Five months after special administrators were appointed at Bulb in an act of quasi-nationalisation, the government is discovering a few truths that should have been obvious on day one.
There isn’t a long queue of would-be buyers willing to pay good money for a failed energy supplier with 1.7 million customers when wholesale markets are still in turmoil. Taxpayers’ financial exposure is only increasing with every passing month.
And semi-state ownership brings some level of ministerial responsibility for how the business is run, including the inexplicable decision to continue paying Hayden Wood, cofounder and chief executive, his £250,000 salary as if nothing had happened.
“We do not want this company to be in this temporary state longer than is absolutely necessary,” Kwasi Kwarteng, the business secretary, told parliament last November when announcing the administration.
The initial advance of £1.7bn of public money was intended to cover Bulb’s working capital requirements for six months, which seemed to be the soft deadline for getting rid of the problem.
That deadline is unlikely to be met, though a summer exit is still possible. However, neither interested party named by the Sunday Times can be regarded as unproblematic.
Passing Bulb to Centrica, the owner of British Gas, would entrench the market leader’s dominance and, even in an emergency that has demonstrated the benefit of having well-capitalised suppliers that don’t fall over, ministers are still supposed to have half an eye on long-term competition. The other reported runner is Masdar, out of Abu Dhabi, which offers no experience of the UK retail energy market.
Other parties could still emerge, but the burning question is whether a “sale” of Bulb would merit the term.
Centrica is said to want taxpayer support for an unknown period to cover the cost of buying energy for Bulb’s customers, a demand that seems entirely sensible on its part. Current wholesale prices equate to £1,000 above today’s price cap. If the difference means losses for Centrica, its shareholders surely wouldn’t tolerate a deal without a dowry.
The government’s plan B, one assumes, is a break-up of Bulb, with the customers parcelled out around the current main players. That process would be fiddly, but Kwarteng would be wise not to dismiss it; it may be needed to clear a developing political headache.
In the meantime, he should ask if the public purse is getting value from the administrator, Teneo. Handing bonuses to staff to prevent a wave of resignations is theoretically defensible, but where’s the evidence that Bulb was in danger of imploding? As for Wood’s generous retainer, there is no justification.
Just Eat Takeaway shareholders demand answers
Calls for a shareholder rebellion at Just Eat Takeaway (JET) are in order for the reasons outlined here last week.
This is the delivery company that over-ordered in destructive fashion for its investors: it attempted to consume Grubhub of the US before it had digested the merger of Takeaway.com of the Netherlands and Just Eat of the UK. The shares have fallen 75% since the $7.3bn (£5.7bn) Grubhub deal was unveiled in June 2020.
So, yes, Cat Rock Capital, with a 6.9% stake, is right to demand a clear-out of the supervisory board that has overseen the calamity. But, among the executives, it feels perverse to target the finance boss, Brent Wissink, while slapping an “abstain” recommendation on the chief executive, Jitse Groen.
The argument seems to be the idea that Grubhub was a “capital allocation mistake”, but, if so, the mistake was primarily Groen’s. He is the founder of the business, the architect of the rapid acquisition strategy and the person who publicly defended the Grubhub deal.
Groen’s stake is as large as Cat Rock’s, which makes him harder to oust; and separating him from his loyal number-counter may send a useful corrective message. Ultimately, though, JET is Groen’s creation and he’s the man who should be in the spotlight.
‘Poison pill’ only subdued scrutiny of Musk
Even before Elon Musk’s $44bn purchase of Twitter was confirmed on Monday evening, one could say that the board’s devious “poison pill” defence was a waste of time.
A threat to flood the market with discounted shares advertised weakness because it suggested the directors couldn’t assemble a decent argument based on creating more value independently.
Far from buying time, the move seems only to have encouraged Twitter’s major shareholders to lobby the board to get to the negotiating table.
In the process, Musk has avoided scrutiny over how he would run Twitter, which is the core issue for anyone who cares about the quality of public discourse. The poison pill was a self-defeating distraction.
