Battle deepens over sale of energy supplier Bulb to Octopus

Centrica was encouraged to make an offer for collapsed energy supplier Bulb and told that UK government support was on offer, according to emails revealed as part of a deepening battle over the sale of the company, which has received the biggest state bailout since the financial crisis.

ScottishPower, British Gas owner Centrica and Eon were told in the High Court on Tuesday that a judicial review they had brought to challenge the sale would be heard early next year, meaning the planned transfer of Bulb to Octopus Energy on December 20 will be overshadowed by the threat of legal action.

The delay to the court hearing was needed to allow sufficient time for disclosure of key government documents on the terms of the sale, the three companies argued.

However, Octopus and the administrators to Bulb had argued that any delay could raise the cost to taxpayers as the energy to supply Bulb’s 1.5mn customers is unhedged.

The issue of government backing is crucial because the three companies have argued in court that state support, known as the government-backed adjustment mechanism, was not on offer during the sales process.

Fast-growing Octopus is expected to pay between £100mn and £200mn to buy Bulb, with an undisclosed package of state support to buy the energy needed for the company’s 1.5mn customers.

But the deal has become increasingly contentious, with the government declining to reveal the terms of the sale and the legal battle pitting the old guard against one of the most prominent “challenger” energy companies.

Lazard, the investment bank handling the sale for the government, told Centrica in emails on August 1, seen by the Financial Times, that “the government has been open to discussions relating to required support”. 

Although the bidding process had formally closed with Octopus emerging as the sole suitor, Lazard invited Chris O’Shea, Centrica’s chief executive, to participate.

“Whilst we are well past binding bid dates, if you have a proposition you would like to discuss, please do send it in writing,” Lazard said in the email, which also included an offer to meet O’Shea in person.

Centrica said Lazard had declined to reveal the terms of the deal despite requirements under state aid rules when substantial amounts of government funding are involved. It also said that second-stage process bid documents had made it clear that there was no aid on offer.

“When we saw media reports of Octopus receiving substantial financial support from the government, we wrote to the bank leading the sale, Lazard, to ask them what that support consisted of as we would expect it to be made known to all parties to allow a fair and transparent process,” Centrica said. “Lazard declined to disclose that information, much to our disappointment.”

The cost of Bulb’s rescue has soared, with taxpayers and customers on the hook. The Office for Budget Responsibility has estimated that the bill will stretch to £6.5bn, equivalent to more than £200 per household.

On Tuesday Citizens Advice also wrote to Grant Shapps, the secretary of state for business, energy and industrial strategy, to say it was concerned there was not “sufficient information [on the Bulb deal] to assess the potential impact and hence ensure consumer interests are properly safeguarded”.

The sale to Octopus would create a challenger to British Gas and Eon, with the merged company becoming one of the biggest retail energy suppliers in the UK.