Energy firm Bulb on brink of collapse amid government talks with creditor

Published

2 years ago

November 22, 2021

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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.

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.

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.

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.”

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.

Business

Post Office spin doctor said he was in a ‘corporate cover up’ – years before apology issued to Horizon victims

Published

1 hour ago

May 14, 2024

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Post Office spin doctor said he was in a 'corporate cover up' - years before apology issued to Horizon victims

A former Post Office communications director told fellow employees he was at “the heart of a corporate cover-up”, at the same time as sub-postmaster prosecutions were taking place and years before an apology was made to victims.

The inquiry into faulty Horizon software, and the associated prosecution of 700 sub-postmasters for theft and false accounting, is taking place to establish a clear account of the implementation and failure of the Fujitsu created software.

As well as the wrongful convictions many more sub-postmasters racked up large debts, lost homes, livelihoods, and reputations as they borrowed heavily to plug Horizon’s incorrectly generated shortfalls in their Post Office branches.

The issue has received renewed attention after the January airing of ITV drama Mr Bates v The Post Office.

An email presented to the inquiry on Tuesday showed the Post Office’s former group communications and corporate affairs director Mark Davies believed he was part of a cover-up and conspiracy.

“It’s fascinating to be part of a conspiracy. To be at the heart of a corporate cover-up,” Mr Davies said in an email to Post Office communications staff, a legal team member, and another director.

At the time the email was sent, in January 2015, the Post Office was prosecuting sub-postmasters using data from Horizon.

It wasn’t until 2019 that an apology was issued to sub-postmasters as part of their successful High Court challenge of Horizon and related prosecutions.

‘Blaming the journalists’

Despite this, it was known at the time that branch accounts could be accessed and altered remotely by the maker Fujitsu or by the Post Office IT helpdesk.

Mr Davies, appearing at the inquiry, said he thought this remote access was only used once when asked why one of his employees said the idea of remote access was “totally loony” and a “conspiracy theory”.

Emails sent by him were consistently “blaming the journalists” for asking questions about Horizon failings, a barrister for the inquiry Julian Blake said.

It was a characterisation accepted by Mr Davies, who said: “With the benefit of hindsight, they absolutely, some of [the emails] look ludicrous, I agree.”

A report into Horizon flaws conducted by forensic accountants Second Sight commissioned by Post Office had identified bugs but Mr Davies and his team viewed its authors as lacking independence.

Second Sight were “colluding” with sub-postmasters, Mr Davies said in an email to the Post Office’s then chief executive Paula Vennells.

Various emails shown to Mr Davies on Tuesday described journalists and Second Sight as “attackers” and media reports as “sloppy”.

Additional reporting by Evan Dale.

Business

Labour leader reassures union bosses in row over workers’ rights plans – but it’s not over yet

Published

1 hour ago

May 14, 2024

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Labour leader reassures union bosses in row over workers' rights plans – but it's not over yet

Sir Keir Starmer has moved to reassure trade union bosses about his party’s plans to strengthen workers’ rights, after he was accused of watering them down.

The party has promised a radical shake-up for workers if they win office – including banning zero hours contracts, employment rights from day one, and ending the practice of “fire and rehire”.

The new deal for working people was billed as the biggest advance in workers’ rights for decades when first unveiled by Angela Rayner in 2021.

The party made some changes last summer, but union bosses claimed a new document circulated to them last week was an attempt to row back further on these commitments.

Sharon Graham, the general secretary of the Unite union, called the new document – which has not been made public – a “betrayal” and “unrecognisable” from the original plans.

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With tensions running high, bosses of trade unions affiliated to Labour met with Sir Keir, deputy leader Angela Rayner and shadow chancellor Rachel Reeves and agreed to scrap the new draft.

In a joint statement they said: “Labour and the affiliated unions had a constructive discussion today. Together we have reiterated Labour’s full commitment to the new deal for working people as agreed in July.

“We will continue to work together at pace on how a Labour government would implement it in legislation.”

Union sources who feared the Labour leadership were bowing to pressure from big business ahead of the election, claimed the party had been talked into a retreat.

After three hours at Labour’s south London headquarters – although it is understood Sir Keir was not there for the whole meeting – Ms Graham said Labour’s position had changed.

She told Sky News: “It was constructive. I think it was really important to have the workers’ voices heard in the meeting itself, because we wanted to reaffirm our position that the New Deal for Working People must be implemented.

