Annual Report and
Financial Statements 2022
Driving
Progress
to Zero
Carbon.
The
energy to
do more.
We launched in 2009 to make energy cheaper,
greener and simpler. Since then, we’ve welcomed
millions of customers, planted over a million trees
and set our sights on helping to decarbonise millions
ofhomes. Webelieve in great service that’s friendly
and reliableand in homes that are better for the planet
andyourwallet.
1 Strategic Report
1 Highlights
2 Who we are and what we do
3 Our values
4 Strategy and focus
6 Review of our business in 2022
14 Streamlined energy and
carbonreporting
19 Statement on corporate
governance arrangements
21 Section 172(1) Statement
22 Our stakeholders
24 Our plan to address the
energycrisis
26 Directors’ Report
30 Financial Statements
Highlights
2022 in numbers.
1 On average over 2022
2 EVs on Charge Anytime
Value of
£50m
for our Customer
Support package
Cost of driving
3p
per mile on
ChargeAnytime
CO
2
e avoided:
4,536
tonnes through home
energy tech
In contact with
300k
customers
everyweek
EV charging
97.5%
optimised
Milestone reached
1,000
heat pumps
installed
8
Belonging
D&INetworks
Milestone reached
4m
trees planted
#1
Best online
experience
3
#1
Diverse
Company
of the Year
2
#1
Green
Energy
Supplier
1
1. Winner, Green Energy Supplier of the
Year at the Energy Awards
2. National Diversity Awards
3. Uswitch awards
To find our more
about us, visit us
online, just scan
theQRcode here
Supported
92
onshore wind and
solarprojects
OVO Group Ltd
Annual Report and Financial Statements 2022
1
Let’s talk
business.
It’s our mission to bring all our
customers with us on the journey
to a greener, fairer future.
Guided by Plan Zero, we are transforming our
business to help create a world without carbon.
We want to help our customers lower their carbon
footprint and play their part in the global goal of
reaching net zero. Whether they’re a homeowner
making the switch to an electric vehicle and a heat
pump, or a renter looking to use less gas for
heating, we’re building a different kind of energy
company – one that actually wants to sell less
energy, help our customers save money and cut
down on carbon emissions.
We are four million customers strong.
OVO is one of the largest energy suppliers in the UK,
which means we can really make a difference.
Our business is not just about how many customers we
sell gas and electricity to, it’s about the ways in which we
can support them on their journey tonet zero – and for
that, we know we need to bring everyone along with us.
That’s why, in 2019, we launched Plan Zero, our
sustainability strategy, and why we are always striving
toimprove the experience for our customers, especially
those in vulnerable circumstances, and to work with
industry, government and the regulator to change the
UK’s energy system for the better.
We harness people power…
When people come to OVO, we don’t want them to
justbe joining a company, we want them to feel inspired
to join a zero carbon movement, who are up for the
jobof solving humanity’s greatest challenge and feel a
deep sense of belonging within it. We are committed
tocreating a strong, inclusive workforce, we want
everyone to feel happy, respected and supported,
andwe make those commitments clear to everyone.
…and technology to
revolutioniseenergy.
People are great, especially our teams and our
customers. But even the best people need help with
the heavy lifting. That’s where our Kaluza platform
comes in. Behind the scenes, Kaluza enables global
energy retailers to transform their customer experience
and accelerate decarbonisation through innovative,
low carbon propositions.
The platform uses machine learning and AI to create a
more flexible energy system, optimising devices to use
energy off-peak, when costs and carbon levels are lower.
Working with a range of industry-leading hardware
manufacturers, energy suppliers and grid operators,
Kaluza’s flexibility offering is driving the global transition
to a distributed and secure zero carbon grid.
It continues to transform our retail operations
byautomating OVO’s meter-to-cash operations,
reducing cost-to-serve and driving new commercial
opportunities for our UK and Australia businesses.
Kaluza powers our award-winning online experience,
gives our customer care advisors the tools to deliver
great service and its pioneering demand response
technology allows us to build engaging and rewarding
offerings around electric vehicle smart charging.
Standing
for more.
We’re tackling some of the world’s
most pressing problems by creating
better energy systems for our planet
and for everyone on it. We are on a
big journey and our values are central
to everything we do.
We’re OVO, pioneers of
the green energy transition.
We use technology and innovation to help all our
customers move closer towards having low-cost,
low carbon homes, because the energy system
wasn’t built for the way we live today. And it
certainly wasn’t built with the pressing need to
reach net zero in mind. OVO was founded to
change that – by making every decision as if the
customer is in the room, by solving complex
challenges to accelerate the energy transition and
by always asking ourselves, ‘What’s better for our
customers?’ and ‘What’s better for the planet?’.
The Directors present their Strategic Report for the year ended 31 December 2022.
We always look for a
better way, whether
that’s bydelivering
abetter service,
employing brilliant
people or improving
our products
andprocesses.
Being open, honest
and fair is one of the
values which applies to
everything we do. We
take pride in talking
toour customers
anddelivering
exceptional work.
Simple solutions
aren’t quick or easy to
find. They take time
and tenacity. Our
people work to find
an answer that helps
us‘build something
great’.
OVO Group Ltd
Annual Report and Financial Statements 2022
32
OVO Group Ltd
Annual Report and Financial Statements 2022
Strategic Report
Who we are and what we do Our values
Our strategy
tomake abig
difference.
Give our customers
evenmore value
We’ll continue to increase the number of
services we offer to our customers to help
them lower their energy costs and their
carbon footprint. From home energy
efficiency services to energy saving tariffs
and smart tech, we want to bring all our
customers with us on the Path to Zero.
We’re investing even more in decarbonising
homes. This means: expanding our team of
OVO Energy Experts who provide bespoke
advice to customers on how to improve
their home’s energy efficiency; accelerating
home electrification by replacing boilers
with heat pumps, installing solar panels
onrooftops and EV chargers in driveways;
andretrofitting homesto keep them warm
and stop wasting energy.
We’ll continue to create unique propositions
for electric vehicle drivers and solar
customers, as wellas hold innovative trials
for customers taking a first big step ontheir
journey to net zero.
Invest in technology
We’ll continuously improve our in-app
experience, giving customers new ways
totrack their energy and the personal
insights they need to reduce costs and
cutcarbon. We’ll build on our innovative
propositions tosupport a more flexible
energy system by rolling outPower Move
for all customers, incentivising them to
reduce energy usage when the grid is
carbon intensive and congested. And we’ll
continue to invest inthe scalability and
resilience of our platform, enabling more
customers toself-serve through our app.
Introduce more people
toOVO
We will show more people how we can
help them improve their homes, save
money on their energy bills and reduce
their carbon footprint. We want more
people to get on their own path to zero.
Expect to seelots more of us!
Enable a smooth
energytransition
2022 saw unprecedented volatility in
global energy markets resulting in record
wholesale energy prices. But, through our
prudent hedging strategy, we were able to
weather the storm, absorb costs and
continue to support our customers.
While we expect to see wholesale energy
prices coming down, we’ll continue to
work with the government and the
regulator to restore the stability of
oursector and, ultimately, reduce
ourreliance on fossil fuels.
Support vulnerable
customers
Our £50 million Customer Support
Package announced ahead of last winter
helped thousands of customers, and we
are not stopping there. We are training
specialist advisors to support customers
in debt, using data to identify those that
need support, and campaigning tirelessly
to change the system for the better.
Retain and attract the
brightest and best
At OVO, our power comes from our
people. We know our success can only
besupported by a truly inclusive culture
where everyone is valued for who they are
and is empowered to thrive. This is why
we’ll continue to build inclusion and
belonging in everything we do, so we can
empower everyone to be their best selves
– wherever they are from, whatever they
believe and however they live their lives.
OVO Group Ltd
Annual Report and Financial Statements 2022
54
OVO Group Ltd
Annual Report and Financial Statements 2022
Strategic Report
Strategy and focus
2022 Review
“ 2022 has dened
our commitment to
our customers, our
resilience and our
dedication to build
a greener, fairer
energy system.”
“ In what proved to be an extremely
dicult year for the industry,
I am pleased that OVO and its
leadership team demonstrated our
continued commitment to serving
our customers and maintaining our
resilience. We now look forward to
partnering with all OVO customers
on their journey to a decarbonised
and secure energy future.”
Strategic Report
A review of our business in 2022
8 2022 review
14 Streamlined energy and carbon reporting
19 Statement on corporate governance arrangements
21 Section 172(1) Statement
22 Our stakeholders
24 Our plan to address the energy crisis
Raman Bhatia
Chief Executive Officer
Stephen Murphy,
Chair
6
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
7
The energy crisis in 2022 delivered a shock of
unprecedented complexity. Energy markets were
inturmoil and prices reached record highs. Here in
the UK, the heaviest burden fell on households, with
many families left struggling to pay their bills. With
winter approaching OVO’s immediate focus was on
how to keep the lights onand its customers warm.
OVO’s response to the energy crisis
Taking
action for our
customers.
What actually caused
theenergy crisis?
In a nutshell, a rise in demand and a fall
insupply. As the world came out of the
COVID-19 pandemic in 2021, increasing
demand for oil and gas started pushing
upthe global price of energy. In February
2022, Russia’s invasion of Ukraine made
adifficult situation even worse. A huge
reduction in supply of gas from Russia to
Western Europe meant the price of energy
throughout Europe rose by almost 10
times what it had been 12 months before.
How were UK
households affected?
Energy prices for UK consumers rose to
unprecedented highs. While much
welcome support from the Government
did come in the form of the Energy Bill
Support Scheme and the Energy Price
Guarantee, millions of households were
still left struggling to pay their energy bills.
OVO’s £50m Customer Support Package
What did OVO do about it?
OVO reacted quickly and launched a
£50m Customer Support Package – the
largest and most progressive of any
energy supplier. The package included:
Payment holidays for debt repayment
for all prepayment meter customers so
that every penny put on the meter
throughout the winter would go
towards heating, not clearing debt
A 200% increase in emergency top-up
credit for customers on a prepayment
meter, and a continued commitment to
never disconnect customers’ meters
from the grid
Free technology and services such as
smart thermostats, electric throws and
boiler checks
A new charity partnership with The
Trussell Trust to support food banks to
meet increased need this winter – in
addition to our continued partnership
with StepChange
To urge the Government to soften the
impact of price rises, OVO set out a Ten
Point Plan to address the energy crisis,
which can be found on our website and
page 24 of the Strategic Report. Many of
the plan’s proposals, such as ending the
prepayment meter poverty premium, have
since been adopted bytheGovernment
3,337 6,132 30,000
customers received a free
boiler service
free thermostats
provided to homes
electric blankets donated
tocustomers
8
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
9
Strategic Report
2022 review
Our goal to decarbonise
homes gathered momentum
The impact of fossil fuels on the planet
and on energy bills means the need to
decarbonise has never been more urgent.
Our OVO Energy Solutions business
started work with Cornwall Council to
complete whole-house retrofits for 400
poorly insulated homes. And in Argyll,
Scotland, the business reached a
milestone of 1,000 heat pumps installed.
We launched OVO Energy Experts, a new
trial for customers to upgrade homes and
unlock up to £260 of savings for those
who adopt new efficiency technology
along with making simple changes in
behaviour. OVO’s Energy Experts are
trained in the latest of green technologies
and are now providing home upgrade
assessments and advising people on the
energy-efficient measures required to
future-proof their homes.
We commenced installation of Zero
Emission Boilers (ZEBs) in OVO customers’
homes, as part of UK Power Networks’
‘Neat Heat’ project. Working in our south
east and east of England areas, in
conjunction with the energy networks and
UK clean tech company tepeo, this project
provides real-world data on how a ZEB
interacts with the electricity network,
allowing us to develop new offerings that
will reduce costs for customers and
allowing UK Power Networks to use its
existing infrastructure in a smarter way.
We supported the
development of new
renewable energy onto
thegrid
To reduce our dependence on gas, we
need more renewable energy. We’re not
energy generators or developers (we are
proudly customer-focused only), but we
wanted to find a way to bring additional
renewable power onto the grid. So, we
became the first energy company to
specifically support subsidy-free
renewables, by offering small-scale,
independent wind and solar farms above
market prices for their electricity.
By paying a premium to generators of
renewable electricity that have not
received any subsidy from government or
industry-backed schemes, we are directly
helping to drive new investment in
renewable assets in the UK.
In 2022 we signed 92 power purchase
agreements (PPAs) with onshore wind and
solar power generators. That’s enough
clean energy to power over 50,000 homes.
We created value for our
customers while supporting
a smarter, greener, more
flexible electricity grid
A flexible energy system is a smart energy
system – for us, our customers and the
planet. It can help us to best use the
renewable energy that’s already powering
the grid and help cut the need for using
gas and other fossil fuels when renewable
energy is not available.
It can also help reduce consumers’ costs,
by shifting consumption away from peak
times when the grid is most congested.
Three quarters of electricity costs for
theaverage household are made up
ofcharges between 4pmand 7pm.
This is why we launched Power Move
– aninnovative trial helping customers
tocut usage during peak times and save
themselves money. The trial rewards
customers up to £100 for moving their
useof energy to times when the grid is
greener and less congested. Trial data will
be invaluable in gaining a more granular
understanding ofconsumer habits and
willenable us todevelop propositions
thatfurther support a more flexible
energysystem.
At the end of 2022, with National Grid
ESO (the organisation responsible for
actually moving electricity around the
National Grid) warning that the availability
of electricity could be tight over the
winter, we announced we were joining its
Demand Flexibility Service. This new trial
rewards our customers for shifting their
energy usage away from peak times
andhelps support the critical energy
balancing that takes place at National
Grid. Customers can earn a minimum
of£1for every kWh shifted below their
personal target – the more electricity
shifted, the greater the reward.
In 2022, Kaluza launched multiple electric
vehicle (EV) smart charging programmes
internationally to demonstrate the power
of its technology in providing easy and
rewarding customer experiences that
reduce the cost of owning an EV while
increasing the use of renewables on the
grid. Such initiatives were launched in
Japan, with Mitsubishi Corporation and
Chubu Electric Power Miraiz, in North
America, with East Bay Community
Energy, and in Australia, with AGL –
where EV drivers earned an average
ofAU$17 a month in smart charging
credits and showed high levels of trust
inKaluza’soptimisation.
More investment
intechnology
We continued to invest in a resilient
scalable platform as we migrated SSE
Energy Services customers onto one
platform. Kaluza’s platform creates
operational cost savings, enabling OVO to
invest more into building market-leading
green and money-saving propositions
andproducts for our customers.
With more of our customers going online
and using the OVO app than ever before,
we invested in our digital experience,
increasing the number of customers able
to self-serve. And for those customers
concerned about the impact of the energy
crisis, we developed an energy tracker to
help our customers understand how they
use their energy and how this impacts
their energy bills and their carbon
footprint. An energy tracking tool also
shows the greenest hours to use
appliances, helping to ease congestion
onthe electricity grid. By smoothing out
peaks in demand and spreading energy
use evenly through the day and night,
theneed for fossil fuels, such as gas,
toprovide more energy at peak times
willdecrease.
The replatforming of SSE Energy Services
customers onto the OVO platforms
operated by Kaluza reduce the cost of
billing while providing a path to lower
ITspend and complexity across our
technology stack. In 2022, Kaluza reduced
OVO’s like-for-like technology spend
byapproximately 60% through migration
onto its platform, lowering the IT costs
percustomer.
We appointed a new CEO
Raman Bhatia became the new CEO of
OVO’s retail business in February 2022.
Having driven the transformation of OVO’s
customer operations as COO of the
business for two years, Raman brought
with him his passion for customer
experience, decarbonisation and creating
a great place to work.
A focus on energy and the
decarbonisation of the home
We completed the sale of SSE Phone &
Broadband to TalkTalk. This sale is part
ofour strategy to continually simplify
ouroperations and to focus on the
decarbonisation of the home.
This transaction provided a great
outcomefor us, our telecoms
customersandthe team.
We won!
2022 was a record-breaking awards
yearat OVO. We kicked off with the
National Diversity Awards recognising
ourprogressive ‘Belonging’ initiatives
withthe Diverse Company of the Year
award. Our customer experience teams
won first place in Uswitch’s Best Online
Experience category. And we continued
toreceive awards for innovation in energy
and sustainability, winning Innovation
Project of the Year (for OVO Energy
Tracker), and Green Energy Supplier of
theYear at the Energy Awards. Ending the
year on a high, the National Sustainability
Awards heralded our Plan Zero a true
pathway to decarbonisation by awarding
us Company of the Year and Green Energy
Supplier of the Year, as well as honouring
OVO Energy Tracker for Best Use of Data
and Analytics.
Financial performance review
Key financial and performance indicators
2022 2021
UK Retail Energy Supply customer numbers ('000) 4,000 4,100
UK Retail Energy Supply total gas and electricity
volume (TWh) 41 51
Adjusted EBITDA (£m)
1
20 159
Statutory (loss)/profit for the year (£m)
4
(after non-cash commodity hedge revaluation
lossof£1.4bn (2021: gain of £422m))
(1,275) 335
Cash (£m)
3
474 145
Net debt (£m)
2
363 411
Reconciliation of adjusted performance measures to statutory results
2022
(£m)
2021
(£m)
Statutory (loss)/profit for the year
4
(1,275) 335
Add: Income tax (credit)/expense (377) 35
(Loss)/profit before tax (1,652) 370
Add: Exceptional items and certain re-measurements 1,485 (372)
Add: Net finance costs 69 58
Add: Share of net losses of associates accounted
forusing equity method 2 1
Add: Depreciation and non-exceptional impairment of
property, plant and equipment and right-of-use assets 14 18
Add: Amortisation of intangible assets 102 84
Adjusted EBITDA 20 159
1. Adjusted EBITDA is defined as operating (loss)/profit, after adjusting for depreciation, amortisation,
impairmentand exceptional items and certain re-measurements including fair value gain/(loss)
onderivativefinancial instruments.
2. Net debt is defined as total loans and borrowings plus lease liabilities less cash and cash equivalents excluding
restricted cash.
3. Cash of £474m (2021: £145m) includes restricted cash of £269m (2021: £nil).
4. As we are well hedged, when prices fell during 2022 from the peaks in December 2021, so did the value of the
energy we had bought in advance for customers. In financial accounting, this results in a large loss in 2022 but
this has no cash impact and will reverse in future periods when customers use this energy. The loss reflects the
value at 31 December 2022 of the energy we prudently bought in advance.
10
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
11
Strategic Report
2022 review continued
Underlying
business performance
The unprecedented high and volatile
commodity prices in FY22 were a key
driver of the Group’s financial
performance, position and cash flow.
The Group’s adjusted EBITDA for the year
ended 31 December 2022 was £20m
(2021: £159m). The downturn in the
Group’s adjusted EBITDA was primarily
driven by lower margins as a result
oftheimpact ofrising wholesale
commodity prices.
At four million, our customer numbers have
remained largely consistent with the prior
year,due to low levels of market switching
and reduced customer acquisition activities
in a period of high commodity prices.
Warmer weather in 2022 compared to 2021
and customers reducing their energy use,
for sustainability and cost reasons, have led
toa reduction in underlying consumption.
Despite limited customer growth and
lower consumption, revenue increased
by49% to £6.7bn (2021: £4.5bn), largely
driven by the impact of higher wholesale
prices on retail tariffs. Nonetheless, the
Group’s gross profit decreased from
£747m in 2021 to £657m in financial year
2022 as the cost of buying energy for our
customers was at times higher than the
prices set under the regulated Price Cap.
Additionally, higher customer bills and
wider economic uncertainty resulted in an
increase of £48m in the bad debt charge,
which amounted to £165m in the year.
However, bad debt charge as a
percentage of revenue remained
consistent with the prior year at 2.5%
(2021: 2.6%).
Rising energy prices led to rising concern
among our customers and an increase
incalls to our customer care advisors.
We met this challenge by investing in
ourcontact centres. We increased the
number of our customer centre advisors
and enhanced their training both to
improve customer service quality and to
better help those of our customers with
difficult and more complex circumstances.
These initiatives brought extra costs
which, together with our £50m Customer
Support Package, significantly contributed
to our lower earnings.
Statutory result
Overall, the statutory loss for the year was
£1.3bn, which includes a re-measurement
loss of £1.4bn on derivative energy
contracts, exceptional items of £47m and
depreciation and amortisation of £116m.
The re-measurement loss relates to
commodity derivatives designated as held
for trading. Although the Group routinely
enters into sale and purchase derivative
contracts for electricity and gas to meet
customers’ future energy usage, a number
of these arrangements are considered to
be derivative financial instruments under
IFRS 9, which requires the instruments
tobe recognised at fair value with
re-measurements recognised in the
incomestatement (for further details
pleasesee Note 2).
These contracts will be used to fulfil
customer contracts. Therefore, the
derivative financial liabilities recognised as
at 31 December 2022 will be reversed when
these contracts unwind in future periods.
In other words, because we are well
hedged, when prices fell during 2022 from
the peaks in December 2021, so did the
value of the energy we had bought in
advance for customers. In financial
accounting, this results in a large loss in
2022 but this has no cash impact and will
reverse in future periods when customers
use this energy. The loss reflects the value at
31 December 2022 of the energy we
prudently bought in advance.
Exceptional items of £47m (2021: £50m)
primarily relate to integration and
reorganisation costs incurred as the
Groupcontinues to simplify the business
following the acquisition of SSE Energy
Services. Integration and reorganisation
costs increased by £39m in 2022 as the
Group ramped up integration activities
and undertook a voluntary redundancy
exercise. These costs were offset by a
gainof £21m recognised on the disposal
ofOrigin Communications Limited
(previously OVO (S) Retail Telecoms
Limited), and a gain of £9m on the
disposal of OVO Energy (France) SAS,
aswe continue to exit from businesses
that are not core to UK domestic energy
supply and decarbonisation initiatives.
What’s been
happening in 2023.
Path
to Zero
Intelligent
Charging
Best Place
toWork
In April 2023, we launched Path to Zero,
adefining moment in our history that
focused on delivering the true net zero
pathway for our customers.
Recognising that ‘100% renewable’
electricitytariffs do very little to support
decarbonisation we wanted to find a
betterway.
Path to Zero is all about the tailored steps
our customers can take to decarbonise
theirhomes.
We committed to investing in helping
customers reduce energy, shift energy use
to greener times, and support them to make
the step towards full electrification of their
transport and heating.
We committed to launch a fund for
developing green skills that will train a
generation to install heat pumps, which is
critical in the decarbonisation of heating.
As a result OVO has also taken the decision
to move away from tariffs underpinned by
the outdated REGO (Renewable Guarantees
of Origin) system. We will instead invest in
our Path to Zero initiatives as well as wind
and solar projects that we know will
generate the renewables we need.
Over 2023 we will continue to call for
change to the energy system to make green
energy tariffs much more meaningful.
OVO and Kaluza announced INFLEXION,
a world-first vehicle-to- everything (V2X)
trial, which will enable millions of
customers to power their entire homes
with their EV battery in the future.
The scheme, an exciting collaboration
between Kaluza, OVO Energy,
Volkswagen Group UK, and EV smart
charging tech business, Indra, allows EV
drivers to power their home with their car,
and also to sell any surplus energy back
tothe grid.
We launched Charge Anytime, an
innovative home EV charging plan that will
help boost the movement towards greener
methods of travel. Customers can save up
to £350 a year by using technology that
enables them to access a charging rate of
10p per kWh (equating to 3p a mile), which
is three times cheaper than the national
average (34p per kWh).
OVO was awarded Best Place to Work for
Women and Top 10 for Very Big
Organisation in the exclusive Sunday
Times Best Places to Work 2023 awards.
