Bulb Energy - Case Update

The England and Wales Court of Appeal has dismissed an appeal brought by British Gas and E.ON in connection with the government’s decisions to approve the sale of Bulb’s business to Octopus and to provide a loan to Octopus to allow the deal to be finalised.

Bulb, an energy supply company which had approximately 1.5 million UK domestic customers, was placed in special administration in November 2021 after experiencing a sharp increase in net losses and deterioration in cash flow due to increases in the price of wholesale gas and electricity. Matt Cowlishaw, Matthew Smith and Daniel Butters of Teneo Advisory were appointed joint energy administrators.

After a year of trading the business, and following a period of marketing and negotiation, in October 2022 the joint energy administrators agreed the terms of a proposed sale transaction with Octopus, the only bidder willing to acquire Bulb, whose bid depended on significant government financial support. The deal was completed in December 2022 over objections made by ScottishPower, British Gas and E.ON.

In addition to opposing approval of the sale before the High Court, the objecting parties commenced separate judicial review proceedings challenging the lawfulness of the Secretary of State’s decisions to approve the deal and to provide up to £4.5 billion in funding to Octopus. Worth noting is that Octopus has since repaid £3 billion of the loan.

The Divisional Court refused permission for judicial review primarily on grounds of undue delay, but also ruled that the subsidy complied with the unlawful subsidy rules under the relevant chapter of the EU-UK Trade and Cooperation Agreement. British Gas and E.ON appealed.

The Court of Appeal found that the Divisional Court erred in dismissing the judicial review proceedings on grounds of undue delay, but ultimately dismissed the appeal because it agreed with the Divisional Court on the merits.

Regarding the fairness of the sales process, the Court of Appeal upheld the Divisional Court's ruling that the process was "open, non-discriminatory, transparent and competitive". It found that bidders were informed of the potential for government support and were invited to propose their own required assistance. The Court dismissed claims that Octopus had received preferential treatment, noting that evidence showed all potential bidders had the same opportunity to request financial support.

The Court also ruled that the subsidy fell within an exception under the Trade and Cooperation Agreement for measures responding to a national or global economic emergency. While Bulb had collapsed before the 2022 energy crisis caused by Russia’s invasion of Ukraine, the ongoing crisis significantly influenced the terms of government support. The Court found that the subsidy was a response to the emergency because it ensured continuity of energy supply and prevented potential market disruption.

The decision can be accessed HERE.

Professionals involved:

• Jason Coppel KC and Patrick Halliday of 11KBW, and Malcolm Birdling and Alastair Richardson of Brick Court Chambers (instructed by Hogan Lovells) for the Secretary of State

• Kieron Beal KC, Naina Patel and Warren Fitt of Blackstone Chambers (instructed by A&O Shearman) for British Gas

• George Peretz KC and Harry Gillow of Monckton Chambers (instructed by Pinsent Masons) for E.ON

• Tom Hickman KC, Gayatri Sarathy and Sean Butler of Blackstone Chambers (instructed by Linklaters) for Bulb and the joint energy administrators

• Lord Pannick KC and Will Bordell of Blackstone Chambers, and Jemima Stratford KC of Brick Court Chambers (instructed by CMS Cameron McKenna Nabarro Olswang) for Octopus