Octopus takeover of Bulb faces delay after rivals seek judicial review

Three companies complain over lack of transparency around deal which could be biggest government bailout since RBS and Lloyds

The takeover of collapsed bailed-out energy supplier Bulb by rival Octopus faces further delays after three rival companies launched judicial review proceedings, arguing that there are “significant concerns” over a possible £1bn government-funded “dowry”.

Octopus agreed to buy Bulb out of a special government-handled administration last month after a year-long process which could cost the taxpayer up to £6.5bn, according to a government estimate.

Octopus was the sole bidder for much of the process, despite early interest from rivals including British Gas owner Centrica and a last-ditch bid from Ovo. However, three rival energy companies, ScottishPower, E.ON and British Gas, intervened earlier this month, arguing for more transparency over the terms of the deal, which could be the biggest government bailout since Royal Bank of Scotland and Lloyds Banking Group during the financial crisis of 2008.

The three companies are now starting judicial review proceedings, the Guardian understands. A review would probably look into whether the government followed the correct legal process in finding a buyer for Bulb, and could significantly delay a takeover, or require the process to be carried out again.

Octopus is estimated to have paid between £100m and £200m to acquire Bulb, which has 1.5 million customers, creating the UK’s third largest energy supplier behind British Gas and E.ON, with 4.9 million customers.

The high court hearing on Tuesday was due to set a date for the takeover to proceed. However, ScottishPower argued that the deal should be halted because of “defects in the marketing process” for the remnants of Bulb, according to court documents.

The decision from the court is expected on Wednesday, but the reasons behind the decision will not be revealed until next week, according to people familiar with the process.

The administration is being handled by advisory firm Teneo, which hired investment bank Lazard to oversee the search for a buyer. ScottishPower argued that it “was not informed that any large-scale government support would be available to the successful bidder”, and that Lazard also failed to provide enough information on Bulb’s hedging positions and customer credit balances, according to a summary of ScottishPower’s arguments heard in court on Tuesday.

ScottishPower said it believed “a substantial part of the £6.5bn” cost to the government of the Bulb saga will go on a “10-figure debt to fund a ‘dowry’” to Octopus, the documents said.

Counsel for the Bulb administrators argued that the energy companies’ submissions were “replete with factual errors and speculation”, and argued that they were irrelevant for the purposes of the hearing, according to a summary of their arguments. The administrators argued that the rival energy companies could have sought meetings with government on potential funding options.

An Octopus Energy 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.”

The Office for Budget Responsibility said this month that the cost of bailing out Bulb had reached £6.5bn, as a result of a decision not to buy power ahead. The government disputes the figure. The National Audit Office, which studies government spending, is scrutinising the deal.

The Octopus founder, Greg Jackson, has said the transaction represents a “fair deal” for taxpayers and that the company has paid over the market rate for Bulb’s customers.

Bulb was set up by the entrepreneurs Hayden Wood and Amit Gudka, who rapidly gained customers with slick technology and marketing. However, its ineffective hedging policy saw Bulb become by far the largest casualty of an energy crisis which saw 28 other suppliers go bust.

Wood told the Guardian on Monday that he was “very sorry for the way things turned out” and said he had worked “extremely hard” to minimise the cost to the taxpayer during the administration process. Gudka left Bulb before its collapse to found a battery storage venture. Both cashed out £4m in shares in a fundraising in 2018.

Lazard was approached for comment.

Contributors

Alex Lawson, Jasper Jolly and Anna Isaac

The GuardianTramp

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