The nationwide workplace survey honours
and celebrates Britain’s top employers and
acknowledges the best workplaces for
women, LGBTQIA+ community, those
with a disability, ethnic minorities,
younger and older workers, and wellbeing.
We were recognised for our highly
progressive people offer and putting
ourgreen ethos and flexibility right
atthecentre.
Our people offer includes unlimited
compassionate and pregnancy loss leave,
fully flexible working, ‘moments that
matter’ and ‘recharge’ leave – creating
space for our people to connect with
phases in their life that deeply matter.
OVO Group Ltd
Annual Report and Financial Statements 2022
1312
OVO Group Ltd
Annual Report and Financial Statements 2022
Strategic Report
2022 review continued
Reporting
on our impact.
We’re committed to measuring and disclosing our impact on the climate and
ourdecarbonisation progress. The below table summarises OVO and Kaluza’s
1
energy use and associated greenhouse gas (GHG) emissions.
Energy consumption figures
Area Energy source
2022 energy consumption
(kWh)
2021 energy
consumption (kWh)
OVO Kaluza Total OVO
Building energy consumption
Natural gas 5,239,680 54,779 5,294,459 5,544,066
Diesel 59,030 – 59,030 71,602
Electricity 8,114,245 282,448 8,396,693 7,963,469
Fleet energy consumption
Diesel 10,122,555 – 10,122,555 18,418,538
Petrol 1,043,995 – 1,043,995 1,814,587
Electricity 1,799,099 – 1,799,099 245,287
Hybrid 5,753 – 5,753 31,840
Plug-in hybrid 1,323 – 1,323 1,350
Business travel energy consumption
Diesel 1,192,174 – 1,192,174 721,444
Petrol 166,523 – 166,523 92,455
Electricity 2,545 – 2,545 245,287
Hybrid 6,127 – 6,127 4,828
Plug-in hybrid 601 – 601 –
Not specified – 36,414 36,414 –
Total kWh consumed 27,753,650 373,641 28,127,291 34,909,466
1. Kaluza is a subsidiary of the Group which engages in the development of an intelligent energy platform that introduces new flexibility into the energy system by optimising
individual devices. Kaluza is a subsidiary of the Group and therefore, falls into compliance for Streamlined Energy and Carbon Reporting (SECR).
GHG emissions figures
Emissions scope Area Energy source
2022 GHG emissions
(tonnes CO
2
e)
2021 GHG
emissions
(tonnes CO
2
e)
OVO Kaluza Total OVO
Scope 1 emissions
Building energy
consumption
Natural gas 943 11 954 1,015
Diesel 15 – 15 18
Fugitive emissions
R410A 75 – 75 60
R407C 15 – 15 -
R32 2 – 2 -
Fleet energy
consumption
Diesel 2,444 – 2,444 4,364
Petrol 238 – 238 418
Hybrid 1 – 1 8
Plug-in hybrid 1 – 1 –
Total Scope 1 emissions 3,734 11 3,745 5,883
Scope 2 emissions
Business travel
energy consumption
Electricity (location-
based)
1,465 55 1,520 1,691
Electricity (market-
based)
131 – 131 410
Fleet energy
consumption
Electricity (location-
based)
346 – 346 52
Electricity (market-
based)
763 – 763
Total Scope 2 emissions (location-based) 1,811 55 1,866 1,743
Total Scope 2 emissions (market-based) 894 – 894 462
Scope 1 and Scope 2
emissions
Total Scope 1 and Scope 2 emissions
(location-based)
5,545^ 66 5,611 7,626^
Total Scope 1 and Scope 2 emissions
(market-based)
4,628^ 11 4,639 6,345^
Total Scope 1 and Scope 2 emissions
intensity relative to revenue (location-based)
(tonnes CO
2
e/£m)
0.84 – 0.84 1.70
Total Scope 1 and Scope 2 emissions
intensity relative to revenue (market-based)
(tonnes CO
2
e/£m)
0.69 – 0.69 1.41
Scope 3 emissions
(Emissions from
consumption of
fuelfor the purposes
of transport)
Business travel energy
consumption
Diesel 303 – 303 180
Petrol 40 – 40 22
Electricity 1 – 1 –
Hybrid 2 – 2 1
Unknown – 9 9 –
Total Scope 3 business travel emissions* 346 9 355 203
Revenue OVO Group Ltd revenue (£m) 6,713 – 6,713 4,493
^ PricewaterhouseCoopers LLP (PwC) was engaged to provide independent limited assurance over selected information in the Annual Report for the year ended 31 December 2022.
Information that is within PwC’s limited assurance scope is marked with the symbol ^. See PwC’s Assurance Statement here: https://www.ovo.com/sustainability-assurance-
report/ and OVO’s 2022 Basis of Preparation at https://company.ovo.com/basis-of-preparation/.
* Please note that these emissions only cover our Scope 3 emissions from consumption of fuel for the purposes of transport, as per the requirements of the SECR. You can see our full
Scope 3 accounts in our Plan Zero report published here: https://company.ovo.com/planzero/plan-zero-progress-and-reporting-2.
14
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
15
Strategic Report
Streamlined energy and carbon reporting
Customers
The largest portion (over 99%) of our total
carbon footprint comes from our Scope 3
emissions, driven by the electricity and gas
that we sell to our customers.
The calculation of these emissions depends
upon the UK Grid’s electricity fuel mix
figures, which reflect the different energy
sources from which the electricity we
supply originates (e.g. wind, solar, etc.).
Fuel mix figures are published each
summer by the energy sector regulator,
Ofgem; therefore, our 2022 Scope 3
emissions are unavailable at the time
ofpreparation of this report.
We’ll calculate these Scope 3 emissions for
2022 once the fuel mix is published and will
disclose our complete emissions profile
inour Plan Zero 2022 progress report,
dueto be published in September 2023.
Please note that our location- and market-
based Scope 3 emissions for 2021 were
11,862,715 tCO
2
e and 12,639,252 tCO
2
e
respectively, as published in our Plan
Zero2021 progress report found here
2
.
The market-based figure was also assured
by PwC and you can find their limited
assurance statement for our 2021
Scope3 market-based emissions here
1
.
Reporting methodology
Our reporting approach is aligned with
theWRI GHG Reporting Protocol
Corporate Standard. The basis of
preparation document outlining the
reporting methodology in detail
canbefound on our website
1
.
Performance
Our absolute Scope 1 and Scope 2 market-
based emissions and location-based
emissions decreased by 26.9% and 26.5%
respectively between 2021
1
and 2022.
Energy and GHG emissions
reduction actions
For the whole nation, 2022 was a very
different year to 2021. At OVO we settled
into a ‘new normal’ operationally following
the easing of COVID-19 restrictions.
As lockdown measures and restrictions
reduced, we saw a return to some
in-person working across our sites.
This was boosted by the return of in-person
events and meetings, and our field teams
were able to go into more of our
customers’ homes.
We also announced a streamlining of our
property portfolio with a move to three
office hubs: in Bristol, London and Glasgow.
Over 2022, we continued to make progress
towards our Plan Zero operational
decarbonisation goals. In September,
weannounced our refreshed Plan Zero
framework which included a more
challenging operational net zero target
andhas allowed for simpler, more frequent
internal reporting on progress.
Alongside our financial metrics, we now
include metrics on fleet decarbonisation
and office energy efficiency in monthly
reporting to our leadership team. Crucially,
and in line with these new metrics, we
accelerated the uptake of electric vehicles
(EVs) across our fleet, meaning EVs now
make up almost half of our total fleet.
Assurance
PricewaterhouseCoopers LLP (PwC) was
engaged to provide independent limited
assurance over selected information in the
Annual Report and Accounts for the year
ended 31 December 2022. PwC’s limited
assurance scope covers the following
information: total Scope 1 and Scope 2
emissions (location-based) and total
Scope 1 and Scope 2 emissions (market-
based). Both metrics are marked with the
symbol ^ in the data table above.
See PwC’s Assurance Statement here
1
.
Considering TCFD in
howwe report
Please note that we will provide further
information with respect to what we have
done so far to consider the TCFD framework
and the impact and outcomes for OVO in
our 2022 Plan Zero Report, due to be
published in Autumn 2023.
The climate crisis is the single most important
issue facing the welfare of the planet and
itspeople. Plan Zero is our ambitious
sustainability strategy which covers our
commitment to the climate, ourcustomers
and our culture. Through PlanZero, we have
set stretching decarbonisation targets and
balance this with ensuring a just transition for
all of our customers and fostering an
innovative, change-maker culture at OVO
where everyone can grow and belong.
We recognise the importance of disclosing
against the recommendations of the TCFD
framework, and to demonstrate our
commitment to the climate, we have
conducted our first TCFD analysis this year.
This year, we will be using the TCFD
guidance and framework to disclose our
work on climate risk to date and have
included a summary of our considerations
inthis report.
From next year, we will be required to make
disclosures in line with the new Companies
Act. These align, but are not exactly the
same as the TCFD and will be reported
in2024.
Climate Governance
Here at OVO, the tone is set from the top
– it is our CEO who oversees our climate
performance and who is also accountable
for the delivery of our Plan Zero goals.
Our Leadership team puts in place the
resources, support, processes and
decision-making to help OVO’s people
putthe environment first. Please see
ourenvironment policy on our website
3
.
Our Board has overarching responsibility
for ensuring the longevity of the business.
The Board’s Risk Committee oversees all
of OVO’s business risks and reports to the
Board as needed, including for physical
and transition risks associated with our
changing climate.
We have a dedicated Sustainability team,
which supports the delivery of key projects
and initiatives, and we’re in the process of
establishing a dedicated sustainability
governance framework, which will take in
the views of representatives from across
OVO. All of our people have a responsibility
to drive progress to achieving Plan Zero,
and we’re aiming to increase the proportion
of training hours that focus on the build out
of green skills to help bridge the
decarbonisation skills gap.
Strategy
Since we launched Plan Zero, the world has
been transformed by a global pandemic, and
the UK has plunged into a cost of living crisis.
Industry guidance to help companies set truly
sustainable net zero targets has also been
updated. As we’re committed to following
the latest climate science, our refreshed
strategy recognises and responds to the
challenges of today and reiterates the
importance of leaving no one behind on the
transition to net zero. You can see more
information on our sustainability strategy
onour website
2
.
Property initiatives
Focusing on three hubs (London, Bristol
and Glasgow) has reduced the number of
our properties by 15, which equates to an
annual reduction in energy consumption
of290,500 kWh.
These core offices are on our building
energy management platform so their
energy consumption is monitored and any
deviations from the norm are investigated.
Of our core offices, London and Glasgow
have onsite solar generation.
We continually seek improvements to
increase energy productivity whether by
adjusting system settings for seasonal or
unexpected weather variations or by
monitoring plant operating times to align
withoccupancy levels.
Overall, our efficiency initiatives and
consolidation of our property portfolio
haveresulted in a reduction of building
electricity consumption by 4.8% and
buildinggas consumption by 5.5% in
comparison with 2021.
Electrifying our vehicle fleet
We continue making progress towards our
Plan Zero goal of having a 100% EV fleet by
2025. We acquired 395 EVs and disposed
of 759 internal combustion engine vehicles.
These changes boosted the proportion
ofEVs in our fleet in 2022 to 48%
(2021: 12%) and significantly reduced
overall fleet emissions. But we face some
challenges to our ambitions, not least the
global shortage of microchips which has
slowed EV production.
We’re continuing to increase the number
ofEV chargers installed at our engineers’
homes, installing 265 by the end of 2022
(2021: 73), an increase of more than 360%.
This year, we onboarded Mina, an EV-
driver reimbursement solution partner, that
allows our drivers to be reimbursed quickly
for the exact amount of energy they use
whilst charging their EV at home. So far, we
have 43% of our EV drivers supported
through this platform.
Public charging remains a barrier for drivers
who can’t charge at home and we are
working on various initiatives to improve
this. We are also continuing with driver
education via our EV champions who dispel
the myths around EVs and help other drivers
understand the range of capabilities and
benefits EVs have.
Business travel
This year, we saw our business travel
emissions increase, largely due to the
easing of COVID-19 restrictions and more
of our people travelling between offices
for in-person meetings and events.
We also hosted two roadshows this year
to showcase some of the amazing work
that our teams from across OVO have
been leading on. From Plan Zero, learning
and development, to Belonging, we
encouraged our people to come together
again and collaborate face-to-face.
1. PricewaterhouseCoopers LLP (PwC) also provided independent limited assurance over OVO’s Scope 1 and Scope 2 market-based and location-based emissions in the
Annual Accounts for the year ended 31 December 2021. See PwC’s 2021 Assurance Statement at https://www.ovo.com/sustainability-assurance-report/ and OVO’s
2021Basis ofPreparation at https://company.ovo.com/basis-of-preparation/
2. https://company.ovo.com/planzero/plan-zero-progress-and-reporting-2/
3. https://company.ovo.com/environmental-policy/
16
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
17
Strategic Report
Streamlined energy and carbon reporting continued Other impact reporting
This year, we also conducted our first
qualitative scenario analysis. We started this
process by mapping out our value chain.
First and foremost, the energy that we sell
needs to be generated or extracted,
transported and then distributed to our
customers’ homes.
The low carbon technologies required to
electrify our customers’ homes and
transportation systems follow a different
value chain. The raw materials needed for
the technologies are extracted and refined,
then manufactured to create a product, and
finally transported to and installed in our
customer’s homes.
Our direct operations consist of where our
people work (our property portfolio including
offices and depots, as well as any remote
working locations of our people) and our
engineers’ logistics network.
Ultimately, our value chain’s end point is our
customers’ homes.
There are a range of different physical and
transition risks and opportunities, which
vary in likelihood and severity, over the
different areas of our value chain, for
example, physical risks such as extreme
weather events and temperature extremes,
or transitional risks such as changes in
consumer demand. On the other hand,
climate-related opportunities, such as
technological development and growing
demand for electricity, present commercial
opportunities for OVO.
Our scenario analysis assessment
considered three scenarios from the
Shared Socioeconomic Pathways (SSP)
database. We’ll be publishing full details
of this assessment as part of our 2022
PlanZero report, which will be available
inSeptember 2023.
Risk management
The identification, assessment and
management of climate-related risk is
incorporated into our existing risk
management framework, which quantifies
severity of risk against financial,
reputational, regulatory and service impacts.
Climate risk is tracked by our Risk
Committee as a principal risk, as there is
the potential for climate-related physical
and transition risks and opportunities to
impact us over the short, medium and
long term.
Metrics and targets
Since 2019, OVO has reported on Scope 1,
2 and 3 greenhouse gas emissions in
accordance with the GHG Protocol.
Our full carbon footprint will be published
in our Plan Zero 2022 progress report
including full Scope 3 disclosure.
Through Plan Zero, we have committed to
transition to net zero and are hoping to
reach this position by 2035. This ambition
has milestone stages:
Reaching net zero across our
operational emissions by 2025; and
Reducing our emissions from gas sold
by 25% by 2025; 50% by 2030% and
reaching a net zero position by 2035.
Plan Zero summarises our commitment to
the climate, customers and our culture.
Each of these focus areas is supported by a
range of quantitative performance indicators
that ensure we are tracking progress.
How we govern.
Our Board sets our strategy and guides our culture, values, brand and reputation.
It makes sure that we understand and meet our obligations to customers, our
people, regulators and shareholders in a way that promotes our long-term
interests. It also has overall responsibility for our governance, risk management
and internal control systems.
In this reporting period, OVO Group Ltd has applied the Wates Corporate
Governance Principles for Large Private Companies. OVO Group Ltd complies
with the principles as follows.
Purpose and leadership
OVO’s vision is to power human progress
with clean, affordable energy for everyone.
Plan Zero sets out our purpose – to drive
progress to zero carbon living – and our
strategy for achieving this. We recognise
our role in leading the transition from fossil
fuels to renewable energy, and in building
an energy system fit for a more sustainable
and renewable future.
Statement on corporate governance arrangements
The OVO Group is currently managed by the following individuals:
Director
Stephen Murphy (Chair)
Jonson Cox (Senior Independent Director)
Kunal Dasgupta (Non-Executive Director)
Stephen Fitzpatrick (Non-Executive Director)
Daniel Sasaki (Non-Executive Director)
Go Muromoto (Non-Executive Director)
Raman Bhatia (Executive Director)
Vincent Casey (Executive Director)
OVO Group Ltd and its subsidiary Boards are made up of the individuals listed above and
other senior management.
The Board of OVO Group Ltd is shown in the Directors Report.
OVO Group Ltd
Annual Report and Financial Statements 2022
19
Strategic Report
Page Section
18
OVO Group Ltd
Annual Report and Financial Statements 2022
Strategic Report
Other impact reporting continued
Directors’ responsibilities
OVO Group Ltd has a governance and
leadership structure in place which provides
a clear framework for oversight and
decision-making for commercial and
functional leaders, and ensures we can
deliver on theambitions set out in Plan Zero,
drive commercial performance and oversee
the operations of each of our businesses.
Directors are aware of their
responsibilities under the Companies Act
2006, as well as their wider legal
obligations and the requirements of
sector-specific regulation in the markets
in which the Group does business.
In late 2021, the OVO Group Ltd Board
implemented a new committee structure –
Audit Committee, Remuneration Committee
and Risk Committee – which has operated
throughout 2022. During 2022, each
committee met three times.
In 2022, the Audit Committee reviewed
the 2021 annual report, considered the
report from the external auditor and
reviewed finance controls. The Risk
Committee reviewed OVO’s principal
risks, received updates on customer
migrations, regulatory policy, tax, and
health and safety, and reviewed macro
market updates ahead of winter 2022.
The activity of the Remuneration
Committee is set out in the remuneration
section below.
Reporting to the OVO Group Ltd Board,
the leadership team: sets group wide
strategy and tracks performance against
it; oversees the ‘how’ of the combined
business; makes decisions and resolves
issues of group wide significance;
andmakes investment and resource
allocation decisions.
Opportunity and risk
The OVO Group Ltd Board is responsible
for OVO’s strategic direction and making
sure risk is effectively managed.
OVO hasconsidered its key risks and has
categorised these into seven principal risk
themes to allow us to understand where
risk may arise:
Financial and Commodity
People and Culture
Customer Proposition
Customer Operations
Regulation, Compliance and Reporting
Security and Resilience
Climate and Environment
We define principal risks as those which
could stop the Group from offering the
best customer service, prevent it from
delivering Plan Zero and adversely impact
its financial health.
OVO’s leadership team is responsible for
identifying risk and taking action to
manage risk to a tolerable level. It is
helped in its understanding of risk by
OVO’s Risk team.
OVO’s Risk Framework, provides a
centralised governance approach that
defines the processes, systems and tools
for effective risk management.
Remuneration
The Remuneration Committee is focused
on ensuring that we attract and retain the
right mix of talented, innovative and
passionate individuals in our senior
management, as well as across OVO.
The Remuneration Committee approves
OVO’s Long term Incentive Plan, which is
designed to reward and retain our senior
management, based on OVO’s growth
trajectory. Each year, the Committee
considers whether to invite our people to
join the Plan, and the target award given
to those people - based on seniority/level
of impact on the organisation’s success.
The OVO annual bonus, available to a
wider group of our people, is underpinned
by a financial gateway, meaning bonuses
will not be paid if the gateway is not
passed. The other metrics of customer
satisfaction ensure OVO does not award
bonuses if OVO has not acted in the best
interest of its customers. The metrics are
reviewed each year to ensure they remain
aligned with OVO’s strategy and purpose.
Annually, all executive remuneration is
benchmarked against external market
data. This exercise identifies any spikes
inspecific disciplines and allows OVO
toreview remuneration by gender/
ethnicity/level. Any changes to executive
remuneration are reviewed and approved
by the Remuneration Committee.
Stakeholders
Our Section 172(1) statement provides
more detail on how we engage
stakeholders and consider their interests
in Board decision-making.
Section 172(1)
Statement.
Stakeholders underpin both our strategy and business model, and
our Board aims to uphold the highest standards of conduct while
ensuring that all decisions are taken with consideration for the long
term interests of stakeholders.
OVO recognises the central role it can play in supporting
customers to decarbonise their homes and support the global
effort to fight climate change. Plan Zero underpins our entire
Company culture. In an increasingly complex, changing and
competitive market, the Board recognises that the Company will
only grow, thrive and deliver on the ambitions set out in Plan Zero
if it understands, respects and responds to the views and needs
ofour stakeholders.
Section 172(1) Statement
OVO Group Ltd
Annual Report and Financial Statements 2022
2120
OVO Group Ltd
Annual Report and Financial Statements 2022
Strategic Report
Statement on corporate governance arrangements continued
A focus
on those
around us.
Our customers
OVO was founded with the ambition of
making energy greener, simpler and
cheaper. We intend to mobilise our
customers into a zero carbon community,
in line with the objectives set out in Plan
Zero, and our goals to reduce our
customers’ carbon footprint by 50% by
2030. Our Board receives direct updates
from OVO’s customer-facing businesses
and regularly discusses customer service
performance, Net Promoter Scores and
feedback. OVO’s leadership team and
Corporate Affairs team regularly engage
with external consumer organisations and
incorporate their feedback into business
decision-making.
Our people
Without talented and committed people,
OVO could not deliver on its ambitions
and on Plan Zero. In 2022, we were proud
to publish our Belonging report – an
update on our journey to building a
leading place to work, where everyone
can thrive. For the first time, the report
also included our gender and ethnicity pay
gap analysis. We were also pleased to
announce our new partnership with the
Aleto Foundation, creating early career
opportunities for young people from
diverse backgrounds. Throughout the
year, our quarterly employee survey gives
our people at all levels the chance to share
views with line managers, colleagues
andleadership, and action plans are
established to ensure feedback is heard
and acted upon. Our Board also regularly
engages with our people through forums
and town halls, providing the opportunity
to discuss and provide feedback on the
priorities and needs of our people.
Our communities
The OVO Charitable Foundation exists to
help create a greener, brighter future – for
every child. As a grant-making organisation,
OVO Foundation funds several charity
partners who share our goals: to bring
children and young people closer to nature,
and to equip them with the skills, knowledge
and opportunities to take action on the
climate crisis. OVO Foundation invests in
projects that address a real and genuine
need, can demonstrate measurable and
meaningful impact, and have the potential
to scale.
We aim to keep all relevant external
stakeholders informed of our community
and charitable investments. By 2022, OVO
Foundation had committed £2m to funding
154 youth-led environmental projects,
helping over 250 schools to become
moreenergy efficient and reaching over
10,000 young people across the UK.
OVO Foundation published the results of a
social return on investment study in 2022,
which found that every £1 invested in such
projects has the power to create over £10
ofvalue for society.
Our suppliers
We build relationships with our external
suppliers based on trust. This facilitates us
providing the best quality products and
services at the most competitive prices,
while mitigating data, social and
environmental risks in an upward supply
chain. In 2022, we continued to operate
our Supplier Code of Conduct for all new
key suppliers as part of our standard
procurement process. We also continued
to operate our sustainable procurement
controls and, where relevant, ensured
sustainability criteria were considered
aspart of any supplier selection.
Governments
and regulators
Our Board members engage regularly
across the UK Government, devolved
administrations, respective parliaments
and the regulator. Our activity is across a
range of mediums, including conferences,
roundtables and media to engage
effectively across key political, regulatory
and policy priorities. Our dedicated Public
Affairs, Policy and Regulation teams
actively manage our external stakeholder
plan and regularly update Board members
on external developments and coordinate
an engagement programme. During 2022,
the key issues discussed with stakeholders
included: the energy crisis; support for
financially vulnerable customers; market
design; and policy levers to accelerate the
transition to zero carbon living.
The planet
OVO’s impacts on the environment and our
planet are central to OVO’s business strategy
to deliver Plan Zero. We recognise that our
business operations have environmental
impacts, including carbon emissions, air
pollution, natural resource use, water
consumption and generation of waste.
