Ovo Energy, the UK’s seventh largest energy provider, plans to expand internationally with a £200 million cash injection from Mitsubishi Corporation.
The deal values the challenger supplier at around £1 billion after Mitsubishi has bought a 20 per cent stake in Ovo.
The “strategic investment” will be used to support Ovo’s expansion into new markets across Europe and Asia Pacific and for the development of the company’s electric vehicle (EV) charging and energy storage technology.
Ovo has also announced the launch of its “intelligent” energy technology division, Kaluza.
The new unit within the Ovo portfolio develops and manages software and hardware to support the integration of EVs and “dynamic” battery storage onto the grid.
Ovo says vehicle-to-grid and other “integration technologies” will be essential to support the energy market’s expected transition from two-thirds fossil fuels in 2017 to two-thirds renewable energy by 2050.
Ovo was founded by chief executive Stephen Fitzpatrick in 2009 to “disrupt the UK energy market”. It has grown over the past decade to become the largest of the challenger energy suppliers with more than 1.5 million customers.
Fitzpatrick said: “Transitioning away from fossil fuels is the biggest challenge we face in the 21st century. The costs of EVs, battery storage and wind and solar power have fallen dramatically in recent years, but it’s becoming increasingly complex to integrate them onto the grid.
“To succeed, we will need to develop new technology and redesign the energy system around the customer. We want to be at the forefront of that global, tech-enabled transition to a zero-carbon energy system. This investment from Mitsubishi Corporation will help us get there.”
Mitsubishi Corporation is a global integrated business enterprise headquartered in Japan, which has approximately 6,200MW of energy assets under management and operation worldwide – roughly equivalent to energy supply for 8.5 million households.
Fitzpatrick added: “Ovo and Mitsubishi Corporation share the same vision for the future of energy: secure, distributed and consumer centric, with affordable clean energy for everyone.
“We’re delighted to be working with an exceptional global partner which is perfectly placed to help us accelerate our international expansion and technology rollout.”
Katsuya Nakanishi, executive vice president, group CEO of Power Solution Group, effective 1 April 2019 of Mitsubishi Corporation, said: “Ovo’s business model, long-term vision for the energy sector and culture align well with our own. They are precisely the sort of technology driven and innovative firm we have been looking for in order to strengthen the downstream business in the energy sector.
“We have been very impressed with Stephen and his team’s plans for the business. Given our global presence and experience in the energy sector, we feel we are uniquely well placed to help Ovo to enhance not only their own business in Europe, but their international expansion plans and broaden their technology offering.”
Greentech Capital Advisors acted as the “exclusive” financial adviser to Ovo.
Commenting on the deal, Jonathan White, UK head of infrastructure at KPMG, said: “The UK’s retail energy market remains ripe for disruption. Ovo Energy has played a major role in leading change in the sector and it has built a significant challenger position, helping to improve consumer choice.
“Significantly, investments like this are not pure-play retail ones. The supply of household energy is now intrinsically tied to trends that will shape the future of the UK economy, like mobility infrastructure and low-carbon energy sources. This makes it highly likely there will be further deal-flow in this space.”