Octopus Energy has announced it will pay back almost the full cost of government subsidies for its acquisition of failed energy provider Bulb.
The move ensures that taxpayers will get back almost the full amount of the bailout.
Octopus acquired Bulb, which collapsed in 2021 due to unsustainable losses caused by rising wholesale gas prices against the price cap set by Ofgem, in 2022. The government initially provided financing facilities worth up to £4.5 billion for the takeover, In addition to the costs already incurred under private management. However, Octopus only used £1.6 billion of this facility.
Octopus Energy, the UK's second-largest energy supplier, indicated in January that it planned to repay just over £2.8bn to the Treasury without deferring repayments until next year. This payment includes £1.2 billion of profits from lower wholesale energy costs over the winter of 2022 and 2023, which must be returned to the government as a condition of the bailout.
After accounting for the £1.5bn incurred during the SMS process, the net cost of a BULB failure to the taxpayer would be around £6.1m. This is well below the £19.6m forecast by Teneo, Bulb's managers, in February.
Jeremy Pocklington, Permanent Secretary of the Department for Energy Security and Net Zero, said in a letter to Dame Meg Hellyer, Chair of the House of Commons Public Accounts Committee, that “this represents a recovery of approximately 99 per cent of the amounts owed to Her Majesty’s Government. A number of uncertainties remain to be seen.” Work is being resolved, and the final size of any shortfall will not be known until the end of the SAR period in 2025.
The Office for Budget Responsibility estimated potential liabilities at £6.5 billion in November 2022, which would have made Bulb's bailout the most expensive since the 2008 financial crisis. Bulb had 1.6 million customers at the time of its collapse in November 2021, and its exposure to rising energy prices during the administration meant own to great losses.
The bailout faced a High Court challenge from three of Octopus's rivals, including Centrica, the owner of British Gas, which argued that the deal posed a risk to the stability of the energy supply market and consumers, given Octopus's financial position.
Greg Jackson, founder and CEO of Octopus Energy, celebrated the outcome, saying: “Ocopus worked hard in the darkest of the energy crisis to get a fair deal, meaning that even though Bulb went bankrupt with billions in liabilities, it cost the government almost nothing.”
Octopus Energy reported its first profit since its inception eight years ago, making a pre-tax profit of £283m in the 12 months to April last year, compared with a pre-tax loss of £166m in the previous period.
