Privately-owned Octopus Energy Ltd. is nearing a deal to acquire failed electricity supplier Bulb Energy Ltd., and has asked the government for a £1 billion funding package, Sky News reported.
(Bloomberg) — Privately-owned Octopus Energy Ltd. is nearing a deal to acquire failed electricity supplier Bulb Energy Ltd., and has asked the government for a £1 billion funding package, Sky News reported.
Octopus is set to pay £100 million ($121.8 million) to £200 million to take on Bulb’s 1.6 million customers, Sky said. Any deal would also include a “significant” profit-share agreement to give the government a return for “several years” on earnings from Bulb customers.
Octopus is seeking the funding package as Bulb does not hedge its purchases of wholesale gas, leaving it exposed to soaring prices. The £1 billion would be repaid by the company in full, Sky reported, citing a source close to the talks.
A spokesperson for Octopus Energy said the company does not comment on rumours and speculation.
The UK government has been seeking a buyer for Bulb since it went bust last year — the biggest of almost 30 British companies that failed due to surging gas prices. Firms including Centrica Plc and Abu Dhabi’s Masdar dropped out of the race to buy Bulb, leaving Octopus as the sole bidder.
An agreement between Octopus and the government to take over Bulb could be reached within weeks, Sky reported, though the complexity of the deal could yet prevent it from happening. The repayment of the £1 billion package, along with the sale price and share of profits, could mean that Bulb’s failure costs taxpayers less than £2 billion, Sky said.
Oil and gas prices have surged this year, in part due to Russia’s invasion of Ukraine. Britain’s gas market is linked to Europe through its network of pipelines to the continent and Norway, and summer prices are already four times higher than usual.
High energy costs are among the biggest challenges facing Boris Johnson’s successor, either Liz Truss or Rishi Sunak, as soon as they take over as new Prime Minister in September. Bills are set to soar weeks later when a price cap is raised by more than 60%, taking the increase this year to about 150%.
Read More: UK Energy Bills Set to Peak Above £500 as Russia Cuts Gas
(Updates with company comment in fourth paragraph)