Ovo Energy has launched an eleventh-hour bid to prevent rival Octopus Energy from swallowing the nationalised supplier Bulb.
Sky News has learnt that Ovo – founded and run by Stephen Fitzpatrick – has written to Bulb’s special administrator to inform it that it is renewing its interest in buying Bulb.
Industry sources said on Thursday that Ovo was confident that a takeover of Bulb would not, unlike the deal being discussed between Whitehall officials and Octopus, require additional taxpayer funding.
Ovo submitted an offer for Bulb soon after it collapsed into insolvency a year ago, but subsequently pulled out of the auction.
Further details of its proposed takeover of Bulb were unclear on Thursday but sources confirmed that Mr Fitzpatrick was “serious” about a deal.
Were it to be successful, a combined Ovo and Bulb would have about 5.5m household customers.
That scale could mean any deal would attract intense scrutiny from competition regulators, according to one analyst.
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Taxpayers’ rescue of Bulb is set to cost the government up to £4bn, Sky News revealed earlier this month, with that figure including temporary funding provided as part of a sale to Octopus.
The last-gasp attempt to scupper Octopus’s deal comes at a time of extraordinary turmoil in UK energy markets.
The new chancellor, Jeremy Hunt, announced in the last few days that a huge subsidy package for consumers’ energy bills would be scaled back, but it is still expected to cost many billions of pounds.
Octopus Energy has been inching closer in recent weeks to clinching a takeover of Bulb, with ministers at the Treasury and the Department for Business, Energy and Industrial Strategy (BEIS) having been told that a sale of Bulb’s 1.6m-strong customer base is now the optimal outcome.
Rivals such as Ovo are said to have been anticipating that the deal would fail, paving the way for a break-up and piecemeal sale of Bulb’s 1.6m-strong customer base.
The government has already been forced to spend billions of pounds buying gas to supply Bulb customers because the company did not hedge its purchases in order to fix its cost base.
Wholesale gas prices have soared over the last year, with Vladimir Putin’s invasion of Ukraine having a particularly pronounced impact on global energy markets.
Octopus is understood to have negotiated a deal that would see it paying between £100m and £200m to take on Bulb’s customer base, with a separate profit-share agreement giving the government a return for several years on earnings from Bulb customers.
Bulb’s collapse in November 2021 was the most significant among dozens of supplier failures, with Ofgem, the industry regulator, facing heavy criticism for its approach to licensing new entrants to the market.
The independent Office for Budget Responsibility said in March that the bailout of Bulb would require more than £2bn to cover its operating losses, although that figure is since understood to have soared.
Nevertheless, it is still dwarfed by the cost of subsidising household and business energy bills for the next six months, which the Centre for Economics and Business Research, a think-tank, has estimated at in the region of £30bn.
It was unclear on Thursday whether talks about the sale of Bulb would be further complicated by Liz Truss’s resignation as prime minister.
Ovo declined to comment.
