Octopus Energy faces a long delay in its buyout of failed peer Bulb, after other rivals sought a legal review of how its deal with the government was made following the largest bailout of a company since the financial crisis.
Following Bulb’s collapse and bailing out by the government last year, Scottish Power, E.ON and Centrica PLC (LSE:CNA) owned British Gas are calling for the Octopus deal to be put on hold due to questions about how the sale to a lone bidder was conducted, with the takeover price estimated to be between £100mln and £200mln.
Scottish Power was concerned that some of the £6.5bn public costs of keeping Bulb afloat may end up in the hands of Octopus.
At a high court session on Tuesday, Scottish Power suggested it did not bid as it had not been “informed that any large-scale government support would be available to the successful bidder”.
Representatives for the company, which is owned by Spanish utility firm Iberdrola, added that the deal should be paused because of “defects in the marketing process”.
It was intended that Tuesday’s high court hearing would set a date to finalise Octopus' takeover of Bulb’s 1.5mln customers, but the process could now be significantly delayed.
The takeover would make Octopus the UK’s third largest energy supplier, hopping over Ovo, EDF and Scottish Power to slot in behind British Gas and E.ON.
Based on the suggested lack of transparency around the deal, Scottish Power, E.ON and British Gas are now opening judicial review proceedings to assess whether the government followed the correct legal processes when searching for a buyer for Bulb.
Court documents showed that Centrica had proposed that Bulb’s customers could be divided between “a group of energy suppliers who do not present financial viability risks” as an alternative deal.
Speaking to the Guardian, a spokesperson for Octopus said: “It’s now clear that other companies had many opportunities to bid, knew they could propose hedging support, and were invited to counter-bid against Octopus.
“Instead of doing so, they waited until a deal was announced and then launched expensive legal action which could cost taxpayers millions, even billions.”