Octopus Energy to buy Shell’s UK household supply division

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Octopus Energy has struck a deal to buy Shell’s household energy supply businesses in the UK and Germany, the latest step in its rapid expansion less than a decade after it was founded. 

London-based Octopus is to take on 100,000 additional household energy customers in Germany and 1.4mn in the UK as a result of the acquisition. The deal will make it the UK’s second largest supplier with 6.5mn customers, behind only Centrica-owned British Gas. The value of the transaction has not been disclosed.

Octopus’s latest deal comes less than one year after the privately owned company took on the 1.5mn customers left behind by UK rival Bulb, which collapsed in November 2021.

Shell entered the UK household supply market in February 2018 when the FTSE 100 group bought First Utility. The move was part of a push by then-chief executive Ben van Beurden to diversify the oil and gas company beyond fossil fuel production and anticipate the shift towards electric cars charged at home.

However, the UK retail energy supply sector has proved tough for many companies. Several executives have complained that a price cap on energy bills introduced in 2019 has made it difficult to turn a profit. 

Shell put the business under review at the start of this year, citing “tough market conditions”. Its recently appointed chief executive, Wael Sawan, has promised to be “ruthless” in pursuing higher shareholder returns and plans to devote a higher proportion of the company’s total expenditure to oil and gas.

Announcing the deal with Octopus on Friday, Shell executive vice-president Steve Hill said the company was “prioritising countries, projects and routes to market where we can deliver the most value”.

Shell also said on Friday that it was winding down its smaller household supply business in the Netherlands, which has about 3,000 customers.

The company still has household supply businesses in the US and Australia, where it serves a combined total of about 420,000 customers.

As part of the sale, Shell and Octopus have also agreed to explore what they described as a “potential international partnership” on electric vehicle charging. Shell wants to develop a global network of around 200,000 public charging points by 2030.

Octopus, founded in 2015, is part of a set of challenger companies established during the 2010s to challenge the dominance of the Big Six suppliers such as British Gas and EDF.

The results of that push for competition — encouraged by regulator Ofgem — have been mixed, however. Octopus and rival Ovo are now among the UK’s largest suppliers, but rival Bulb was the largest of 30 that collapsed in late 2021 and early 2022 following the sharp rise in wholesale gas prices. 

Octopus is backed by investors including Japanese utility Tokyo Gas, Australia-listed Origin Energy, and Generation Investment Management, the investment group chaired by Al Gore. 

Greg Jackson, founder and chief executive, said he was “pleased” to buy Shell’s businesses and that Octopus’s “commitment to customers” was “paramount”.

Octopus Energy is also taking on Shell’s roughly 500,000 UK broadband customers.

The acquisition, which is subject to regulatory approval, is due to complete by the end of the year.

Shell’s UK household energy supply business generated revenue of £1.3bn and a pre-tax loss of £111.6mn in the year ending December 2021, the latest year for which accounts are available. 

Octopus, in its latest accounts, reported revenue of £3.9bn and a pre-tax loss of £180.8mn for the year ending April 2022.