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Octopus Energy has made a last-minute entry in a three-way race to buy collapsed electricity and gas supplier Bulb, according to two people close to the deal.
Centrica, the owner of British Gas, and Masdar, an Abu Dhabi-based energy company, are also in talks with the UK government as it tries to secure bids ahead of a closing deadline on June 30, say people familiar with the discussions.
Ovo Energy is weighing a last-minute offer after making a bid in November, which it later withdrew, although it is not part of the formal process, which is being run by financial advisers Lazard.
Bulb collapsed last November after natural gas prices soared and it failed to raise new money, leaving the government to step in to ensure its 1.6mn households still received energy.
While bigger rivals took on the customers of about 30 smaller failed rivals, regulator Ofgem considered transfers would be too difficult to carry out at Bulb.
Ministers are now keen to offload Bulb as taxpayers have spent hundreds of millions of pounds propping it up in the past seven months.
The government has set aside up to £2.2bn to keep the business running over the coming months, making it the biggest state bailout since Royal Bank of Scotland in 2008.
To offload the energy provider this summer, the government is expected to offer bidders a clean balance sheet with no debt as well as a generous financial dowry to secure a deal, say two people close to the negotiations.
However, the government has not set out how much money it would be prepared to inject in the deal and is instead waiting to see what the three bidders offer, according to officials.
Wild fluctuations in the price of gas, which has dropped in recent weeks, have made it harder to predict how much support Bulb will need to continue as a going concern.
“Bulb is eating cash and the government is desperate to do a deal and the buyers know that,” said one person close to the government.
Potential buyers also point out that Bulb’s brand has been damaged, with consumers likely to seek better deals at rivals.
In addition, Ofgem has already handed companies taking over the customers of 29 smaller failed suppliers £1.84bn, with the cost loaded on to household bills.
Any sale would differ from previous customer transfers because the buyer would take on the entire company, although it remains unclear how outstanding creditors will be handled. This includes Sequoia Economic Infrastructure Income Fund, which is owed about £50mn
Bulb, which never made a profit, owed £254mn to customers who had paid for their electricity and gas in advance when it collapsed last November. It recorded a loss of £59mn at the time of its administration.
Hayden Wood, Bulb’s co-founder and chief executive who had been working on a government advisory board before its collapse, continues to be paid a £250,000 salary, while staff have been handed retention bonuses.
Wood and his co-founder Amit Gudka both earned more than £8mn from a share sale in 2018.
Octopus Energy, Ovo Energy, Centrica, Masdar, Sequoia, Lazard and Bulb declined to comment.
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