Ovo Energy is cutting millions from its budget to meet Ofgem’s tougher financial rules and convince investors of its stability as it struggles to raise new funding.
Ovo Energy is preparing to cut tens of millions of pounds from its budget as part of a radical plan to stabilise its finances and satisfy the energy regulator, Ofgem.
The country’s fourth-largest gas and electricity supplier, serving around four million customers, is seeking to convince regulators and investors of its long-term viability by reducing spending across advertising, marketing, and brand sponsorships.
The cost-cutting drive comes as Ovo founder Stephen Fitzpatrick scrambles to meet new financial requirements imposed by Ofgem following the collapse of dozens of smaller suppliers during the 2022 energy crisis. The new rules oblige large providers to hold a specific amount of cash based on their customer numbers – a figure believed to run into hundreds of millions of pounds for Ovo.
The changes have made it harder for the company to attract outside investment. Bankers at Rothschild are overseeing Ovo’s search for £300m in new funding, but industry sources say that potential investors have been deterred by the firm’s regulatory difficulties.
Embed from Getty Images
The uncertainty has prompted Ovo to cut spending instead. The move raises questions about the future of its high-profile sponsorships, including the Wembley Ovo Arena.
Details of the survival plan have emerged after the sudden departures of chief executive David Buttress and chief financial officer James Davies last week. Chris Houghton, who replaced Mr Buttress as chief executive, is now leading the business alongside chair Dame Jayne-Anne Gadhia, the former Virgin Money boss.
Ovo confirmed it is in active discussions with Ofgem to finalise its revised business plan. The regulator is said to be closely monitoring the company’s financial position under its new regime.
In a further blow to confidence, Mayfair Equity Partners, Ovo’s second-largest shareholder, is reportedly looking to sell its 30% stake. The private equity firm first invested in Ovo in 2015, six years after Mr Fitzpatrick founded the company.
Ovo has been seeking new investment for months. Talks with Iberdrola, the owner of Scottish Power, over a possible merger failed to reach agreement, while a separate approach from Norwegian investment group Verdane was also abandoned.
Despite recent losses of £135m and warnings over its ability to remain solvent, the company still paid £27m last year to a Fitzpatrick-owned firm under a royalty deal, although Ofgem’s latest financial rules have since restricted such payments.
The energy supplier insists it is not at immediate risk of collapse but is under mounting pressure after a string of recent failures in the sector. Two smaller firms, Rebel Energy and Tomato Energy, have gone under in recent months, together affecting more than 100,000 customers.
Ovo also attracted controversy last month after doubling costs for electric vehicle customers. Under its new tariff, drivers will pay 14p per kilowatt hour to charge their cars – up from 7p – unless they sign up for a monthly plan of at least £27.50. The move was met with criticism from customers, though the company claimed it was designed to simplify payments rather than raise revenue.
Founded in 2009, Ovo remains one of the UK’s largest independent suppliers. But with new leadership, investor pressure, and regulatory scrutiny intensifying, the company faces its toughest test yet as it races to prove its financial resilience.