Gazprom UK trading arm’s bosses seek buyout as insolvency nears

British government also preparing to temporarily run UK unit of Russian energy firm

The business is just days away from needing a government bailout from the UK’s specialist administration regime. EPA

Gazprom executives from the British trading arm of the Russian state-backed energy company are considering a management buyout as the UK government prepares to temporarily run the UK unit.

Senior managers at Gazprom Marketing & Trading Retail, which supplies commercial customers including hospitals and local authorities across the UK, are looking to acquire the division, according to Sky News.

The move comes as the business is just days away from needing a government bailout from the UK’s specialist administration regime to ensure continuity of supply.

Gazprom’s British retail supply arm has come under increasing pressure from companies turning their backs on Russian business over the war in Ukraine.

While the company has more than 30,000 business customers, with concerns over their future supply needs, the UK subsidiary trades as Gazprom Energy and supplied over a fifth of UK business gas in 2020.

It has more than 300 staff across the UK, France and the Netherlands and supplies commercial and public bodies, including parts of the National Health Service.

Ambulances outside a London hospital run by the NHS, which is coming under pressure to ditch contracts it holds with Russia's Gazprom. EPA

The parent company's chief executive, Alexei Miller, reportedly a close associate of Russian president Vladimir Putin, has been placed under sanctions since the Russian invasion of Ukraine.

Teneo is being lined up to oversee the running of the company in case it goes into special administration, according to sources, with the appointment of any administrator requiring regulatory and legal approval.

The preparations by the UK government are the latest sign of how the Russian-controlled firm is being squeezed as a result of the invasion. Other energy giants are also turning their backs on Gazprom’s wholesale trading unit, with only a few of Europe’s large companies still doing business with it in the over-the-counter market.

“We are in constant contact with our regulator Ofgem and no decision has been taken to appoint a special administrator or supplier of last resort that we know about,” the retail unit said in an emailed statement late on Monday. It added that it was “entirely normal” for Ofgem to “consider all possible scenarios and formulate plans to respond to whatever events unfold”.

The annual volume of energy supplied by the UK retail arm is about double that of Bulb Energy, the household supplier that is already being run by Teneo. The cost to the taxpayer of that rescue is already swelling as gas and power prices continue to surge.

Partly because of its size, Gazprom Energy is more likely to go straight into special administration than through Ofgem’s Supplier of Last Resort process that has been used to reallocate the customers of more than two dozen household suppliers since August.

So far only Bulb has been taken into SAR, where administrators run the firm with government money in order to prevent a shock to the wider market.

Gazprom Energy customers are not protected by Ofgem’s price cap, which limits the cost of energy for households only. If their contracts are cut short, many would face having to sign deals at much more expensive rates than they are currently paying.