Ovo Energy explores sale of Kaluza Stake at “unicorn” valuation: report

Ovo Energy, the UK’s fourth-largest residential gas and electricity supplier, is planning to sell a stake in its software arm, Kaluza, at a potential “unicorn” valuation, Sky News has reported.

The move is part of a broader strategy to bolster the balance sheet of the company, which serves just under four million retail customers.

The company has appointed investment bank Arma Partners to explore options for the potential sale of Kaluza, which it owns 80% of, with the remaining 20% held by Australian energy firm AGL.

Kaluza describes itself as an energy intelligence platform and recently announced a licensing partnership with French energy group Engie.

Industry sources suggest that Ovo could seek a valuation for Kaluza exceeding $1 billion, with some analysts projecting valuations as high as $2.5 billion based on annual recurring revenue (ARR).

Kaluza has been expanding internationally, recently acquiring Australian energy software specialist Beige Technologies to strengthen its presence in the Asia-Pacific market.

The company is led by chief executive Melissa Gander.

Financial strengthening and investor interest

The prospective stake sale comes amid Ovo’s broader efforts to improve its financial position.

Rothschild, the investment bank, has been in talks with potential investors regarding a £300 million capital injection.

At one stage, these discussions included Iberdrola, the owner of Scottish Power, while Centrica, parent company of British Gas, may also have shown interest.

The sources cited in the report said that a deal with a third party could be finalized before the end of the year.

Ovo, like its competitor Octopus Energy, has struggled to meet new capital adequacy requirements set by the industry regulator Ofgem.

The company stated that it has “taken proactive measures to align with Ofgem’s new capital rules, working constructively to meet the requirements.”

In parallel, the company recently named Dame Jayne-Anne Gadhia, former Virgin Money chief, as independent chair of its retail arm, signaling a continued focus on governance and oversight.

Ovo’s market position

Founded in 2009 by entrepreneur Stephen Fitzpatrick, who also owns London’s Kensington Roof Gardens, Ovo positioned itself as a challenger brand in the UK energy sector, aiming to offer better service than established suppliers.

Its shareholders include private equity firm Mayfair Equity Partners, Morgan Stanley Investment Management, and Japanese conglomerate Mitsubishi Corporation.

Ovo’s transformational moment came in 2020, when it acquired SSE’s retail supply business, instantly becoming one of the UK’s leading energy companies.

However, growth has not been without challenges.

The company has faced scrutiny from Ofgem and a series of customer complaints, particularly around overcharging.

The business is now run by chief executive David Buttress, who briefly served as Boris Johnson’s cost-of-living tsar after leaving Just Eat.

The planned stake sale in Kaluza reflects a broader trend among UK energy suppliers, with competitors like Octopus Energy exploring similar transactions in their software arms.

With Kaluza’s international expansion, licensing partnerships, and investor interest, Ovo appears poised to leverage its software assets to strengthen financial stability while maintaining its position in the competitive UK energy market.