One of Britain's largest energy suppliers, OVO Energy, has issued a stark warning about its financial future, flagging a "material uncertainty" over its ability to continue as a going concern. The company, which serves around four million customers, is also poised to cut approximately 200 jobs as part of a cost-saving drive.
Leadership Exodus and Regulatory Shortfall
The warning comes amidst significant leadership changes and a failure to meet new financial resilience rules. David Buttress, the former Just Eat chief, stepped down as OVO's CEO after just 18 months. He departed alongside Chief Financial Officer James Davies, who had been in the role for little over a year after joining from Monzo.
More critically, OVO's latest accounts reveal the company fell short of Ofgem's new capital adequacy targets, which came into force in April. These rules, introduced after the 2021-22 energy crisis, require suppliers to hold a buffer of £115 in adjusted net assets per dual-fuel customer to ensure they can withstand market shocks.
A Plan to Regain Compliance
OVO has submitted a plan to the industry regulator, Ofgem, outlining how it intends to meet these financial standards. The proposed redundancies form part of this strategy to save millions of pounds. In its accounts, the company stated it is "committed to improving its capital position" and is working on a "capitalisation plan."
However, OVO added a significant caveat, noting "uncertainty around the timing and extent" of this plan due to elements outside its control. This admission directly led to the warning about a "material uncertainty" casting doubt on the group's future.
Broader Industry Concerns and Rival Criticism
OVO is not alone in missing the target. Britain's biggest supplier, Octopus Energy, and another unnamed company are also non-compliant. This has sparked complaints from rival firms about an unlevel playing field. Chris O'Shea, CEO of British Gas owner Centrica, called in July for suppliers failing the rules to be banned from taking on new customers, accusing Ofgem of not upholding its own regulations.
Ofgem's position is that firms with an agreed plan to meet the targets are not in breach of its rules and therefore face no immediate sanctions. A spokesperson confirmed, "We expect suppliers to deliver on agreed plans and adhere to any restrictions we put in place."
The financial figures underscore the challenge. OVO tumbled to a £167 million underlying pre-tax loss in 2024, a dramatic reversal from profits of £1.1 billion the previous year. The 2023 results were notably boosted by Ofgem allowing suppliers to recover crisis-related costs.
An OVO spokesperson sought to reassure customers, stating: "Ovo is a fully funded entity backed by longstanding shareholders... This is not a reflection on our ability to serve our customers." They emphasised the company's focus on "bringing innovation and long term investment to the sector," while confirming full consultation and support for affected staff.
