Ovo warns of ‘material uncertainty’ over its going concern status
Household energy supplier makes disclosure after failing to meet industry regulator’s capital adequacy targets
Ovo Group has warned of “material uncertainty” over its ability to continue as a going concern, raising questions over the future of one of the UK’s largest household energy suppliers.
The company said in its latest accounts that, while it is forecast to have sufficient liquidity in the period to September 2026, there were questions over the timing and extent of a capitalisation plan to meet new regulatory requirements.
“Certain elements [of the plan] are outside of the control of the group,” Ovo added. “This creates a material uncertainty which may cast a significant doubt on the group’s . . . ability to continue as a going concern.”
Going concern warnings alert the market that, in a worst-case scenario, a company may not be able to meet its liabilities and could face insolvency.
Ovo’s accounts also show that it breached some of its covenants with lenders last year, although no action was taken against it and the facilities were fully repaid. It also took advantage of an extended payment facility with a key supplier.
Ovo, whose UK household energy division has roughly 4mn customers, said it was a “fully funded entity backed by long-standing shareholders”.
Last week Ovo confirmed it was one of three energy companies that are not yet meeting new capital buffer targets set by Ofgem, the industry regulator.
Octopus Energy, now Britain’s largest household energy supplier, is also not hitting the targets, together with another company that has not been identified.
Ovo and Octopus were both set up to challenge the dominance of the former Big Six energy suppliers such as British Gas and EDF, and have grown rapidly over the past decade.
“Capital adequacy requirements are new, and all suppliers are working with them for the first time,” an Ovo spokesperson said. “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.”
Ofgem established its capital buffer targets after 30 energy suppliers collapsed in 2021 and 2022 when they were unable to withstand a surge in wholesale prices driven by an increase in demand after the Covid pandemic.
Ovo’s newly published accounts, for the year ending December 31 2024, show that it recorded an operating loss of £108mn.
That compared with a profit of £1.1bn in 2023, with much of the swing to the loss in 2024 caused by changes in the value of Ovo’s energy trading contracts.
After repaying £400mn to lenders in January, Ovo said it has a new £60mn loan from hedge fund Cheyne Capital Management, with interest payable at 12 per cent “plus variable rate”, on a compound basis.
In a press release accompanying the accounts, Ovo said it had showed a “year of progress” in which it extended the reach of its software platform, Kaluza, to millions of customers around the world.
“We’re putting power back into the hands of customers and accelerating the transition to clean, affordable energy,” said David Buttress, chief executive of Ovo’s household energy division.