Octopus Energy’s takeover of Bulb Energy will not be approved today, and faces the prospect of further delays after rival suppliers launched judicial review proceedings.
Big Six energy firms including British Gas owner Centrica, EON and Scottish Power lodged their calls for a judicial review this morning – a court process that looks at the legality of a Government decision.
The suppliers are concerned about the perceived lack of transparency in the deal and the use of public funds as part of Bulb’s buyout.
This follows a three-week delay to Bulb’s approval process, after the rival firms successfully argued they needed more time to assess potential issues with the deal.
Octopus had been hoping the courts would green-light its deal for Bulb today, but there is now a growing possibility the protracted saga could drag on for weeks and months.
Bulb has already spent over a year in de-facto nationalisation, as the most high-profile victim of the energy crisis, collapsing amid soaring wholesale costs and exposed by its insufficient hedging strategy.
The UK’s seventh biggest supplier, home to 1.6m customers, has been propped up with taxpayer funds since its fall from grace last November.
The judge will decide tomorrow if he will set a timeline for Bulb’s takeover via the Energy Transfer Scheme, the first of its kind in the industry.
This would run parallel to any judicial process brought by rival firms.
Bulb uncertainty risks driving up prices
The costs involved in Bulb’s inglorious stint in special administration have risen to £6.5bn, the biggest state bailout since RBS in 2008, according to the latest figures from the Office for Budget Responsibility.
Further delays will increase uncertainty over its future and could see costs for overseeing Bulb climb to eye-watering heights this winter.
An EON spokesperson said: “We can confirm we have issued judicial review proceedings in order to challenge the decision by the secretary of state to approve the proposed takeover of Bulb energy and its customers by Octopus and the decision to provide substantial government funding to allow that to take place.
City A.M. understands Centrica is not opposed in principle to the sale of Bulb to Octopus with public funds, but is concerned over the lack of available details regarding its buyout.
Scottish Power declined to comment, but its chief executive Keith Anderson has previously called for the auction process to be re-opened.
The terms of the deal are yet to be published – but City A.M. understands Octopus has agreed to pay the Government between £100-200m to take over Bulb.
The arrangement will also include a profit-share arrangement, ringfencing of Bulb customers and as much as £1bn in hedging support, however the exact terms remain frustratingly opaque.
The acquisition will create the UK’s third largest energy supplier behind British Gas and E.ON, with 4.9 million customers
Octopus was highly critical of the latest developments, criticising rival suppliers for undertaking expensive legal action rather than making their own bids.
A spokesperson said: “It’s now clear that other companies had many opportunities to bid, knew they could propose hedging support, and were invited to counter bid against Octopus. Instead of doing so, they waited until a deal was announced and then launched expensive legal action which could cost taxpayers millions, even billions.
“We will continue to work hard to get this resolved as fast as possible, bringing stability for bulb customers and staff and ending the huge financial exposure for taxpayers.”