Lights out for Bulb? OVO plans takeover bid

October 11, 2021

2 min read

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What's going on here?

OVO Energy is making plans to make a bid for Bulb, the sixth largest energy company in the UK and one of OVO’s rivals, only two weeks after Bulb sought a bailout to avoid becoming yet another energy company to go out of business.

What does this mean?

Bristol-based OVO was founded in 2009 by a former City trader who had the ambition of disrupting the “Big Six” – the top market-dominating suppliers at the time. Today, OVO is the second largest energy supplier in the UK with a customer base currently standing at 4.5m, with only British Gas coming out above it.

Bulb is one of many smaller UK energy companies with approximately 1.7m customers, supplying 100% renewable energy and carbon neutral gas. Founded in 2015, Bulb grew rapidly, attracting 1m customers, permitting it to expand to France, Spain and Texas. As one of many energy companies affected by the sector’s troubles, Bulb sought a bailout in late September. Prior to Bulb’s call for help, it was criticised for hiking prices by 80%. Martin Lewis (founder of consumer advice website MoneySavingExpert.com) spoke out against Bulb’s recent “outrageous” demands for direct debit payments. 

Octopus Energy is also rumoured to be interested in bidding for Bulb, who is its industry rival.

What's the big picture effect?

Amidst the UK energy sector meltdown, several UK energy firms have gone bust (read more about this here) prompting energy watchdog Ofgem to transfer customers from companies such as Igloo Energy and Symbio Energy over to larger companies like E.ON under Ofgem’s “supplier of last resort” programme. Reports suggest that nearly 40 further energy companies could go out of business over winter, leaving just 10 operating. 

Government plans involve taking Ofgem’s “supplier of last resort” scheme forward, the idea being that the larger companies absorb the smaller players. Political commentators such as former energy secretary and current leader of the Liberal Democrat party Sir Ed Davey have criticised these plans as “lamentable”, stating the focus should instead shift to problems such as poor insulation in British homes. In addition, further commentators have expressed a lack of faith in current Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng. 

News of bids such as OVO’s foment existing consumer fears of a shortage-laden winter, with energy prices rumoured to rise further. An upcoming review into the current energy price cap in the UK is soon to be carried out by Ofgem amid such fears, which will also consider the business models of British energy companies. Indeed, a director from Ofgem stated consumers have no need to worry, highlighting that supplies will continue as normal. 

Certain commentators are suspiciously anticipating the outcome of Ofgem’s review, following their criticism of the government regulator for not listening to earlier warnings about the energy market’s fragility. It therefore remains to be seen whether Ofgem can provide a solution to the crisis. In the meantime, it is likely that large companies such as OVO will continue to plan the absorption of their smaller competitors such as Bulb.

Report written by Edie Essex Barrett

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