The UK government has admitted that it is providing up to £4.5bn to Octopus Energy to support the purchase of failed electricity supplier Bulb.
Octopus completed its acquisition of Bulb on Tuesday night despite efforts by rivals including Centrica and Eon to delay the deal through the courts.
In documents published on Wednesday, the Department for Business, Energy and Industrial Strategy said the £4.5bn post-acquisition financing was primarily to support the purchase of electricity and gas in wholesale markets for Bulb’s 1.5mn customers, and was based on forecast energy costs until March 31.
Octopus will have to repay loans to purchase wholesale electricity and gas, which the company should recoup as customers settle their bills.
Bulb was placed in “special administration” in November 2021 after its co-founder and chief executive Hayden Wood, a former management consultant, admitted to the energy regulator that the business could no longer withstand sharp surges in wholesale energy prices and had failed to raise external funding or find a buyer.
It was initially supported via a £1.69bn taxpayer loan, making it the biggest bailout since the rescues of Royal Bank of Scotland and HBOS during the financial crisis of 2008-09.
Teneo, which was appointed as special administrator to Bulb, said in November that of the initial £1.69bn loan, £1.14bn had been drawn down. The £4.5bn is in addition to the funding already provided.
The UK’s fiscal watchdog, the Office for Budget Responsibility, estimated last month that the total bill for taxpayers of the Bulb bailout could reach £6.5bn, although the government contested that figure.
The business department insisted in its documents that the £4.5bn post-acquisition support was an “estimated upper limit” and that the “extent of government support could be lower than £4.5bn, depending on energy prices this winter”.
Bulb’s acquisition by Octopus has proved highly contentious with rivals Centrica, Eon and ScottishPower, which last month sought judicial reviews of the government’s decision in October to approve the acquisition. The reviews will not be heard until next year.
Among their complaints was the speed of the deal and its lack of transparency. Until Wednesday, very little detail had been published about the terms of the arrangement.
Greg Jackson, chief executive of Octopus, insisted on Wednesday that his company’s acquisition of Bulb would “bring an end to the huge financial exposures for taxpayers and paves the way for a better and more certain future for Bulb’s staff and customers”.