U.K. Government Prepares to Take Over Gazprom Retail Arm
U.K. Prepares to Temporarily Nationalize Gazprom M&T Retail Unit
(Bloomberg) -- The U.K. government is preparing to step in and temporarily run Gazprom PJSC’s British retail supply arm as it comes under increasing pressure from companies turning their backs on Russian business over the war in Ukraine.
Gazprom Marketing & Trading Retail Ltd. is a prime candidate to be taken into the U.K.’s special administration regime if it fails, to ensure continuity of supply, according to a person familiar with the matter. Officials are closely monitoring the situation at the company, which has more than 30,000 business customers.
Teneo Inc. is being lined up to oversee the running of the company in case it goes into special administration, according to people familiar with the matter. The appointment of any administrator needs regulatory and legal approval.
The preparations by the U.K. government are the latest sign of how the Russian-controlled firm is being squeezed as a result of the invasion. Other energy giants are also turning their backs on Gazprom’s wholesale trading unit, with only a few of Europe’s large companies still doing business with it in the over-the-counter market.
“We are in constant contact with our regulator Ofgem and no decision has been taken to appoint a special administrator or supplier of last resort (SOLR) that we know about,” the retail unit said in an emailed statement late Monday, adding it was “entirely normal” for Ofgem to “consider all possible scenarios and formulate plans to respond to whatever events unfold.”
The subsidiary trades as Gazprom Energy and supplied over a fifth of U.K. business gas in 2020. It has staff of over 300 people across the U.K., France and the Netherlands and supplies commercial and public bodies, including parts of the National Health Service.
The annual volume of energy supplied by the retail arm is about double that of Bulb Energy Ltd., the household supplier that’s currently being run by Teneo. The cost to the taxpayer of that rescue is already swelling as gas and power prices continue to surge.
Partly because of its size, Gazprom Energy is more likely to go straight into special administration than through Ofgem’s Supplier of Last Resort process that’s been used to re-allocate the customers of more than two dozen household suppliers since August. So far only Bulb has been taken into SAR, where administrators run the firm with government money in order to prevent a shock to the wider market.
Gazprom Energy customers aren’t protected by Ofgem’s price cap, which limits the cost of energy for households only. If their contracts are cut short, many would face having to sign deals at much more expensive rates than they’re currently paying.
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