Challenger energy supplier Bulb is scrambling to find funding to see it through the winter, as overheated natural gas prices threaten to cook a majority of the UK’s energy suppliers.
The loss-making startup is being advised by longtime bankers Lazard as it searches for a lifeline, sources close to the matter said. Those paths to survival could include raising new funds from investors or launching a joint venture or merger with other struggling suppliers.
But one potential backer of Bulb told the Financial Times that finding financing in this climate will be difficult.
To both investors and potential partners on the market, Bulb has been emphasising the size and quality of its customer database.
Bulb has experienced a meteoric rise since it was launched by Amit Gudka and Hayden Wood in 2015. It now holds around a 5% share of the British domestic energy market, with 1.7 million households enrolled. It also saw revenues soar by 1,159% between 2016 and 2019, making it the fastest-growing company in Europe, according to an analysis by the Financial Times.
But that explosive growth hasn’t translated into profit: Bulb lost £129 million in 2018-19 and £59 million in 2019-20.
Those shaky finances have left Bulb in peril as surging wholesale gas prices roil the energy market. Five energy suppliers have folded in the last five weeks, most recently People's Energy and Utility Point.
According to a forecast by consultants Baringa for The Times, an additional 39 small and mid-sized energy suppliers could join them this winter, leaving millions of households in the lurch.
Gas prices have rocked by 324% over the last year, including a steep 68% rise over the last five weeks. With energy suppliers limited in what they can charge households by the price cap, companies that aren’t fully hedged are seeing their costs far outpace takings from tariffs.
Bulb was cagey about its future. A spokesperson for the supplier said: "From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2.
"Like everyone in the industry, we're monitoring wholesale prices and their impact on our business.”
Lazard declined to comment.
Meanwhile, the government and Ofgem are considering how to manage a sudden contraction in the energy market. While a bailout of struggling suppliers is unlikely to be on the cards, the government could hand loans to the most economically robust suppliers to help them manage the costs of taking on millions of unprofitable customers abandoned by failed companies.
Another option could be the creation of a “bad bank” to absorb customers energy suppliers are unwilling or unable to take on.
One measure the government isn’t considering is a repeal of the energy price cap. "It's in place to protect people's energy bills. That's what it does, that's what it has done, and as I say, it'll continue to do so,” a spokesperson for the Prime Minister said.
The spokesperson also dismissed calls to scrap green levies on energy suppliers such as the Renewables Obligation (RO), saying they’re important to the UK’s decarbonisation efforts.
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