German energy giant Eon has confirmed it will buy challenger Ovo in a deal that will create Britain’s largest energy supplier.
The deal between the two firms solidifies the shift towards a small number of suppliers having a firm grip on Britain’s energy market once again, as challengers struggle with rising costs.
Eon supplies around 5.6million customers in the UK and the acquisition of Ovo will add a further four million.
This will give the combined group a 28 per cent share of the British electricity market, ahead of rival Octopus Energy at 25 per cent.
The number of energy suppliers reached a peak of 70 in 2018, before collapsing to 22 by the end of 2022, following Russia’s invasion of Ukraine. There are now just 17.
Eon is set to buy Ovo to create the country’s largest electricity supplier
It comes after mounting financial pressure on Ovo, which last year flagged ‘material uncertainty’ over its ability to continue trading as it fell short of the regulator’s financial resilience targets.
In a statement, Ovo said the energy market had undergone ‘significant change in recent years’, and regulatory changes had ‘altered the economics of the sector’.
It added that the future of the market will ‘favour greater scale and access to long-term capital’.
The German-headquartered Eon said the deal would help to ‘strengthen its position in one of Europe’s largest energy markets.’
It follows years of financial pressure on Ovo, which was set up in 2009 to disrupt a market dominated by just a few companies.
In 2024, Ovo booked a net loss of £135million and said there was uncertainty over whether it could meet targets by regulator Ofgem.
Following the collapse of several suppliers in 2022, energy suppliers must now ensure they have stronger financial buffers.
Last year, chief executive David Buttress stepped down amid hundreds of redundancies in a cost-cutting drive.
Until the deal is approved, which is expected later this year, Ovo and Eon will continue to operate as separate companies and all tariffs would be ‘honoured in full’.
The firms did not disclose the value of the deal, although previous reports suggested it could be as much as £600million.
Stephen Fitzpatrick, Founder of OVO, said: ‘Energy retail is now more regulated, more capital intensive and increasingly dependent on long-term investment and scale.
‘In that context, bringing OVO together with E.ON is the right next step for customers, for colleagues, and for the long-term commitment that decarbonisation requires.’
Ovo also agreed to sell its Home Services business, which provides boiler insurance and boiler servicing, to Hometree, subject to regulatory approval.
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