Orbit Energy Limited

The Joint Administrators of Orbit Energy Limited are facing a challenge to their fees, despite likely securing a total dividend of 100p/£ plus statutory interest for all creditors.

The energy supplier entered administration on 1 December 2021, primarily due to the significant increase in the wholesale price of gas and electricity, leading to the company paying much more for electricity than it was able to charge customers due to the regulatory price cap.

Joanne Hewitt-Schembri, Paul Berkovi and Mark Firmin of Alvarez & Marsal were appointed Joint Administrators.

The Joint Administrators have been very successful in realising the company’s assets, resulting in preferential creditors having been paid 100p/£ and unsecured creditors having been paid 78.2p/£ to date. The Joint Administrators anticipate that unsecured creditors will ultimately receive a dividend of 100p/£, plus statutory interest. There are no secured creditors.

Notwithstanding the Joint Administrators’ successes, their fees are being challenged by Shoreditch Energy Limited (“SEL“), the company’s sole shareholder.

Prior to the appointment of the Joint Administrators, the company transferred c.£11.9m to SEL. The funds were purportedly being held under the terms of an escrow agreement for the benefit of Ofgem and Scottish Power. Under the terms of the escrow agreement, the surplus of c.£2.7m should have been returned to the company.

The Joint Administrators have recently entered into an escrow surplus deed pursuant to which SEL will not dispose of or release the surplus funds, except to the extent the Joint Administrators believe the surplus funds are required to meet claims, costs, expenses, obligations or liabilities in the administration.

Even though the surplus should have been returned to the company, the Joint Administrators entered into the deed on the basis that there is a good prospect that there will be a surplus in the administration estate, in addition to the escrow surplus, to be retained by the company for the benefit of SEL as shareholder.

SEL has issued two separate applications challenging the Joint Administrators’ remuneration and expenses as excessive. SEL seeks to reduce the Joint Administrators’ remuneration, for some or all of the remuneration and expenses not to be treated as expenses of the administration, and the payment of the excess of remuneration or expenses to SEL.

The Joint Administrators intend to vigorously defend their remuneration and expenses as reasonable, proportionate and justifiable in the circumstances.

The hearing will likely be held in late 2023 or early 2024.

The Joint Administrators’ latest progress report can be found HERE.

The Joint Administrators have been assisted by CMS Cameron McKenna Nabarro Olswang, Patterson Belknap Webb & Tyler and Womble Bond Dickinson.