artificial intelligence and machine learning, as well as simplifying vast quantities of data to improve networks' efficiency.

Mr Fitzpatrick has set out an ambitious sustainability strategy, called Plan Zero, as a contribution to the global climate change agenda.

"While the shift to renewables is driving decarbonisation of the power sector, the hard work of tackling carbon emissions in the rest of the economy, in particular the residential sector, is just beginning," he said recently.

"Ultimately, success will come down to turning consumers into willing, active participants in the energy transition.

"Companies must now focus on building trust with their customers, harnessing technology that makes zero carbon living simple and affordable for everyone."

Nomura GreenTech Capital Advisors and Barclays have been advising OVO on the capital-raising.

Last year, OVO appointed Jonson Cox, the chairman of Ofwat, Britain's water regulator, as a non-executive director of its retail board.

Mr Cox added crucial regulatory experience to the company during a period when energy suppliers are under intense scrutiny from industry watchdogs.

In January 2020, OVO was fined nearly £9m by Ofgem for issuing inaccurate statements to half a million customers between 2015 and 2018.

The new OVO Energy board, which is chaired by former Harvey Nichols boss Stacey Cartwright, encompasses customer-facing brands including the Boost, Spark and CORGI Homeplan operations.

OVO's other shareholders include the private equity firm Mayfair Equity Partners.

Spokespeople for OVO and Goldman declined to comment on the talks on Friday.

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