Octopus Energy is nearing a deal to acquire failed electricity supplier Bulb and has asked the UK government for a £1 billion ($1.2bn) funding package.
UK company Octopus is ready to pay £100 million to £200m to take on Bulb’s 1.6 million customers, with any deal to include a “significant” profit-share agreement to give the government a return for “several years” on earnings from Bulb customers.
Octopus is seeking the funding package after Bulb paid the price for not hedging its purchases of wholesale gas, leaving it exposed to soaring prices. The £1bn would be repaid by the company in full, according to Sky News which cited a source close to the talks.
The UK government has been seeking a buyer for Bulb since it went bust last year. It was the biggest of almost 30 British companies that failed because of surging gas prices.
Firms including Centrica and Abu Dhabi’s Masdar dropped out of the race to buy Bulb, leaving Octopus as the sole bidder.
An agreement between Octopus and the government to take over Bulb could be reached within weeks, Sky said, although the complexity of the deal could prevent it from going ahead.
An Octopus representative said the company did not comment on rumours and speculation.
Octopus has a reputation for trailblazing thanks to its proprietary Kraken technology, a platform designed to promote smart grid use, increase efficiency and improve customer service.
The proof of its success lies in a fast-growing customer base for Octopus: the company now has operations in 13 countries and is contracted to serve 25 million energy accounts.
And while many sector start-ups have crashed and burnt in recent months in the face of the global energy crisis, Octopus has thrived.
Oil and gas prices have continued to surge this year, in part because of Russia’s invasion of Ukraine.
Britain’s gas market is linked to Europe through its network of pipelines to the continent and Norway, and summer prices are four times higher than usual.
High energy costs are among the biggest challenges facing departing prime minister Boris Johnson’s successor, either Liz Truss or Rishi Sunak, as soon as they take over in September.
Bills are set to soar weeks later when a price cap is raised by more than 60 per cent, taking the increase this year to about 150 per cent.