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Octopus Energy has completed its takeover of fallen rival Bulb, absorbing its 1.5m customers and becoming the third-biggest supplier in the UK with over five million households on its books.
The acquisition was finalized via a new process known as the Energy Transfer Scheme (ETS) – which moves Bulb moves back into private ownership following a year-long stint in special administration.
The ETS was approved by the Business and Energy Secretary on 7 November, and the High Court ruled that this month that the transfer can go ahead.
It set a commencement date for the ETS to take place last night at 11:58pm on the 20th December.
The arrangement will see Bulb’s relevant assets moved into a new, ring-fenced business – separate from Octopus Energy – to protect consumers during the transfer.
For the time being, Bulb’s 1.5m customers will remain on the company’s systems and still be looked after by the same team.
Octopus was chosen to take on Bulb following an open competition run by Bulb’s special administrators.
The deal includes a nine-figure lump sum and hedging support, reportedly as much as £1bn, alongside a four-year profit-share agreement between Octopus and the Government.
Bulb’s customers will also be ring-fenced in a separate business to the rest of Octopus’ customers until the funds involved in the hedging support are repaid.
However, Octopus is yet to reveal the exact terms of the financial arrangement to takeover Bulb.
Greg Jackson, chief executive and founder of Octopus Energy, said: “This starts to bring an end to the huge financial exposures for taxpayers and paves the way for a better and more certain future for Bulb’s staff and customers.
“For now, we’d ask Bulb customers to sit tight – they will still be looked after by the Bulb team. We’ll be in touch with customers as and when their account is ready to move to Octopus’ systems.”
The Office for Budget Responsibility estimates the overall cost of Bulb’s year-long stint in special administration has risen to £6.5bn, a figure contested by both Octopus and the Government.
Other estimates for the cost of Bulb’s period of de-facto nationalisation place the cost at around £2-4bn.
The costs involved have ballooned with Bulb being unable to hedge to purchase energy, instead buying supplies on the spot market which has soared to record heights this year.
Octopus has pledged that the new business will start hedging for Bulb from day one, to ensure that the company is fully hedged by the end of March 2023.
Despite the deal being finalised, Octopus faces further challenges in the courts with rival suppliers Centrica, EON and Scottish Power launching judicial reviews against the takeover.
They are appealing the Business Secretary’s decision to approve the takeover, with court dates for the reviews set for next year – most likely in late February.
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