Octopus Energy has signed a deal with Shell to buy its UK energy arm, meaning one of Britain’s most popular suppliers will now power almost one in four homes.
The deal will require regulator approval and Shell customers were advised to “sit tight” for now, with it hoped to be formalised in the final quarter of the year.
Octopus has the highest approval rating of any UK energy supplier according to a Bain & Company survey recently, and has been Which?’s Recommended Energy Supplier for six years running.
The firm is HQd in the UK and operates in 15 countries, with major investments of up to $1bn from funds and other large energy companies.
The traditional big six energy firms were Centrica-owned British Gas, EDF Energy, EON, Npower, Scottish Power and SSE – but the rise of Octopus, and other firms like Ovo, has challenged their dominance.
The deal means the energy giant will now take on two million new home energy and broadband customers, taking the total number of customers to around 6.5m – and making it the second-biggest in the country. There ate approximately 28m households in the UK.
This comes after a drawn out process by Shell, with Octopus now the second=biggest UK supplier of energy.
If it is approved by the regulator, there may however be concerns raised about decreasing levels of customer choice, with the so-called ‘big six’ energy firms now supplying 90 per cent of the market.
Greg Jackson, CEO and founder of Octopus Energy Group, said: “Following a stringent process, we are pleased to be acquiring Shell Energy Retail in the UK and Germany.
“Octopus has proven that it delivers game-changing service whilst innovating and investing relentlessly towards a cheaper cleaner energy system. Our commitment to customers is paramount and we will do whatever it takes to deliver the Octopus promise when we welcome these new customers too.”
Steve Hill, Executive Vice-President, Shell Energy said the sale comes after a recent announcement “divest our home energy retail business in Europe.”
“To drive performance, discipline and simplification, we are prioritising countries, projects, and routes to market where we can deliver the most value. We will work closely with Octopus to ensure a seamless transition and continued high standards of customer service.”
The agreement also includes a memorandum of understanding to look at more international partnership for EV charging customers.
Natalie Mathie, energy expert at Uswitch.com, said it “will be good for customers to have more certainty about what might happen next” but “it could take some time until the deal is approved and completed.”
She added “Shell Energy’s decision to exit the market is disappointing, as it has been a well-backed challenger to the larger energy suppliers.
“It is important that there is strong competition between firms in the longer term, so suppliers cannot rest on their laurels when it comes to service quality and price.”
When asked about the value of the deal, both Shell and Octopus said they were not disclosing the information.
A spokesperson for Ofgem said: “We have been notified of the sale of Shell Energy Retail Limited (SERL) in the UK and Shell Energy Retail GmbH (SERG) in Germany to Octopus Energy Group. We will carry out our usual trade assessment processes in the coming weeks.”