The UK government is ready to bail out Gazprom’s UK energy supply arm within weeks if the company cannot find a buyer, according to government and industry figures.
Gazprom Marketing & Trading Retail, which operates as Gazprom Energy and supplies gas to around a fifth of UK businesses, is coming under pressure as companies back out of contracts following Russia’s invasion of Ukraine.
A person close to the company, a subsidiary of the London-based Russian state group’s global energy trading division, said rivals had been approached in a bid to secure a quick sale.
However, he acknowledged that it “would be difficult” to reach an agreement and said any sale would have to solve the problem of covered supplies – gas bought in advance from Gazprom Energy at prices likely to be much cheaper than the fares that would be paid. now.
According to two people close to the company, staff desertions in the UK could also complicate the continuation of Gazprom Energy’s activities.
Gazprom Energy is likely to benefit from the departure of some customers because it sells them gas at a price below current market rates. Some customers may also have to pay to unwind their contracts.
The government is monitoring the situation closely and stands ready to rescue the company if it fails, according to a government official.
In this scenario, the state could either find another supplier to take over its 30,000 commercial customers or save the company as it did last year with energy supplier Bulb through the “d ‘special administration’.
A special administration would be a de facto nationalization where taxpayers would provide financial support to keep the business going, allowing continuity of supply for customers.
Bulb was Britain’s seventh largest supplier, with 1.5 million customers, and was taken over last year after admitting it was no longer able to sustain record wholesale gas and electricity prices.
The Treasury has set aside a £1.7bn ‘envelope’ to support Bulb until the end of April and although the company has only burned £600m so far it could have 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 company but buys it on the wholesale market, where the fuel comes from several sources including the North Sea.
It supplies 100,000 sites in the UK, Ireland, France and the Netherlands, and supplies almost twice as much gas by volume as Bulb. It has offices in London and Manchester, employs around 350 people and has more than 60,000 business customers, including parts of the NHS.
Any collapse could open the prospect of steep price increases for customers who 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 unaware that no decision had yet been made to appoint a supplier of last resort or a special administrator.