Energy firms on the brink of collapse reveals report
HALF of Britain’s energy suppliers face an existential risk after the “Beast from the East” tore through the balance sheets of the industry’s small players.
Thousands of energy customers could be left in limbo due to a high risk that around 10 of the most fragile suppliers are on the brink of going under.
Many hundreds of thousands more bill payers face the risk of sudden energy tariff hikes because almost 40 suppliers may be forced to squeeze their customers to survive.
The startling strain endured by the industry in the wake of the volatile winter energy market is laid bare in leaked proprietary data compiled by one of the City’s top analytics firms, Dun and Bradstreet.
The report, seen by The Sunday Telegraph, ranks 37 of Britain’s 81 energy suppliers as being at risk. Eight are identified as being on the brink of failing based on forensic analysis of company financial accounts and trade payments.
The dire health warning underlines the struggle of energy suppliers, which have endured a winter of price spikes not seen in six years, and face the threat of the Government’s looming energy price cap later in the year.
The list includes many of the suppliers that rely on offering some of the market’s cheapest deals to see off the steady rise in competition. One of the worst hit suppliers, Iresa Energy, has already quietly accepted a major bailout from a larger peer within the last month. The supplier grasped another stay of execution after slumping into credit default twice last week.
The market administrator Elexon informed senior industry sources via email, seen by The Telegraph, that Iresa’s credit effectively ran dry on Monday, and again on Wednesday, before it managed to resolve the default at the end of the week.
Iresa had already offered up its entire business as collateral to borrow an unspecified sum from business energy company Contract Natural Gas (CNG) last month, according to documents filed to Companies House.
A spokesman for CNG said the company was not able to comment, and Iresa did not respond.
Iresa’s battle to stay afloat comes weeks after the regulator forced the Nottinghamshire-based supplier to stop taking on new customers while it investigates whether Iresa broke rules relating to “customer information and customer contact”.
Energy supply bosses fear the regulator may force their companies to pick up swathes of disgruntled energy customers if a smaller market rival goes bust. Their fragile profit margins have been tested by the sudden freeze that swept Britain in late March, and decimated cash flows for poorly-funded new market entrants after energy markets spiked to six-year highs.
A perfect storm of weaker European gas production, shrinking storage capacity and rising oil prices has held energy market prices well above those paid last year.