OVO Group has a formalised Environment
Policy which sets out our commitment to
minimise the negative impacts of our
business activities on the environment across
our value chain. Our entire business strategy
is informed by Plan Zero and our mission to
provide mass market, affordable and simple
solutions that support our customers to take
action against climate change to help them
decarbonise their homes.
In 2022, we were proud to publish our
refreshed Plan Zero strategy which sets out
our intention to reach net zero by 2035, rather
than 2030. We’re still aiming to cut 60% of our
total carbon footprint by 2030, the same as
before. The difference is, now, we’ll reach net
zero with less reliance on carbon offsetting.
We’ll only offset the emissions we cannot
avoid or reduce – about 10% of our carbon
footprint. To make sure no one is left behind,
we’ve also raised the importance of social
impact and affordability in our strategy. And to
make it easier for our external stakeholders to
see how we’re getting along, we introduced a
new live reporting structure.
Throughout 2022, we reported environmental
performance periodically to OVO’s leadership
team and annually to the Board.
Embedding Section 172
into Board decision-
making processes
Section 172 is well embedded into the
duties of the Board and its decision-
making processes. Our Chairman sets the
agenda for each Board meeting and has
taken steps to ensure we are meeting the
requirements and carefully considering
the needs of our stakeholders through
acombination of the following:
Strategically significant topics are
reviewed through the Risk and Audit
Committees, e.g. regular consideration
of regulatory and political risks is
provided through this forum and
feedback from engagement with
priority stakeholders across
government and the regulator is shared
with Committee members.
Board papers ensure that stakeholders’
views have been considered and
responded to, where required.
The views and needs of stakeholders
are considered thoroughly by the Board
as part of any significant decisions it
makes throughout the course of the
year.
Direct engagement by the Chairman
and Board with relevant stakeholders
via a mix of bilateral meetings,
committees, forums and conferences
on key strategic issues for the Group.
Regularly scheduled Board
presentations and reports on issues
such as: customer engagement, risk
register report, health and safety
reports, investment updates, and
developments related to our people
and culture.
The Directors also fulfil their Section
172 duties partly through the delegation
of day-to-day decision-making to the
employees of the Group and regularly
receive and consider feedback on
stakeholders’ views from dedicated
teams within Corporate Affairs.
22
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
23
Strategic Report
Our stakeholders
Our plan to address the energy crisis.
A Ten
Point Plan.
Throughout 2022, the record increases in energy prices caused by volatility on
global wholesale markets were unsettling for millions of households.
From the start of the energy crisis, we worked closely with the regulator,
government, consumer groups and industry to limit the impact on household
energy bills as much as possible.
In line with our original mission statement to deliver simpler, greener and cheaper
energy, we listened carefully to the views and concerns of our key stakeholders.
Feedback from our customers, OVO’s customer-facing teams, external charities
and consumer organisations clearly demonstrated that consumers faced a real
lack of support given the scale of the crisis.
Through engagement with our stakeholders, we realised that a compassionate
and creative approach was required to address the energy costs crisis in the
short, medium and long term, and we developed 10 policy recommendations to
improve the UK energy market for the benefit of our customers. These include:
We published our ‘Ten Point Plan’ to
address the energy crisis and gained
signicant media coverage to amplify its
recommendations. Following publication,
we undertook extensive engagement
with government, the regulator, our
communities and third party organisations
in an eort to build momentum in support
of the proposals. We are proud to report
that a number of the policies have been
adopted by the UK Government and we
look forward to continuing to advocate for
these proposals throughout 2023.
Approved by the Board on 26 June 2023
and signed on its behalf by:
Vincent Casey
Director
In the short term In the medium term In the long term
1 4 8
Bring forward the energy
rebate to be paid in full
before Christmas
Abolish the
prepaymentmeter
poverty penalty
Ensure the Future System
Operator has a mandate
for securing long term
energy demand
2 5 9
Set up a Fuel Poverty
Taskforce to identify
those most in need
Reduce bill shocks –
in a progressive way
Bring back the
Department of Energy
and Climate Change
3 6 10
Immediately increase
funding for debt
advisorycharities
Make bills simpler and
fairer by abolishing the
standing charge
Introduce a carbon tax
7
Insulate everything:
mobilise a national
energy efficiency effort
24
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
25
Strategic Report
2022 Strategic review
Image to be supplied
Raman Bhatia
Chief Executive Officer
Directors’ Report
About
us.
OVO Together, Bristol
OVO Together, Bristol
Path to Zero Launch Event
Aleto OVO10 participants, 2022
26
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
27
Directors’ Report
Directors’ Report for the Year Ended 31 December 2022
The Directors’ report
The Directors present their report and the audited consolidated
financialstatements for the year ended 31 December 2022.
OVO Group Ltd Board
The OVO Group Ltd Board is committed
to fulfilling our purpose, and overseeing
OVO’s strategy to achieve it in a way that
is ethical, responsible and creates long
term value for all of our stakeholders.
Our Code of Conduct is published on
ourwebsite
1
and supports our culture
byreinforcing the ethical behaviours
weexpect at OVO.
During 2022, all of our people received
training on the code. The OVO Group Ltd
Board is chaired by Stephen Murphy, who
during the year ended 31 December 2022
also held the position as the Chairman
ofLondon & Capital Group Limited.
The role of Chair is separate from that
ofChief Executive.
During the year, a total of eight director
appointments were active, consisting of
one independent non-executive director,
five shareholder non-executive directors,
and two executive directors. The Directors
of the Company who were in office during
the year and up to the date of signing the
financial statements are listed below.
In 2022, the OVO Group Ltd Board met
10times and the Directors attended
asfollows:
1. https://company.ovo.com 2. https://www.ovoenergy.com
Director % 2022 meetings attended during appointment
Stephen Murphy (Independent Chair) 100%
Stephen Fitzpatrick (Shareholder Director) 100%
Adrian Letts
1
(Executive Director) 100%
Atsushi Suzuki
2
(Shareholder Director) n/a
Go Murumoto
3
(Shareholder Director) 100%
Daniel Sasaki (Shareholder Director) 40%
Kunal Dasgupta
4
(Shareholder Director) n/a
Vincent Casey (Executive Director) 100%
1 Resigned 1 March 2022, 2 Resigned 1 January 2022, 3 Appointed 1 January 2022, 4 Appointed 15 December2022
The Boards of OVO Group Ltd subsidiaries
are made up of members of the leadership
team and senior management
Principal activities
The principal activities of the Group are
set out below:
the procurement and supply of gas and
electricity from the wholesale markets
and renewable sources;
the installation, repair and maintenance
of boilers and the provision of boiler
and heating cover;
the installation of smart meters and the
provision of related services;
the supply of energy efficiency
solutions; and
the development of technology
solutions to support the energy market.
Dividends
Directors do not propose a dividend for
the year (2021: no dividends proposed).
Financial instruments
Financial risk management objectives and
policies have been established for the
purpose of making use of financial
instruments in managing the exposure of
the Group to commodity price risk, credit
risk, interest rate risk and liquidity risk.
Details of financial risk management
objectives and policies can be found in
Note 33 of the financial statements.
Employment of
disabled persons
One of the Group’s core values is treating
people fairly, giving equal opportunities to
all employees and applicants. The Group
ensures all employees get the same
chances for training, development and
career progression depending on their
performance, including any disabled
employees. If an employee becomes
disabled whilst in employment, the Group
will make every effort to give the employee
suitable responsibilities with reasonable
adjustments in their current role, in line
with the Equality Act 2010. Where this is
not possible, the Group will try to find the
employee another role within OVO and
provide additional training (as necessary).
Research and development
The Group engages in the development
oftechnology solutions to support the
energy market.
Branches outside of the
United Kingdom
Kaluza Ltd, which is a wholly owned
subsidiary of the Group, has a branch,
Kaluza Limited Sucursal em Portugal,
located in Lisbon, Portugal, which
provides engineering services to
otherGroup companies.
Future developments
The Directors believe that the Group
remains well positioned in the market
place with a differentiated offer.
Further details of the Group’s future
developments can be found in the
Strategic Report. For further
information,also visit our website
2
.
Subsequent events
aftertheyear ended
31December 2022
Subsequent to the balance sheet date,
Intelligent Energy Technology Ltd, a
subsidiary of the Group, has entered into
ashare purchase agreement with Gulf Oil
International Limited to sell its shareholding
in Indra Renewable Technologies Limited,
with completion of the transaction subject
to certain conditions
Going concern
The financial statements have been
prepared on a going concern basis.
Details on going concern basis can be
found in Note 2 of the financial statements.
Directors’ liabilities
As permitted by the Articles of
Association, the Directors have the benefit
of an indemnity which is a qualifying third
party indemnity provision as defined by
Section 234 of the Companies Act 2006.
The indemnity was in force throughout
last financial year and is currently in force.
The Company also purchased and
maintained throughout the financial year
Directors’ and Officers’ liability insurance
in respect of itself and its Directors.
Streamlined energy and
carbon reporting
Details of the Group’s compliance against
the Streamlined Energy and Carbon
Reporting Framework Regulations can
befound in the Strategic Report under
theheading ‘Streamlined Energy and
Carbon Reporting’.
Corporate governance
The Group’s statement on corporate
governance can be found in the Strategic
Report under the heading ‘ Statement on
corporate governance arrangements’.
Disclosure of information
tothe auditors
Each Director has taken steps that they
ought to have taken as a director in order
to make themselves aware of any relevant
audit information and to establish that the
Company’s auditors are aware of that
information. Each Director confirms that
there is no relevant information that they
know of and of which they know the
auditors are unaware.
Statement of Directors’
Responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have elected to prepare the financial
statements in accordance with UK-
adopted international accounting
standards. Under company law, the
Directors must not approve the financial
statements unless they are satisfied that
they give a true and fair view of the state
of affairs of the Group and the Company
and of the profit or loss of the Group and
the Company for that period. In preparing
these financial statements, the Directors
are required to:
select suitable accounting policies
andthen apply them consistently;
make judgements and accounting
estimates that are reasonable
andprudent;
state whether applicable UK-adopted
international accounting standards in
conformity with the requirements of
the Companies Act 2006 have been
followed, subject to any material
departures disclosed and explained
inthe financial statements; and
prepare the financial statements on
thegoing concern basis unless it is
inappropriate to presume that the
Group and Company will continue
inbusiness.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
and the Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group
and the Company, and that enable them
toensure that the financial statements
comply with the Companies Act 2006.
They are also responsible for safeguarding
the assets of the Group and the Company,
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Group’s and the
Company’s website. Legislation in
theUnited Kingdom governing the
preparation and dissemination of
financialstatements may differ from
legislation in other jurisdictions.
Approved by the Board on 26 June 2023
and signed on its behalf by:
Vincent Casey
Executive Director
Charitable donations
During the year, the Group made charitable
donations of £2,349,000 (2021: £759,000).
The donations to the StepChange Debt
Charity and The Trussell Trust are part of
OVO’s initiative to support UK consumers
in response to the cost of living crisis.
£
The OVO Charitable
Foundation
649,000
StepChange Debt Charity 1,200,000
The Trussell Trust 500,000
Employee engagement
We aspire to be the leading place to work
for people who will change the world.
In pursuit of this goal, we regularly engage
with our people, and have regard for their
interests in our decision-making.
Employee engagement is further
discussed in the Strategic Report under
the heading ‘Our stakeholders’.
Other stakeholder
engagement
We have regard for our business
relationships with suppliers, customers
and other stakeholders, and take formal
consideration of any stakeholders which
are relevant to any major decisions taken
by the Board throughout the year.
Other stakeholder engagement is further
discussed in the Strategic Report under
the heading ‘Our stakeholders’.
28
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
29
Directors’ Report
Directors’ Report for the Year Ended 31 December 2022
Financial statements
The numbers.
Financial Statements
32 Independent Auditors’ Report to the
MembersofOVOGroup Ltd
35 Consolidated Income Statement
36 Consolidated Statement of Comprehensive Income
37 Consolidated and Company Statements
ofFinancialPosition
39 Consolidated Statement of Changes in Equity
40 Company Statement of Changes in Equity
41 Consolidated Statement of Cash Flows
42 Consolidated Statement of Cash Flows
43 Company Statement of Cash Flows
44 Notes to the Financial Statements
30
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
31
Independent Auditors’ Report to the Members of OVO Group Ltd
Report on the audit of the financial statements
Opinion
In our opinion, OVO Group Ltd’s Group financial statements and Company financial statements (the “financial statements”):
•
give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2022 and of the Group’s loss
and the Group’s and Company’s cash flows for the year then ended;
•
have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with
the provisions of the Companies Act 2006; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which
comprise: the Consolidated and Company Statements of Financial Position as at 31 December 2022; the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity
and the Consolidated and Company Statements of Cash Flows for the year then ended; and the Notes to the financial statements,
which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the
Company’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
33
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and the Directors’ report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006
requires us also to report certain opinions and matters as described below.
Strategic report and the Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and the
Directors’ report for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report and the Directors' report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
33
32
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Financial statements
Independent Auditors’ Report to the Members of OVO Group Ltd continued
34
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to Ofgem licence conditions and UK tax legislation, and we considered the extent to which non-compliance might
have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the
financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were
related to posting of inappropriate journal entries to manipulate the financial statements, and management bias in accounting
estimates and judgements, in particular in respect of revenue recognition and impairment of receivables. Audit procedures
performed by the engagement team included:
•
Discussions with management, in house legal counsel and the members of the Audit Committee, including consideration of
known or suspected instances of non-compliance with laws and regulations and fraud;
•
Review of Ofgem's website for details of any enforcement action or open investigations;
•
Testing whether tax provisions reflect relevant tax legislation, including consideration of any uncertain tax positions;
•
Challenging assumptions and judgements made by management in their significant accounting estimates;
•
Identifying and where applicable testing journal entries that met our predefined risk criteria, in particular journal entries posted
with unusual account combinations; and
•
Incorporating an element of unpredictability to our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
27 June 2023
Consolidated Income Statement for the Year Ended 31 December 2022
35
2022 £m 2021 £m
Note
Underlying
business
performance
Exceptional
items and
certain re-
measurements
1
Results
for the
year
Underlying
business
performance
Exceptional
items and
certain re-
measurements
1
Results
for the
year
Revenue 4 6,730 – 6,730 4,513 – 4,513
Cost of sales (6,073) – (6,073) (3,766) (14) (3,780)
Gross profit 657 – 657 747 (14) 733
Administrative expenses (595) (76) (671) (574) (40) (614)
Net impairment losses of financial assets
– customer debtors 5 (165) – (165) (117) – (117)
Re-measurement of derivative energy
contracts 22 – (1,438) (1,438) – 422 422
Other operating income 6 7 29 36 1 4 5
Operating (loss)/profit 7 (96) (1,485) (1,581) 57 372 429
Finance income 9 5 – 5 – – –
Finance costs 9 (74) – (74) (58) – (58)
Net finance costs 9 (69) – (69) (58) – (58)
Share of net losses of associates
accounted for using the equity method 17 (2) – (2) (1) – (1)
(Loss)/profit before tax (167) (1,485) (1,652) (2) 372 370
Income tax credit/(expense) 13 39 338 377 33 (68) (35)
(Loss)/profit for the year (128) (1,147) (1,275) 31 304 335
(Loss)/profit attributable to:
Owners of the Company (126) (1,147) (1,273) 32 304 336
Non-controlling interests (2) – (2) (1) – (1)
(Loss)/profit for the year (128) (1,147) (1,275) 31 304 335
1 Refer to Note 8 for details of current and prior year exceptional items and certain re-measurements. The above results were derived from continuing operations with the exception of
businesses disposed of referred to in Note 18.
Financial statements
35
34
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Consolidated Statement of Comprehensive Income for the Year Ended
31 December 2022
36
Note
2022
£m
2021
£m
(Loss)/profit for the year (1,275) 335
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Re-measurements of defined benefit surplus 29 10 11
Deferred tax on defined benefit surplus 13 (3) (3)
Total other comprehensive income 7 8
Total comprehensive (expense)/income for the year (1,268) 343
Total comprehensive (expense)/income attributable to:
Owners of the Company (1,266) 344
Non-controlling interests (2) (1)
(1,268) 343
Consolidated and Company Statements of Financial Position as at
31 December 2022
37
2022 2021
Note
Group
£m
Company
£m
Group
£m
Company
£m
Assets
Non-current assets
Property, plant and equipment 14 8 – 8 –
Right-of-use assets 15 38 – 35 –
Intangible assets 16 482 5 535 5
Deferred tax assets 13 440 – 142 –
Investments in subsidiaries 17 – 203 – 200
Investments accounted for using the equity method 17 8 – 8 –
Defined benefit pension asset 29 29 – 20 –
Derivative financial instruments 22 38 – – –
1,043 208 748 205
Current assets
Inventories 20 34 – 29 –
Trade and other receivables 21 1,215 88 936 105
Derivative financial instruments 22 – – 461 –
Income tax asset 7 – 3 –
Cash and cash equivalents 23 474 2 145 –
1,730 90 1,574 105
Assets classified as held for sale 19 1 – – –
Total assets 2,774 298 2,322 310
Liabilities
Current liabilities
Trade and other payables 24 (1,299) (10) (907) (26)
Deferred income (906) – (534) –
Lease liabilities 26 (9) – (12) –
Provisions 28 (20) – (39) –
Derivative financial instruments 22 (1,054) – – –
(3,288) (10) (1,492) (26)
Financial statements
37
36
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Consolidated and Company Statements of Financial Position as at
31 December 2022 continued
38
2022 2021
Note
Group
£m
Company
£m
Group
£m
Company
£m
Non-current liabilities
Trade and other payables 24 (18) – – –
Deferred tax liabilities 13 – – (80) –
Loans and borrowings 25 (525) – (514) –
Provisions 28 (28) – (19) –
Lease liabilities 26 (34) – (30) –
Derivative financial instruments 22 – – (39) –
(605) – (682) –
Total liabilities (3,893) (10) (2,174) (26)
Net (liabilities)/assets (1,119) 288 148 284
Equity
Share capital 30 – – – –
Share premium 30 133 133 133 133
Other reserves 30 – 80 1 80
(Accumulated losses)/Retained earnings (1,252) 75 15 71
Total equity, attributable to owners of the parent (1,119) 288 149 284
Non-controlling interests – – (1) –
Total equity (1,119) 288 148 284
No income statement is presented for the Company as permitted by Section 408 of the Companies Act 2006. The Company made a
profit for the financial year of £4m (2021: loss of £13m).
The financial statements on pages 35 – 103 were approved by the Board on 26 June 2023 and signed on its behalf by:
Vincent Casey
Director
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2022
39
Attributable to owners of the parent
Share
capital
£m
Share
premium
£m
Other
reserves
£m
(Accumulated
losses)/
Retained
earnings
£m
Total equity,
attributable to
owners of the
parent
£m
Non-controlling
interests
£m
Total equity
£m
At 1 January 2021 – 133 – (329) (196) – (196)
Profit/(loss) for the year – – – 336 336 (1) 335
Other comprehensive income – – – 8 8 – 8
Movement in foreign
currency translation reserve – – 1 – 1 – 1
At 31 December 2021 – 133 1 15 149 (1) 148
Attributable to owners of the parent
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings/
(Accumulated
losses)
£m
Total equity,
attributable to
owners of the
parent
£m
Non-controlling
interests
£m
Total equity
£m
At 1 January 2022 – 133 1 15 149 (1) 148
Loss for the year – – – (1,273) (1,273) (2) (1,275)
Other comprehensive income – – – 7 7 – 7
Decrease in non-controlling
interest in subsidiaries
1
– – – (1) (1) 3 2
Movement in foreign currency
translation reserve – – (1) – (1) – (1)
At 31 December 2022 – 133 – (1,252) (1,119) – (1,119)
1 On 9 September 2022, the Group sold its shareholding in OVO Energy (France) SAS (OEF) to ENI Gas & Power France S.A. (ENI). In the prior year, the Group owned 75% of OEF
and recognised a non-controlling interest in OEF representing ENI's 25% interest in the company. The carrying amount of the existing 25% non-controlling interest was £1m as at
31 December 2021. Prior to the sale in the year, the Group had subscribed for further shares in OEF which increased its ownership to 99.75% from 75% and, as a result, the Group
recognised a decrease in non-controlling interests of £3m and an increase in equity attributable to owners of the parent of £3m. The Group subsequently disposed of its shareholding
in OEF. Refer to Note 18 Disposals for further details.
Financial statements
39
38
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Company Statement of Changes in Equity for the Year Ended
31 December 2022
40
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2021 – 133 80 84 297
Loss for the year – – – (13) (13)
At 31 December 2021 – 133 80 71 284
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2022 – 133 80 71 284
Profit for the year – – – 4 4
At 31 December 2022 – 133 80 75 288
Consolidated Statement of Cash Flows for the Year Ended
31 December 2022
41
Note
2022
£m
2021
£m
Cash flows from operating activities
(Loss)/profit for the year (1,275) 335
Adjustments for non-cash items
Depreciation of property, plant and equipment 14 4 7
Depreciation and impairment of right-of-use assets 15 10 12
Amortisation of intangible assets 16 102 84
Defined benefit pension transactions 2 4
Finance income 9 (5) –
Finance costs 9 74 58
Net gain on disposals of subsidiaries and businesses 6 (29) (4)
Income tax (credit)/expense 13 (377) 35
Research and development expenditure credit 6 (7) (1)
Net loss/(gain) on derivative financial instruments at fair value through profit or loss 22 1,438 (422)
Share of net losses of associates accounted for using the equity method 17 2 1
Other movements 5 1
(56) 110
Working capital adjustments
Increase in inventories (5) (11)
(Increase)/decrease in trade and other receivables (282) 178
Increase in trade and other payables 424 73
Increase/(decrease) in deferred income 378 (143)
Decrease in provisions (11) (24)
Cash generated from operations 448 183
Income tax received – 12
Net cash flow generated from operating activities 448 195
Cash flows from investing activities
Interest received 1 –
Cash receipts from repayment of loans, classified as investing activities 5 –
Proceeds from the sale of business 18 1 8
Proceeds from the disposal of subsidiaries, net of cash disposed 18 14 3
Payments for property, plant and equipment (5) (1)
Payments for intangible assets (59) (53)
Payments for investments in associates accounted for using equity method (2) (5)
Net cash flow used in investing activities (45) (48)
Financial statements
41
40
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Consolidated Statement of Cash Flows for the Year Ended
31 December 2022 continued
42
Note
2022
£m
2021
£m
Cash flows from financing activities
Interest paid (24) (34)
Repayment of bank borrowing (38) –
Principal elements of lease payments 26 (12) (17)
Net cash flow used in financing activities (74) (51)
Net increase in cash and cash equivalents 329 96
Cash and cash equivalents at 1 January 145 49
Cash and cash equivalents at 31 December
1
23 474 145
1 Cash and cash equivalents as at 31 December 2022 include £269m relating to cash received from the Government not yet distributed to customers under the Energy Bills Support
Scheme. The use of this cash is restricted to distributing to eligible customers to reduce their energy bills under the scheme. Cash available for use as at 31 December 2022 is therefore
£205m. Refer to Government support schemes in the Summary of significant accounting policies for further details on the scheme.
