- Supplier is UK’s fourth-largest and has 4million customers
The future of one of Britain’s biggest gas and electricity suppliers could be at risk after bosses flagged a ‘material uncertainty’ over its ability to continue as a going concern.
Ovo Energy, which has four million customers in the UK and is the sponsor of Wembley Arena, is working with regulator Ofgem to bolster its balance sheet to meet capital adequacy requirements that came in at the end of March.
The group is understood to be one of three suppliers, alongside Octopus Energy, that have so far failed to adhere to the new financial resilience standards, The Times reported earlier this year.
Following the collapse of several suppliers in the wake of Russia’s invasion of Ukraine, energy suppliers must now ensure they have stronger financial buffers. They must achieve a capital target of £115 adjusted net assets per dual-fuel equivalent customer.
Ovo also said its performance had been affected by more customers falling into debt on their energy bills in recent years as costs spiked.
‘Uncertainty’: Ovo Energy slumped to a statutory loss before tax of £110million in 2024
It said: ‘The level and structure of operational expenditure and bad debt allowances in the price cap has the potential to adversely affect our financial position.
‘And cost of living and pricing pressures continue to impact levels of bad debt.
‘We’ve delivered initiatives to improve our understanding of customer debt risk, provide debt support to customers earlier, and to encourage the use of direct debit but delays in the restart of warrant visits have affected debt recovery.’
Newly published accounts show Ovo Energy slumped to a statutory loss before tax of £110million in 2024, down from profit of £810million last year, as it moved from a £379million net cash position to holding £3million in overdrafts.
Losses were partly driven by the re-measurement of derivatives contracts, financing costs, and the impact of depreciation and amortisation.
The results came during a year of leadership change at Ovo Energy, which brought in Justin King as non-executive chair, David Buttress as chief executive, and James Davies as chief financial officer.
Ovo bought the brand from its founder Stephen Fitzpatrick, who remains the majority shareholder, in January in exchange for £150million in shares.
Ovo said there is uncertainty over the ‘timing and extent of the implementation of a capitalisation plan’, which it warned it dependent ‘on factors outside the control of the group’.
But it said it had ‘taken actions to strengthen its balance sheet’ over the second half of 2024 and the first half of 2025, and it is ‘working closely with Ofgem to deliver a capitalisation plan to meet the minimum capital requirement’.
Efforts include a £235million capital injection from its parent company via a new share issuance.
Ovo Energy said: ‘The group is committed to improving its capital position and is working closely with Ofgem to deliver a capitalisation plan to meet the minimum capital requirement.
‘The directors acknowledged a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.
‘This uncertainty arises from the timing and extent of the implementation of a capitalisation plan, which depends on factors outside the control of the group.’
In a separate statement, a spokesperson said: ‘OVO is a fully funded entity backed by longstanding shareholders and with ongoing facilities from the likes of Shell.
‘Capital adequacy requirements are new, and all suppliers are working with them for the first time.
‘This is not a reflection on our ability to serve our customers or on performance this year and we will continue to focus on bringing innovation and long term investment to the sector.’
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .