JAnd ready to say goodbye to Pulp, the exhausted energy supplier that’s been roaming semi-nationalized for the past 12 months. The Supreme Court is set to approve Bulb’s transfer out of management this weekend, at which point Octopus Energy will become owner of a company with 1.5 million customers.
Also, no doubt, prepare to hear another round of bragging from Grant Shapps, the business secretary, about how the sale is a great bargain for the public purse. However, do not expect him – or anyone associated with the transaction – to provide evidence to support this claim. The level of transparency around this deal is shockingly low.
Here are some of the big items the Shapps division didn’t reveal: what Octopus pays for Bulb (£100m to £200m reported, but not officially announced); How much time has Octopus been given to pay for energy the government will buy for Bulb customers this winter; The interest rate that the “octopus” pays on these amounts; and details of the Profit Share Agreement that will apply until Octopus has repaid the financing.
Instead of offering basic financial facts, all we’ve got are warm – but terribly vague – assurances from Greg Jackson, Octopus president, that there may be a positive side for taxpayers. “[The structure of the deal] He ensures that if Octopus makes any money as a result of the acquisition, the taxpayer gets a fair share of it… If the markets improve, they get the interest, he said last week.
what does that mean? How, for example, would a taxpayer’s “fair share” of a beleaguered Bulb entity be calculated? Since Bulb never reported a hard final profit (and neither did Octopus, by the way), are we talking about operating profit, pre-tax or even after-tax? Nobody will say.
The lack of openness – apparently driven by the business division, rather than Octopus – extended to the refusal of information about the amount of customer credit balances Bulb held. The government refused this newspaper’s request for freedom of information in this regard on the grounds of commercial secrecy. Given that Ofgem, the energy regulator, is in the process of preparing industry-wide proposals to ensure tough segregation of deposits to prevent companies from funding themselves with client money, you’d think ministers would prefer reasonable disclosure. apparently not.
It must be said that a degree of uncertainty about the eventual loss of public money from saving Pulp is inevitable. Outsiders’ estimates of the public purse being hit are quite large – from £1.2 billion to £4 billion – in part because so much depends on the price of gas this winter. But this inexplicable vagueness is not an excuse to keep the details of the deal with Octopus in a lot of secrecy.
The deal – who knows? – It may be the best that the government can do in difficult circumstances. It may be reasonable to do so when the wholesale price of gas has fallen from its highs. But grumbling elsewhere in the energy industry about the lack of scrutiny, and skepticism about cryptic support, is understandable. Bulb, the UK’s seventh-largest energy supplier, is being handed over to the fourth-largest company under opaque terms. If it’s such a good business deal for taxpayers, why make it so vague?
Bumper bonuses boost CEO pay
Wait long enough in the top FTSE 100, and sooner or later one of the elements of your multi-level bonus package is sure to win the trump cards. So he’s in the latest crop of pay awards. PricewaterhouseCoopers calculates that CEO pay rose 23% to an average of £3.9m last year with annual bonuses providing most of the increase.
In past years of wage increases that have outpaced inflation, employers have usually been thankful for stock-based long-term incentive schemes. The return of the old bounty to the spotlight appears to owe it all to the fact that targets have been low in a frustrating Covid year. When the economy recovered, (almost) everyone got trophies.
CEO bonuses were paid out at a maximum rate of 86% (versus 58% the year before) – so high that the notion of rewarding exceptional performance loses its meaning. The payment becomes more like a semi-guaranteed maturity, with annual fluctuations settling quickly for most participants. It’s a racket.