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Octopus Energy has announced it will repay almost the entire cost of the government support provided for its takeover of the failed energy provider Bulb.
This move ensures that taxpayers will recover nearly the full amount of the bailout.
Bulb, which collapsed in 2021 due to unsustainable losses from rising wholesale gas prices against the price cap set by Ofgem, was taken over by Octopus in 2022. The government initially provided a funding facility worth up to £4.5 billion for the takeover, in addition to the costs already incurred under special administration. However, Octopus utilised only £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 £2.8 billion to the Treasury without deferring repayment until next year. This repayment includes £1.2 billion in profits generated from the decline in wholesale energy costs during the winter of 2022 and 2023, which must be returned to the government as a condition of the bailout.
After accounting for the £1.5 billion incurred during the special administration regime process, the net cost of Bulb’s failure to the taxpayer will be approximately £6.1 million. This is significantly lower than the £19.6 million forecast in February by Bulb’s administrators, Teneo.
Jeremy Pocklington, permanent secretary for the Department for Energy Security and Net Zero, stated in a letter to Dame Meg Hillier, chairwoman of the Commons’ public accounts committee, “This represents an approximately 99 per cent-plus recovery of amounts owed to HMG. There are still a number of uncertainties to work through, and the final quantum of any shortfall will not be known until the end of the SAR period in 2025.”
The Office for Budget Responsibility had estimated the potential liability 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 special administration led to significant losses.
The bailout faced a High Court challenge from three of Octopus’s competitors, 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, stating, “Octopus worked hard in the darkest depths of the energy crisis to create a fair deal, meaning that although Bulb went bust with billions of liabilities, it has cost the government almost nothing.”
Octopus Energy reported its first profit since its inception eight years ago, achieving a pre-tax profit of £283 million in the 12 months to April last year, compared to a pre-tax loss of £166 million in the previous period.
