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The British government is preparing to bail out Gazprom’s British energy unit

The UK government stands ready to bail out Gazprom’s UK utility arm within weeks if the company fails to find a buyer, government and industry sources say.

Gazprom Marketing & Trading Retail trading as Gazprom energy and supplies gas to around a fifth of UK companies is coming under pressure as companies pull out of contracts in the wake of the Russian invasion of Ukraine.

A source close to the company, a subsidiary of the Russian state-owned company’s London-based global energy trading division, said competitors had been approached to secure a quick sale.

However, he acknowledged that reaching an agreement would be “difficult” and said any sale would need to address the issue of secured supplies – gas bought upfront from Gazprom Energy at prices that are likely to be much cheaper are as the rates payable now.

According to two people close to the company, the departure of British employees is also making it difficult for Gazprom Energy to continue operations.

Gazprom Energy could potentially benefit from some departing customers as it sells them gas at cheaper prices than current market prices. Some customers may also have to pay to reverse their contracts.

According to a government official, the government is closely monitoring the situation and stands ready to bail out the company if it fails.

In this scenario, the state could either find another provider to take over its 30,000 business customers, or save the company, as it did last year with the energy supplier Bulb, through the “special administration” procedure.

Special administration would be a de facto nationalization, with taxpayers providing financial support to keep the company afloat and enable continuity of supply to customers.

Bulb was Britain’s seventh largest supplier with 1.5 million customers and was bought in a bailout last year after admitting it was no longer able to withstand record wholesale gas and electricity prices.

The Treasury has provided an ‘envelope’ of £1.7bn to get Bulb by the end of April and although the company has burned just £600m so far it could need another cash injection this year if energy prices stay high.

Gazprom Energy does not sell gas from its Russian parent company, but buys it on the wholesale market, where the fuel comes from multiple sources including the North Sea.

It supplies 100,000 locations in the UK, Ireland, France and the Netherlands and delivers almost twice as much gas as Bulb. It has offices in London and Manchester, employs around 350 people and serves more than 60,000 commercial customers, including parts of the NHS.

Any collapse could raise the prospect of steep price hikes for customers who would not be protected by regulator Ofgem’s price cap, which applies only to households.

The person close to Gazprom Energy said the company is in constant contact with the regulator and is unaware that a decision has yet been made to appoint a supplier of last resort or a special administrator.

https://www.ft.com/content/63d3d214-bb35-421b-a26c-02d8754566e5 The British government is preparing to bail out Gazprom’s British energy unit

Adam Bradshaw

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