Sky News reported that Ovo Energy – the UK’s 4th largest residential electricity and gas supplier – plans to sell its software division, Kaluza at an “unicorn valuation”.
This move forms part of an overall strategy designed to strengthen the balance sheet for the company that serves just over four million retail clients.
Arma Partners, an investment bank, has been appointed by the company to investigate options regarding the possible sale of Kaluza. The remaining 20% is owned by the Australian energy giant AGL.
Kaluza calls itself an intelligence platform for energy and announced recently a partnership with the French energy company Engie.
According to industry sources, Ovo may seek an evaluation of Kaluza that exceeds $1 billion. Some analysts have projected valuations up to $2.5 billion on the basis of annual recurring revenues (ARR).
Kaluza is expanding its international presence. It recently acquired Australian software specialists Beige Technologies in order to increase its market share on the Asia-Pacific region.
Melissa Gander is the chief executive officer of this company.
Investor interest and financial strengthening
Ovo is also working to strengthen its overall financial situation.
Rothschild Investment Bank has held talks with investors about a capital infusion of PS300million.
Centrica, owner of British Gas and Iberdrola were both interested at one time.
Sources cited by the article said that an agreement with a third-party could be completed before the year’s end.
Ovo has, along with its competitor Octopus, struggled to comply with the new capital requirements set forth by industry regulator Ofgem.
The company said that they have “taken positive measures in order to comply with Ofgem’s new capital requirements, and are working to satisfy the requirement.”
Parallel to this, the company has recently appointed Dame Jayne Anne Gadhia as an independent chair for its retail division, signaling that it is committed to governance and oversight.
Ovo’s position on the market
Ovo was founded in 2009 by Stephen Fitzpatrick who owns London’s Kensington Roof Gardens. The company positioned itself in the UK Energy sector as a brand that would challenge established providers and offer a better level of service.
The private equity firm Mayfair Equity Partners and the Japanese conglomerate Mitsubishi Corporation are among its shareholders.
Ovo had a transformational moment in 2020 when it bought SSE’s retail business. It instantly became one of the UK’s largest energy companies.
Growth hasn’t been free of challenges.
Ofgem has inspected the company and received a number of complaints from customers, mainly regarding overcharging.
David Buttress is the new chief executive of Just Eat. He was Boris Johnson’s cost-of living tsar for a short time after leaving Just Eat.
This planned sale of Kaluza shares a trend that is gaining traction among UK energy providers. Companies like Octopus are exploring similar deals in their software divisions.
Ovo’s software assets will be leveraged by Kaluza to improve its financial stability and maintain its competitive position on the UK energy market.
The report below may change as new information is revealed.
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