Company Statement of Cash Flows for the Year Ended 31 December 2022
43
Note
2022
£m
2021
£m
Cash flows from operating activities
Profit/(loss) for the year 4 (13)
Adjustments for non-cash items
Impairment of investments in subsidiaries 17 – 5
Loss on disposal of investments 4 –
Finance income (4) (6)
Income tax expense 1 1
5 (13)
Working capital adjustments
Decrease in trade and other receivables 14 9
Decrease in trade and other payables – (1)
Net cash flow generated from/(used in) operating activities 19 (5)
Cash flows from investing activities
Payments for investments in subsidiaries (8) (1)
Cash receipts from repayment of loans, classified as investing activities 5 –
Net cash flow used in investing activities (3) (1)
Cash flows from financing activities
Repayment of related party financing (14) –
Net cash flow used in financing activities (14) –
Net increase/(decrease) in cash and cash equivalents 2 (6)
Cash and cash equivalents at 1 January – 6
Cash and cash equivalents at 31 December 23 2 –
Financial statements
43
42
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022
44
1 General information
The Company is a private company limited by share capital, incorporated and domiciled in the United Kingdom. The nature of the
Group’s operations and principal activities is set out in the Directors’ Report on page 26.
The address of its registered office and principal place of business is:
1 Rivergate
Temple Quay
Bristol
England
BS1 6ED
UK
These financial statements were authorised for issue by the Board on 26 June 2023.
2 Accounting policies
All accounting policies noted below relate to the Group and Company, except for those that explicitly state that they relate to the
Company only.
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The Group and Company financial statements have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The financial statements have been prepared under the historical cost convention, except for the following:
•
assets held for sale – measured at the lower of carrying amount and fair value less costs to sell;
•
financial assets and liabilities at fair value through profit or loss – measured at fair value through profit or loss; and
•
defined benefit pension schemes – plan assets measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 3.
No income statement is presented for the Company as permitted by Section 408 of the Companies Act 2006. The Company made a
profit for the financial year of £4m (2021: loss of £13m).
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity
operates (the functional currency). The financial statements are presented in Pounds Sterling (£), which is the Group’s functional and
presentation currency.
The financial statements are rounded to the nearest million (£m) except where otherwise stated.
Going concern
The financial statements have been prepared on the going concern basis as the Directors expect that the Group and Company will be
able to continue in operation and meet their commitments as they fall due over the going concern period.
The Group had net liabilities of £1,119m (2021: net assets of £148m) and net current liabilities of £1,557m (2021: net current assets of
£82m) as at the balance sheet date. The significant net liabilities positions were primarily driven by the re-measurement of
commodity derivatives designated as held for trading. Despite this, the Group continues to manage its liquidity risk appropriately in
the wake of volatile commodity prices. Our hedging arrangements have remained effective in managing our exposure to commodity
price volatility and, together with Government customer support schemes, have managed the Group’s liquidity risk. At 31 December
2022, the Group had £205m (2021: £145m) of unrestricted cash and cash equivalents. In addition to servicing interest costs, the
Group prepaid £38m against its term loan facilities during the year and has remained compliant with all of its financial covenants
under its financing arrangements and energy trading arrangements.
45
2 Accounting policies continued
Looking ahead, the Directors have reviewed the financial forecast of the Group and Company, and have performed a going concern
review considering both a base and several severe but plausible downside scenarios.
The base forecast takes into account of the following key assumptions:
•
Gross margin fluctuations over the forecast period as a result of forecast commodity prices and expected movements in the
regulatory price cap.
•
Increased expected credit losses as a result of the impact of the UK cost of living crisis, including rising energy bills, inflation and
interest rates, and increased operating costs resulting from planned initiatives aimed at mitigating bad debt risks;
•
Stable customer numbers, with customer churn offset by customer growth; and
•
The impact of ring-fencing of renewable obligation receipts.
The severe but plausible downside scenarios included a further increase in bad debt, an increase in customer churn, and weather
scenarios. Under the forecast (both base case and downside scenarios) the Group and Company have sufficient liquidity over the full
going concern period and would be compliant with its financial covenants. In addition, the Directors have a range of mitigations
within the Group’s direct control to protect the Group’s earnings and liquidity in the event of an unlikely more severe downside
scenario. These mitigations include reductions in a selection of discretionary operating and capital expenditure.
Accordingly, the Directors have a reasonable expectation that the Group and the Company have adequate liquidity and resources
to continue operating for a period of at least 12 months from the date of approval of the financial statements and, therefore, has
considered it appropriate to adopt the going concern basis in preparing the financial statements. The Directors do not believe there
are any material uncertainties to disclose in relation to the Group’s and the Company’s ability to continue as a going concern.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings drawn up to
31 December 2022.
A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with those used by the Group.
The purchase method of accounting is used to account for business combinations that result in the acquisition of subsidiaries by the
Group. Corporate restructuring, which does not meet the definition of a business combination, are accounted for through the
application of predecessor accounting. The cost of a business combination is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any excess
of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions between the Company and its subsidiaries, which are
related parties, are eliminated in full.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the
Group. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity
therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the
non-controlling shareholders’ share of changes in equity since the date of the combination. Total comprehensive income is attributed
to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Financial statements
45
44
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
46
2 Accounting policies continued
Changes in accounting policy
New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing
1 January 2022:
•
Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16;
•
Onerous contracts – Cost of Fulfilling a Contract – Amendments to IAS 37;
•
Annual Improvements to IFRS Standards 2018-2020; and
•
Reference to the Conceptual Framework – Amendments to IFRS 3.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New standards and interpretations not yet adopted
IFRS 17 Insurance Contracts will be effective from 1 January 2023. The Group currently has fixed fee service contracts that are
accounted for as insurance contracts under IFRS 4 Insurance contracts. The Group has completed its assessment of IFRS 17 and
expects these contracts to fall within the scope of IFRS 17 as the Group conducts individual risk assessments when setting the price
of these contracts. The Group will apply the simplified Premium Allocation Approach to its contracts as the duration of the Group’s
insurance contracts is not greater than one year. The Group does not expect a material impact on the consolidated financial
statements from the application of this standard.
Certain new accounting standards, amendments to accounting standards and interpretations not mentioned above have been
published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material impact on the Group in the current or future reporting
periods and on foreseeable future transactions.
Government support schemes
In light of the cost of living crisis in the year, the UK Government has established both the Energy Price Guarantee Scheme (EPG)
and Energy Bills Support Scheme (EBSS) which form part of the Government’s cost of living assistance package for consumers
from October 2022 to March 2023.
Energy Price Guarantee Scheme
The Energy Price Guarantee Scheme (EPG) protects consumers from increases in energy costs as the scheme limits the amount
suppliers can charge per unit of energy used. The scheme reduces the average annual domestic household bill for the period from
1 October 2022 to 31 March 2023 to approximately £2,500 per annum, and was extended at the same level from 1 April 2023 to
30 June 2023. The scheme is expected to remain in place until April 2024. Energy suppliers are compensated by the Government
for the savings delivered to households, which represent the difference between the expected price cap and the guarantee rates.
Management has determined it appropriate to apply the requirements of IAS 20 Government Grants to EPG grant income. The Group
recognises EPG grant income over the support period as customers are charged reduced rates. The Group recognises EPG grant
income to the extent there is reasonable assurance that the Group will comply with the conditions attaching to the scheme and that
the income will be received. The Group presents EPG grant income within revenue as it judges the income arises from the ordinary
activities of the Group. Since the start of the scheme, the Group has recognised EPG grant income of £853m which represents the
amount of savings delivered to households.
Energy Bills Support Scheme
The Energy Bills Support Scheme (EBSS) provides domestic electricity customers in Great Britain with £400 of support, delivered
by electricity suppliers over six months from October 2022. Households receive a discount of £66 applied to their energy bills in
October and November, rising to £67 each month from December through to March 2023. The Group delivers this support as either
a cash benefit or a credit to customers’ energy account, depending on their payment type. The Group receives funding from the
Government monthly in advance. The funding from the Government is restricted to the use of delivering the support to customers.
The Group held restricted cash of £269m relating to cash received from BEIS not yet distributed to customers under the scheme.
Since the start of the scheme, the Group has received £1,021m from the Government under the scheme and has distributed £729m to
customers. The total obligations not yet satisfied under the scheme amounted to £292m as at the balance sheet date, which consi
st
of £269m cash received from BEIS and £23m unredeemed vouchers issued to prepayment customers. The Group recognises a cash
asset and a corresponding liability related to the obligation to deliver the support to customers to the extent that the cash has been
received but not yet distributed at a reporting period end.
47
2 Accounting policies continued
Revenue
The principles in IFRS 15 are applied to revenue recognition criteria using the following five-step model:
1. Identify the contracts with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognise revenue when or as the entity satisfies its performance obligations
Transaction price
In determining the transaction price, the Group considers the effects of variable consideration, the existence of significant financing
components, non-cash consideration, and consideration payable to the customer (if any).
(i) Variable consideration
If the consideration in a contract includes a variable amount, revenue is only recognised in an amount at which it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur.
(ii) Consideration payable to a customer
If the contract contains consideration payable to a customer, the consideration payable is accounted for as a reduction of the
transaction price.
Revenue recognition
The below sets out the revenue recognition accounting policies for each material revenue stream for the Group:
Sale of gas and electricity
The Group earns the majority of its revenue from the supply of electricity and gas to customers. Revenue is recognised ‘over time’
consistent with the delivery of electricity and gas to the customer, as the receipt and consumption of the benefits of the electricity
and gas are considered to be simultaneous. Further information is included in Note 3.
Revenue is measured on the applicable customer tariff rate and after deduction of discounts for direct debits, paperless billing
or government schemes such as the Warm Home Discount.
Installation and rental of meters
Installation and rental of meters predominantly relates to the provision of meter installation to meter asset providers. Revenue from
the installation of meters is recognised at a point in time as the control of installed meters passes to the customers.
Voiceline and broadband revenue
Voiceline and broadband revenue is earned from the provision of services relating to the sale of telephone and broadband
connectivity and associated services to consumers within the telecommunications market. The majority of voiceline and broadband
revenue is recognised ‘over time’ as the provision of voiceline and broadband services is considered consistent with receipt and
consumption of the benefits of the services.
Sale of home and emergency cover
Revenue from the sale of home and emergency cover predominantly relates to the provision of boiler service and boiler and central
heating cover. Boiler service contracts are entered into with home services customers by Corgi Homeplan Ltd. Boiler and central
heating covers are insurance contracts entered into with home services customers by OVO Insurance Services Ltd, authorised and
regulated by the Guernsey Financial Services Commission. Both companies are wholly-owned subsidiaries of the Group.
Boiler service contracts are typically fixed-fee contracts for the provision of boiler service. Revenue arising from boiler services
is recognised at a point in time when the service is performed.
Boiler and central heating covers protect policyholders against the risk of breakdowns. These covers generally include maintenance,
repair and/or replacement of the items affected, but the benefits available to customers may vary, depending on the terms and
conditions of the contracts entered into. The Group is exposed to risk transferred under these contracts, which depends on the
occurrence of future uncertain events such as extreme weather events, the nature and frequency of faults, and the cost of repair
or replacement of the items affected. Insurance risk is actively managed through customer risk assessment at contract inception
and annual boiler service.
Financial statements
47
46
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
48
2 Accounting policies continued
The risk transferred under these contracts is not considered materially concentrated as the covers are sold to residential customers
across the UK with small individual contract values. The Group regularly assesses insurance risk sensitivities such as frequency of
claims and increases in fulfilment costs based on both historic and forward-looking information, and a reasonable increase in these
sensitivities would not have a material impact on the results of the Group.
The amount and timing of the Group’s future cash flows arising from these contracts is uncertain and is also dependent on the terms
and conditions entered into with the customers, such as the items that are covered and the level of associated services that is agreed,
the number of call-outs to carry out work, and limits on repairs and maintenance and/or replacement costs.
Revenue is recognised over the life of contracts (usually 12 months). Costs incurred to settle claims predominantly relate to the labour
costs in servicing claims.
The below sets out the revenue and expenses relating to insurance contracts recognised in the financial statements.
2022
£m
2021
£m
Revenue relating to insurance contracts 50 34
Expenses relating to insurance contracts (42) (30)
Accrued income and receivables
Accrued income is the right to consideration in exchange for goods or services provided to a customer. If the Group provides goods
or services to a customer before the customer pays consideration or before payment is due, accrued income is recognised for the
earned consideration that is conditional.
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e. only the passage of time is required
before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to provide goods or services to a customer for which the Group has received consideration
(or an amount of consideration is due) from the customer. If a customer pays consideration before the Group provides goods or
services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
Contract liabilities, or deferred income, are recognised as revenue when the Group performs under the contract.
Net basis of measurement of contract balances
Accrued income and deferred income balances are determined for each contract on a net basis. This is because the rights and
obligations within each contract are considered inter-dependent. Where two contracts are with the same or related entities,
an assessment is made of whether accrued income and deferred income are inter-dependent and, if so, contract balances
are reported net.
Capitalisation of costs to obtain or fulfil a contract
The costs of obtaining or fulfilling a contract are recognised as an asset if certain criteria are met. Capitalised costs are amortised
on a straight line basis over the remaining contract term, unless the pattern of good or service delivery indicates a more appropriate
profile. To be eligible for capitalisation, costs must be directly attributable to specific contracts, relate to future activity and generate
future economic benefits. Capitalised costs are regularly assessed for recoverability.
49
2 Accounting policies continued
Exceptional items and certain re-measurements
Exceptional items and certain re-measurements are those expenses or credits that are deemed unusual by nature and/or scale and
of such significance that separate disclosure is required for the financial statements to be properly understood. Exceptional items
and certain re-measurements include fair value gain/(loss) on derivative financial instruments.
The Group often undertakes lengthy transformation programmes which may span over more than a year. Transformation
programmes are generally of a one-off nature as the incurrence of costs associated to them ceases when they are complete.
The costs of these programmes are considered exceptional and may be reported in more than one year.
Government grants
Grants from the Government are recognised in the income statement over the period in which the related costs are recognised
and only when there is reasonable assurance that the Group will comply with the conditions attached to them and the grant will
be received.
Finance income and costs
Interest income and expense is recognised in the income statement as it accrues, using the effective interest method.
Foreign currency transactions and financial statements of foreign operations
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity
at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the initial transaction dates.
Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.
The assets and liabilities of foreign operations are translated into Sterling at exchange rates ruling at the statement of financial
position date. The revenues and expenses of foreign operations are translated into Sterling at rates approximating to the exchange
rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation of foreign operations are
recognised in the foreign currency translation reserve.
Tax
The tax expense or credit for the period comprises current tax and deferred tax. Tax is recognised in the income statement, except
that a charge (or credit) attributable to an item of income or expense recognised as other comprehensive income is also recognised
directly in other comprehensive income.
The current income tax charge or credit is calculated on the basis of tax rates and laws that have been enacted or substantively
enacted by the reporting date in the countries where the Group operates and generates taxable income.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, the expected period of realisation and using tax rates enacted or substantively enacted at the
reporting period end date. Deferred tax is not discounted.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the
temporary difference can be utilised.
Tax assets and tax liabilities are offset in the statement of financial position where they relate to taxes levied by the same tax
authority and the same taxable entity or group and the entity has a legally enforceable right to set off.
Financial statements
49
48
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
50
2 Accounting policies continued
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation
and subsequent accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition
and installation.
Depreciation
Depreciation is charged so as to write off the cost of assets, other than those under construction over their estimated useful lives,
as follows:
Asset class Depreciation method and rate
Leasehold property Period of the lease
Fixtures and fittings 3 years straight line
Meter assets and miscellaneous equipment 4 to 10 years straight line
Office equipment 3 years straight line
Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group’s interest in the net
fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is held
in the currency of the acquired entity and revalued to the closing rate at each reporting period date.
Goodwill is not subject to amortisation but is tested for impairment.
Negative goodwill arising on an acquisition is recognised directly in the income statement. On disposal of a subsidiary or a jointly
controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income
statement on disposal.
Intangible assets
Customer-related intangible assets acquired in a business combination are recognised at fair value at the acquisition date.
Customer-related intangible assets have a finite useful life and are carried at cost less accumulated amortisation and any
accumulated impairment losses.
Computer software and licences acquired in a business combination are recognised at fair value at the acquisition date.
Acquired computer software and licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs
that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are
recognised as intangible assets when the following criteria are met:
•
it is technically feasible to complete the software product so that it will be available for use;
•
management intends to complete the software product and use or sell it;
•
there is an ability to use or sell the software product;
•
it can be demonstrated how the software product will generate probable future economic benefits;
•
adequate technical, financial and other resources to complete the development and to use or sell the software are available; and
•
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and
an appropriate portion of relevant attributable overheads. Other development expenditures that do not meet these criteria are
recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
51
2 Accounting policies continued
Amortisation
Amortisation is provided on intangible assets, other than goodwill, so as to write off the cost, less any estimated residual value, over
their expected useful economic life as follows:
Asset class Amortisation method and rate
Other intangible assets 3 to 5 years straight line
Software and IT development costs 3 to 5 years straight line
Trade name 4 to 10 years straight line
Contractual customer relationships Over the expected life of the contract
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested
annually for impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows
(cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each
reporting date.
Investments
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case
where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting, after initially being recognised at cost.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses of the investee in the income statement and the Group’s share of movements
in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates
and joint ventures are recognised as a reduction in the carrying amount of the investment.
Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the Group.
The carrying amount of equity accounted investments is tested for impairment in accordance with the policy described for non-
financial assets.
The Company only policy is that investments in subsidiaries are carried at cost, less any impairment.
Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and
non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment
to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable
to owners of the Company.
When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant
influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in the
income statement. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retai
ned
interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This might
mean that amounts previously recognised in other comprehensive income are reclassified to the income statement.
Financial statements
51
50
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
52
2 Accounting policies continued
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents which
are not available for use by the Group are presented as restricted cash.
Trade receivables
Trade receivables are predominantly amounts due from customers for the sale of electricity and gas or other services performed
in the ordinary course of the Group’s business. If collection is expected in one year or less (or in the normal operating cycle of
the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables do not carry any interest and are held at transaction price less an appropriate impairment recognised where the
loss is probable. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected credit loss allowance for all trade receivables and accrued income. Further detail on this model and application within
these financial statements can be found within Note 3.
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their
carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits
and financial assets that are carried at fair value.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to
sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess
of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-
current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as
held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be
recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented
separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a
separate major line of business, is part of a single co-ordinated plan to dispose of such a line of business, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operations are presented separately in the income statement if the
discontinued operation represents a major line of business of the Group.
Inventories
Smart meter inventory is stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO)
method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle
of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective
interest method.
53
2 Accounting policies continued
Borrowings
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently
carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption
being recognised as a charge to the income statement over the period of the relevant borrowing.
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the reporting date.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity
services and amortised over the period of the facility to which it relates.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the reporting date and
are discounted to present value where the effect is material.
Share-based payments
OVO Group operates a number of equity-settled, share-based compensation plans, under which the Group receives services from
employees as consideration for equity instruments of OVO Group Ltd. The fair value of the employee services received in exchange
for the grant of the equity instruments is recognised as an expense. The total amount to be expensed is determined by reference to
the fair value of the equity instruments granted:
•
including any market performance conditions (for example, an entity’s share price);
•
excluding the impact of any service and non-market performance vesting conditions (for example, sales growth targets and
remaining an employee of the Group over a specified time period); and
•
including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of equity instruments that are
expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied.
In addition, in some circumstances, employees may provide services in advance of the grant date and, therefore, the grant date
fair value is estimated for the purposes of recognising the expense during the period between service commencement period
and grant date.
At the end of each reporting period, the Group revises its estimates of the number of shares that are expected to vest based
on the non-market vesting conditions. It recognises the impact of the revision to the original estimates, if any, in the income
statement, with a corresponding adjustment to equity.
The grant by OVO Group Ltd of its equity instruments to the employees of subsidiary undertakings in the Group (such as to
employees of OVO Energy Ltd) is treated as a capital contribution. The fair value of employee services received, measured by
reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings,
with a corresponding credit to equity in the parent entity financial statements.
The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant
itself, and the charge will be treated as a cash-settled transaction.
Financial statements
53
52
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
54
2 Accounting policies continued
Leases
Definition
A lease is a contract, or a part of a contract, that conveys the right to use an asset or a physically distinct part of an asset (the
underlying asset) for a period of time in exchange for consideration. Further, the contract must convey the right to the Group to
control the asset or a physically distinct portion thereof. A contract is deemed to convey the right to control the underlying asset if,
throughout the period of use, the Group has the right to:
•
obtain substantially all the economic benefits from the use of the underlying asset; and
•
direct the use of the underlying asset (e.g., direct how and for what purpose the asset is used).
Initial recognition and measurement
The Group initially recognises a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use
the underlying asset for the lease term.
The lease liability is measured at the present value of the lease payments to be made over the lease term. The lease payments include
fixed payments, purchase options at exercise price (where payment is reasonably certain), expected amount of residual value
guarantees, termination option penalties (where payment is considered reasonably certain) and variable lease payments that
depend on an index or rate.
The right-of-use asset is initially measured at the amount of the lease liability, adjusted for lease prepayments, lease incentives
received, the Group’s initial direct costs (e.g., commissions) and an estimate of restoration, removal and dismantling costs.
Subsequent measurement
After the commencement date, the Group measures the lease liability by:
(a) increasing the carrying amount to reflect interest on the lease liability;
(b) reducing the carrying amount to reflect the lease payments made; and
(c) re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in substance fixed lease
payments or on the occurrence of other specific events.
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on
the remaining balance of the lease liability. Interest charges are included in finance costs in the income statement, unless the costs
are included in the carrying amount of another asset applying other applicable standards. Variable lease payments not included in
the measurement of the lease liability are included in operating expenses in the period in which the event or condition that triggers
them arises.
The related right-of-use asset is accounted for using the Cost model in IAS 16 and depreciated and charged in accordance with
the depreciation requirements of IAS 16 Property, Plant and Equipment as disclosed in the accounting policy for Property, Plant
and Equipment. Adjustments are made to the carrying value of the right-of-use asset where the lease liability is re-measured
in accordance with the above. Right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of assets
as disclosed in the accounting policy in impairment.
Lease modifications
If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist,
the lease modification will result in either a separate lease or a change in the accounting for the existing lease.
The modification is accounted for as a separate lease if both:
(a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
(b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and
any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
55
2 Accounting policies continued
If both of these conditions are met, the lease modification results in two separate leases, the unmodified original lease and a separate
lease. The Group then accounts for these in line with the accounting policy for new leases. If either of the conditions are not met,
the modified lease is not accounted for as a separate lease and the consideration is allocated to the contract and the lease liability is
re-measured using the lease term of the modified lease and the discount rate as determined at the effective date of the modification.
For a modification that fully or partially decreases the scope of the lease (e.g., reduces the square footage of leased space),
IFRS 16 requires a lessee to decrease the carrying amount of the right-of-use asset to reflect partial or full termination of the lease.
Any difference between those adjustments is recognised in the income statement at the effective date of the modification.
For all other lease modifications which are not accounted for as a separate lease, IFRS 16 requires the lessee to recognise the
amount of the re-measurement of the lease liability as an adjustment to the corresponding right-of-use asset without affecting
the income statement.
Short term and low value leases
The Group has made an accounting policy election, by class of underlying asset, not to recognise lease assets and lease liabilities
for leases with a lease term of 12 months or less (i.e. short term leases).
The Group has made an accounting policy election on a lease-by-lease basis not to recognise lease assets on leases for which the
underlying asset is of low value.
Lease payments on short term and low value leases are accounted for on a straight line basis over the term of the lease or other
systematic basis if considered more appropriate. Short term and low value lease payments are included in operating expenses in the
income statement.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or
receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material,
the initial measurement is on a present value basis.
Financial instruments
Initial recognition
The Group recognises financial assets and financial liabilities in the statement of financial position when, and only when, the Group
becomes party to the contractual provisions of the financial instrument.
