Octopus Energy stated that it decided not to make its first annual profit after spending £150m on trying to lower customers’ electricity and gas bills.
According to the energy supplier, it would have made only a £9m annual profit. Instead, it decided to invest in customers to protect them from the worst of rising energy prices due to a sharp increase in wholesale gas costs related to Russia’s invasion in Ukraine. This decision led to a £141m operating deficit for the previous financial year through April 2022.
Stuart Jackson, Octopus’ head of finance, stated that executives made a conscious decision to “shield customers against the significant increase in wholesale prices”.
Octopus also stated that the bailout of Bulb, the collapsed energy supplier, would cost taxpayers £260m. This is far less than the £6.5bn estimate in November.
Octopus estimated that the government incurred costs of £1.46bn during Bulb’s special administration. However, Octopus reported that the government has made significant gains of £1.2bn over the past months due to sharp drops in wholesale energy prices and the undisclosed price Octopus paid for the firm.
This contrasts with the £6.5bn cost that was estimated by the Office for Budget Responsibility and the £4.5bn that the UK government set aside the next month.
Rocketing gas prices caused 29 companies to go under, causing consumers £2.7bn in losses. Bulb is not included.
Rivals are questioning the track record of new entrants to the market, such as Octopus or Bulb since neither company has ever made a profit.
Greg Jackson, the founder of Octopus and chief executive, sought to distance himself from Bulb, and other failed suppliers. He noted that the company had raised capital funds from a number of international investors.
Stuart Jackson stated that, although the firm had in-house software, it meant that “we should generate profit above the industry average, on average”, but that this was not the right time to do so during the crisis.
Jackson stated that the group’s investors include the Canada Pension Plan Investment Board as well as a fund founded by Al Gore (ex-US vice-president). Jackson believes the group has a long-term mindset. The group didn’t pay out any dividends.
Octopus Energy group, including Kraken’s technology arm, reported an increase in annual revenues of more than doubling to £4.2bn. After adding 1.3 million customers over the past year, Octopus Energy now has 3.4 million customers. This includes 580,000 that was taken on by Avro Energy after it was declared bankrupt.
Octopus claimed that it submitted a claim recently to Ofgem to increase its amount owed by Avro’s customers through the supplier-of-last resort process by 10% to £760m. This was paid through all consumer bills.
Octopus will now have 4.9 million customers after the acquisition of Bulb. This makes it the third largest UK energy supplier, behind British Gas, and E.ON.
