Failed UK power supplier Bulb pays millions in bonuses

The failed gas and electricity provider Bulb Energy has been paying millions in bonuses to retain staff since its £1.7bn government bailout in November, according to people familiar with the payments.

Bulb was effectively nationalised last year after collapsing with 1.6mn customers. That has left the taxpayer with a bill which, according to official estimates, will reach £2.2bn by next year, making it the biggest state bailout since Royal Bank of Scotland in 2008.

The company continues to operate with taxpayer funds while in special administration as the government tries to find a buyer. But officials fear a staff exodus could affect its ability to continue servicing customers.

Hiring replacements would probably be difficult because of the UK’s tight labour market and the uncertainty surrounding the group. Around £2mn has been paid in quarterly retention bonuses so far, according to one person close to the government.

The payments, which are not in the employees’ contracts, are being made to retain key staff, including customer-facing people, to continue critical operations and to support the attempts to sell the business, said two people familiar with the matter.

The Department for Business, Energy and Industrial Strategy said the employee retention scheme was needed to “maintain operational effectiveness and support Bulb’s customers whilst the energy administrators discharge their statutory responsibilities and to support the process of finding a buyer for the company”.

The costs will add to the burden on taxpayers of supplier collapses at a time when energy bills are soaring. It emerged at a parliamentary hearing last week that Hayden Wood, chief executive and founder of Bulb Energy, was still being paid the same £250,000 salary he received before the company’s rescue.

Labour MP Andy McDonald, a member of the House of Commons business select committee, asked MPs last week whether it was “morally justifiable” for taxpayers to be paying Wood’s salary.

The company, which had never made a profit since being established in 2015, owed £254mn to customers who had paid for their electricity and gas in advance when it collapsed last November.

In March 2020 it recorded a £63mn loss despite sales of £1.5bn. However, Wood and co-founder Amit Gudka together earned more than £8mn from a share sale in 2018, according to figures first reported by the Sunday Times.

Bulb said: “As part of Bulb’s fundraise in 2018, shareholders were offered the opportunity to sell shares to allow new investors to buy into the business. Hayden participated in that share sale alongside other shareholders.”

Chief executive Hayden Wood is still being paid the same £250,000 salary he received before Bulb’s rescue. © Chris J Ratcliffe/Bloomberg

Bulb was the biggest supplier out of the 29 companies that have failed since the middle of last year as a result of poor capitalisation, inadequate hedging and a rise in wholesale gas prices.

Although millions of customers from other collapsed suppliers have been transferred to solvent rivals, Bulb was considered too large so the costs are being borne by taxpayers.

Companies that took over smaller failed suppliers have claimed £1.84bn from the energy regulator Ofgem to cover the costs. This is being passed to customers through a £68 charge on every household bill in the year from April — contributing to the almost £700 rise in bills to £1,971 this year for those consumers on a tariff covered by the price cap.

Bulb’s special administration is being run by the consultancy Teneo but most of its staff are employed through its parent company Simple Energy, which is in a separate administration run by Interpath Advisory.

Staff had worked “incredibly hard” to ensure the business continued to trade “against the backdrop of personal uncertainty” created by the administration, said Interpath, which declined to confirm the size of the retention payments.

Separately, Centrica — the owner of British Gas — and Masdar, an energy company from Abu Dhabi declined to comment on a Sunday Times report they are among bidders for the business.

Lazards is advising on the sales process, where the second phase is under way. Bulb, Teneo and Lazards also declined to comment.

Source link