Electrical fault caused fire at Ocado distribution centre

LONDON (Reuters) - British online grocer Ocado said a huge blaze which destroyed its major distribution centre in Andover, southern England, was caused by an electrical fault in a battery that caused a robot to catch fire.

FILE PHOTO: A delivery van leaves the dispatch area of the Ocado CFC (Customer Fulfilment Centre) in Andover, Britain May 1, 2018. Picture taken May 1, 2018. REUTERS/Peter Nicholls/File Photo

Shares in Ocado fell as much as 5.4 percent but recovered to be down 1.2 percent at 0845 GMT.

The firm said it remained confident that “there are no significant implications for the risk profile of the group’s assets or the viability of the group’s model.”

Ocado has only a 1 percent share of Britain’s grocery market. However its 9.7 billion pound ($12.6 billion) stock market valuation has been driven by the technology side of its business - providing international retailers with the infrastructure and software to develop their own online grocery businesses to compete with the likes of Amazon.

Ocado said an assessment of the reasons for the fire had been carried out by the company, its insurers, FM Global, and the local Hampshire Fire Service.

It concluded an electrical fault at one of the first generation battery charging units at the edge of the ambient

storage grid at the Andover plant caused the plastic lid on the top of a grocery-carrying robot to catch light.

Ocado said it has taken action intended to eliminate the risk of such an event occurring again. It has introduced additional localised smoke detectors and removed the plastic lid on its robots.

It said the lid serves no practical purpose and its

removal has not impacted the efficiency of the robots in any way.

Ocado also intends to add heat sensors in the ambient product storage grid which are in addition to the existing sensors in the chilled storage grid.

The firm also noted that the first generation battery charging units were only used at the Andover customer fulfilment centre (CFC) and not at its other three CFCs.

The firm has comprehensive insurance cover for the Andover complex and as well as the lost stock and equipment, and for business interruption losses.

The details were included in a circular to shareholders Ocado published in relation to its 1.5 billion pound joint venture deal with Marks & Spencer.

Prior to the blaze the Andover centre was providing about 10 percent of Ocado’s UK capacity. The company warned in February of a reduction in sales growth until it increases capacity elsewhere.

The Andover plant, which was processing 30,000 orders a week, is Ocado’s third automated warehouse and has been instrumental in it winning major deals to sell its technology to U.S. group Kroger, France’s Casino, Canada’s Sobeys and Sweden’s ICA.

Ocado shareholders will vote on the M&S deal at a general meeting on May 20.

($1 = 0.7730 pounds)

Reporting by James Davey; editing by Kate Holton/Keith Weir