Financial assets are initially recognised at fair value. Financial liabilities are initially recognised at fair value, representing the proceeds
received net of premiums, discounts and transaction costs that are directly attributable to the financial liability.
All regular way purchases and sales of financial assets and financial liabilities classified as fair value through profit or loss (FVTPL)
are recognised on the trade date, i.e. the date on which the Group commits to purchase or sell the financial assets or financial
liabilities. All regular way purchases and sales of other financial assets and financial liabilities are recognised on the settlement date,
i.e. the date on which the asset or liability is received from or delivered to the counterparty. Regular way purchases or sales are
purchases or sales of financial assets that require delivery within the time frame generally established by regulation or convention
in the market place.
Subsequent to initial measurement, financial assets and financial liabilities are measured at either amortised cost or fair value.
Financial statements
55
54
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
56
2 Accounting policies continued
Classification and measurement
Financial instruments are classified at inception into one of the following categories, which then determine the subsequent
measurement methodology:
Financial assets are classified into one of the following three categories:
•
financial assets at amortised cost;
•
financial assets at fair value through other comprehensive income (FVTOCI); or
•
financial assets at fair value through the profit or loss (FVTPL).
Financial liabilities are classified into one of the following two categories:
•
financial liabilities at amortised cost; or
•
financial liabilities at fair value through the profit or loss (FVTPL).
The classification and the basis for measurement are subject to the Group’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets, as detailed below:
At 31 December 2022, the Group had no assets measured at FVOCI.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
•
the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
•
the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
If either of the above two criteria is not met, the financial assets are classified and measured at fair value through the profit
or loss (FVTPL).
If a financial asset meets the amortised cost criteria, the Group may choose to designate the financial asset at FVTPL.
Such an election is irrevocable and applicable only if the FVTPL classification significantly reduces a measurement
or recognition inconsistency.
Financial assets at fair value through the profit or loss (FVTPL)
Financial assets not otherwise classified above are classified and measured as FVTPL. This classification includes derivative
financial assets.
Financial liabilities at amortised cost
All financial liabilities, other than those classified as financial liabilities at FVTPL, are measured at amortised cost using the effective
interest rate method.
Financial liabilities at fair value through the profit or loss
Financial liabilities not measured at amortised cost are classified and measured at FVTPL. This classification includes derivative
financial liabilities.
Impairment of financial assets
The Group applies the IFRS 9 expected credit loss model to financial assets measured at amortised cost. For trade receivables and
accrued income, the Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected
credit loss allowance.
For other financial assets carried at amortised cost, the Group and the Company apply the three-stage general impairment model
and recognises either a lifetime expected credit loss or a 12-month expected credit loss depending on the Group’s and the
Company’s assessment of whether there has been a significant increase in the credit risk associated with the financial asset
since initial recognition.
57
2 Accounting policies continued
Commodity derivatives
Within its regular course of business, the Group routinely enters into sale and purchase transactions for physical delivery of
electricity and gas. Where the contract was entered into and continues to be held for the purpose of meeting forecast customer
usage, the contracts are designated as ‘own-use’ contracts and are measured at cost. These contracts are not within the scope
of IFRS 9.
Derivative commodity contracts which are not designated as own-use contracts are accounted for as trading derivatives and are
recognised in the statement of financial position at fair value. The gain or loss on re-measurement to fair value is recognised
immediately in the income statement.
The percentage of contracts that are deemed to meet own-use criteria is considered to be an area of accounting judgement that
significantly impacts the level of unrealised gains and losses on derivatives that are recognised in the financial statements.
Although the Group only enters into contracts based on expected volumes, the volumetric risk means that the Group often has to
enter into offsetting sell trades to match actual demand. This constitutes net settling under IFRS 9 which requires such contracts to
be treated as derivative financial instruments under IFRS 9 rather than falling within the ‘own use’ exemption. The Group therefore
designates its contracts as either ‘own-use’ or ‘trading’ depending on the risk of them being net settled, with only those contracts
that are deemed to be highly probable of resulting in physical delivery being treated as own-use.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions are paid into a separate entity and the Group has no
legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior periods.
For defined contribution plans, contributions are paid to publicly or privately administered pension insurance plans on a mandatory or
contractual basis. The contributions are recognised as employee benefit expense when they are due. If contribution payments
exceed the contribution due for service, the excess is recognised as an asset.
Defined benefit pension obligation
Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent
on one or more factors such as age, years of service and compensation.
The asset recognised in the statement of financial position in respect of the defined benefit pension plan is the fair value of plan
assets minus the present value of the defined benefit obligation at the reporting date. The defined benefit obligation is measured
using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future payments by reference to market yields at the reporting date on high quality corporate bonds that are
denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms
of the related pension liability.
Actuarial gains and losses are charged or credited to other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Employee benefits
The Group operates a flexible benefit scheme for qualifying employees whereby in addition to their salary, those employees are
invited to select certain benefits with a value based on a percentage of their base pay. All costs related to the scheme are expensed
in the income statement in the year in which services are rendered by employees. One of the available benefits is payment to a
defined contribution pension plan. This is a post-employment benefit plan under which the Group pays fixed contributions into a
separate entity and will have no legal or constructive obligations to pay further amounts. The Group has enrolled in the automatic
pension scheme since November 2013.
A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
Financial statements
57
56
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
58
3 Critical accounting judgements and key sources of estimation uncertainty
The key estimates and judgements made by the Directors in the preparation of the financial statements are in respect of revenue
recognition, impairment of trade receivables, recognition of deferred tax assets, and derivative financial instruments.
Revenue recognition – energy supplied but not yet measured (estimation uncertainty)
Revenue from energy supplied to OVO customers includes an estimate of the value of electricity or gas supplied to customers
between the date of the latest meter reading and the financial year end.
This estimate comprises both billed revenue (trade receivables) and unbilled revenue (accrued income) and is calculated with
reference to the tariffs and contractual rates applicable to customers against estimated customer consumption. Estimated customer
consumption takes into account various factors including usage patterns, weather trends and notified aggregated volumes supplied
to the customers from national settlements bodies.
A change in the assumptions underpinning the calculation would have an impact on the amount of revenue recognised in any
given period.
This estimate is subject to an internal validation process which compares calculated unbilled volumes to a theoretical real-time billing
benchmark measure of unbilled volumes with reference to historical consumption patterns adjusted for seasonality/weather and
aggregated metering data used in industry reconciliation processes. At 31 December 2022, revenue arising from estimated
consumption amounted to £1,635m (2021: £1,217m). The judgements applied, and the assumptions underpinning these judgements in
arriving at this estimated amount, are considered to be appropriate. However, a change in these assumptions would have an impact
on the amount of revenue recognised. Management believes that based on latest industry data the amount of revenue recognised
could increase by up to £59m based on a reasonable change in the overall assumptions made in reaching this estimate.
Revenue recognition – Energy Price Guarantee government grants (estimation uncertainty)
The Group recognises revenue arising from government grants under the Energy Price Guarantee Scheme (EPG). The government
grants are determined by a support rate on a p/kWh basis determined by the Government and the volume of electricity and gas
treated as supplied by the Group and, therefore, are subject to the same estimation uncertainty in energy supply revenue recognition
(refer to Revenue recognition – energy supplied but not yet measured for further information).
The scheme is subject to industry reconciliation procedures which can result in a higher or a lower value of industry deemed supply
than has been estimated as being supplied to customers by the Group and, as a result, can impact the amount of EPG income
recognised. There are also conditions attached to the scheme that the Group is required to comply with in order to receive the
support payment. The Group recognises EPG income to the extent it has reasonable assurance that it has complied with the
conditions attaching to the EPG scheme and that the EPG income recognised thus far will be received.
The judgments applied, and the assumptions underpinning these judgements, are considered to be appropriate. However, a change
in these assumptions would have an impact on the revenue recognised. The primary source of estimation uncertainty relating to
unread revenue arising from eligible customers under the scheme amounted to £589m (2021: £nil). Management believes that based
on latest industry data the amount of revenue recognised could increase by up to £25m based on a reasonable change in the overall
assumptions made in reaching this estimate.
59
3 Critical accounting judgements and key sources of estimation uncertainty continued
Derivative financial instruments (accounting judgement)
Within its regular course of business, the Group routinely enters into sale and purchase derivative contracts for electricity and gas.
Where the contract was entered into and continues to be held for the purpose of receipt or delivery in accordance with the Group's
expected sale, purchase or usage requirements, the contracts are designated as ‘own-use’ contracts and are measured at cost.
These contracts are not within the scope of IFRS 9. The percentage of contracts that are deemed to meet ‘own-use’ criteria is
considered to be an area of accounting judgement that significantly impacts the level of unrealised gains and losses on derivatives
that are recognised in the financial statements.
Although the Group only enters into contracts based on expected volumes, the volumetric risk means that the Group often has to
enter into offsetting sell trades to match actual demand. This constitutes net settling under IFRS 9 which requires such contracts to
be treated as derivative financial instruments under IFRS 9 rather than falling within the ‘own-use’ exemption. The Group therefore
designates its contracts as either ‘own-use’ or ‘trading’ depending on the risk of them being net settled, with only those contracts
that are deemed to be highly probable of resulting in physical delivery being treated as own-use.
At 31 December 2022, the Group has £1,016m (2021: £422m) derivative energy contracts that are not determined as own-use
contracts and are measured at fair value through profit or loss. Refer to Note 33 Financial risk management for sensitivity analysis.
Deferred tax assets (accounting judgement and estimation uncertainty)
Deferred tax assets have been recognised in respect of UK tax losses and other temporary differences giving rise to deferred tax
assets where the Directors believe it is probable that these assets will be recovered, i.e. that future taxable amounts (e.g. taxable
profits) will be available to utilise those temporary differences and losses. The carrying amount of the deferred tax assets are
reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the asset to be recovered. The recoverability of deferred tax assets relating to losses is
based on forecasts of future taxable profits which are, by their nature, uncertain.
The Group prepares medium term forecasts based on Board-approved budgets. These are used to support judgements made in the
preparation of the Group’s financial statements including the recognition of deferred tax assets.
Having assessed the level of profits made by the Group since the year end and forecasts of revenue and costs for the coming years,
the Directors believe it is probable that the Group will generate sustainable profits and therefore a deferred tax asset has been
recognised. Deferred tax assets of £188m in respect of UK tax losses are expected to be utilised over the next nine to thirteen years
(2021: six to eight years).
The Group remains exposed to the risk of changes in law that impact the Group’s ability to carry forward and utilise tax attributes
recognised as deferred tax assets.
Impairment of trade receivables (estimation uncertainty)
Impairments against trade receivables are recognised where the loss is expected. The Group applies the IFRS 9 simplified approach
to measuring expected credit losses which uses a lifetime expected credit loss allowance for all trade receivables and accrued
income. For energy customers, the impairment is calculated by splitting the portfolio into segments and the Directors have based
their assessment of the level of impairment on collection rates experienced within each segment to date. The estimates and
assumptions used to determine the level of provision will continue to be reviewed periodically and could lead to changes in the
impairment provision methodology which would impact the income statement in future years.
The assumption that future performance of customer debt settlement will be reflective of past performance is the most significant
assumption within the expected credit loss provisioning model. To address this risk, the Group reviews the provision rates for each
segment on a regular basis to ensure they include the most up to date assumptions and use forward looking information. In order
to test the sensitivity of the impairment of the Group’s trade receivables balance, the Group has considered the impact of the
underlying provision rates worsening by 10%. This would lead to a £24m increase in the expected credit loss provision in 2022.
Financial statements
59
58
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
60
4 Revenue
Analysis of revenue
The analysis of the Group's revenue for the year from continuing operations is set out below:
2022
£m
2021
£m
Sale of gas and electricity 5,624 4,207
Government grants – Energy Price Guarantee Scheme 853 –
Installation and rental of meters 119 162
Sale of home and emergency cover and related services 65 61
Voiceline and broadband revenue 34 49
Other revenue 35 34
6,730 4,513
The Group has recognised grant income of £853m in the year which represents the amounts of support delivered to households and
compensated by the Government under the Energy Price Guarantee Scheme (EPG). Refer to Government support schemes in the
Summary of significant accounting policies for further details on the scheme.
Revenue generated outside of the UK in the year is £17m (2021: £20m) of which £14m (2021: £20m) is included within 'Sale of gas and
electricity' and £3m (2021: £nil) is included within Other revenue.
Other revenue mainly consists of sale of energy efficiency solutions services of £13m (2021: £12m), sale of renewable certificates of
£10m (2021: £nil), insurance claims and boiler installation services of £3m (2021: £9m), revenue protection and other meter operator
services of £1m (2021: £6m) and Software-as-a-Service professional services of £1m (2021: £nil).
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers:
Group
31 December
2022
£m
31 December
2021
£m
1 January
2021
£m
Assets related to contracts with customers
Trade receivables 679 603 556
Accrued income 370 374 599
Provision for impairment of trade receivables and accrued income (329) (310) (257)
Total current assets related to contracts with customers 720 667 898
Contract liabilities
Deferred income (906) (534) (677)
Total current contract liabilities (906) (534) (677)
Assets and liabilities related to contracts with customers have increased in the year, reflecting the impact of increased commodity
prices on retail tariffs and the Government support schemes.
All of the opening deferred income balance has been recognised as revenue during the year, with the closing balance relating to new
liabilities where the associated performance obligations have not yet been satisfied.
61
5 Net impairment losses of financial assets – customer debtors
The analysis of the Group's net impairment losses of financial assets for the year is as follows:
2022
£m
2021
£m
Impairment losses of trade receivables and accrued income 167 117
Reversal of previously recognised impairment losses (2) –
Net impairment losses of financial assets – customer debtors 165 117
6 Other operating income
The analysis of the Group's other operating income for the year is as follows:
2022
£m
2021
£m
Gain on disposal of subsidiaries 30 3
Net (loss)/gain on disposal of businesses (1) 1
Government grants – Coronavirus Job Retention Scheme – 1
Research and development expenditure credit 7 1
Net foreign exchange losses – (1)
36 5
Government grants relate to grants received in respect of furloughed employees under the Coronavirus Job Retention Scheme in the
prior year, a scheme introduced by the Government to support organisations during the COVID-19 pandemic.
Refer to Note 18 Disposals for further details on the gain on disposal of subsidiaries. Net (loss)/gain on disposal of businesses consists
of gain on disposal of the Revenue Protection business of £1m and loss on disposal of intangible assets of £2m.
7 Operating (loss)/profit
Arrived at after charging/(crediting):
2022
£m
2021
£m
Net impairment losses of financial assets – customer debtors 165 117
Depreciation expense – property, plant and equipment 4 7
Depreciation expense – right-of-use assets 10 11
Impairment – right-of-use assets – 1
Amortisation – intangible assets 102 84
Government grants – Coronavirus Job Retention Scheme – (1)
Government grants – Energy Price Guarantee Scheme (853) –
Financial statements
61
60
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
62
8 Exceptional items and certain re-measurements
2022
£m
2021
£m
Integration 37 26
Group reorganisation 39 11
Gain on disposal of subsidiaries (30) (3)
Net loss/(gain) on disposal of businesses 1 (1)
Industry and regulatory – 14
Mergers and acquisitions – 3
Re-measurement of derivative energy contracts 1,438 (422)
Exceptional items and certain re-measurements included within Group operating (loss)/profit 1,485 (372)
Exceptional items and certain re-measurements included within Group (loss)/profit before tax 1,485 (372)
Net taxation on exceptional items and certain re-measurements (338) 68
Integration
The Group continued to engage in activities to integrate SSE operations and systems into OVO throughout the year, following the
acquisition of OVO (S) Energy Services Limited Group (SSE) in 2020. The majority of the costs within integration was associated with
staff personnel and professional services supporting customer migration from the SSE legacy customer operating platform to the
Kaluza platform, and integrating and simplifying the SSE legacy technology estate within the Group.
Group reorganisation
The Group continued its restructuring programme throughout the year which was initiated following the acquisition of SSE in 2020.
In the current year, the Group further announced a voluntary redundancy programme to reduce the number of roles across the
Group by 1,700. The majority of the costs within group reorganisation relates to redundancy costs being recognised in relation to
both incurred and expected future severance costs. Group reorganisation is part of a wider cost efficiency initiative which also
consists of other transformational activities aimed at simplifying the Group's operations.
Group reorganisation and integration are part of a group wide programme which was initiated as a result of the SSE acquisition and is
therefore considered non-recurring after the programme is complete. These costs will cross more than one accounting period as the
programme spans over more than a year. The programme is expected to complete by the end of 2023.
Gain on disposal of subsidiaries
Gain on disposal of subsidiaries includes the gain on disposals of Origin Communications Limited (previously OVO (S) Retail
Telecoms Limited) of £21m and OVO Energy (France) SAS of £9m in the year. Prior year amount included the gain on disposal of
OVO Energy Australia of £3m. Refer to Note 18 Disposal for further details.
Net loss/(gain) on disposal of businesses
Net loss/(gain) on disposal of businesses consists of gain on disposal of the Revenue Protection business of £1m and loss on disposal
of intangible assets of £2m. Prior year amount included the gain on disposal of Large Power Metering operation of £1m. Refer to Note
18 Disposal for further details.
Industry & regulatory
High and volatile prices in the wholesale energy market saw various energy suppliers collapse in 2021. As a result, the Group incurred
incremental costs in relation to industry and regulatory costs in the prior year.
Mergers & acquisitions
These consist of professional fees relating to mergers and acquisitions activity in the prior year.
Re-measurement of derivative energy contracts
Energy contracts that are not designated as ‘own-use’ contracts constitute financial instruments under IFRS 9 and are carried at fair
value through profit or loss. Re-measurement of derivative energy contracts has resulted in a net loss of £1.4bn. The significant loss
reflects the continued volatility in commodity prices in the wholesale energy market in the year and is a result of falling commodity
prices towards the balance sheet date.
63
8 Exceptional items and certain re-measurements continued
Income statement classification
Recognised in cost of sales are £nil exceptional industry and regulatory costs (2021: £14m exceptional industry and regulatory costs).
The £1.4bn loss arising from the re-measurement of derivative energy contracts is recognised in re-measurement of derivative energy
contracts (2021: £422m gain). The £29m net gain on disposal of subsidiaries and businesses is recognised in other operating income
(2021: £4m). The remaining total of £76m exceptional costs is recognised in administrative expenses (2021: £40m).
Adjusted performance measures
Management reports adjusted performance measures in the financial statements as management considers they provide additional
useful information on business performance and underlying trends. They are also the primary measure management uses to monitor
performance internally and are also reported to our lenders as part of covenants reporting.
Adjusted performance measures are non-GAAP measures and are not defined by IFRS. The presentation of alternative performance
measures is a judgement and policy choice made by management and, therefore, not comparable.
Adjusted EBITDA is defined as operating (loss)/profit, after adjusting for depreciation, amortisation, impairment and exceptional
items and certain re-measurements including fair value gain/(loss) on derivative financial instruments. Adjusted operating
(loss)/profit is defined as operating (loss)/profit, after adjusting for exceptional items and certain re-measurements including fair
value gain/(loss) on derivative financial instruments. Adjusted (loss)/profit before tax is defined as (loss)/profit before tax, after
adjusting for exceptional items and certain re-measurements including fair value gain/(loss) on derivative financial instruments.
A reconciliation of the adjusted performance measures to statutory (loss)/profit is shown below.
2022
£m
2021
£m
Statutory (loss)/profit for the year (1,275) 335
Add: Income tax (credit)/expense (377) 35
(Loss)/profit before tax (1,652) 370
Add: Exceptional items and certain re-measurements 1,485 (372)
Adjusted (loss) before tax (167) (2)
Add: Net finance costs 69 58
Add: Share of net losses of associates accounted for using equity method 2 1
Adjusted operating (loss)/profit (96) 57
Add: Depreciation and non-exceptional impairment of property, plant and equipment and right-of-use assets 14 18
Add: Amortisation and impairment of intangible assets 102 84
Adjusted EBITDA 20 159
9 Finance income and costs
2022
£m
2021
£m
Finance income
Interest income on bank deposits 5 –
Finance costs
Interest and finance charges paid or payable for loans and borrowings (70) (53)
Unwinding of discount on provisions (1) (2)
Interest expense on leases (3) (3)
Total finance costs (74) (58)
Net finance costs (69) (58)
Financial statements
63
62
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
64
10 Staff costs
Group:
The aggregate payroll costs (including Directors' remuneration) are as follows:
2022
£m
2021
£m
Wages and salaries 254 274
Social security costs 28 28
Pension costs – defined contribution scheme 16 18
Pension costs – defined benefit scheme 5 9
Capitalised staff costs (35) (33)
Staff costs recognised in the income statement 268 296
Company:
No employees are directly employed by OVO Group Ltd. The aggregate payroll costs included in the Company financial statements
during the year are £nil (2021: £nil).
Group:
The monthly average number of persons employed (including Directors) during the year, analysed by category is as follows:
2022
No.
2021
No.
People & operations 3,737 5,086
Technology & business change 822 891
Commercial & finance 699 411
Group 29 26
5,287 6,414
65
11 Directors' remuneration
The Directors' remuneration for the year is as follows:
2022
£ '000
2021
£ '000
Remuneration 865 1,632
Contributions paid to defined contribution pension scheme 17 71
Compensation for loss of office 779 –
1,661 1,703
In respect of the highest paid Director:
2022
£ '000
2021
£ '000
Remuneration 129 558
Contributions paid to defined contribution pension scheme – 15
Compensation for loss of office 779 –
908 573
The Directors’ remuneration and salary costs for the current year are recognised in OVO Energy Ltd (2021: OVO Energy Ltd).
Retirement benefits were accruing to one of the Directors (2021: three). The number of Directors in respect of whose qualifying
services shares were received or receivable under the long term incentive plan is nil (2021: six). No shares were received or
receivable in the year by the highest-paid Director in respect of qualifying services under the Group’s long term incentive plan
(2021: No shares were received). Total aggregate share-based payment recognised in the year in respect of the Directors’ qualifying
services is £40,000 (2021: £86,000).
12 Auditors’ remuneration
2022
£’000
2021
£’000
Audit of Company 170 150
Audit of subsidiaries 580 500
Total audit fees 750 650
Tax compliance services – 9
Other non-audit services 75 181
Total non-audit fees 75 190
Total auditors’ remuneration 825 840
The Group bears the costs of audit of the OVO Energy Group of the ESPS which amounted to £20,000 for the year ended
31 December 2022 (2021: £18,000). Other non-audit services include limited assurance over selected sustainability
information reported in the Annual Report and agreed upon procedures in connection with the Group's term loan facilities
reporting requirements.
Financial statements
65
64
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
66
13 Income tax credit/(expense)
Tax (credited)/charged in the consolidated income statement
2022
£m
2021
£m
Current taxation
Current taxation 2 1
Deferred taxation
Arising from origination and reversal of temporary differences (321) 71
Adjustment in respect of prior periods (1) –
Arising from changes in tax rates and laws (57) (37)
Total deferred taxation (379) 34
Tax (credit)/expense in the income statement (377) 35
The tax on (loss)/profit before tax for the current year is higher than (2021: lower than) the standard rate of corporation tax in the UK
of 19% (2021: 19%).
