Octopus Energy says it has met Ofgem capital buffer target

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Octopus Energy meets Ofgem target

Highlights

Octopus Energy reports it now exceeds Ofgem's capital target of £115 in net adjusted assets per dual-fuel customer, which was around £800 million total.
Ofgem confirms three suppliers, including Octopus, are under continued assessment despite self-reporting compliance, amid rising wholesale prices and increased sector pressures.
Octopus remains the UK's largest supplier with over 8 million customers, posted a pre-tax loss of £254.8 million on £13.7 billion revenue for the year to April 2025.

Capital target review and regulatory context

As reported by Financial Times, Octopus Energy has told Ofgem that it is now above its capital target, with the regulator assessing the company's own reporting to confirm the position, according to people familiar with the matter.

Meeting the target would mark a significant milestone for the London-based supplier, whose earlier failure to get there drew criticism from rivals and scrutiny from the regulator. Octopus agreed a path with Ofgem to reach the requirement, meaning it was not in breach of the rules while it worked toward compliance.

Ofgem introduced new capital targets for household energy suppliers in March last year after dozens of companies collapsed in 2021 and 2022 amid surging wholesale prices linked to Russia's cut in energy supplies to Europe and other pressures. Under the regime, suppliers must stay above a minimum capital floor of £0 for each dual-fuel customer and either meet, or be on an approved path toward, a target of holding £115 in net adjusted assets per dual-fuel customer.

Industry data on customer numbers suggested Octopus's capital requirement was around £800 million. Last year, Octopus and rival Ovo emerged as among a small number of suppliers above the floor but still below the full target, prompting accusations from competitors that it was unfair for Octopus to continue taking on new customers.

Greg Jackson, Octopus's founder and chief executive, pushed back on that criticism last September, arguing the regime was too crude and failed to reflect the resilience provided by the company's supply contract with Shell.

Energy market resilience and sector pressure

Octopus has expanded rapidly since entering the market about a decade ago and overtook British Gas at the start of 2025 to become Britain's largest household energy supplier, with more than 8 million UK customers. The company is backed by investors including Generation Investment Management, co-founded by former U.S. vice-president Al Gore, and Australia's Origin Energy.

In December, Octopus spun off software arm Kraken Technologies and agreed to sell a minority stake for about $1 billion to investors including Fidelity and a unit of the Ontario Teachers' Pension Plan. Octopus Energy was due to receive about $850 million of the proceeds.

In a market resilience report published on Tuesday, Ofgem says three suppliers are still not meeting their capital targets, including one that has self-reported being above its target after changes to its financial arrangements that are still under assessment. People familiar with the matter say that supplier is Octopus.

Octopus's latest annual accounts, published in December, show a pre-tax loss of £254.8 million for the year to April 2025 on revenues of £13.7 billion. Ofgem can block suppliers that do not meet their targets from paying dividends or taking on new customers, while Ovo's retail energy supplier is in the process of being sold to Eon.

Ofgem says the new capital rules and related measures have made the sector far more resilient to internal and external shocks, helping protect households, businesses and the wider economy. But it also warns that profound uncertainty linked to the conflict in the Middle East is pushing up wholesale prices, with the cap on British household energy prices set to rise 13 percent in July, increasing pressure on supplier balance sheets and consumer affordability.

Our earlier article on WHSmith’s equity fundraising and profit forecast cut explained that the retailer planned to issue 26 million new shares—around 20% of existing capital—to reduce leverage after weaker travel retail trading. We also noted that geopolitical disruption was weighing on airport passenger spending, alongside pressure in its North American business and an expected impairment charge tied to restructuring.

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