Recommendation 17

Octopus was the only bidder for Bulb energy during the sale process. Ofgem told us that this was in part due the unhedged position of Bulb, meaning it did not have any contractual arrangements with a wholesale energy supplier to purchase energy in advance. It explained that the lack of hedging, combined with the volatile high energy prices, made Bulb unattractive to bidders especially since some suppliers were experiencing difficulties in accessing appropriate long-term arrangements to develop a full hedge for Bulb.35 These factors contributed to the sale process taking 10 months to complete.36 We asked Teneo if it thought that there would have been more bidders if Bulb’s hedging position were different. Teneo told us that all the bidders knew of Bulb’s unhedged position and that the government was open to addressing it as part of a purchase deal. Octopus told us that the transaction to purchase Bulb was difficult due to Bulb being unhedged, but that the administrators (Teneo) were open to suggestions about ways in which it could construct a transaction, that enabled it to take the business out of administration. Octopus also told us that to limit the risks posed by the unhedged Bulb, it constructed a deal that would limit the company’s exposure to the cost of buying energy as it would have been very expensive and not possible to fill a hedge in one go.37 Corporate finance and insolvency expertise in government