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UK energy supplier Ovo Group increased its profits 11-fold last year, after the regulator intervened to allow companies to recoup rising costs in the wake of Russia’s invasion of Ukraine.
Ovo Group, which owns UK household supplier Ovo Energy as well as energy software company Kaluza, reported adjusted earnings (ebitda) of £225mn in the year to the end of December 2023 on revenues of £8.7bn.
That was up from £20mn on revenues of £6.7bn in 2022, according to newly published accounts.
The Bristol-based company said the improvement was mainly due to the UK energy regulator Ofgem allowing companies to recoup from customers in 2023 the costs of buying energy in 2022 and late 2021, when wholesale prices soared due to worries about gas shortages in the run-up to and after the Russian invasion.
Several other large suppliers have reported a surge in profits during 2023 because of that mechanism, including British Gas which posted adjusted operating profits of £969mn for the first half of 2023, up from £98mn in the same period the year before.
Ovo is controlled by its founder Stephen Fitzpatrick, who set up the company in 2009 as a challenger to the “Big Six” energy suppliers such as British Gas. Its other shareholders are Mayfair Equity Partners and Mitsubishi Corporation.
Ovo Energy became the UK’s third-largest supplier in 2020 after buying the retail supply division of SSE. But it has since been overtaken on market share by rival Octopus Energy.
It is now the UK’s fourth largest supplier with about 4mn customers. Earlier this year, it appointed former Sainsbury’s chief executive Justin King as its non-executive chair.
The £225mn adjusted ebitda figure strips out the value of energy Ovo buys in advance to hedge its supply commitments. Its unadjusted results show a swing from a £1.3bn loss in 2022 to a £817mn profit in 2023.
Its results are published at a sensitive time for the sector. The UK price cap on household energy bills has fallen more than 60 per cent since the start of 2023 at the height of the energy crisis, as wholesale gas prices have fallen. But the cap is expected to increase by 10 per cent in October following a recovery in wholesale gas prices.
Household energy companies including Ovo were summoned to a meeting with the government last week to discuss what more they could do to prevent customers getting into debt from energy bills.
Commenting on the results, Ovo chief executive David Buttress said he wanted to “invest in the technology and services that help customers upgrade their homes and reduce their reliance on fossil fuels, while keeping their bills down”.
King said: “Whether they are looking to charge their car on the street or save money on their heating, we want to make things easier, helping people to spend less.”