energy

Auction for failed UK energy supplier Bulb draws single bid


The British government is scrambling to salvage a deal for collapsed energy supplier Bulb after attempts to auction off the company attracted just a single bid — from its one-time rival Octopus Energy.

The government has been trying to sell Bulb since it collapsed last November after natural gas prices soared and it failed to raise new money. The government stepped in to ensure that its 1.6mn customers would still receive energy and aimed to sell the business by the end of July.

Final bids were due last month and only Octopus, the fifth-biggest UK gas and electricity supplier, tabled an offer after the government “hardballed” suppliers, according to three sources close to the discussions.

Centrica, the largest UK supplier, had been tipped to lodge a bid but pulled out of the competition last month. Masdar, an Abu Dhabi-based company that had been in discussions with the government, declined to submit a bid but may provide financing for Octopus, according to two sources close to the process. A government official confirmed that only one bid had been received.

The government is now in a weakened position as it attempts to agree terms for a sale of Bulb, which is burning through taxpayer cash and losing staff. The company is already expected to cost the government at least £2.2bn, marking the biggest state bailout since Royal Bank of Scotland in 2008.

A ministerial meeting was held last Friday to discuss options for Bulb, which could still include dividing up its customers between other suppliers or handing incentives to Octopus to take them on, said two people close to the sales process.

The terms of Octopus’s offer are not yet clear.

The sources added that the government could decline Octopus’s bid, although it is keen to sell the business as it is haemorrhaging cash as a result of government rules that do not allow it to hedge — or buy in advance the energy it sells. That has left it exposed to volatile gas prices, which have soared since Russia invaded Ukraine.

The Bulb brand has also been tarnished and there is a risk that customers will leave, industry experts said.

The government is “selling a semi-derelict building in a ropey area and they are trying to do the estate agent’s job of making it out to be a des res”, one person close to the sales process said. “This is a market that is a disaster and this is a company that is a disaster within that market.”

One person close to Bulb said they were still optimistic that more bids could come out of the woodwork. Handing the customers to a host of other suppliers could also cause confusion this winter when average energy bills are expected to surge by almost 65 per cent to £3,200 a year, sources close to the sales process said.

Bulb was the biggest supplier out of 31 companies that have failed since the middle of last year as a result of poor capitalisation and inadequate hedging that left them unable to manage the sharp rise in gas prices.

Although millions of customers from other collapsed suppliers have been transferred to solvent rivals, Bulb was considered too large so the costs are currently being borne by taxpayers. All households are already paying £94 a year to cover the cost of failed suppliers but this is expected to rise to £164 a year once the price of Bulb’s administration is eventually spread across customer energy bills, according to analysis by Citizens Advice.

The government and regulator Ofgem’s handling of the crisis has been strongly criticised after founders and shareholders have been allowed to walk away without penalty while households across the country bore the “brunt” of the supplier failures, according to a National Audit Office report.

Hayden Wood, chief executive and founder of Bulb, has received the same £250,000 salary as before the company’s rescue until he steps down at the end of this month. Wood and his co-founder Amit Gudka both earned more than £8mn from a share sale in 2018.

Octopus, Bulb, Masdar and Teneo, the administrator, declined to comment.

Additional reporting by David Sheppard



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