British Gas owner Centrica has pulled out of the auction for failed energy provider Bulb, leaving the UK government struggling to achieve a competitive bidding process, the Financial Times reported, citing people close to the sale process.
Bulb collapsed last November after natural gas prices soared and it failed to raise new money. The government stepped in to ensure its 1.6 million customers still received energy and had planned to sell the business by the end of July.
Centrica’s withdrawal has left just two confirmed potential bidders – Octopus Energy, the fifth biggest supplier, and Masdar, an energy company from Abu Dhabi.
One option was that the two team up, with Masdar providing the cash, and Octopus, which has never made a profit, taking on Bulb’s customers, said one of the people.
Closing bids are due this Thursday in a sales process that is being handled by Lazards.
Bulb’s insolvency is expected to cost the government at least £2.2bn, making it the biggest state bailout since Royal Bank of Scotland in 2008. Meanwhile, the cost to consumers continues to mount, with Bulb making an £886m loss in the six months since nationalisation, according to reports from administrators.
Creditors, many of them small businesses, are owed £585m and are unlikely to be paid. However, Infrastructure fund Sequoia, backed by Simple, Bulb’s parent company, is guaranteed to receive its original £55m investment and has earned a £10m dividend since November.
Interpath, the administrator to Simple, has charged £3.7m, or £800 an hour for 4,646 hours, since Bulb collapsed, the newspaper reported. A further £2.5m in legal fees, mostly to law firm Freshfields, has been partially paid and Lazards, which is handling the sale, is expected to receive £1.5m.
Teneo, which is running the administration process, is reportedly expected to receive tens of millions of pounds.
The National Audit Office has criticised energy regulator Ofgem’s handling of the crisis, which has seen 30 suppliers including Bulb collapse in the past year. Customers of all suppliers will pay at least £96 a year, some of which has already been added to energy bills, to cover the cost of the failed businesses.
This excludes the cost of bailing out Bulb, which is currently paid by taxpayers but will eventually be added to customer bills.
Bulb chief executive and founder Hayden Wood, is still being paid the same £250,000 salary he received before the company’s rescue, and the company has employed Simon Stacey, a former N-Power executive, as finance director on an interim basis. Centrica, Octopus, Masdar, Lazard and Bulb declined to comment.
