Centrica heads back to court to challenge government over Octopus’ Bulb takeover
British Gas owner Centrica is set to lock horns with the government in court on Tuesday over its handling of the sale of collapsed energy supplier Bulb to rival Octopus Energy.
It argues Octopus was offered state support to fund the hedging of energy supplies for Bulb’s 1.6m customers – terms that were not offered to Centrica..
This, Centrica argues, has given Octopus an unfair advantage and distorted the market, as Octopus saw its customer base jump from 3.3m to 4.9m customers.
Octopus dismisses the claim, however, and argues it negotiated a deal in good faith with Bulb’s administrators Teneo and the government.
Centrica is one of three energy firms raising complaints as part of a judicial review of the process, alongside Big Six rivals EON UK and Scottish Power, who are also raising their own issues about the lack of transparency in the funding in the takeover deal.
The suppliers will all make their case at a three-day hearing in London this week at the Royal Courts of Justice, with a ruling expected in the Spring.
The courtroom showdown could mark the final chapter in a protracted industry saga.
If the energy firms’ challenge is successful, this could potentially lead to the takeover of Bulb being reversed or to potential compensation and changes in the terms of Octopus’ takeover deal.
Morning Wire understands Octopus has calculated the government will make £1.19bn in profit from the hedging arrangement – a forecast that will feature in its submission to the judicial review case.
The deal for Bulb includes a nine-figure sum, a profit-share agreement with the government involving the 1.6m customers and hedging support in the form of a loan.
The terms of Octopus’ takeover, however, have been shrouded in secrecy.
This has led to competing estimates for how much the deal will ultimately cost the taxpayer.
Octopus previously revealed that the takeover of Bulb would only cost the taxpayer £260m, rather than the £6.5bn calculated by the Office for Budget Responsibility – far higher than the £2.5bn to £4bn estimates made by industry analysts over the last year.
Morning Wire understands the £1.19bn profit reflects the cost of hedging support at £1.76bn, with Octopus set to pay back nearly £3bn to the government following recent sharp declines in wholesale price.s
However, rivals are likely to highlight the government provided a £4.5bn financing facility to fund Bulb’s operations under Octopus ownership until the end of March