Octopus Energy Explores Offer To Wrap Tentacles Around Bulb Amid Industry Crisis | Economic news
Octopus Energy plans to take control of Bulb, its competitor brand, amid the crisis in the UK residential energy market that has sparked a series of business losses.
Sky News has learned that Octopus Energy is among the parties requesting access to a data room set up by Bulb’s financial advisers in an attempt to secure new funding in the coming weeks.
Over the weekend, it was unclear whether Octopus Energy’s interest would extend to mounting a formal bid to acquire Bulb, which has around 1.7 million customers, or whether it was simply operating a opportunity to learn more about the financial situation of a competitor.
Octopus is considered one of the best managed and most financially sound companies in the industry.
If it bought Bulb, Octopus Energy would become a serious competitor in terms of the number of UK residential customers for the biggest players in the market.
Adding Bulb to its own customer base of over two million households would create a giant supplier for just under four million UK households.
This would mean that Octopus Energy was still the sixth player in the market, but it would be a much closer challenger in terms of size from Ovo Energy and Scottish Power.
Lazard, who advises Bulb, would look in a few weeks to show interest in financial investors to inject capital into the company, although the timing of any strategic bidder is likely to be more flexible, according to an executive of one. rival electricity supplier. .
Nonetheless, industry sources said formidable obstacles remained to any attempt by Octopus Energy to acquire Bulb, including the requirement to fund industry-wide working capital and renewable energy programs. , in addition to the current financial pressures affecting the market.
Details of the structure or possible value of any deal are not believed to have been determined yet, while the names of any other bidder or potential investor were unclear on Saturday.
Despite media speculation, Bulb is not in the same imminent financial danger as many smaller market players and has acted to reassure customers of its status in recent days.
In the past fifteen weeks, half a dozen suppliers have gone out of business, including Avro Energy, Green, PFP Energy and Utility Point, affecting a total of nearly 1.5 million homes.
Industry regulator Ofgem is expected to reallocate around 800,000 Avro and Green customers to larger suppliers in the coming days under a mechanism known as a supplier of last resort (SOLR).
Sources said Ofgem is also in discussions with restructuring firms to act as a special administrator – effectively nationalizing temporarily – any firm that cannot be resolved through the SOLR mechanism.
A spokesperson for the regulator said: “Ofgem and the government are preparing for a wide range of scenarios and have long-standing contingency plans in place for any situation as needed. These processes include speaking to a variety of organizations. “
Combined with the panic buying that has plagued motorists in recent days and the supply chain crises that have left retail managers on the lookout for the reduced availability of many items as Christmas approaches, the crisis in l he energy supply posed a huge headache for the government.
Ministers have nonetheless withdrawn in recent days from the idea of ââproviding multibillion-pound financing to subsidize the transfer of customers from failing suppliers.
The energy price cap, which will rise to Â£ 1,309 for prepaid customers in early October, is now expected to be significantly increased again when it is next revised in spring 2022.
Octopus Energy was founded just over five years ago by Greg Jackson, who found himself frustrated with the pricing tactics of the big existing players.
The company, which supplies electricity and gas entirely from renewable sources to more than two million UK homes, has also established operations in Germany and the United States.
Its energy technology – or entech – platform, Kraken, uses advanced data and machine learning to support more than 17 million customer accounts worldwide, and has set a goal of 100 million accounts on the platform. -form by 2027.
Octopus Energy did not respond to a series of requests for comment by phone, text and email about the nature of its interest in Bulb.
Mr Jackson tweeted this week that if there were “real energy problems caused by global gas and nuclear weapons shortages in the UK … the idea of” crisis “is being pumped out by the old Big 6 in order to try to bounce back [government] and regulators to restore the comfortable oligopoly they once enjoyed. “
A Bulb spokesperson said: âFrom time to time, we explore various opportunities to fund our business plans and continue our mission of reducing bills and CO2 emissions. Like everyone in the industry, we let’s monitor wholesale prices and their impact on our business. “
Bulb, which like Octopus Energy is loss-making, was established in 2015 and has grown rapidly by offering offers at competitive prices.
E.ON Next, the new brand that unites E.ON and npower customers, has approximately 5.2 million residential customers, while Ovo Energy, which absorbed SSE’s retail customer base nearly two years, has 4.5 million.
British Gas, which is owned by Centrica, remains the market leader with seven million customers and is expected to take many more through the SOLR system by the end of the year.
EDF Energy, the French public supplier, and Scottish Power are the remaining members of the former âBig Sixâ.