Pulp, the UK’s seventh largest energy company, is collapsing – but the government says customers are protected | Business News

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Bulbe, Britain’s seventh largest energy supplier, has officially entered the administration – becoming the industry’s biggest victim yet of the crisis.

The government confirmed the collapse after the company, which launched in 2015 and has 1.7 million customers, said earlier this week it was set to enter a “special management” guaranteed by taxpayers.

The process is being embraced because Bulb is seen as too big to be treated in the same way as more than 20 smaller competitors who have already given up since the beginning of September as rising wholesale gas prices put their finances under strain.

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In those cases, the regulator Ofgem ensured continuity of supply by selecting a larger company to deal with customers.

But Bulb’s own management will see that it is backed by secured funding from the Treasury, without interrupting service or supply to customers, while officials seek a deal to restructure, sell or relocate its customer base.

This will mean using hundreds of millions of pounds of taxpayer money to fund the company’s commitments in the wholesale energy markets to ensure it can continue to operate.

It has been widely reported that the company that handles private management, Teneo, will receive up to £1.7 billion.

Pulp’s demise could put its roughly 1,000 workforce at risk, although in the short term there will still be a need to continue in their roles through private management.

Nearly four million customers have been affected by the collapse of their suppliers since the fall.

Companies found themselves cornered after wholesale gas prices rose to record levels leaving them losing money on energy they were contracted to sell to homes and businesses at lower prices.

Sky News revealed earlier this week that Bulb is about to call officials and that investment bank Lazard is set to look for a buyer for the company.

An executive at one energy supplier told Sky they expect a “significant” interest in acquiring the business once it is unshackled from hundreds of millions of pounds of financial commitments.

Today’s court has appointed energy officials to operate BulbUK under the Special Management System.

Customers do not need to do anything and their credit balances are protected. The lamp will continue to supply power as normal.

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– Department of BEIS (beisgovuk) November 24, 2021

Energy Secretary Greg Hands said of the latest development: “Our top priority is protecting consumers and appointing those responsible will ensure that energy supplies remain normal for Bulb customers across the country, providing vital reassurance while agreeing on a durable solution.

“The administrators will now have temporary responsibility for the operation of Bulb, and this includes ensuring that if a new owner cannot be found, customers will be safely transferred to another supplier.”

The timing of the official appointment has been complicated by talks with Bulb’s secured creditor, Sequoia Economic Infrastructure Fund, which has a £55m secured loan to Bulb’s parent company, Simple Energy.

In a stock market update on Wednesday, Sequoia noted its concerns about a “loan to a British energy supply company that has (in effect) been ‘nationalised’ by the UK government.”

“In the interest of the shareholders, we will take all steps to ensure fair and equitable treatment of our secured loan, in accordance with the precedents,” she said.

Sequoia noted that during the special management period, he would be “unable to enforce his security on the borrower’s assets” and that government-provided financing “may rank high” in its loan.

“Therefore, the private administration may have the effect of transferring (without compensation) the value of the fund’s guarantees to the government,” she added.

Sky News reported, just hours before Bulb entered private management, that Sequoia had moved to prevent the appointment of AlixPartners as Simple Energy’s chief executive.

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