The differences are reconciled below:
2022
£m
2021
£m
(Loss)/profit before tax (1,652) 370
Corporation tax at standard rate (314) 70
Effect of expenses not deductible in determining taxable profit or tax loss – 1
Adjustment for prior periods (1) –
Deferred tax not recognised for the period 4 3
Effect of different statutory tax rates (1) (1)
Deferred tax credit relating to changes in tax rates or laws (57) (37)
Effect of revenues exempt from taxation (8) (1)
Total tax (credit)/charge (377) 35
67
13 Income tax credit/(expense) continued
Deferred tax
Group
Deferred tax movement during the year:
At
1 January
2022
£m
Recognised in
income
£m
Recognised in
other
comprehensive
income
£m
Disposal of
subsidiary
£m
At
31 December
2022
£m
Accelerated tax depreciation 37 9 – – 46
Provisions – 1 – – 1
Revaluation of intangible assets (61) 3 – 2 (56)
Tax losses carry-forwards 156 32 – – 188
Pension benefit obligations (5) 1 (3) – (7)
Derivatives (80) 318 – – 238
Other items 15 15 – – 30
Net tax assets/(liabilities) 62 379 (3) 2 440
Deferred tax movement during the prior year:
At
1 January
2021
£m
Recognised in
income
£m
Recognised in
other
comprehensive
income
£m
At
31 December
2021
£m
Accelerated tax depreciation 30 7 – 37
Provisions – – – –
Revaluation of intangible assets (60) (1) – (61)
Tax losses carry-forwards 119 37 – 156
Pension benefit obligations (3) 1 (3) (5)
Derivatives – (80) – (80)
Other items 13 2 – 15
Net tax assets/(liabilities) 99 (34) (3) 62
Other items primarily consist of deferred tax on restricted interest deductions carried forward.
As at 31 December 2021, £80m deferred tax liabilities of the £62m net deferred tax assets were recognised as non-current liabilities
on the balance sheet.
Deferred tax assets of £188m have been recognised in respect of carried forward UK tax losses on the basis that there will
be sufficient future profits available against which to offset them. There are no time limits on the recovery of such losses.
Refer to Note 3 Critical accounting judgements, for further discussion on the basis for recognition of deferred tax assets.
A deferred tax asset of £238m is also recognised in respect of the re-measurement loss on derivative energy commodity
contracts which is not deductible for tax purposes. This deferred tax asset will be reversed when the relevant contracts
unwind in future periods.
Deferred tax of £20m (2021: £22m) has not been recognised in relation to indefinite carry forward tax losses of £80m (gross)
for which it is not considered probable that the losses will be utilised based on assessment of available evidence.
The change to the main UK corporation tax rate to 25% announced in the 2021 Finance Bill was substantively enacted on 24 May
2021. The rate effective from 1 April 2023 is 25% increased from the current rate of 19%. Deferred tax assets and liabilities were
re-measured in 2021 based on the applicable tax rate in the period that the balances were expected to be realised. The impact of
this rate change in the current period is a tax credit of £57m primarily relating to the re-measurement of new temporary differences
arising in the year from the current tax rate of 19% to the deferred tax rate, which is based on the applicable tax rate in the period that
the balances are expected to be realised.
Financial statements
67
66
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
68
14 Property, plant and equipment
Group
Leasehold
property
£m
Fixtures and
fittings
£m
Office
equipment
£m
Meter assets
and
miscellaneous
equipment
£m
Total
£m
Cost
At 1 January 2021 9 2 6 11 28
Additions 5 – 3 – 8
Disposals – – – (1) (1)
At 31 December 2021 14 2 9 10 35
Additions 2 – 2 – 4
Disposals (4) – (3) (9) (16)
At 31 December 2022 12 2 8 1 23
Accumulated depreciation
At 1 January 2021 8 2 4 6 20
Charge for the year 3 – 1 3 7
At 31 December 2021 11 2 5 9 27
Charge for the year 1 – 2 1 4
Eliminated on disposal (4) – (3) (9) (16)
At 31 December 2022 8 2 4 1 15
Carrying amount
At 31 December 2022 4 – 4 – 8
At 31 December 2021 3 – 4 1 8
At 1 January 2021 1 – 2 5 8
The depreciation charge of £4m (2021: £7m) is recognised in administrative expenses.
The amount of contractual commitments for the acquisition of property, plant and equipment as at the balance sheet date
is £3m (2021: £nil).
69
15 Right-of-use assets
Group
Property
£m
Fleet
£m
Total
£m
Cost
At 1 January 2021 53 23 76
Modifications (1) (1) (2)
Disposals (1) – (1)
At 31 December 2021 51 22 73
Additions 7 – 7
Modifications – 6 6
At 31 December 2022 58 28 86
Accumulated depreciation and impairment
At 1 January 2021 20 7 27
Charge for the year 7 4 11
Impairment 1 – 1
Eliminated on disposal (1) – (1)
At 31 December 2021 27 11 38
Charge for the year 6 4 10
At 31 December 2022 33 15 48
Carrying amount
At 31 December 2022 25 13 38
At 31 December 2021 24 11 35
At 1 January 2021 33 16 49
Depreciation charge of £10m (2021: £11m) is recognised in administrative expenses. There is no impairment recognised in the year
(2021: £1m recognised in administration expenses).
Financial statements
69
68
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
70
16 Intangible assets
Group
Goodwill
£m
Contractual
customer
relationships
£m
Software
and IT
development
costs
£m
Trade
name
£m
Other
intangible
assets
£m
Total
£m
Cost
At 1 January 2021 153 338 142 51 7 691
Additions – – 53 – – 53
At 31 December 2021 153 338 195 51 7 744
Additions – – 59 – – 59
Disposals – (12) (23) – – (35)
Transfers to assets held for sale – (5) – – – (5)
At 31 December 2022 153 321 231 51 7 763
Accumulated amortisation
At 1 January 2021 3 65 42 12 3 125
Amortisation charge – 46 26 11 1 84
At 31 December 2021 3 111 68 23 4 209
Amortisation charge – 46 42 13 1 102
Amortisation eliminated on disposal – (5) (21) – – (26)
Transfers to assets held for sale – (4) – – – (4)
At 31 December 2022 3 148 89 36 5 281
Carrying amount
At 31 December 2022 150 173 142 15 2 482
At 31 December 2021 150 227 127 28 3 535
At 1 January 2021 150 273 100 39 4 566
Amortisation charge of £102m (2021: £84m) is recognised in administrative expenses.
Included within the carrying amount of the Software and IT development costs of £142m (2021: £127m) are intangible assets under
construction of £42m (2021: £78m), which are not subject to amortisation. Carrying value of development costs associated with
the Kaluza platform included in Software and IT development is £67m (2021: £50m). The remaining amortisation period of the
Kaluza platform is between three and five years (2021: four and five years). Contractual customer relationships include customer
relationships acquired from SSE with a carrying value of £153m (2021: £193m). The remaining amortisation period is between
four and six years (2021: three and seven years).
71
16 Intangible assets continued
Impairment assessment
At each reporting period end date, an annual impairment test for goodwill and intangibles not yet ready for use is undertaken.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash
flows (cash-generating units) and the carrying value of the cash-generating units is compared to their recoverable amount.
Where the recoverable amount is less than the carrying value, an impairment occurs. Other non-financial assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
There has been no indication that other non-financial assets might be impaired.
The recoverable amount of the CGUs has been determined using a value in use calculation in line with IAS 36. The methodology
applied to the value in use calculation reflects past experience and external sources of information. Pre-tax cash flows used in the
value in use calculations are derived from the Group's board-approved budget for 2023 and five-year forecast. Long term growth
rates have been used in the extrapolation of cash flow projections beyond the five-year forecast period and are determined with
reference to publicly available historical data and long term growth rate forecasts from external sources, adjusted for management
assumptions where appropriate. Cash flows are discounted at a pre-tax rate that reflects both current market assessments of the
time value of money and the risks specific to the CGUs. Discount rates are based on the estimated weighted average cost of capital
of each CGU, adjusted to reflect the impact of tax to derive a pre-tax discount rate. Inflation rates used in the forecast range from 3%
to 5% and are based on publicly available inflation forecasts, adjusted for management assumptions where appropriate.
The Group considers UK Retail Energy and Home Services to be separate CGUs. The key assumptions used in the value in use
calculations for impairment assessment for these CGUs are set out below:
UK Retail Energy Home Services (previously Corgi)
Goodwill allocated to CGU £113m (2021: £113m) £37m (2021: £37m)
Assumptions
Revenue
Existing customers adjusted for growth forecast based on customer acquisition activity and the current
and anticipated market conditions. Gas and electricity revenue based on forward market prices and
price caps.
Gross margin
Gross margins achieved in latest periods adjusted for current market conditions and the impact of
expected regulatory changes on cost of goods.
Operating costs
Payroll costs based on projected headcount in line with expected efficiency achieved as a result of
integration and cost saving initiatives and inflation expectations. Sales & marketing and customer
acquisition costs in line with the Group's growth plan. Credit losses based on historical assumptions
updated for current market conditions and growth assumptions on revenue and customers.
Growth rate to perpetuity 0% (2021: 0%) 0% (2021: 2%)
Pre-tax discount rate 19% (2021: 18%) 19% (2021: 15%)
This testing did not identify any instances where the carrying value was in excess of the recoverable amount and, therefore,
no impairment charge has been recorded. No reasonable possible change in any of the above assumptions would result in the
elimination of the recoverable amount headroom over the assets carrying values. Further, management considers that Plan Zero
will create opportunities and financial value for the Group and has not had a negative impact on our impairment assessments.
Financial statements
71
70
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
72
16 Intangible assets continued
Company
Software and IT
development
costs
£m
Total
£m
Cost
At 1 January 2021 5 5
At 31 December 2021 5 5
At 31 December 2022 5 5
Carrying amount
At 31 December 2022 5 5
At 31 December 2021 5 5
At 1 January 2021 5 5
17 Investments
Group subsidiaries
Details of the Group subsidiaries as at 31 December 2022 and 31 December 2021 are as follows:
Proportion of ownership interest
and voting rights held
Name of subsidiary Principal activity
Registered office / Country
of incorporation
2022 2021
OVO Holdings Ltd* Holding company
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO Finance Ltd Holding company
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO Energy Ltd Sale of electricity and gas to customers in the UK
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO Electricity Ltd
Sale of services associated with the supply of
electricity to other OVO Group companies
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO Gas Ltd
Sale of services associated with the supply of gas
to other OVO Group companies
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
Spark Energy Limited Dormant
Grampian House,
200 Dunkeld Road, Perth,
Scotland, PH1 3GH, UK
100% 100%
Spark Gas Shipping Ltd Non-trading company
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
Kaluza Ltd Development of intelligent energy platform
69 Notting Hill Gate, London,
England, W11 3JS, UK
100% 100%
Kaluza (US) LLC Management services
Capitol Services, Inc, 1675
South State St., Suite B, Dover,
DE 19901, Kent County, USA
100% 100%
73
17 Investments continued
Proportion of ownership interest
and voting rights held
Name of subsidiary Principal activity
Registered office / Country
of incorporation 2022 2021
OVO Field Force Ltd Non-trading company
1 Rivergate Temple Quay, Bristol,
England, BS1 6ED, UK
100% 100%
Corgi Homeplan Ltd
Sale of boiler, central heating and electrical wiring
services, breakdown cover and installation services
Cadworks, 41 West Campbell
Street, Glasgow, Scotland, G2
6SE, UK
100% 100%
Kantan Ltd.* Development of software application
9 Pembridge Road, London,
England, W11 3JY, UK
91.84% /
100%
91.84% /
100%
Intelligent Energy
Technology Ltd*
Holding company
1 Rivergate Temple Quay, Bristol,
England, BS1 6ED, UK
100% 100%
OVO Insurance
Services Ltd.
Insurance services
PO Box 155, Mill Court, La
Charroterie, St Peter Port,
Guernsey, GY1 4ET
100% 100%
OVO Energy
(France) SAS*
Disposed of
231 rue Saint-Honore 75001 Paris,
France
0% 75%
OVO Energy
(Netherlands) B.V.*
Dissolved Netherlands 0% 100%
OVO Energy
(Italy) S.r.l*
Dissolved
Via dell'Annunciata n. 23/4, Avv.
Francesco Dagnino c/o LEXIA
Avvocati, 20121, Milan, Italy
0% 100%
OVO Energy
Spain SL*
Sale of electricity and gas to customers in Spain
C. Muntaner 328 Entresuelo 1a,
08021 Barcelona, Spain
100% 100%
OVO Energy
Japan GK*
Dissolved
Level 11, Aoyama Palacio Tower
3-6-7 Kita-Aoyama Minato-ku,
Tokyo, Japan
0% 100%
Financial statements
73
72
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
74
17 Investments continued
Proportion of ownership interest
and voting rights held
Name of subsidiary Principal activity
Registered office / Country
of incorporation 2022 2021
OVO Energy
Germany GmbH*
Dormant
CO23 Berlin UG, Stresemannsr.
23, 10963 Berlin, Germany
100% 100%
OVO (S) Energy Services
Limited
Intermediate holding company
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO (S) Electricity
Limited
Dormant
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO (S) Gas Limited
Licensed marketing and sale of natural gas to
domestic customers in the UK
1 Rivergate Temple Quay,
Bristol, England, BS1 6ED, UK
100% 100%
OVO (S) Energy
Solutions Limited
Installation of energy efficiency measures in
domestic properties
Cadworks, 41 West Campbell
Street, Glasgow, Scotland,
G2 6SE, UK
100% 100%
OVO (S) Home
Services Limited
Sale of boiler, central heating and electrical
wiring services, breakdown cover and
installation services
Cadworks, 41 West Campbell
Street, Glasgow, Scotland,
G2 6SE, UK
100% 100%
OVO (S) Metering
Limited
Non-trading company
Grampian House, 200 Dunkeld
Road, Perth, Scotland,
PH1 3GH, UK
100% 100%
Origin Communications
Limited (previously
OVO (S) Retail
Telecoms Limited)
Disposed of
Soapworks, Ordsall Lane,
Salford, England, M5 3TT, UK
0% 100%
* indicates direct investment of the Company
Ownership interest in all subsidiaries is based on Ordinary shares held.
For the year ended 31 December 2022, the following subsidiaries were entitled to exemption from audit under Section 479A of the
Companies Act 2006 relating to subsidiary companies:
OVO Holdings Ltd
Spark Gas Shipping Ltd
OVO Field Force Ltd
Corgi Homeplan Ltd
Kantan Ltd.
Intelligent Energy Technology Ltd
OVO (S) Energy Services Limited
OVO (S) Electricity Limited
OVO (S) Energy Solutions Limited
OVO (S) Home Services Limited
OVO (S) Metering Limited
OVO Group Ltd has guaranteed the liabilities of the above subsidiaries in order for them to qualify for the exemption from audit
under Section 479A of the Companies Act 2006 for the year ended 31 December 2022.
75
17 Investments continued
Group associates
Investments
accounted for
using the equity
method
£m
Cost
At 1 January 2021 1
Additions 8
Share of net losses of associates (1)
At 31 December 2021 8
Additions 2
Share of net losses of associates (2)
At 31 December 2022 8
Carrying amount
At 31 December 2022 8
At 31 December 2021 8
During the year, the Group subscribed for further shares in OVO Energy Pty Ltd. OVO Energy Pty Ltd ceased to be a wholly owned
subsidiary and became an associate of the Group in the prior year as the Group's shareholding was diluted following AGL
subscription of new shares issued by the entity. £3m of the additions in the prior year related to the retained investment at fair value
recognised when the Group lost control of OVO Energy Pty Ltd. The Group’s shareholding in Indra Renewable Technologies Limited
was diluted following new shares issued by the entity in the year.
In the prior year, the Group increased its shareholding in Chaddenwych Services Limited and Indra Renewable Technologies Limited.
Details of the Group's associates as at 31 December 2022 and 31 December 2021 are as follows:
Proportion of ownership interest and voting rights held
Name of associate Principal activity Registered office 2022 2021
Indra Renewable
Technologies Limited
Engineering design
activities for industrial
process and production
Sentinel House,
Sparrowhawk Close,
Malvern, England, WR14
1GL, UK
33.18% 45.82%
Chaddenwych
Services Limited
Energy information
technology platform
and service
86-90 Paul Street, London,
England, EC2A 4NE, UK
29.66% 29.66%
The Renewable
Exchange Limited
Trading platform and
solutions for renewable
generators
One The Square, Temple
Quay, Bristol, England,
BS1 6DG, UK
42.35% / 44% 44% / 44%
OVO Energy Pty Ltd
Sale of electricity and gas
to customers in Australia
L22 120 Spencer Street,
Melbourne, VIC 3000,
Australia
49% 47.23%
Financial statements
75
74
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
76
17 Investments continued
Summary of the Company investments
31 December
2022
£m
31 December
2021
£m
Investments in subsidiaries 203 200
Investments
in subsidiaries
£m
Subsidiaries
Cost
At 1 January 2021 198
Additions 7
At 31 December 2021 205
Additions 8
Disposals (5)
At 31 December 2022 208
Provision
At 1 January 2021 –
Provision 5
At 31 December 2021 5
At 31 December 2022 5
Carrying amount
At 31 December 2022 203
At 31 December 2021 200
The Company invested further capital into OVO Energy Pty Ltd and OVO Energy (France) SAS in the year. Investment in OVO Energy
(France) SAS was subsequently disposed of in September 2022. Refer to Note 18 Disposals for further details.
In the prior year, the Company invested further capital into OVO Energy Pty Ltd, OVO Energy (France) SAS and OVO Energy Spain
SL. An impairment charge was recognised during the prior year in relation to the carrying value of the investments.
77
18 Disposals
Disposal of Origin Communications Limited (previously OVO (S) Retail Telecoms Limited) and OVO Energy (France) SAS
In August 2022, the Group agreed to sell the entire issued share capital of Origin Communications Limited to Tosca IOM Finco
Limited. Origin Communications Limited was an indirect wholly owned subsidiary of OVO Group Ltd which provides telephone
and broadband connectivity and associated services to consumers in the UK. The sale completed on 14 October 2022.
In addition, the Group sold its shareholding of OVO Energy (France) SAS (OEF) to ENI Gas & Power France S.A. (ENI) for a
consideration of €1 during the year. In the prior year, the Group owned 75% of OEF and recognised a non-controlling interest in OEF
representing ENI's 25% interest in the company. Prior to the sale, the Group had subscribed for further shares in OEF which increased
its ownership to 99.75% from 75%. The Group sold its 99.75% shareholding in OEF on 9 September 2022. OEF was a subsidiary which
operates in the energy supply business in France.
Both subsidiaries do not represent a major line of business or geographical area of operation for the Group. The Group recognised
a total gain of £30m on the disposals which is recognised in other operating income in the income statement.
The carrying amounts of assets and liabilities disposed of as at the date of completion are set out in the table below:
Origin
Communications
Limited 14
October
2022
£m
OVO Energy
(France) SAS 9
September
2022
£m
Assets and liabilities disposed of:
Intangible assets – acquired customer relationships 7 –
Trade and other receivables 8 10
Cash and cash equivalents 5 4
Trade and other payables (10) (16)
Deferred income – (6)
Deferred tax liabilities (2) –
Net assets/(liabilities) disposed of 8 (8)
Gain on disposal:
Total consideration 29 –
Net (assets)/liabilities disposed of (8) 8
Gain on disposal before income tax and reclassification of foreign currency translation reserve 21 8
Reclassification of foreign currency translation reserve – 1
Gain on disposal after income tax and reclassification of foreign currency translation reserve 21 9
Financial statements
77
76
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
78
18 Disposals continued
Origin
Communications
Limited 14
October
2022
£m
OVO Energy
(France) SAS 9
September
2022
£m
Satisfied by:
Cash 23 –
Deferred consideration 6 –
Total consideration 29 –
Cash flow analysis:
Cash consideration received 23 –
Less: cash and cash equivalents disposed of (5) (4)
Net cash inflow/(outflow) arising on disposal 18 (4)
Prior year loss of control of OVO Energy Australia
In March 2021, the Group announced a partnership with AGL, Australia's largest energy retailer and generator to bring digital energy
services to Australia. As part of the agreement, AGL invested in OVO Energy Australia (OEA) to adapt the Kaluza platform for
Australia and serve a growing customer base with innovative products and services.
On 12 April 2021, AGL acquired a 51% shareholding in OVO Energy Australia, following which the Group no longer controls the
subsidiary. The Group has significant influence over OVO Energy Australia and is an associate to the Group. The Group accounts
for the investment in OEA under equity accounting. The subsidiary does not represent a major line of business or geographical area
of operation for the Group.
The Group recognised a gain of £3m associated with the loss of control attributable to the former controlling interest. The gain is
recognised in other gains in the income statement.
The carrying value of assets and liabilities disposed of as at the date control was lost (12 April 2021) are as set out in the table below:
12 April
2021
£m
Assets and liabilities disposed of:
Cash and cash equivalents 6
Total consideration 9
Net assets disposed of (6)
Total gain 3
Made up of:
Gain on disposal of subsidiary 2
Gain on retained investment 1
Total gain 3
Satisfied by:
Cash 9
Cash flow analysis:
Cash consideration received 9
Less: cash and cash equivalent balances disposed of (6)
Net cash inflow arising on disposal 3
79
18 Disposals continued
Prior year disposal of Large Power Metering operation
On 25 February 2021, the Group publicly announced the decision of its Board of Directors to sell its Large Power Metering operation,
which was a line of business within OVO (S) Metering Limited, a wholly owned subsidiary. The sale was completed on 6 April 2021.
The Large Power Metering operation does not represent a major line of business.
The carrying amounts of assets and liabilities as at the date of sale (6 April 2021) were:
6 April
2021
£m
Assets disposed of:
Property, plant and equipment 4
Inventories 1
Trade receivables and accrued income 2
Total assets 7
Total consideration 8
Total assets sold (7)
Gain on sale before income tax 1
Gain on sale after income tax 1
Satisfied by:
Cash 8
Cash flow analysis:
Cash consideration received 8
Net cash inflow arising on sale 8
19 Assets classified as held for sale
As part of the Group's strategy to simplify operations, management has taken the decision during the year to dispose of its traditional
meter rental operation which generates revenue from the rental of traditional meters. The operation is a line of business within
OVO Energy Ltd, an indirectly wholly owned subsidiary. Management expects the sale of the operation to be completed in 2023.
At 31 December 2022, assets relating to the operation were classified as assets held for sale.
The assets of the operation classified as held for sale as at 31 December 2022 are as follows:
2022
£m
2021
£m
Intangible assets – acquired customer relationships 1 –
Assets held for sale 1 –
20 Inventories
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Finished goods and goods for resale 34 – 29 –
Finished goods and goods for resale primarily comprise smart meter assets. The cost of smart meter assets recognised as an expense
in the year amounted to £35m (2021: £45m). Write-downs of inventories amounted to £8m in the year (2021: £nil). These are included
within cost of sales.
The cost of renewable obligation certificates recognised as an expense in the year amounted to £326m (2021: £366m).
This is included within cost of sales.
Financial statements
79
78
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
80
21 Trade and other receivables
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Trade receivables and accrued income 1,049 – 977 –
Provision for impairment of trade receivables and accrued income (329) – (310) –
Net trade receivables and accrued income 720 – 667 –
Amounts owed by related parties 1 87 2 103
Grant receivables 107 – – –
Prepayments 200 – 86 –
Cash collateral 87 – 48 –
Cash-in-transit 50 – 92 –
Other receivables 50 1 41 2
1,215 88 936 105
Grant receivables consist of grant income receivable from the Government in relation to the Energy Price Guarantee Scheme. Refer
to Government support schemes in the Summary of significant accounting policies for further details on the scheme. The increase
in prepayments is due to prepayments made for commodity costs for Q1 2023.
The fair value of those trade and other receivables classified as financial assets are disclosed in Note 32.
The Group's exposure to credit and market risks, including impairments and allowances for credit losses, relating to trade and other
receivables is disclosed in Note 33.
