UK's Octopus Energy seizes bigger slice of energy retail market

© Reuters.

By Nina Chestney

LONDON (Reuters) - Octopus Energy Ltd is now the fifth biggest power supplier in the UK after taking on new customers which increased its revenues last year following the collapse of smaller suppliers.

Octopus reported energy supply revenues of 1.9 billion pounds ($2.6 billion) to April 30 2021, versus 1.2 billion in the same period a year before, as its customer base rose to 2.1 million, it said in full-year results on Saturday.

The privately held company, part of the Octopus Energy Group, now has more than three million customers, ranking it the fifth largest energy retailer in the UK after Centrica (LON:CNA)'s British Gas, OVO Energy, E.ON, and EDF (PA:EDF)'s EDF Energy.

Octopus posted an operating loss of nearly 85 million pounds last year, compared to a loss of nearly 50 million in 2020, which it said reflected continued re-investment.

After taking out customer acquisition costs and exceptionals, the loss was around 1 million pounds, it added.

Natural gas and power prices in Europe have spiked this year as economies reopened from COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down supplies to Europe.

More than 25 British suppliers have collapsed since the start of 2021 due to rising wholesale gas and power prices, poor forward power sales hedging and because a price cap prevented them from passing on rising costs to customers, forcing millions of households to be passed onto new suppliers.

"The company expects to incur around 100 million pounds of losses as it absorbs the impact of the energy crisis on behalf of customers," Octopus Energy Group said in a statement.

Octopus Energy Ltd, which supplies gas and renewable electricity, said it follows a sophisticated hedging policy, making forward commitments for power and gas delivery for each customer that is acquired or renewed onto a fixed price contract.

Traditional suppliers hedge their customers’ needs well in advance, but some of the smaller players avoided that strategy to give them greater price flexibility to try to profit from arbitrage between wholesale and retail prices.

Octopus Energy Group, backed by Octopus Investments, said it halved its operating loss across the group to 31 million pounds last year from of 63 million pounds in 2020.

The group's revenues increased by 62% year-on-year to 2 billion pounds due to energy supply growth and licensing from its software and technology platform, Kraken.

It also said it has acquired Plüm énergie, a French start-up firm which currently looks after almost 100,000 energy accounts, from retail customers and large companies to local authorities.

($1 = 0.7453 pounds)