The sale of Bulb offers buyers a rare opportunity for growth, particularly as the ongoing energy crisis restricts customer acquisition through the usual means, an industry expert has commented.
On Thursday (30 June) the bidding process for Bulb, which entered the Special Administration Regime (SAR) last year, drew to a close.
It was widely reported that Octopus Energy and the Abu Dhabi-based energy company Masdar were the frontrunners to acquire the nationalized retailer. Meanwhile, British Gas-owner Centrica, thought by many to be the obvious buyer, was reported to have pulled out.
Giving his thoughts on the attractiveness of Bulb as a potential acquisition, Investec senior analyst Martin Young, said: “Ultimately, I would say the more customers you can have, the lower the average cost to serve per customer that you will have.
“I’m an advocate of the notion that size matters in this business, so there is a logic for somebody going out to acquire additional customers.”
Young said current energy prices mean suppliers are unwilling to undercut the price cap and offer cheaper deals to lure in customers. “And that’s before you get into the machinations of the market stabilisation charge and things like that,” he added.
Additionally, while the Supplier of Last Resort process is another way to acquire customers, this comes with costs that suppliers may be unable to recover through Last Resort Supply Payments.
Young said that with the sale of Bulb, there is a large block of customers available that would not ordinarily be available for suppliers seeking growth.
“They are being sold prima facie from a distressed seller position, so you would like to think that could work favourably for an acquirer in terms of the cost per customer acquired,” he remarked.
However, he warned: “Obviously, what you’ve got to back yourself to do is to keep those customers or at least the majority of those customers. Because it’s one thing saying we’re going to pay X to acquire these customers but if the attitude of those customers is thank you very much, but as soon as the market changes they’re heading for the exit, that isn’t necessarily the best deal that you might do.”
Although the bidding process closed last week, sources close to the matter told Utility Week the date for final bids should not be seen as a hard deadline and that the process is still ongoing.
The Department for Business, Energy and Industrial Strategy (BEIS) would not go into details of Bulb’s administration when asked by Utility Week, but it reiterated the obligation of special administrator Teneo to keep the costs of the process as low as possible in line with their legal responsibilities.
“It is actively considering all exit options. The government will seek to recoup costs at a later date, ensuring that we get maximum value for money for taxpayers,” a spokesperson said.