British gas owner Centrica was encouraged to make an offer for collapsed energy supplier Bulb and told UK government support was on offer, in a sign of the deepening battle over the sale of a company that received the biggest state bailout since the financial crisis.
ScottishPower, British Gas and Eon were in the High Court on Tuesday in an attempt to establish whether there is enough time to launch a judicial review before a sale to Octopus Energy completes on December 20.
The offer of government backing is crucial because the three companies have argued that state support, known as the government-backed adjustment mechanism, was not on offer during the sales process.
Fast-growing Octopus is expected to pay between £100mn and £200mn to buy Bulb, with an undisclosed package of state support to buy the energy needed for the company’s 1.5mn customers.
Lazard, the investment bank handling the sale for the government, told Centrica in emails on August 1, seen by the Financial Times, that “the government has been open to discussions relating to required support”.
Despite the bidding process having formally closed with Octopus emerging as the sole suitor, Lazard invited Chris O’Shea, Centrica’s chief executive, to participate.
“Whilst we are well past binding bid dates, if you have a proposition you would like to discuss, please do send it in writing,” Lazard said in the email, which also included an offer to meet O’Shea in person.
Centrica said Lazard had declined to reveal the terms of the deal despite requirements under state aid rules when substantial amounts of government funding are involved. It also said that second-stage process bid documents had made it clear that there was no aid on offer.
“When we saw media reports of Octopus receiving substantial financial support from the government, we wrote to the bank leading the sale, Lazard, to ask them what that support consisted of as we would expect it to be made known to all parties to allow a fair and transparent process,” Centrica said. “Lazard declined to disclose that information, much to our disappointment.”
The cost of Bulb’s rescue has soared, with taxpayers and customers on the hook. The Office for Budget Responsibility has estimated that the bill to the taxpayer will soar to £6.5bn, equivalent to more than £200 per household.
The sale to Octopus would create a challenger to British Gas and Eon, with the merged company becoming one of the biggest retail energy suppliers in the UK.
But the deal has become increasingly contentious, with the government declining to reveal the terms of the sale. The legal battle has pitted the old guard against one of the most prominent new “challenger” energy companies.
Octopus was launched in 2016 by technology entrepreneur Greg Jackson to break the grip of “legacy” suppliers such as Centrica, whose chief executive O’Shea has previously held senior roles at Shell and the former BG Group.