Together Energy on the Brink of Collapse

An energy company half-owned by Warrington Borough Council is lining up administrators amid rumours that it could fold as soon as this week, abandoning 170,000 customers and leaving Warrington taxpayers out of pocket.

Clydebank-based Together Energy has reportedly been searching for additional funding since November, amid a surge in wholesale natural gas prices that has toppled 26 energy suppliers since August. While a spokesperson for the supplier said last week that it was “still in active conversations” with investors, it is thought Together’s chances of securing additional funding are remote given the state of the retail energy market.

An unnamed source told Sky News that Warrington Borough Council, which has invested £52 million in the company, was unlikely to stump up more money for a rescue.

The Cheshire local authority initially invested £18 million in Together Energy in September 2019, saying the partnership was “an important part of the council's work to address the climate emergency, tackle fuel poverty and create new job opportunities for local people.”

It also said that the investment would generate “a commercial return to the council which can be reinvested in frontline services.” 

Warrington council isn’t alone in making commercial investments; many local authorities in England have done similarly, hoping the returns would patch holes in their financing left by the austerity cuts to grants from central government.

But Warrington Council’s investment activities have drawn scrutiny, particularly the £151 million loan it handed to online retailer THG and its billionaire founder Matt Moulding in October 2020—one of the largest council loans on record.

Since then the council has arranged a revolving credit facility for Together worth £20 million and provided a £14 million guarantee to Danish wholesale energy provider Ørsted. That puts the council’s total estimated exposure to Together at £52 million, according to the FT.

The council was bullish about the investment last year, saying Together’s organic growth model projected the supplier would have 850,000 customer accounts within three years. It wasn’t anticipating the turmoil that hit the retail energy market in the autumn. 

Like dozens of other energy suppliers, Together Energy has struggled to stay afloat as wholesale natural gas prices—and to a lesser extent, electricity prices— have soared. An early sign of trouble was the provisional order Ofgem handed the supplier in late October after it failed to make a £12.4 million payment into the Renewable Obligation (RO) fund that supports clean energy generators. The energy regulator gave Together Energy until the end of January to make the payments.

Together chief executive Paul Richards laid some of the blame for the company's difficulties on the energy price cap, which limits the amount suppliers can charge domestic customers. He told the BBC that his company was making losses and that while he supports a price cap to protect consumers, the current mechanism is “not fit for industry, nor is it fit for customers.”

Now Together Energy is preparing to call in insolvency practitioners from FRP Advisory, the administrators preferred by Warrington Borough Council.

One energy industry executive told Sky News that they expected Together Energy to collapse this week, becoming the 27th casualty of the energy crisis. 

If Together Energy folds, its 170,000 households will be assigned to a new company through the supplier of last resort (SoLR) mechanism deployed by Ofgem to manage market exits.