Octopus Energy is near clinching a takeover of stricken rival Bulb in a deal that can crystallise as much as £4bn of losses for British taxpayers.
Sky News has learnt that ministers on the Treasury and the Department for Business, Energy and Industrial Strategy (BEIS) have been informed {that a} sale of Bulb’s 1.6m-strong buyer base is now the optimum final result.
Industry sources mentioned this weekend that the federal government and Bulb’s particular administrator, Teneo Financial Advisory, had been getting ready to signal a binding settlement to promote the corporate to Octopus Energy by the top of this month.
The transaction, which is alleged to have the backing of trade regulator Ofgem, could be focused for completion in December, in line with a type of insiders.
If accomplished, it could finish almost a 12 months of uncertainty over the destiny of Bulb, Britain’s seventh-largest residential energy provider on the level of its collapse.
The authorities has already been pressured to spend billions of kilos shopping for fuel to produce Bulb prospects as a result of the corporate didn’t hedge its purchases with the intention to repair its price base.
Wholesale fuel costs have soared during the last 12 months, with Vladimir Putin’s invasion of Ukraine having a very pronounced impression on international vitality markets.
Sky News revealed throughout the summer season that Octopus Energy, run by Greg Jackson, was in search of a £1bn taxpayer funding package deal to seal the takeover of Bulb.
That would enable the client to safe adequate ahead provides of fuel to steer the corporate via the winter months.
Octopus intends to repay the roughly-£1bn authorities funding over a interval lasting various months, in line with sources near the state of affairs.
An vitality trade knowledgeable mentioned on Saturday: “Under public ownership, Bulb has been unhedged and will have cost the taxpayer billions.
“Fixing its buying and selling in an orderly approach will take a number of months to keep away from shifting the market and making issues much more costly for everybody.”
Insiders said the sale to Octopus would deliver the best achievable financial outcome for taxpayers, while also giving certainty to Bulb customers.
Mr Jackson’s company is expected to pay between £100m and £200m to take on Bulb’s customer base, with a separate profit-share agreement giving the government a return for several years on earnings from Bulb customers.
Kwasi Kwarteng, the chancellor, and Jacob Rees-Mogg, business secretary, are likely to be asked to sign off the deal in the next three weeks.
Bulb’s collapse in November 2021 was the most significant among dozens of supplier failures, with Ofgem, the industry regulator, facing heavy criticism for its approach to licensing new entrants to the market.
The independent Office for Budget Responsibility said in March that the bailout of Bulb would require more than £2bn to cover its operating losses, although that figure is since understood to have soared.
Nevertheless, it is still dwarfed by the cost of subsidising household and business energy bills for the next six months, which the Centre for Economics and Business Research, a think-tank, recently estimated at in the region of £30bn.
Liz Truss’s administration is seeking long-term gas supply deals with foreign states but has been warned by Treasury officials that it faces paying a “safety premium” because of elevated current prices, reports said this week.
In Bulb’s case, the profit-share agreement, which would last several years, would enable the government to recoup a small part of the cost to taxpayers.
Some sector executives have estimated that Bulb is losing as much as £5m every day because of its failure to hedge forward gas purchases.
Octopus Energy’s swoop on its competitor in would take its customer base to approximately 5m British households and cement its status as one of the most important utilities operating in the UK.
Founded by Mr Jackson, it has raised more than £1bn from a swathe of blue-chip investors.
It recently completed a $550m fundraising, with $325m committed to support the growth of its UK and international energy technology platform, Kraken.
The accountancy firm KPMG is advising Octopus Energy on the talks about a takeover of Bulb.
Octopus Energy declined to comment on Saturday, while a government spokesman said: “The Special Administrator of Bulb is required by legislation to maintain prices as little as attainable.
“We continue to engage closely with them to ensure maximum value for money for taxpayers.”
Source: information.sky.com”