NAO questions Octopus’ finances after Bulb takeover – but deal will save the taxpayer money
The UK’s public spending watchdog has questioned the health of Octopus’ finances after it revealed in a report today that Ofgem had raised concerns about the energy firms “weaker financial position” during its takeover bid for Bulb.
In its report into Octopus’ takeover of Bulb, the National Audit Office said that “risks remain” on Octopus’ planned £3bn payment to the government – the amount it has agreed to pay to cover Bulb buying energy at spot prices between October and March this year.
The NAO disclosed that Ofgem had “noted that Octopus’s rapid growth had resulted in a weaker financial position than other large suppliers,” when it reviewed Octopus’s bid for Bulb last summer.
Ofgem had reportedly “identified risks around Octopus’s low levels of investor support and its over-reliance on customer credit balances for working capital” – but ultimately approved the deal.
The NAO argued there were still “risks and uncertainties” to recovering the £3bn from Octopus, with payment not due to begin until 2024.
The government “is dependent on the continued commercial success of Octopus for the repayment of these funds,” the NAO concluded.
Responding to NAO’s concerns about its finances, an Octopus Energy spokesperson said: “We’re a very prudently run business with a stringent hedging policy and over £1bn in financial backing from global investors, energy groups and pension giants.”
“Our backers include some of the largest funds in the world, who have around a trillion dollars under management. We’ve not only weathered the energy crisis and grown, but also looked after customers better than anyone else,” they added.
However, the NAO’s report confirmed Octopus’ takeover of its fallen rival will cost billions less than first feared.
It expects the government will only end up spending a total of £240m on saving Bulb and offloading the supplier to Octopus – far lower than the £6.5bn estimate made in November by the Office for Budget Responsibility (OBR).
“We’re delighted to have been able to step up and create a fair deal for the government, where taxpayers are likely to profit as a result,” the Octopus spokesperson said.
The takeover is currently being challenged in the courts by rivals including British Gas, EON UK and Scottish Power, who have accused Octopus of receiving preferential terms during the bidding process – an allegation both the government and Octopus deny.