Octopus Energy said it has decided against making its first ever annual profit after ploughing £150m into attempting to keep customers’ gas and electricity bills down.
The energy supplier said it would have made a slim annual profit of £9m but instead decided to invest in protecting customers from the worst of the energy price increases caused by a sharp rise in wholesale gas costs linked to Russia’s invasion of Ukraine. The decision resulted in a £141m operating loss for the last financial year, to the end of April 2022.
The Octopus head of finance, Stuart Jackson, said executives had made a “conscious decision” to “shield customers from the significant rise in wholesale costs”.
Separately, Octopus said the bailout of the collapsed energy supplier Bulb would cost the taxpayer £260m, far less than the £6.5bn estimated in November. Octopus calculated the government built up costs of £1.46bn while the firm was in special administration, but made gains of £1.2bn in recent months largely owing to a sharp fall in wholesale energy costs as well as the undisclosed price Octopus paid to buy the firm.
This upturn contrasts with the £6.5bn cost estimated by the Office for Budget Responsibility in November and the £4.5bn set aside by the UK government the following month.
The finances of Britain’s energy suppliers have come under scrutiny after rocketing gas prices pushed 29 firms to collapse, costing consumers £2.7bn, excluding the cost of Bulb.
Rivals have questioned the record of new entrants to the market, such as Octopus and Bulb, as neither company has ever made a profit.
However, the Octopus founder and chief executive, Greg Jackson, has sought to distance his firm from Bulb and other failed suppliers, noting that the company had raised capital from a string of reputable international investors.
Stuart Jackson said that although the firm’s in-house software meant “we should be able to generate profit above what the industry might see, on average, this is not the right time through the crisis to be realising that”.
Jackson said the group’s investors, which include the Canada Pension Plan Investment Board and a fund started by former US vice-president Al Gore, have a “long-term” attitude. The group did not pay out a dividend.
Octopus Energy group, which also includes the firm’s technology arm Kraken, reported annual revenues more than doubling to £4.2bn. Its retail business now has 3.4 million customers after adding 1.3 million over the year, including 580,000 taken on from Avro Energy after it went bankrupt.
Octopus said it recently submitted a claim to the energy regulator, Ofgem, to increase the amount it was owed in the cost of taking on Avro’s customers, through the supplier of last resort process, by 10% to £760m, paid for through all consumers’ bills.
After the acquisition of Bulb, Octopus will have 4.9 million customers, making it the third-largest UK energy supplier behind British Gas and E.ON.
