Utility Week

6 | 27TH SEPTEMBER - 3RD OCTOBER 2019 | UTILITY WEEK News Inside story I t was the best of times, it was the worst of times, it was a week in which two big energy sector deals told a very di erent story about life in the retail space. For one, Ovo Energy, it was a bold move towards the future with the acquisition of SSE's retail busi- ness, which overnight turned the challenger brand into a heavy weight. The other deal – Eon's acquisition of Innogy – saw Eon also take on Innogy's UK energy retail brand and big six player Npower, despite not really want- ing the loss-making business. One deal was perhaps a sign of the times and re‚ ected one of the success stories of the sector, the other less so. When Ovo Energy snapped up the retail arm of big six player SSE for £500 million, industry observers agreed that it got a good discount. Some estimates are that it paid no more than two-thirds of the book value (see analysis, p18). SSE had been trying for some time to get rid of its retail business in order to focus on other areas such as networks and renewables. Indeed, in December 2018 it unveiled a plan to merge its retail business with Innogy's Npower. The second part of that plan would see Eon acquire the rest of Innogy. However the wheels came o that deal following the introduction of the price cap on standard variable tari s, A tale of twodeals While an exultant Ovo leapt into the big time with its surprise bid for SSE's retail business, Eon moved to take on fellow big six brand Npower and could hardly have sounded less enthusiastic about it. Adam John reports. How big are the big six? We all know the big six are big, but how do we calcu- late just how big they are? Furthermore, with the two deals in the o ng, the big six will soon become the big ve. What will the market look like then? We thought these would be easy enough ques- tions to answer but it has not been straightforward. There are a number of di• erent metrics for meas- uring company size. To paraphrase the great Eric Morecambe, we have all the right companies, just not necessarily in the right order. More o€ en than not the number of customers a company has will be counted towards its size, but some would say this is irrelevant and that customer accounts are what is important. Yet getting hold of the number of accounts each large energy supplier has is a di cult task. One supplier, which will remain nameless, said it did not break down its data into customer accounts. Yet if we look at the market share of each company, we can make a list of suppliers from the largest to the smallest. Or smallest largest, if you will. A€ er analysing data from Ofgem, automated switching service Look A€ er My Bills put the electric- ity and gas market shares of suppliers into pie charts. In the most up-to-date data of current electricity market shares, British Gas is ahead of all other sup- pliers at 19 per cent. Yet if we consider the recently announced deals that are planned for the market, we start to see a di• erent picture, with Eon taking the top spot, British Gas pushed into second place and Ovo Energy in third. In terms of electricity market share, this means that ranked largest to smallest, the big ve will be: • Eon (20 per cent) • British Gas (19 per cent) • Ovo (18 per cent) • EDF (11 per cent) • Scottish Power (10 per cent) The gas market, however, is a slightly di• erent beast and British Gas is clearly the gas giant, with a 28 per cent share. Even if the planned acquisitions go ahead, the Centrica-owned energy supplier still retains the top spot. Eon moves into second place with a 17 per cent share while Ovo takes third with 15 per cent. Therefore in terms of gas market share, the big ve will be: • British Gas (28 per cent) • Eon (17 per cent) • Ovo (15 per cent) • EDF and Scottish Power (8 per cent) Needless to say, it is a statistical mine eld. AJ "This transaction marks a signifi cant moment for the energy industry. SSE and Ovo are a great fi t. They share our values on sustainability and serving customers." Stephen Fitzpatrick, chief executive, Ovo Energy

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