1 December 2021 Bulb's Special Administration

Bulb's Special Administration​

What do you need to know this week?

Bulb, Britain’s seventh-largest energy supplier, entered into special administration on November 22, 2021. Shortly after its announcement, the government set aside £1.69 billion to support Bulb’s administrator, Teneo Restructuring, in keeping the company running for the immediate future.

So, why did this happen? First, it’s important to understand what is meant by ‘special administration’. When a company becomes insolvent, it can appoint an administrator to rescue the company or sell its assets to recover the money that it owes. In particular, this administration process is ‘special’ because the Energy Act 2011 introduced a regime for energy supply companies that requires administrators to take into account customer interests in addition to creditor interests (i.e. who Bulb owes money to).

What caused Bulb’s insolvency in the first place? The company cited the energy crisis whereby gas supply shortages and increased demand meant that energy companies had to pay higher prices for electricity - thus leading to higher costs. These costs, combined with Britain’s energy price cap, meant that Bulb was providing energy to its customers at a significant loss.

Why is this important for your interviews?

Bulb’s insolvency represents a wider crisis within England’s energy market. Since September alone, 21 other domestic energy suppliers have gone bust. Ed Miliband (Shadow Secretary for Business, Energy and Industrial Strategy) has argued that the energy sector’s crisis points to a ‘systemic failure of regulation’.

In particular, Bulb’s case is interesting since it’s the largest energy supplier to collapse and the first energy company to have ever gone into special administration. Previously, customers of smaller failed firms were transferred to another energy company instead (aka. Supplier of Last Resort transactions). However, due to Bulb’s scale, special administration was deemed the most suitable option.

Employment considerations are also important in insolvency proceedings. During special administration, employees continue their roles as normal. However, Bulb’s workforce of approximately 1,000 individuals could be at risk of losing their jobs if the administration proves unsuccessful.

How is this topic relevant to law firms?

Large-scale administration proceedings, such as this one, will involve the expertise of restructuring and insolvency teams. Advice from employment departments will also likely be sought.

Here, Freshfields is advising Bulb Energy and its parent company, Simple Energy, in its administration. Linklaters is acting for Teneo Restructuring, the administrator in this matter. Other law firms selected to represent stakeholders include Reed Smith and Watson Farley & Williams.