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Shell to supply energy to UK households after takeover of First Utility

A Shell petrol station in London
Shell has bought First Utility outright and will be supplying 825,000 households if the deal completes as expected at the end of February. Photograph: Ben Stansall/AFP/Getty Images

The Anglo-Dutch oil company Shell will soon be selling electricity and gas direct to householders in the UK for the first time after buying one of the county’s biggest energy suppliers, First Utility.

The acquisition of the largest supplier outside of the “big six” compounds a year of upheaval in the UK energy market, which is already being transformed by the proposed merger of Npower and SSE and the imposition of price caps.

Shell has bought First Utility outright for an undisclosed sum, and will be supplying 825,000 households if the deal completes as expected at the end of February. Industry figures said the price was likely in the region of £200m-£300m.

The move is the latest in a buying spree by Shell, which has acquired two electric car infrastructure firms in recent months as it diversifies beyond oil and gas.

Mark Gainsborough, its executive vice-president of new energies, said: “The supply and demand of residential energy is rapidly changing, driven by new technologies that enable householders to better manage their energy use, and the need for a low-carbon energy system.”

Experts said the entrance of Shell into UK energy supply would cause a significant shake-up.

Robert Buckley, research director at analysts Cornwall Insight, said: “It clearly is a brand that is an order of magnitude bigger than any other brand coming to UK energy retail. It’s one that will make any competition sit up and take note.”

Buckley said it would be a good thing for consumers. “One of the issues that has come up consistently is having confidence in the brand you want to switch to, and people will have heard of Shell and have regular interaction with them through a forecourt,” he said.

First Utility, which launched in 2008 and has grown into the biggest independent energy supplier in the UK, has recently diversified, branching out into broadband supply earlier this year.

The company said the takeover by Shell would enable it to develop new products for customers, including ones relating to electric car charging.

Darren Braham, First’s co-founder, said: “First Utility has brought significant disruption and competition to the energy market and this move will help us to capitalise on all the opportunities provided by digitalisation, decarbonisation and the move to battery technology and electric vehicles.”

Shell is entering a market which is under intense political scrutiny and faces the biggest change since privatisation with the introduction of a price cap on default tariffs in early 2019.

Of the biggest energy suppliers, First Utility will be less affected by the measure because it has the lowest proportion of customers on tariffs that will be capped – 23% compared to market leader British Gas on 67%.

Gainsborough said Shell hoped to increase market share. “We are moving in with ambition to grow significantly over time,” he said, adding that the company was undeterred by the threat of price caps. The reality is the UK is, counter to what many think, it’s a very competitive market for household energy.”

Gainsborough continued that it was too early to say whether First Utility would rebrand but in terms of the management team it would be “business as usual” initially.

Braham said the sector was in flux and Shell’s scale would help it take advantage of that. “I think there’s a big change in the market with price caps coming, and the big six are quite vulnerable.”

He added that the company was also looking to expand internationally to other markets.

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