Utilita ignites interest in bid for council-owned Bristol Energy

15 July 2020, 12:27 | Updated: 15 July 2020, 13:30

A top 10 gas and electricity supplier is igniting a takeover bid for the local authority-owned Bristol Energy as it seeks to expand its base of pre-paid energy customers.

Sky News has learnt that Utilita has emerged as a leading contender to acquire Bristol Energy, which is hunting a buyer after admitting failure in its attempt to build a nationwide rival to the likes of British Gas and EDF UK.

Utilita, which is privately owned and boasts about 800,000 customers, is preparing to make an offer for the council-owned business, industry sources said on Wednesday.

Bristol City Council has pumped more than £35m into Bristol Energy since it was set up nearly a decade ago.

People close to the auction process said Utilita was one of several interested parties, but added that the two businesses' reliance on pre-pay customers made them a logical fit.

Some bidders are expected to make offers only for Bristol Energy's customer book, rather than the wider business.

Bristol's mayor, Marvin Rees, said last month that the venture "was always a high risk for the council, and one which has brought continued challenges".

"The energy market is dominated by well-established far larger energy providers," he added.

"Having inherited a failing company where £15m had already been spent or earmarked for spend, we were faced with a choice: we could have closed the company then or tried to develop a business strategy that would succeed, both in tackling fuel poverty in Bristol and delivering a financial return for the city.

"This proved to be impossible in such a volatile marketplace."

Utilita has grown rapidly in recent years, and explored a sale in 2017.

Its shareholders include Secure Meters and its chief executive, Bill Bullen.

In January, Utilita was notified by Ofgem, the energy regulator, that it was being investigated over possible breaches of the industry price cap for pre-payment customers.

The Bristol Energy sale process is being run by EY, the professional services firm.

The company had just over 100,000 customers earlier this year, but boasted that it had taken "a significant step on its journey to becoming a wholly green energy supplier, launching 3 new 100% green electricity and lower carbon gas tariffs, with a focus on sourcing energy from local wind and solar farms".

Bristol Energy's auction will raise renewed questions about the decisions of a string of local authorities around the UK to compete with energy behemoths such as Centrica, the owner of British Gas, and Scottish Power.

In Nottingham, the future of council-owned Robin Hood Energy is also under review in the wake of a £24m annual loss disclosed in March.

The decision to seek a buyer for Bristol Energy comes amid expectations of a wave of customer defaults across the energy sector as the finances of consumers and businesses feel the strain of the coronavirus pandemic.

A squeeze on energy suppliers' margins and competition exacerbated by regulator Ofgem's introduction of a price cap have already forced dozens of smaller operators out of business.

The customer books of collapsed suppliers have invariably been reallocated to big six players such as EDF Energy and Ovo Energy, which was catapulted into the ranks of the industry's biggest players through the £500m takeover of SSE's retail business.

Utilita declined to comment.