Utility Week

18 | 30TH AUGUST - 5TH SEPTEMBER 2019 | UTILITY WEEK Finance & Investment Octopus Energy has confirmed it is in discussions with "many companies" aer reports sug- gested it was seeking to acquire fellow challenger brand Co-op Energy. The challenger energy firm refused to confirm reports in The Sunday Times that it was in talks with Co-op Energy about a deal that would take it over the million-customer mark. How- ENERGY Octopus 'holds talks' with Co-op Energy over possible acquisition ever, Utility Week understands a potential takeover is being dis- cussed, with Octopus thought to see potential to drive efficiency savings relating to Co-op's acqui- sition of Flow Energy last year. Co-op Energy is owned by the Midcounties Cooperative, in whose latest annual report chief executive Phil Ponsonby said the losses within the energy busi- ness had "worsened". He added that underlying conditions in the market such as the price cap, wholesale costs and greater competition were unlikely to improve and the board had been considering a "range of options" to reduce the energy retailer's overall impact on the wider business. Last year Co-op bought struggling supplier Flow Energy in a £9.25 million deal that saw Will Eon's acquisition of Npower conclude before Brexit? It's been a busy month for M&A developments in the energy retail sector: Ovo is in talks with SSE; as Brexit nears, the European Commission is yet to approve Eon's Npower acquisition; and Octopus Energy is talking to "many companies" after reports of interest in fellow challenger Co-op Energy The European Commis- sion has refused to rule out Eon's planned acquisi- tion of Npower becoming embroiled in the fallout from a no-deal Brexit. A decision on the acqui- sition, part of the wider asset swap between RWE and Eon, which would see the latter absorb Npower's customers, was expected towards the end of Septem- ber, but no hard deadline has been set. A European Commission spokesperson confirmed earlier this month that it would not commit to a deci- sion on the deal being con- cluded by 31 October, saying it was "very technical". Until the UK's planned departure from the EU on 31 October, the deal does not need separate competition approval from the Competi- tion and Markets Authority (CMA). An industry source, how- ever, said it was "inconceiv- able" that the CMA would not have been asked its opinion by the European Commission. The source also told Utility Week that Michael Lewis, Eon's current chief executive, will continue in his role aer Npower is absorbed. "A green light from the EU Commission would allow Eon acquire the majority shareholding of Npower. However, it would still need to then buy up the remain- ing shares not owned by RWE – a process which it is thought could take anything from three to 12 months." Combining the customer bases of the two suppliers would transform the make- up of the big six, and if the much-reported potential deal between SSE and Ovo Energy takes place, the big six would become the big five. Currently Eon has around 3.8 million cus- tomers, while Npower has approximately 3.6 million. This means that Eon will have a combined total of 7.4 million customers if the deal goes ahead – making it the second-largest energy sup- plier behind Centrica-owned British Gas. A spokesperson for Eon confirmed the deal was still awaiting approval from the European Commission, aer which there were no more hurdles. In January, Eon said it did not expect "any material effect" on either the timing or delivery of the major asset swap between itself and RWE following the collapse of the proposed merger. At the time a spokes- person for German-owned Eon told Utility Week that "no decisions" had been made but that a deal was expected "not before mid- 2019". AJ ENERGY SSE considers sale of retail arm to Ovo Big six supplier SSE is in talks with challenger brand Ovo Energy over the possible sale of the energy giant's retail arm. A successful deal would see Ovo become the UK's second- largest energy supplier, with 7 million customers, behind Centrica-owned British Gas. SSE, which has 5.7 million energy customers, says it is "actively progressing" a number of options for the future of SSE Energy Services, following the collapsed merger with fellow big six supplier Npower. A spokesperson added: "These discussions are continu- ing; however, no final decisions have been taken and no agree- ments regarding the terms of any transaction have been entered into. The board remains focused on securing the best long-term future for the business, its cus- tomers and employees, and for shareholders." Ovo declined to comment. SSE's retail business has been under growing pressure in recent months, with the company los- ing 70,000 customers between 31 March and 30 June this year. In its preliminary results released in May, SSE reported an 8 per cent drop in customer accounts to 6.25 million. The merger between SSE and Innogy-owned Npower was called off at the end of last year aer the two companies failed to agree terms. EC: cannot guarantee deal will go through by 31 October Flow's 130,000 customers remain with a separate brand under its own licence and with its own tar- iffs, and when GB Energy went under in 2016, Co-op acquired its 160,000 customers. Meanwhile Octopus Energy, part of the Octopus Group, has made some high-profile acquisi- tions in recent years, including the customers of failed supplier Iresa. UTILITY WEEK CONGRESS 2019 8-9 October 2019 | Birmingham Octopus Energy chief executive Greg Jackson will be joining our CEO panel debate at Utility Week's Congress in October. For further information on the two-day event or to book your ticket, visit: uw-event.co.uk/congress This week

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