“We’ve got a really good position where that has been recommitted to. We’re meeting again in three weeks’ time after we put some information together to discuss a new document. It was a crunch meeting. It was a red line meeting. But I think we’ve got there.” She added: “I think it [Labour’s position] has changed”.

The new deal had originally come with a promise that an “employment rights bill” to legislate for it would be introduced within 100 days of winning power, although this is now seen as unrealistic.

Some changes were agreed last summer at the national policy forum, a gathering of party officials, MPs and union leaders, which the Unite boss claimed was an attempt to “curry favour with big business”.

The Financial Times reported last week that a new draft included even more business-friendly language on fire and rehire – essentially sacking workers and hiring them back on less favourable terms.

The paper reported that it contained a line about the importance of allowing businesses to “restructure to remain viable and preserve their workforce when there is genuinely no alternative”.

It was also claimed that zero hours contracts would not be completely banned because some people choose to have them – but give workers rights to a contract reflecting their usual work pattern.

Labour has also promised to bring in fair pay agreements for social care workers, which a right-wing research group Policy Exchange claimed could add £225 to the average council tax bill.

Sir Keir’s party has already pruned back their 2021 plans to invest £28bn in green energy, after a protracted battle within the party.

Union leaders will be holding Sir Keir and his shadow chancellors’ feet to the fire to ensure another of his party’s more radical dividing lines does not go the same way, under the glare of an election campaign.

But despite the smiles today, this is a row delayed, with more wrangling to be done.

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Interest rate cut prospects threatened by pace of wage growth

Published

13 hours ago

May 14, 2024

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Interest rate cut prospects threatened by pace of wage growth

The prospects for an interest rate cut next month have not been helped by the latest wage growth figures which have come in higher than expected.

Data from the Office for National Statistics (ONS) showed regular wage growth, excluding the effects of bonuses, was 6% higher over the three months to March compared with a year earlier.

That was no lower than the sum reported the previous month.

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The ONS reported that total pay was also static, at an upwardly revised 5.7% for the period.

Economists had been expecting declines in both readings.

The data also showed a rise in the unemployment rate from 4.2% to 4.3%.

ONS director of economic statistics Liz McKeown said: “We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods.

“At the same time, the steady decline in the number of job vacancies has continued for a twenty-second consecutive month, although numbers remain above pre-pandemic levels.

“With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of COVID-19.

“Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years.”

The figures were released against a backdrop of intense speculation on the timing of a Bank of England interest rate cut.

The Bank, which last week signalled further progress in efforts to bring down inflation, has held the rate at 5.25% since last summer.

The rate-setting committee wants to see a “sustainable” return to its 2% inflation target before imposing the first cut.

Wage growth has been among the stubborn factors of concern.

The Bank feels that the pace, currently around double the rate of price growth, risks fuelling a second round of inflation because more discretionary spending could result in higher prices.

Its chief economist Huw Pill later said in a speech that the pay growth rates remain “quite well above” what would be consistent for meeting the target sustainably.

Inflation figures out next week, which cover the month of April, are tipped to show a sharp easing in the main consumer prices index (CPI) measure, largely due to plunging energy bills.

A figure just above 2% is forecast by economists.

The Bank has resisted the temptation to cut borrowing costs as it believes that figure could shift back up towards 3% in the second half of the year.

Financial markets saw a 53% chance of a rate cut on 20 June – the monetary policy committee’s (MPC’s) next meeting.

While restrictive monetary policy was largely blamed for the UK’s recession during the second half of 2023, the economy has since performed better than expected.

That complicates the picture for the MPC.

Separate ONS data last week showed a 0.6% rise in gross domestic product during the first quarter of the year.

As with the wage figures, the Bank will be anxious that a growth spurt risks fanning the flames of inflation.

Policymakers have said their decisions will be data dependent.

There is a further employment report due from the ONS ahead of 20 June and two sets of inflation figures between today and that date.

Yael Selfin, chief economist at KPMG UK, said of the rate cut prospects: “Next month will be key in terms of pay data as it will provide initial evidence of the impact of April’s National Living Wage increase.

“If it comes in line with our expectations of only a modest boost, and sufficient to keep annual pay growth on a downward trajectory, this could ignite more dovish sentiment on the MPC ahead of their June vote.”

Rob Wood, chief UK economist at Pantheon Macroeconomics, believed the Bank would back a rate cut at its next meeting.

“Much as we have concerns over the jobs data, the labour market keeps gradually easing, and they give the MPC a hook to hang a June rate cut on,” he wrote.