Heat the Rich? Part four: OVO
Throughout October and November, Corporate Watch will be taking a critical look at the top six UK energy suppliers, in solidarity with the millions of people who are struggling to keep warm now that energy bills have risen once again.
We ask: who is profiting from supplying our energy? How much are the bosses getting paid? and how have these companies been cosying up to government?
We hope that our research can be a useful resource for those organising towards a mass non-payment of energy bills.
We will be releasing our alternative company profiles of the Big Six energy suppliers in reverse order over the coming weeks. You can see our profiles on Scottish Power, EDF and Octopus Energy here. Next up?
OVO Energy; the UK’s 3rd largest supplier
Bristol-based OVO is the third biggest UK energy supplier. The company is majority owned by its billionaire founder, and major Tory donor Stephen Fitzpatrick – who has the dubious honour of being dubbed ‘Britain’s Elon Musk’.
OVO seem to be taking the threat of an energy bill strike seriously, with Fitzpatrick taking the time to complain to the Daily Mail that the call for collective action on energy bills isn’t “the British way”.
What is it?
OVO Energy supplies electricity and gas to customers in the UK through its SSE branded division, and Boost, for its prepayment customers. Corgi HomePlan – owned by OVO Finance, provides boiler cover. OVO purchased Spark Energy in 2018, which specialises in supplying energy to landlords and letting agencies. Group subsidiary Kaluza provides software platforms for utilities.
However, OVO’s income comes overwhelmingly from gas and electricity supply, accounting for a massive £4.2 billion of its £4.5 billion revenue in 2021.
OVO sponsors the OVO Hydro in Glasgow, Scotland’s largest entertainment venue.
Where is it active?
2019 figures, the latest available, show that OVO’s Boost prepayment business had over 350,000 households on its books.
OVO Group also has subsidiaries in several other countries, including a domestic supply company in Spain. However, revenue generated outside the UK came to only £20 million in 2021, out of a total of £4.5 billion.
Who owns it?
Privately owned, OVO’s founder and ultimate owner is Stephen Fitzpatrick, who owns 68% of OVO Energy’s parent company, OVO Group Limited, via his holding company Imagination Industries Ltd. Mitsubishi Corporation owns 21% and Mayfair Olympic Holdco Limited owns 11%.
Fitzpatrick is also CEO of a ‘vertical aircraft’ business – marketing ‘flying electric taxis’ – with his stake valued at around $1 billion last year. The company is US-listed and based in the Cayman Islands, a tax haven.
The billionaire launched a cynical PR offensive at the start of September, outlining a ten-point action plan for the energy crisis. Fitzpatrick’s suggestions made it look like he was on the side of the poor, but his company profits are the real bottom line, as the government bailout measures later announced by Liz Truss and Kwasi Kwarteng will – as well as putting a temporary cap on what consumers can be charged for energy – ensure the profits of private companies like OVO by guaranteeing that the state will cover any shortfall faced by companies.
OVO Group’s accounting is creative, to say the least, which isn’t surprising for a company whose founder is a CEO of a business in the Cayman Islands. For example, OVO has come under criticism for the high fees it pays for ‘branding rights’ to Fitzpatrick’s holding company Imagination Industries Ltd. – £21 million last year.
Fitzpatrick has previously been quizzed by MPs over inter-company loans – including a £5.6 million loan from his holding company Imagination Industries, OVO’s parent company, to his ‘flying taxi’ company Vertical Aerospace, with a massive interest rate of 30%.
Similarly, questions have also been asked about loans within the group. OVO Group received £7 million in interest from Group companies in 2021 and provided £17 million of loans to OVO Holdings Ltd, an intermediary between the parent and its subsidiary OVO Energy. Interest on the loans is paid at 7% or higher.
Finally, The OVO Group has made £1.5 million in tax-deductible donations to the ‘Ovo Charitable Foundation’.
What other criticisms have been made of the company?
OVO was told to pay £8.9 million to customers in 2020 after overcharging. Inaccurate statements had been sent to more than half a million customers. Then last year the company was told to pay £2.8 million in compensation after failing to safeguard customers’ tariff prices when they switched energy suppliers.
OVO also received criticism for wrongly claiming that a customer owed £44,000 after the company had made an error reading her meter.
How much is it making?
The company reported a pre-tax profit of £370 million in 2021 (compared to a £176 million loss the previous year) however, this was largely due to a £372 million revaluation of energy derivative contracts. The underlying business made a £2 million loss, compared to a £66 million loss in 2020. It cut 1,700 jobs in January, in addition to 2,600 already lost in 2020. However, the company recently hired 500 workers in the face of a sharp rise in calls from customers. It received £17 million in furlough payments in 2020.
The company has £2.3 billion in assets. As of 31 December 2021, OVO had £300,000 of loans outstanding to directors,
Bailed out by the state
Recently published accounts suggested that until the government announced support for energy bills, the company had been concerned that it would breach financial requirements this year, putting the company’s future in doubt. It blamed households being unable to pay their bills, leading to an increase in “bad debt” as a factor. However, when the accounts were released publicly at the end of September the company said it did not expect to breach any covenants in the next 12 months, adding that the auditors had raised concerns in June over the impact of “market uncertainties” but government and regulatory action had created “more certainty”.
Who runs it?
CEO and owner Stephen Fitzpatrick donated £185,000 to the Conservative Party in the first quarter of 2019, making him one of the largest donors in the period running up to Boris Johnson’s re-election that December, at a time when Labour’s policy was to nationalise energy. Most of the donation was paid via his company Imagination Industries Incubator, whose parent Imagination Industries Ltd. receives payments for branding rights from OVO.
OVO Group’s highest-paid director in 2021 received £558,000.
The CEO of OVO’s Retail arm, Raman Bhatia, was previously the Head of Digital Bank for HSBC Retail Banking and Wealth Management in the UK and Europe, serving on the Executive Committee where he led on risk management. HSBC has been fined billions for a variety of breaches including money laundering regulations. Earlier in his career, he worked as a management consultant at Bain, an investment firm that has been accused of ‘vampire capitalism’ for its asset-stripping activities. Bhatia has previously spoken at a panel at the Conservative Party conference.
Stephen Murphy, Chairman of the OVO Group board, was previously CEO of the Virgin Group from 2005 to 2011.
Last year OVO Energy’s highest-paid director, then believed to be Adrian Letts, whose tenure as Chief Executive ended early this year, received £644,000 including pension contributions. In the previous year, the highest-paid director received £327,000.
In total OVO’s directors were paid over £2.4 million in 2021, taking into account pensions and other payments this totalled over £3 million.
Does OVO have a close relationship with government?
According to Transparency International, OVO has taken part in 38 meetings with UK government ministers since 2012. A great many of these meetings were with Kwasi Kwarteng, who – during his brief stint as Chancellor of the Exchequer in Autumn 2022 – worked on the Tory energy bailout package. OVO had a private meeting with Kwarteng to discuss energy retail issues in June 2022.
Jonson Cox, a director at OVO Finance, OVO’s immediate parent company, chaired UK water regulator Ofwat from 2012-2020. Previously he had held senior positions at two water companies.
HQ: 1 Rivergate, Temple Quay Bristol, BS1 6ED
Read Full article from Corporate Watch: https://corporatewatch.org/ovo/