22 Derivative financial instruments
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Derivative financial instruments classified in non-current assets 38 – – –
Derivative financial instruments classified in current assets – – 461 –
Derivative financial instruments classified in non-current liabilities – – (39) –
Derivative financial instruments classified in current liabilities (1,054) – – –
Total derivative financial instruments (1,016) – 422 –
The Group designates certain energy contracts as held for trading. Energy contracts that are not designated as ‘own-use’ contracts
constitute financial instruments under IFRS 9 and are carried at fair value through profit or loss.
The amount of derivative re-measurement that has been recognised through the profit or loss is as follows:
2022
£m
2021
£m
Amounts recognised in operating (loss)/profit
Re-measurement of derivative energy contracts (1,438) 422
Amounts recognised in the consolidated income statement (1,438) 422
81
23 Cash and cash equivalents
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Cash at bank 474 2 145 –
Restricted cash
Of the £474m cash at bank, £269m relates to cash received from the Government not yet distributed to customers under the Energy
Bills Support Scheme. The use of this cash is restricted to distributing to eligible customers to reduce their energy bills under the
scheme. Cash available for use as at 31 December 2022 is therefore £205m. Refer to Government support schemes in the Summary
of significant accounting policies for further details on the scheme.
24 Trade and other payables
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Current liabilities
Trade payables 384 – 276 –
Accrued expenses 589 – 574 –
Amounts due to related parties 15 9 15 21
Social security and other taxes 6 – 6 –
Corporation tax payable – 1 – 2
Other payables 305 – 36 3
1,299 10 907 26
Non-current liabilities
Amounts due to related parties 18 – – –
Of the other payables amount, £292m relates to obligations not yet satisfied under the Energy Bills Support Scheme as at the balance
sheet date which consist of cash received from the Government of £269m not yet distributed to customers and £23m unredeemed
vouchers issued to prepayment customers. Refer to Government support schemes in the Summary of significant accounting policies
for further details on the scheme.
The Group's exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is disclosed
in Note 33.
The Group's commodity purchasing arrangement gives rise to a variable liability to the creditor which is a combination of accounts
payable and future purchase commitments secured on the cash and debtors of OVO Energy Ltd. As at the year end, there was
no outstanding liability on the extended credit facility. The arrangement has associated financial covenants. The Group has not
defaulted under the extended credit facility during each of the years ended 31 December 2022 and 2021.
Financial statements
81
80
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
82
25 Loans and borrowings
The statement of financial position includes the following amounts relating to loans and borrowings:
31 December 2022 31 December 2021
Group
£m
Company
£m
Group
£m
Company
£m
Loans and borrowings
Bank borrowings 379 – 386 –
Other borrowings 146 – 128 –
525 – 514 –
Bank borrowings
Bank borrowings consist of a £300m term loan facility and a £100m second lien term loan facility. Both facilities are repayable in full
on 14 January 2025. The second lien loan facility is subordinated to the first facility.
Interest was payable at 8.25% plus variable rate on the term loan facility and at 0% plus variable rate from 1 October 2020 to
14 January 2021; at 8.625% plus variable rate from 15 January 2021 to 14 January 2022; and is payable at 9.75% plus variable rate from
15 January 2022 on the second lien facility. Interest margin on the term loan facility increased by 1.5% to 9.75% from 15 July 2021.
The incremental interest on the term loan facility is capitalised, compounded and added to the unpaid principal amount of the loan.
Interest on the second lien facility is capitalised, compounded and added to the unpaid principal amount of the loan. Costs incurred
in raising finance were £39m and are being amortised over the life of the facilities. The Group made partial repayments of £38m
(2021: £nil) against the term loan facility during the year.
Both term loan facilities agreements were amended on 30 December 2021, replacing the interest rate calculation mechanism
as a result of the interest rate benchmark reform (IBOR). Following the amendments, variable rates are based on SONIA
(Sterling Overnight Index Average) and a credit spread adjustment. The Group took the practical expedient available under
IBOR Phase 2 amendments to account for these changes by updating the effective interest rate without the recognition
of an immediate gain or loss.
Other borrowings
Other borrowings consist of loan notes issued. Loan notes are unsecured and are repayable in full on 31 December 2029.
Interest is payable at 13.25%. Unpaid interest is capitalised, compounded and added to the unpaid principal amount of the loan.
The Group's exposure to market and liquidity risk; including maturity analysis, in respect of loans and borrowings is disclosed
in Note 33.
26 Leases
Group
The statement of financial position includes the following amounts relating to lease liabilities:
31 December
2022
£m
31 December
2021
£m
Current lease liabilities 9 12
Non-current lease liabilities 34 30
Total lease liabilities 43 42
83
26 Leases continued
Lease liabilities maturity analysis
A maturity analysis of lease liabilities based on undiscounted gross cash flows is as follows:
31 December
2022
£m
31 December
2021
£m
Less than one year 11 14
Between one and five years 25 23
Greater than five years 21 12
Total lease liabilities (undiscounted) 57 49
The Group leases various offices and vehicles. The balance sheet amounts relating to leases are shown within Note 15
Right-of-use assets.
The current year interest expense on lease liabilities (included in finance costs) was £3m (2021: £3m).
The total cash outflow for leases for the year ended 31 December 2022 was £15m (2021: £17m).
27 Changes in liabilities arising from financing activities
The table below details changes in the Group's and Company's liabilities arising from financing activities, including both cash
and non-cash changes. Liabilities arising from financing activities are those for which cash flows were or will be classified
in the Group's and Company's statement of cash flows as cash flows from financing activities.
Group
Reconciliation of liabilities arising from financing activities
Non-cash changes
At
1 January
2022
£m
Financing cash
flows
£m
New leases
£m
Other changes
£m
At
31 December
2022
£m
Non-current loans and borrowings 514 (59) – 70 525
Non-current lease liabilities 30 – 6 (2) 34
Current lease liabilities 12 (15) 1 11 9
556 (74) 7 79 568
Non-cash
changes
At
1 January
2021
£m
Financing cash
flows
£m
Other changes
£m
At
31 December
2021
£m
Non-current loans and borrowings 405 (34) 143 514
Current loans and borrowings 91 – (91) –
Non-current lease liabilities 44 – (14) 30
Current lease liabilities 14 (17) 15 12
554 (51) 53 556
Financial statements
83
82
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
84
27 Changes in liabilities arising from financing activities continued
Company
Reconciliation of liabilities arising from financing activities
Non-cash
changes
At
1 January
2022
£m
Financing cash
flows
£m
Other
changes
£m
At
31 December
2022
£m
Amounts due to related parties 21 (14) 2 9
Non-cash
changes
At
1 January
2021
£m
Other
changes
£m
At
31 December
2021
£m
Amounts due to related parties 20 1 21
The 'Other changes' column includes transaction costs, the effect of amortisation of transaction costs, accrued but not yet paid
interest on interest-bearing loans and borrowings including lease liabilities, and reclassification of amounts between non-current
and current liabilities.
28 Provisions
Group
Onerous
contracts
provisions
£m
Restructuring
provision
£m
Dilapidation
provision
£m
Other
provisions
£m
Facility
agreement exit
fee provision
£m
Total
£m
At 1 January 2022 46 1 5 4 2 58
Additional provisions 5 37 – 21 – 63
Provisions used (41) (29) – (2) – (72)
Unused amounts reversed (1) (2) – – – (3)
Increase due to passage of time or unwinding
of discount
1 – – – – 1
Increase from transfers and other changes - - - 1 - 1
At 31 December 2022 10 7 5 24 2 48
Non-current liabilities 2 – 1 23 2 28
Current liabilities 8 7 4 1 – 20
Onerous contracts provisions
As part of the acquisition of OVO (S) Energy Services Limited Group (SSE) in 2020, the Group entered into a Master Services
Agreement (MSA) with SSE Telecommunications Limited in connection with the supply of telephony services. At the time of the
acquisition, the agreement was deemed an unfavourable contract as the Group considered the costs of meeting the obligations
under the contract exceeded the economic benefits expected to be received from it. It is management's intention to terminate
the MSA at the earliest possible period. The costs of £8m disclosed above are expected to be fully utilised over the next 12 months.
Restructuring provision
Following the acquisition of SSE in 2020, the Group initiated an integration programme which has resulted in the redundancy of a
number of employees in the Group. In the current year, the Group further announced a voluntary redundancy programme to reduce
the number of roles across the Group by 1,700. The programme was aimed at simplifying the business to reduce costs. Restructuring
costs currently provided for are expected to be fully utilised over the next 12 months.
85
28 Provisions continued
Dilapidation provision
The Group is required to restore the leased premises of its offices to their original condition at the end of the respective lease terms.
A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements.
These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of
the lease or the useful life of the assets.
Other provisions
Other provisions primarily relate to obligations under agreements with meter assets providers. The costs are expected to be utilised
over the lifespan of the agreements.
Facility agreement exit fee provision
Upon the occurrence of an exit event for a fully repaid facility agreement, the Group is required to make an exit fee payment based
on the enterprise value of the Group at the date of the event. The recognised provision reflects the Directors’ best estimate of the fair
value of this fee at 31 December 2022.
29 Pension and other schemes
Defined contribution pension scheme
The Group operates both defined contribution and benefit pension schemes. The pension cost charge under the defined contribution
scheme for the year represents contributions payable by the Group to the scheme and amounted to £16m (2021: £18m).
Defined benefit pension schemes
Introduction
The Group sponsors a funded defined benefit pension plan for qualifying UK employees – the OVO Energy Group of the ESPS.
The scheme was established on 14 January 2020 following the acquisition of OVO (S) Energy Services Limited Group by the Group
in order to provide retirement benefits for eligible company employees. The scheme is sectionalised with separate sections for
former members of the Southern Electricity Group of the ESPS and former members of the Scottish Hydro-Electric Pension Scheme.
The assets in each section are ring-fenced to provide benefits solely for the members of that section.
The scheme is administered by an independent trustee, which is legally separate from the Group. The trustee is required by law to
act in the interest of all relevant beneficiaries, and is responsible for the investment policy for the assets and day-to-day
administration of the benefits. Under the scheme, employees are entitled to annual pensions, and in some cases also lump sum
benefits, on retirement at age 60 or 63 calculated with reference to pensionable service and final pensionable salary. Benefits are
also payable on death and following other events such as withdrawing from active service. No other post-retirement benefits are
provided to these employees.
Profile of the scheme
The Defined Benefit Obligation (DBO) includes benefits for current employees, former employees and current pensioners. The vast
majority of the DBO is attributable to current employees.
The scheme duration is an indicator of the weighted-average time until benefit payments are made. For the scheme as a whole,
the duration is approximately 20 years.
Funding requirements
UK legislation requires that pension schemes are funded prudently. The first formal valuation of the scheme since inception on 14
January 2020 had an effective date of 31 March 2020, and resulted in a surplus of £10.4m relative to technical provisions overall.
Following the scheme’s first formal valuation, the Group is paying contributions equivalent to 32.7% of salaries for employees in the
Southern section and 39.0% of salaries for employees in the Hydro section to meet the expected cost of benefits being built up by
these employees. The next funding valuation is due no later than 31 March 2023 when funding arrangements for the scheme will be
reviewed. Contributions of around £1m are expected to be paid by the Group during the year ending 31 December 2023.
Financial statements
85
84
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
86
29 Pension and other schemes continued
Risks associated with the scheme
The scheme exposes the Group to some risks, the most significant of which are:
Asset volatility
The DBO is calculated using a discount rate set with reference to corporate bond yields. If assets underperform this yield, this will
create a deficit.
The scheme holds approximately 14% of its assets in equities which, though expected to outperform corporate bonds in the long
term, create volatility and risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given
the scheme's long term objectives.
Changes in bond yields
A decrease in corporate bond yields will increase the value placed on the scheme's DBO for accounting purposes, although this will
be partially offset by an increase in the value of the scheme's bond holdings.
Inflation risk
The majority of the scheme’s DBO is linked to inflation, and higher inflation leads to a higher DBO (although, in most cases, caps on
the level of inflationary increases are in place to protect against extreme inflation). Most of the assets are either unaffected by or only
loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.
Life expectancy
The majority of the scheme’s obligations are to provide benefits for the lifetime of the member, so increases in life expectancy will
result in an increase in the DBO.
Risk management
The Group and trustees have agreed a long term strategy for reducing investment risk as and when appropriate. This includes an
asset-liability matching policy which aims to reduce the volatility of the funding level of the scheme. By investing in assets such as
index-linked gilts and swaps, which perform in line with the liabilities of the scheme, the scheme is protected against inflation being
higher than expected.
The trustees insure certain benefits which are payable on death before retirement.
Reporting at 31 December 2022
The results of the latest funding valuation at 31 March 2020 have been adjusted to the statement of financial position date, taking
account of experience over the period since 31 March 2020, changes in market conditions and differences in the financial and
demographic assumptions. The present value of the Defined Benefit Obligation, and the related current service cost, were measured
using the projected unit credit method.
The principal assumptions used to calculate the liabilities under IAS 19 are as follows:
Main financial assumptions
The principal financial assumptions used to determine the present value of the defined benefit obligation at the statement of financial
position date are as follows:
31 December
2022
%
31 December
2021
%
Discount rate 4.70 1.90
RPI inflation 3.10 3.10
CPI inflation 2.70 2.70
Rate of general long term increase in salaries 3.20 3.20
Pension increases in payment (RPI max 5% p.a.) 2.90 3.00
Pension increases in payment (RPI max 3% p.a.) 2.30 2.40
The financial assumptions reflect the nature and term of the scheme's liabilities.
87
29 Pension and other schemes continued
Post-retirement mortality assumptions
31 December
2022
Years
31 December
2021
Years
Life expectancy for male currently aged 60 26.40 26.30
Life expectancy for female currently aged 60 28.40 27.80
Life expectancy at 60 for male currently aged 40 27.90 28.20
Life expectancy at 60 for female currently aged 40 29.90 29.80
31 December 2022 31 December 2021
SAPS S3 Tables SAPS S3 Tables
Mortality base table adopted ‘All’ for males and ‘Middle’ for females ‘All’ for males and ‘Middle’ for females
Scaled by 105% for Southern section and
by 109% for Hydro section
Scaled by 105% for Southern section and
by 109% for Hydro section
Mortality future improvements adopted
CMI 2021 projections model with Sk parameter
of 7.0 and A parameter of 0.25, and long term
improvement rate of 1.25% p.a.
CMI 2020 projections model with Sk
parameter of 7.0 and A parameter of 0.25,
and long term improvement rate of 1.25% p.a.
GMP equalisation
Cost of equalising benefits for differences
in GMPs between males and females taken
to be around 0.2% of liabilities
Cost of equalising benefits for differences
in GMPs between males and females taken
to be around 0.2% of liabilities
Cash commutation
Allowance made for members to take
maximum permitted lump sump at retirement
by commuting pension based on current
commutation terms
Allowance made for members to take
maximum permitted lump sump at retirement
by commuting pension based on current
commutation terms
Reconciliation of scheme assets and liabilities to assets and liabilities recognised
The amounts recognised in the statement of financial position are as follows:
31 December
2022
£m
31 December
2021
£m
Fair value of scheme assets 85 120
Present value of scheme liabilities (56) (100)
Defined benefit pension scheme surplus 29 20
Asset recognised in the statement of financial position 29 20
Minimum funding requirement
When determining the adjustment in respect of the minimum funding requirement, it has been assumed that the Group would be
entitled to a refund from the scheme of any surplus arising in the scheme in future.
Financial statements
87
86
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
88
29 Pension and other schemes continued
Scheme assets
Changes in the fair value of scheme assets during the year are as follows:
31 December
2022
£m
31 December
2021
£m
Fair value at start of year 120 108
Interest income on scheme assets 2 1
Re-measurement (losses)/gains on scheme assets (37) 6
Net increase in assets from bulk transfers – 3
Contributions by employer 3 5
Net benefits paid out (3) (3)
Fair value at end of year 85 120
Analysis of assets
The scheme assets are invested in the following asset classes:
31 December
2022
£m
31 December
2021
£m
Equities 12 37
Index-linked gilts 31 36
Corporate bonds 33 41
Cash/net current assets 9 6
Total market value of assets 85 120
Actual return on scheme assets
2022
£m
2021
£m
Interest income on scheme assets 2 1
Re-measurement (losses)/gains on scheme assets (37) 6
Actual return on scheme assets (35) 7
The pension scheme has not invested in any of the Group's own financial instruments or in properties or other assets used by the
Group. All scheme assets are quoted.
89
29 Pension and other schemes continued
Scheme liabilities
Changes in the present value of scheme liabilities over the year are as follows:
31 December
2022
£m
31 December
2021
£m
Present value at start of year 100 95
Current service cost 3 6
Past service cost (including curtailments) 2 3
Actuarial gains on scheme liabilities arising from changes in financial assumptions (49) (5)
Actuarial losses on scheme liabilities arising from changes in demographic assumptions 1 –
Actuarial losses on scheme liabilities arising from experience 1 –
Net increase in liabilities from bulk transfers – 3
Interest expense 2 1
Net benefits paid out (4) (3)
Present value at end of year 56 100
Amounts recognised in the consolidated income statement
2022
£m
2021
£m
Amounts recognised in operating (loss)/profit
Current service cost (3) (6)
Past service cost (including curtailments) (2) (3)
Recognised in arriving at operating (loss)/profit (5) (9)
Amounts recognised in the income statement (5) (9)
Amounts taken to the consolidated statement of comprehensive income
2022
£m
2021
£m
Re-measurement (losses)/gains on scheme assets (37) 6
Actuarial gains arising on scheme liabilities from changes in financial assumptions 49 5
Actuarial losses on scheme liabilities arising from changes in demographic assumptions (1) –
Actuarial losses on scheme liabilities arising from experience (1) –
Amounts recognised in the statement of comprehensive income 10 11
Financial statements
89
88
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
90
29 Pension and other schemes continued
Sensitivity to key assumptions
The key assumptions used for IAS 19 are: discount rate, inflation and mortality. If different assumptions were used, this could have
a material effect on the results disclosed. The sensitivity of the results to these assumptions is set out below.
The sensitivity information shown has been prepared by approximately adjusting the IAS 19 liabilities calculated at the statement
of financial position date using the same method used to adjust the results of the latest formal valuation to the statement of financial
position date.
2022 2021
Change
£m
Value
£m
Change
£m
Value
£m
DBO at the end of year – 56 – 100
0.25% p.a. decrease in the discount rate 3 60 6 107
0.25% p.a. increase in the inflation assumptions 3 59 6 107
One-year increase in life expectancy 1 58 4 105
30 Share capital and reserves
Authorised, allotted, called up and fully paid shares
31 December 2022 31 December 2021
No. £ No. £
A Ordinary of £0.00001 each 14,598,927 146 14,598,927 146
B1 Ordinary of £0.00001 each 22,222 – 22,222 –
B2 Ordinary of £0.00001 each 47,837 – 55,264 1
B3 Ordinary of £0.00001 each 94,948 1 85,463 1
C Ordinary of £0.00001 each 27,321 – 27,321 –
D1 Ordinary of £0.00001 each 221,401 2 221,401 2
D2 Ordinary of £0.00001 each 36,038 – 36,038 –
D3 Ordinary of £0.00001 each 67,674 1 67,674 1
D4 Ordinary of £0.00001 each 28,215 – 28,215 –
D5 Ordinary of £0.00001 each 54,302 1 54,302 1
E1 Ordinary of £0.00001 each 480,374 5 514,268 5
Preferred Shares of £0.00001 each 1,869,749 19 1,869,749 19
Deferred Shares of £0.00001 each 15,572 – 89,106 1
17,564,580 175 17,669,950 177
The B, C, D and E Ordinary shares have been issued as part of Employee Share Schemes as discussed in Note 31.
Other than A Ordinary and preferred shares, no other share classes confer voting or dividend rights. Both A Ordinary and preferred
shares have full voting rights. Preferred shares rank ahead of A Ordinary shares with regards to dividend rights. On return of capital,
share classes are ranked in the following order: preferred shares, D Ordinary shares, E Ordinary shares, B Ordinary Shares and
A Ordinary and C Ordinary shares. A and C Ordinary shares rank pari passu on return of capital.
91
30 Share capital and reserves continued
Current year movements in issued capital are as follows:
1 January
2022
£
Newly
Issued
£
Converted /
cancelled
£
31 December
2022
£
A Ordinary 14,598,927 – – 14,598,927
B1 Ordinary 22,222 – – 22,222
B2 Ordinary 55,264 – (7,427) 47,837
B3 Ordinary 85,463 29,043 (19,558) 94,948
C Ordinary 27,321 – – 27,321
D1 Ordinary 221,401 – – 221,401
D2 Ordinary 36,038 – – 36,038
D3 Ordinary 67,674 – – 67,674
D4 Ordinary 28,215 – – 28,215
D5 Ordinary 54,302 – – 54,302
E1 Ordinary 514,268 – (33,894) 480,374
Preference 1,869,749 – – 1,869,749
Deferred 89,106 – (73,534) 15,572
Total 17,669,950 29,043 (134,413) 17,564,580
Nature and purpose of reserves
Share premium (Group and Company)
In 2019, 1,658,282 A Ordinary shares were issued to Mitsubishi Corporation for consideration of £109m. Share premium of £103m
was recognised in 2019, representing the excess consideration received above the nominal value of the shares issued, less £7m of
associated transaction costs. The majority of the remaining share premium balance relates to share premium recognised upon the
issuance of 2,424,771 preference shares to Mayfair Olympic Holdco Limited in 2015. The share premium represents the consideration
of £31m less the nominal value of the shares issued and £3m associated transaction costs.
Other reserves (Group)
Other reserves primarily comprise the Group’s foreign currency translation reserve of £nil (2021: £1m), which arose from the re-
translation of the opening net assets and results of non-sterling functional currency operations.
Other reserves (Company)
Other reserves primarily comprise a merger reserve of £78m (2021: £78m), which arose as part of a business combination in 2014.
31 Share-based payments
Ovo Group Share Scheme
Scheme details and movements
In July 2014, OVO Group established a new employee share plan. Under the terms of the scheme, the Group awarded its own
employees and employees of other Group companies class B, C, D and E Ordinary shares in OVO Group Ltd.
B shares (Employee Shareholder Scheme) are free shares awarded to employees in line with the Government's employee shareholder
status rules. B shares have a four year ‘rolling vesting’ period, with a portion of the shares vesting annually, rather than all at the end
of the scheme.
Employees are given the option to purchase C shares from their bonus. They have a one year vesting period.
D shares are also awarded as part of the Long-term Incentive Plan (LTIP). They have a vesting period based
on performance conditions.
E shares are also awarded as part of the LTIP. They have a vesting period based on performance conditions.
The scheme is equity settled and a fair value liability is calculated on grant date. The expense is charged to the income statement
on a straight line basis over the expected vesting period of the awards.
Financial statements
91
90
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
92
31 Share-based payments continued
Analysis of charge to the income statement
£ '000 2022 2021
B shares 135 138
C shares – –
D shares – –
E shares – –
135 138
Reconciliation of movements in awards
Thousands of shares B shares C shares D shares E shares
As at 1 January 2022 164 27 408 514
Issued in the year 29 – – –
Forfeited in the year (27) – – (34)
Issued at 31 December 2022 166 27 408 480
Weighted average vesting period (months) 19 – – –
Thousands of shares B shares C shares D shares E shares
As at 1 January 2021 136 27 408 530
Forfeited in the year (27) – – (16)
Issued in the year 55 – – –
Issued at 31 December 2021 164 27 408 514
Weighted average vesting period (months) 15 – – –
Pricing
For the purpose of valuing the awards, to calculate the share-based payment charge, all shares issued were valued based
on observable market multiples of competitors, discounted cash flows and, where available, transaction data.
