A local authority-backed energy supplier to more than 170,000 homes is racing to secure new funding as it plots a path back to profitability amid the industry’s deepening crisis.
Sky News has learnt that Together Energy, which is 50%-owned by Warrington Borough Council, is working with advisers at Alvarez & Marsal to raise additional capital.
The company, which has 350,000 accounts, is said to be pitching to prospective investors that it is well-positioned to acquire underperforming rivals once wholesale energy markets begin to stabilise.
Image: Together is 50%-owned by Warrington Borough CouncilMore than 20 domestic energy suppliers have collapsed since the beginning of August as unhedged market participants have been caught out by soaring wholesale gas prices.
The largest of those, Bulb, is expected to crash into a form of insolvency later on Wednesday, with the taxpayer taking on responsibility for funding its ongoing operation.
AdvertisementMarket sources said that Ofgem, the industry regulator, had filed to place Bulb into a special administration regime (SAR) – the first test of the bailout mechanism – on Wednesday morning.
It was unclear how large a funding shortfall Together Energy, which employs about 250 people, faces.
More from BusinessThe company’s other shareholders include Paul Richards, its chief executive.
A spokeswoman for the company insisted that it was “looking to source strategic long-term funding for growth, not short-term [capital]”, although industry sources said that A&M had highlighted the need for short-term funding in recent months.
What do you do if your energy supplier goes bust?
Together Energy says that 100% of its electricity comes from renewable sources, and that it is “working towards offsetting 100% of our carbon gas by August 2023”.
Warrington Borough Council initially invested £18m in Together Energy in September 2019, arguing that 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”.
Earlier this year, the local authority boasted that the supplier’s organic growth model projected that the company would have 850,000 customer accounts within three years.
However, the crisis engulfing the industry has raised questions about the long-term sustainability of many smaller suppliers.
Two other council-backed suppliers have already lost their independence: Bristol Energy, which was sold to Together Energy in September 2020 for £14m, and Robin Hood Energy, which received millions of pounds in funding from Nottingham City Council, collapsed last year, with its customers transferred to British Gas.
Including Bulb’s customer base, close to four million British households have seen their energy supplier fall into insolvency proceedings since the summer, with more companies expected to follow.
3:01 Energy supplier crisis must never happen again – British Gas ownerSky News revealed Bulb’s imminent collapse this week, as well as the imminent appointment of the investment bank Lazard to sell the business or its assets.
Lazard has been advising Bulb on fundraising options for several months, and conducted talks with a range of prospective bidders, including Octopus Energy, OVO Energy and Shell Energy Retail.
Some or all of those companies are expected to table fresh offers to buy Bulb out of administration.
One energy company executive said the prospect of taxpayers funding Bulb during the winter months, coupled with the possibility of more normalised wholesale gas prices by next spring, would make Bulb an attractive takeover opportunity.
Teneo Restructuring is being lined up by Ofgem as Bulb’s special administrator.
