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Oil giant Shell to buy ‘big six’ energy rival First Utility

Jillian Ambrose 

Oil giant Shell will soon begin supplying lighting and heat to British homes through a major deal to buy the biggest energy supply rival to the ‘big six’ utilities.

Shell’s European arm will snap up First Utility for an undisclosed sum, giving the oil major a route into the domestic energy supply market in the UK and Germany, as it begins to shift towards clean electricity and electric vehicles.

The landmark deal emerged after a four-year relationship between the supplier and Shell, through which the Anglo-Dutch oil company provides all of First Utility’s wholesale gas and power. At the same time First Utility trades under the Shell brand in Germany.

Darren Braham, the co-founder of First Utility, said the pair began discussing a potential takeover around three months ago and said the deal was expected to close by the end of February.

“The customer base of First Utility helps bring together the investments Shell has made through its New Energies business in electric vehicle charging and the connected home and come up with some really interesting propositions to target big six customers,” he said.

First Utility is one of the largest of a new crop of energy suppliers which have emerged in recent years to challenge the entrenched dominance of the big six.

The growing upstart supplies around 825,000 households with lights and gas across the country and has also moved into broadband.

The traditional energy suppliers are already losing hundreds of thousands of customers to new energy rivals. They are also under heavy financial pressure ahead of a crackdown on standard energy deal through the Government’s looming price cap.

The deal is expected to unlock Shell’s ambitions to tap the growing demand for clean energy and play a leading role in the roll-out of electric vehicle charging, which presents a threat to its legacy position as a supplier of diesel and petrol for traditional combustion engine vehicles.

Mark Gainsborough, who heads up Shell’s New Energies division, said the innovation arm would double its investments next year to $2bn (£1.5bn) to deepen its presence in the growing electricity market.

“The biggest growth in the energy market in the coming decade will be in electricity,” he told the Telegraph. “It’s a growing market and one that is changing quite a lot. Consumers have a lot more control over their energy in the home through digital devices and the growth of electric vehicles will bring a lot more new opportunities. It’s an exciting growth market that is undoubtedly very competitive.”

The Telegraph reported earlier this year that Shell is also preparing to open Britain’s first “no-petrol” service station in the capital next year as part of its drive towards cleaner motoring.

Shell also plans to roll out high-speed electric vehicle charging points across a selection of its 400 UK service stations, allowing drivers to charge their electric vehicle batteries by up to 80pc in 30 minutes.

Energy industry sources have said the deal could kick-start a raft of takeovers within the retail energy market, which is ripe for consolidation after a steady rise in the number of small suppliers coming into the market.

The growing appetite for a place in the energy market has emerged amid a boom in digital, ‘smart’ home service offerings, which has created a market for connected home solutions.

Other companies said to be showing an active interest in the energy market include major telecoms companies, financial service providers and technology providers which are eager to secure a foothold in the ‘smart-home’ market.

“This combination will enable Shell to enter a new part of the energy market in the UK and to improve choice for customers by delivering innovative services at competitive prices,” Mr Gainsborough added.

SOURCE

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