Thursday 24 October 2019 8:24 am

Competition watchdog to examine £500m Ovo Energy-SSE deal

The Competition and Markets Authority (CMA) said today it was looking into whether Ovo Energy’s £500m acquisition of energy supplier SSE’s retail arm will harm competition.

SSE’s retail energy business supplies around 3.5m households in the UK.

The watchdog said it was inviting comments on the transaction from interested parties until 6 November.

Alistair Phillips-Davies, SSE chief executive, 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 and customers.”

Read more: SSE abandons takeover of rival energy provider Npower as government price cap takes its toll

Big Six energy supplier SSE agreed last month to sell its consumer business to Ovo for £400m in cash and £100m in loan notes.

The deal marks a huge expansion for challenger firm Ovo, which is the UK’s largest independent supplier. Ovo will take over SSE’s 3.5m customers, in addition to roughly 8,000 employees.

Ovo acquired another independent, Spark Energy, in October 2018, after the troubled supplier ceased trading.

If the deal with SSE goes ahead, it will make Ovo the nation’s second-biggest power supplier overnight behind only British Gas, which has 12m customers.

On Tuesday Ofgem, the energy sector regulator, proposed new rules to prevent suppliers from taking on additional customers without first proving they had the capacity to do so.

Under these regulations, suppliers would have to show they have the right resources for growth when they reach thresholds of 50,000, 150,000, 250,000 and 500,000 to 800,000 customers.

Read more: SSE in talks to sell energy retail business to Ovo Energy

SSE had previously planned to merger its retail arm with Npower which is owned by German energy giant Innogy.

The deal was approved by the CMA in August 2018 after a lengthy investigation.

However, in December the pair walked away from the deal after the introduction of an energy price cap by the government.

The two sides said they were unable to reach an agreement on revised commercial terms.

Ovo Energy declined to comment.