UK government prepares to rescue Gazprom’s British energy unit

The UK government is on standby to rescue Gazprom’s UK energy supply arm within weeks if the company fails to find a buyer, according to government and industry figures.

Gazprom Marketing & Trading Retail, which trades as Gazprom Energy and supplies gas to about a fifth of UK companies, is coming under pressure as companies withdraw from contracts following Russia’s invasion of Ukraine.

One person close to the business, a subsidiary of the Russian state group’s London-based global energy trading division, said rivals had been approached in an effort to secure a quick sale.

However, he acknowledged it “would be difficult” to reach a deal, and said any sale would have to address the issue of hedged supplies — gas bought in advance from Gazprom Energy at prices likely to be much cheaper than the rates that would be paid now.

UK staff desertions are also making it hard for Gazprom Energy to continue operating, according to two people close to the business.

Gazprom Energy potentially stands to benefit from some departing customers as it is selling them gas at cheaper than current market rates. Some customers may also have to pay to unwind their contracts.

The government is monitoring the situation closely and is on standby to rescue the company if it fails, according to a government official.

In that scenario the state could either find another supplier to take over its 30,000 business customers or rescue the company as it did last year with energy supplier Bulb through the “special administration” process.

A special administration would be a de facto nationalisation where taxpayers would provide financial support to keep the company running as a going concern — enabling continuity of supply for customers.

Bulb was Britain’s seventh-biggest supplier, with 1.5mn customers, and was taken over in a bailout last year after admitting it was no longer able to withstand record wholesale gas and power prices.

The Treasury has set aside an “envelope” of £1.7bn to sustain Bulb until the end of April and although the company has so far only burnt through £600mn it could need a further injection of cash this year if energy prices remain high.

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Gazprom Energy does not sell gas from its Russian parent but buys it on the wholesale market, where the fuel comes from several sources including the North Sea.

It supplies 100,000 sites across the UK, Ireland, France and the Netherlands, and provides almost twice as much gas by volume as Bulb. It has offices in London and Manchester, employs about 350 people and has more than 60,000 commercial customers, including parts of the NHS.

Any collapse could raise the prospect of steep price rises for customers that would not be protected by regulator Ofgem’s price cap, which only applies to households.

The person close to Gazprom Energy said the company was in constant contact with the regulator and was not aware any decision had yet been made to appoint a supplier of last resort or a special administrator.

Source: Financial Times