B shares
Upon issuance, the B shares awarded in June 2017 were valued at £12.10 per share, September 2017 shares were valued at £15.30 per
share and December 2017 shares were valued at £15.30 per share. B1 shares issued in June 2019 were valued at £14.30 per share and
B2 shares at £2.60 per share. B2 and B3 shares issued in 2020 were all valued at £2.07 per share. B3 shares issued in 2021 and 2022
were all valued at £0.10 per share.
C shares
Upon issuance, the C shares awarded in June 2017 were valued at £17.00 per share and September 2017 shares were valued at £17.00
per share. The C shares awarded in 2018 were all valued at £17.00 per share.
D shares
Upon issuance, the D shares awarded in June 2017 were valued at £0.31 per share and September 2017 shares were valued at £0.31
per share.
E shares
Upon issuance, the E shares awarded in 2017 had no fair value. The E shares awarded in 2018 were valued at £0.20 per share.
93
32 Financial instruments
Set out below is a comparison, by class, of the carrying amounts and fair values of the Group’s financial instruments:
Group
31 December 2022 31 December 2021
Carrying value
£m
Fair value
£m
Carrying value
£m
Fair value
£m
Financial assets
Financial assets through profit or loss
Trade and other receivables 1 1 2 2
Derivative financial instruments 38 38 461 461
Total financial assets through profit or loss 39 39 463 463
Financial assets at amortised cost
Cash and cash equivalents 474 474 145 145
Trade and other receivables 1,007 1,007 837 837
Total financial assets at amortised cost 1,481 1,481 982 982
Total financial assets 1,520 1,520 1,445 1,445
Financial liabilities
Financial liabilities through profit or loss
Trade and other payables – – (2) (2)
Derivative financial instruments (1,054) (1,054) (39) (39)
Total financial liabilities through profit or loss (1,054) (1,054) (41) (41)
Financial liabilities at amortised cost
Trade and other payables (1,311) (1,311) (899) (899)
Loans and borrowings (525) (543) (514) (544)
Lease liabilities (43) (43) (42) (42)
Total financial liabilities at amortised cost (1,879) (1,897) (1,455) (1,485)
Total financial liabilities (2,933) (2,951) (1,496) (1,526)
Financial statements
93
92
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
94
32 Financial instruments continued
Company
31 December 2022 31 December 2021
Carrying value
£m
Fair value
£m
Carrying value
£m
Fair value
£m
Financial assets
Financial assets at amortised cost
Cash and cash equivalents 2 2 – –
Trade and other receivables 88 88 104 104
Total financial assets at amortised cost 90 90 104 104
Total financial assets 90 90 104 104
Financial liabilities
Financial liabilities through profit or loss
Trade and other payables – – (2) (2)
Total financial liabilities through profit or loss – – (2) (2)
Financial liabilities at amortised cost
Trade and other payables (9) (9) (22) (22)
Total financial liabilities at amortised cost (9) (9) (22) (22)
Total financial liabilities (9) (9) (24) (24)
The Group holds £1m convertible loan notes issued by the Group's associates (2021: £2m). These are accounted for at fair value
through profit or loss and are included in trade and other receivables.
Included in trade and other payables in the prior year is £2m relating to put option arrangements. In the year ended 31 December
2020, the Group entered into a shareholder agreement with ENI gas e luce S.p.A. (EGL) whereby a written put and purchased
call option were granted to repurchase shares in OVO Energy (France) SAS, a subsidiary of OVO Group Ltd. The options were
exercisable if there was no binding agreement to enter into a joint venture between the Group and EGL by 1 February 2022.
The amount that may become payable under the options on exercise was initially recognised at the present value of the
redemption amount with a corresponding charge directly to equity. The redemption amount is €2.5m plus 6%. These options
were not exercised and have therefore expired in the year.
Management assesses that the fair values of cash and cash equivalents, trade and other receivables, and trade and other payables
approximate their carrying amounts largely due to the short term maturities of these instruments.
The following methods and assumptions were used to estimate the fair values:
•
The fair value of financial assets is based on the expectation of recovery of balances. Impaired receivables mainly relate to
customers from whom it is unlikely that full payment will ever be received. The primary inputs used to impair the receivable
balances are not based on observable market data.
•
The fair value of loans and borrowings and lease liabilities is estimated by discounting future cash flows using rates currently
available for debt on similar terms, credit risk and remaining maturities.
•
The fair value of derivative financial instruments is determined with reference to closing market prices. All derivatives are
classified as Level 2 within the fair value hierarchy. The fair value measurements are those derived from inputs, other than
quoted prices, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
95
33 Financial risk management and impairment of financial assets
The Group's activities expose it to a variety of financial risks: credit risk, market risk (predominantly from interest rate risk and
commodity price risk), liquidity risk and operational risk. The Group's overall risk management programme focuses on the
unpredictability of commodity price markets and seeks to minimise potential adverse effects on the Group's financial performance.
The Company has limited exposure to market risk and liquidity risk due to the nature of its principal activities as a holding company
but is exposed to credit risk for amounts owed by companies within the same group. The risk is therefore not considered material for
the assessment of the Company’s financial performance.
Risk management is carried out by the Risk and Audit Committees, under policies approved by the Directors and the Group
management team.
Credit risk and impairment
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and from security deposits held by suppliers and
distributors as collateral and deposits with the Group's bank.
The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at
the balance sheet date was £1,520m (2021: £1,445m) being the total of the carrying amount of financial assets which include trade
receivables and accrued income, derivative financial instruments and cash. Included in the carrying amount of financial assets are
security deposits held by suppliers and distributors as collateral which amount to £87m (2021: £48m). The collateral balance has
increased in 2022 as a result of higher commodity prices. Treasury, trading and energy procurement counterparties typically have
strong credit ratings and accordingly have low credit risk; the Group does not expect credit losses to arise on these balances.
The Group manages credit risk relating to trade receivables and accrued income by monitoring the ageing of outstanding balances
regularly and, depending on the business units, assessing the creditworthiness of a new customer before trade commences. As the
Group's customer base is residential and therefore diverse, there is limited concentration of risk.
The Group measures expected credit losses by performing an impairment analysis at each reporting date. Expected credit losses are
recognised unless the Group is satisfied that no recovery of the amount owing is possible, at which point the amounts considered
irrecoverable are written off against the trade receivable directly. The Group provides for impairment losses based on estimated
irrecoverable amounts determined by reference to specific circumstances and the experience of management of debtor default
in the industry. Trade receivables are written off only after a period of time has elapsed since the final bill. Enforcement activity
continues in respect of these balances unless there are specific known circumstances that remove any value in further action.
The credit quality of financial assets that are neither due or impaired can be assessed by reference to historical information about
counterparty default rates. Impaired receivables mainly relate to customers from whom it is unlikely that full payments will be
received. The simplified approach of measuring lifetime expected credit losses has been adopted to measure expected credit
losses on trade receivables and accrued income. The provision is calculated based on default rates applied to different groups
of outstanding receivables based on brands and payment types, whether the receivables are billed or unbilled, and whether the
customer has left. The Directors have based their assessment of the level of impairment on collection rates experienced within
each grouping to date.
Macroeconomic conditions
Management assesses the impact of high commodity prices on tariffs and inflation will continue to have a negative impact on
household disposable income and has taken into account the impact of the economic factors when measuring expected credit losses.
Financial statements
95
94
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
96
33 Financial risk management and impairment of financial assets continued
Allowances for impairment by credit losses
2022
Energy supply
customers
£m
At start of year 310
Additional impairment for credit losses recognised in the year 167
Amounts written off (146)
Reversal of impairment losses (2)
At end of year 329
2021
Energy supply
customers
£m
At start of year 257
Additional impairment for credit losses recognised in the year 117
Amounts written off (64)
At end of year 310
All expected credit losses recognised within the Group related to contracts with customers. The tables below show the ageing and
expected credit losses profile of billed receivables for credit customers. Billed receivables are segmented on a customer account
basis by the age of the customer’s oldest invoice. Ageing is not available for Pay-as-you-go receivables of £115m (2021: £85m)
against which a provision of £37m is held (2021: £29m). Unbilled receivables are £351m (2021: £350m) against which a provision of
£34m is held (2021: £82m). Provisions for Pay-as-you-go and unbilled receivables are calculated on a similar basis as billed
receivables. In addition, the Group has non-energy supply related receivables of £40m against which no provision is held.
2022
Residential energy customers
Days past oldest invoice date
Current
£m
31-90 days
£m
>90 days
£m
>12 months
£m
Total
£m
Direct debits
Expected credit loss rate 4.8% 5.0% 6.5% 28.6% 7.6%
Gross carrying amount 21 20 31 7 79
Expected credit loss 1 1 2 2 6
Net carrying amount 20 19 29 5 73
Payment on demand
Expected credit loss rate 20.5% 28.6% 35.2% 43.8% 36.0%
Gross carrying amount 39 28 88 112 267
Expected credit loss 8 8 31 49 96
Net carrying amount 31 20 57 63 171
Final bills
Expected credit loss rate 42.9% 46.2% 72.5% 90.7% 79.7%
Gross carrying amount 7 13 69 108 197
Expected credit loss 3 6 50 98 157
Net carrying amount 4 7 19 10 40
Total net residential energy customer receivables 55 46 105 78 284
97
33 Financial risk management and impairment of financial assets continued
2021
Residential energy customers
Days past oldest invoice date
Current
£m
31-90 days
£m
>90 days
£m
>12 months
£m
Total
£m
Direct debits
Expected credit loss rate 0.0% 3.3% 8.5% 33.3% 7.8%
Gross carrying amount 26 30 47 12 115
Expected credit loss – 1 4 4 9
Net carrying amount 26 29 43 8 106
Payment on demand
Expected credit loss rate 18.2% 25.0% 28.1% 40.8% 30.1%
Gross carrying amount 44 32 64 76 216
Expected credit loss 8 8 18 31 65
Net carrying amount 36 24 46 45 151
Final bills
Expected credit loss rate 50.0% 50.0% 63.8% 83.1% 72.5%
Gross carrying amount 6 14 58 89 167
Expected credit loss 3 7 37 74 121
Net carrying amount 3 7 21 15 46
Total net residential energy customer receivables 65 60 110 68 303
Market risk
Interest rate risk
The Group borrows to finance its operations and growth. Interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest
rates relates primarily to the Group’s long term debt obligations with floating interest rates. The Group aims to minimise interest rate
risk in order to optimise cost of capital.
Sensitivity analysis
The Group has performed an analysis of the sensitivity of the Group’s financial position and performance to changes in interest rates.
The Group deems a two percentage point move (2021: one) in UK interest rates to be reasonably possible, considering the current
interest rate environment. The Group’s (loss)/profit before tax is affected through the impact on floating rate borrowings as follows:
2022 2021
Increase/
decrease in
basis points
Effect on loss
before tax
£m
Increase/
decrease in
basis points
Effect on profit
before tax
£m
Term loan facilities +200 8 +100 8
–200 (8) –100 (10)
Effect of IBOR reform
The Group only has term loan facilities which previously referenced GBP LIBOR. Both term loan facilities agreements were amended
on 30 December 2021, replacing the interest rate calculation mechanism as a result of IBOR reform. Following the amendments,
interest rates are based on SONIA (Sterling Overnight Index Average) and a credit spread adjustment. The Group took the practical
expedient available under IBOR Phase 2 amendments to account for these changes by updating the effective interest rate without
the recognition of an immediate gain or loss.
Financial statements
97
96
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
98
33 Financial risk management and impairment of financial assets continued
Commodity price risk
Commodity risk is the exposure that the Group has to price movements in the wholesale gas and electricity markets. The risk is
primarily that market prices for commodities will fluctuate between the time that tariffs are set and the time at which the
corresponding procurement cost is fixed; this may result in lower than expected margins or unprofitable sales. The Group is also
exposed to volumetric risk in the form of uncertain consumption profiles arising from a range of factors which include weather,
economic climate and changes in energy consumption patterns.
The Group manages commodity risk by entering into forward contracts for a variety of periods. Energy procurement contracts are
entered into and continue to be held for the purpose of the receipt of a non-financial item which is in accordance with the Group's
expected purchase and sale requirements and are therefore out of scope of IFRS 9. Only certain energy contracts that are not
designated as ‘own-use’ contracts constitute financial instruments under IFRS 9.
Energy contracts that are not financial instruments under IFRS 9 are accounted for as executory contracts and changes in fair value
do not immediately impact profit or equity, and as such, are not exposed to commodity price risk as defined by IFRS 7. So, whilst the
risk associated with energy procurement contracts outside the scope of IFRS 9 is monitored for internal risk management purposes,
only those energy contracts within the scope of IFRS 9 are within the scope of the IFRS 7 disclosure requirements. Although the
Group only enters into contracts based on expected volumes, the volumetric risk discussed above means that the Group often has to
enter into offsetting sell trades to match actual demand. This constitutes net settling under IFRS 9 which requires such contracts to
be treated as derivative financial instruments under IFRS 9 rather than falling within the ‘own-use’ exemption. The Group therefore
designates its contracts as either ‘own-use’ or ‘trading’ depending on the risk of them being net settled, with only those contracts
that are deemed to be highly probable of resulting in physical delivery being treated as own-use.
The Group regularly re-assesses the volume threshold at which contracts are deemed to be highly probable of resulting in physical
delivery to reflect the latest best view of forecasted volume. This has resulted in a larger proportion of the contract book being
designated as trading, but to a larger extent, the increase in the value of derivative energy contracts in the year is due to the decrease
in commodity prices towards the end of the year. As at 31 December 2022, the Group has £1,016m (2021: £422m) derivative energy
contracts that are not determined as own-use contracts and are measured at fair value through profit or loss.
Sensitivity analysis
The Group has performed an analysis of the sensitivity of the Group’s financial position and performance to changes in commodity
prices in respect to derivative energy contracts measured at fair value through profit or loss. The impact of changes in commodity
prices on the fair value of the Group's derivative financial assets is as follows:
Reasonably
possible change
in variable
Effect on loss
before tax
2022
£m
Effect on profit
before tax
2021
£m
UK gas (p/therm) +/–25% 109/(109) 89/(91)
UK power (£/MWh) +/–25% 56/(56) 112/(104)
99
33 Financial risk management and impairment of financial assets continued
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group management team uses short and long term cash flow forecasts to manage liquidity risk. Forecasts are supplemented
by sensitivity analysis which is used to assess funding adequacy for at least a 12-month period.
The biggest threat to the Group's liquidity would arise from unusually cold weather or other factors causing customer volumes to be
much higher than anticipated. This could place a strain on the Group's working capital as payments due for supplier invoices could
become due before customer collection levels could be adjusted. The Group has an extended payment facility with its key supplier
where the Group may defer payments past the supplier invoices due date. The Group also manages this liquidity risk by following
a strict and sophisticated hedging policy.
The Group manages its cash resources to ensure it has sufficient funds to meet all expected demands as they fall due. The below sets
out the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
Maturity analysis
2022
Within
1 year
£m
Between
1 and 5 years
£m
After
more than
5 years
£m
Total
£m
Trade and other payables 1,293 18 – 1,311
Bank and other borrowings – 397 146 543
Lease liabilities 11 25 21 57
Derivative financial instruments 1,054 – – 1,054
2,358 440 167 2,965
Maturity analysis
2021
Within
1 year
£m
Between
1 and 5 years
£m
After
more than
5 years
£m
Total
£m
Trade and other payables 901 – – 901
Bank and other borrowings – 544 – 544
Lease liabilities 14 23 12 49
Derivative financial instruments – 39 – 39
915 606 12 1,533
Financial statements
99
98
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
100
33 Financial risk management and impairment of financial assets continued
Capital risk management
Capital risk is managed to ensure the Group continues as a going concern and grows in a sustainable manner. The Group's total
capital comprises the Group's net debt and total equity. Net debt is calculated as total loans and borrowings plus lease liabilities less
cash and cash equivalents. Management monitors debt levels to limit the risk of financial distress and to improve the Group's credit
standing and, in doing so, seeks to reduce its cost of debt and collateral requirements in energy trading and hedging arrangements,
and to remain as an attractive counterparty to the Group's suppliers.
The Group maintains a consolidated financial model to monitor the development of the Group's capital structure, which has the
ability to model various scenarios and sensitivities. Key outputs from this model are regularly presented to the Board.
Group
31 December
2022
£m
31 December
2021
£m
Loans and borrowings 525 514
Lease liabilities 43 42
Less: cash and cash equivalents (excluding restricted cash) (205) (145)
Net debt 363 411
Total shareholders' (deficit)/funds (1,119) 148
Total capital (756) 559
The Group's borrowings are subject to meeting its financial covenants attached to the Group's credit facilities. The Group complied
with all external borrowing covenants during the years ended 31 December 2022 and 31 December 2021. Compliance with these
covenants is monitored by management on a monthly basis.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2022 and
2021.
34 Related party transactions
Key management personnel
Key management includes Directors of the Company and members of the Group executive leadership team. The executive
leadership team has grown in the year and management has considered it appropriate to redetermine key management personnel
to include more members of the executive leadership team. The compensation paid or payable to key management for employee
services to the Group's subsidiaries is as follows:
2022
£ '000
2021
£ '000
Wages and salaries 5,443 1,632
Compensation for loss of office 963 –
Social security costs 991 115
Pension costs – defined contribution scheme 72 71
Share-based payments 45 86
7,514 1,904
101
34 Related party transactions continued
Summary of transactions with key management
Loans with Directors and key management personnel are disclosed as follows:
2022
At 1 January
2022
£ '000
Advances to
Directors
£ '000
Repayments
from Directors
£ '000
At 31 December
2022
£ '000
Loans to Directors and key management personnel 905 – – 905
2021
At 1 January
2021
(Restated)
£ '000
Advances to
Directors
(Restated)
£ '000
Repayments
from Directors
(Restated)
£ '000
At 31 December
2021
(Restated)
£ '000
Loans to Directors and key management personnel 575 695 (365) 905
Loans to Directors and key management personnel are subject to interest at the official rate which was 2% for the year. Interest is
accrued on a daily basis on the principal amount of the loan outstanding and is payable upon the repayment of the loan amount.
Interest accruing on these loans amounted to £18,000 for the year. 2021 numbers have been restated to include loans to key
management personnel and other Directors of the Group.
Summary of transactions with the ultimate parent entity
Group
Imagination Industries Ltd (Group)
During the year, the Group incurred costs of £32m payable to Imagination Industries Ltd (2021: £21m). As at 31 December 2022,
£33m remained outstanding from the Group to Imagination Industries Ltd (2021: £15m).
Summary of transactions with other significant shareholders
Group & Company
Mayfair Equity Partners LLP (Group & Company)
During the year, the Company incurred costs of £100k payable to Mayfair Equity Partners LLP (2021: £100k). No amounts were
outstanding as at 31 December 2022 (2021: £nil).
Mitsubishi Corporation International (Europe) plc (Group & Company)
During the year, the Company incurred costs of £103k payable to Mitsubishi Corporation International (Europe) plc (2021: £105k).
No amounts were outstanding as at 31 December 2022 (2021: £nil).
Financial statements
101
100
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
Notes to the Financial Statements for the
Year Ended 31 December 2022 continued
102
34 Related party transactions continued
Summary of transactions with subsidiaries (Company)
2022
Subsidiary
Amounts
(received from)/
provided to
£m
Amounts repaid
(from)/to
£m
Interest
receivable
£m
Amounts owed
by/(to) as at
31 December
2022
£m
OVO Holdings Ltd – – 3 58
OVO Energy Ltd (9) (26) – (9)
Corgi Homeplan Ltd – (1) 1 12
OVO (S) Home Services Limited 5 – – 5
Kaluza Ltd – – – 6
Kantan Ltd. 2 – – 6
OVO Field Force Ltd – 21 – –
Amounts due to OVO Field Force Ltd of £21m as at 31 December 2021 were novated to OVO Energy Ltd during the year. The
Company received £7m cash funding from OVO Energy Ltd which is included in the cash flows from financing activities in the
Company Statement of Cash Flows.
2021
Subsidiary
Amounts
provided
to
£m
Amounts
repaid
from
£m
Amounts
impaired
£m
Interest
receivable
£m
Interest
payable
£m
Amounts owed
by/(to) as at
31 December
2021
£m
OVO Holdings Ltd 17 – – 3 – 55
OVO Energy Ltd – (3) – 2 – 26
Corgi Homeplan Ltd – – – 1 – 12
Intelligent Energy Technology Ltd – (17) – – – –
Kaluza Ltd – – – 1 – 6
OVO Energy (France) SAS 2 – (5) – – –
OVO Energy Pty Ltd – (3) – – – –
Kantan Ltd. 1 – – – – 4
OVO Energy Spain SL 4 – (6) – – –
OVO Field Force Ltd – – – – (1) (21)
All amounts owed by and due to related parties are unsecured, have no fixed date of repayment and are repayable on demand.
Interest is incurred at either 7% or 8.55% on interest bearing balances unless otherwise disclosed.
Outstanding balances at the year end are unsecured and settlement occurs in cash. There have been no guarantees provided or
received for any related party receivables or payables. For the year ended 31 December 2021, a provision for expected credit losses
was recognised relating to amounts owed by OVO Energy (France) SAS and OVO Energy Spain SL. No impairment was recognised
for the amounts owed by related parties in the year ended 31 December 2022. The impairment on amounts owed by OVO Energy
(France) SAS was reversed in the year ended 31 December 2022.
103
34 Related party transactions continued
Summary of transactions with associates (Group)
2022
Associate
Loan
provided to/
(received from)
£m
Loan repaid
from
£m
Sales to/
(purchases from)
£m
Interest
received
£m
Interest
paid
£m
Amounts owed
by as at
31 December
2022
£m
Indra Renewable Technologies Limited 2 (2) – – – –
The Renewable Exchange Limited – – – – – 1
Chaddenwych Services Limited – – – – – 1
2021
Associate
Loan
provided to/
(received from)
£m
Loan repaid
to/(from)
£m
Sales to/
(purchases from)
£m
Interest
received
£m
Interest
paid
£m
Amounts owed
by/(to) as at
31 December
2021
£m
Indra Renewable Technologies Limited – (3) – – – –
The Renewable Exchange Limited – – – – – 1
Chaddenwych Services Limited – – – – – 1
Outstanding loans to associates relate to unsecured convertible loan notes issued by the Group's associates. Interest on loan notes
issued by The Renewable Exchange Limited and Chaddenwych Services Limited is accrued at 7% and 10% respectively, and the loan
notes are repayable or convertible into shareholdings in the associates at maturity or in certain events. Loan to Indra Renewable
Technologies Limited was repaid in the year ended 31 December 2021 in exchange for an increased shareholding in the associate.
Interest was previously accrued at 7% on the unsecured loan. In the year ended 31 December 2022, the Group agreed to extend
a working capital loan facility to Indra Renewable Technologies Limited in exchange for stock warrants. Interest was accrued
at 8% on the working capital loan. The facility was repaid during the year.
35 Parent and ultimate parent undertaking
As at 31 December 2022, the ultimate and immediate parent was Imagination Industries Ltd which is both the largest group
of undertakings for which group financial statements are drawn up and of which the Company is a member. These financial
statements are available upon request from the registered office at 9 Pembridge Road, Notting Hill, London W11 3JY.
Following a group restructure on 7 March 2023, Energy Transition Holdings Ltd became the Company's ultimate parent company.
The ultimate controlling party is Stephen Fitzpatrick.
36 Subsequent events after the year ended 31 December 2022
Subsequent to the balance sheet date, Intelligent Energy Technology Ltd, a subsidiary of the Group, has entered into a share
purchase agreement with Gulf Oil International Limited to sell its shareholding in Indra Renewable Technologies Limited, with
completion of the transaction subject to certain conditions.
Financial statements
103
102
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO Group Ltd
Annual Report and Financial Statements 2022
OVO registered office
1 Rivergate Temple Quay
Bristol
BS1 6ED