Energy firm Bulb on brink of collapse amid government talks with creditor
Bulb, Britain’s seventh-biggest energy supplier, is facing collapse within days amid eleventh-hour talks between the government and the company’s biggest secured creditor.
Sky News has learnt that the company, which launched in 2015 and has amassed 1.7 million customers, is expected to appoint insolvency practitioners imminently.
The precise timing remained unclear on Monday because of the complexity of the looming administration process and ongoing talks between the government and Sequoia Economic Infrastructure Income Fund, which has an outstanding secured loan of roughly £50m to Bulb’s parent company Simple Energy, according to industry sources.
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Sequoia is said to have demanded the repayment of its loan prior to Bulb being placed into administration, they added.
A range of government departments and Ofgem, the industry regulator, began accelerating contingency plans for the collapse of Bulb last month.
Bulb executives and their advisors have been working on an emergency sale of the company, with the likes of Octopus Energy, Ovo Energy, Shell Energy Retail and Centrica, the owner of British Gas, expressing varying degrees of interest.
The ‘challenger’ energy company has also made a series of requests to the government in the last few weeks to help it structure a rescue support package, but these have been rejected, according to another industry executive.
Talks about a solvent rescue deal have also faded, they said.
Bulb’s demise would mark by far the biggest insolvency of the crisis engulfing the sector.
Bulb would be the biggest company to collapse as a result of the crisis engulfing the sector
Its customer base is nearly as large in aggregate as the roughly-20 suppliers which have collapsed during the last three months.
About 2 million households have seen their energy provider succumb to soaring wholesale prices since the start of September.
Bulb’s demise may place at long-term risk the jobs of the roughly-1000 people who work for the company, which was launched in 2015 by Amit Gudka and Hayden Wood, although the bulk of its workforce will not be at risk in the short-term as they will be required to continue in their roles during the special administration.
A Bulb spokesperson said: “We’ve decided to support Bulb being placed into special administration, which means it will continue to operate with no interruption of service or supply to members.
“If you’re a Bulb member, please don’t worry as your energy supply is secure and all credit balances are protected.”
Significantly, the insolvency of Bulb will entail the first use of a resolution process called a Special Administration Regime (SAR), which would guarantee funding for Bulb from the Treasury while administrators seek a restructuring deal, buyer or transfer of the customer base.
That would mean hundreds of millions of pounds of taxpayers’ money being used to fund Bulb’s obligations in the wholesale energy markets to ensure that it can continue operating.
Sky News revealed in September that Ofgem had lined up Teneo Restructuring to oversee the insolvency of a large energy supplier, although it was unclear whether it or AlixPartners, Bulb’s restructuring advisor, would handle the administration.
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The largest of the suppliers to collapse during the current crisis, Avro Energy, had about 580,000 customers.
Bulb has been regarded for some time as being too large to go through Ofgem’s Supplier of Last Resort (SOLR) process – the method by which all of the UK’s other collapsed energy companies have been resolved in recent months.
In the SOLR process, a company’s operating licence is removed and bids are sought from other industry players for its customer base, with losses incurred by the acquirers of those customers then recouped through an industry levy.
Under the SAR, the administrator has a legal duty to consider the interest of customers, unlike a conventional insolvency process where the primary duty is to creditors.
In a long-established statement on its website about SAR, Ofgem said a memorandum of understanding had been drawn up between itself, the Treasury and BEIS, adding: “Provisions for this administration scheme for energy suppliers were included in the 2011 Energy Act.
“It has never been used before because a large energy supplier has never been insolvent.”
A government spokesman did not immediately comment on Monday but said three weeks ago: “Ofgem – as the expert regulator – is monitoring the situation across the energy market for the continued impacts on high worldwide wholesale gas prices.
“We have put in place the powers and robust processes to ensure customers do not experience any disruption to their energy supply and that costs are minimised if a supplier should exit the market.”
About two million customers have seen their energy supplier collapse since the start of September
The regulator added in late October: “There has been an unprecedented increase in global gas prices which is putting financial pressure on suppliers.
“We know this is a worrying time for many people and our number one priority is protecting customers.
“In the event a supplier fails, Ofgem and government have robust processes in place to ensure customers’ electricity and gas supply continue and domestic customers’ credit balances are protected.”
The ongoing crisis in the energy sector has sparked demands from some executives for a removal of the industry price cap or a bailout fund to help with the rescue of smaller suppliers.
Kwasi Kwarteng, the business secretary, has rejected both demands.
Last week, Ofgem said it would seek to adjust the industry price cap more frequently as a result of recent challenges, meaning British consumers are expected to face even higher bills in the years ahead.
The collapse of one of the biggest challengers to the big players – the largest of which are British Gas, E.ON Next, EDF Energy, Scottish Power and Ovo Energy,, which acquired SSE’s retail business – would be a blow to hopes of a more varied and competitive market.
Octopus Energy, which like Bulb supplies 100% renewable energy, has established itself as an independent, well-funded challenger and now boasts 2.5 million customers across more than 4 million accounts.
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
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The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
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