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UK's Bulb to go into administration as funding talks collapse

Stock MarketsNov 22, 2021 17:10
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© Reuters.

By Susanna Twidale

(Reuters) -Britain's Bulb expects to appoint administrators shortly, it said on Monday, as it became the biggest UK energy supplier to be driven into financial difficulty by a surge in wholesale gas and electricity prices.

More than 20 energy suppliers have collapsed since the beginning of September because the regulator Ofgem's price cap prevented them passing on rising costs to customers.

London-based Bulb, which has around 1,000 employees and more than 1.7 million customers, or around 5%-6% of the market, had been in talks with multiple parties but failed to secure funding.

"The rising energy crisis ... has concerned investors who can’t go ahead while wholesale prices are so high and the price cap - designed to protect customers - currently means suppliers provide energy at a significant loss," Bulb said in a statement on its website.

Analysts have said the difference between what companies can charge a customer under the cap and the current cost of supplying them with power from the wholesale markets is around 400 pounds ($538) over a year.

Britain's domestic price cap https://www.reuters.com/business/energy/two-more-british-energy-suppliers-cease-trading-2021-10-13 rose 12%-13% from Oct. 1 but wholesale prices have risen far higher since that cap was set in August.

Bulb said its international businesses in France, Spain and Texas were separate from the UK business and would continue to trade.

Britain's government said on Monday it has agreed with Ofgem that the regulator could use its Special Administrator Regime (SAR) to ensure customers' supplies will not be disrupted and credit balances protected.

The government could also provide grants or loans to keep the company running while a solution is found.

"The level of debt held by the company could mean it is effectively part-nationalised for a period, so the taxpayer is getting involved in the currently unrewarding business of energy supply," said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown (LON:HRGV).

A spokesman for Prime Minister Boris Johnson said it was too early to say whether the company could remain a going concern.

"We will obviously seek to appoint the administrators who will effectively run it and provide energy through that system, but at this stage it is too early to say what the future of that provider will be going forward," the spokesman said.

The SAR scheme was set up for when an energy company that goes bust is too big for Ofgem to be able to find a new home for its customers using its usual processes.

The other suppliers to collapse this year, with a total of around 2 million customers combined, had fewer customers than Bulb.

($1 = 0.7439 pounds)

UK's Bulb to go into administration as funding talks collapse
 

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