The government has set aside up to GBP1.7 billion to fund the continued operation of Bulb Energy after the supplier collapsed into administration.

A court appointed special administrators from Teneo yesterday to keep running Britain’s seventh-largest energy utility so supplies and customer services to its 1.6 million household customers should continue unaffected.

A GBP1.69 billion loan from the taxpayer will fund the work. The administrators say it will cost about GBP2.1 billion to keep Bulb trading until the end of April. They will need to buy significant volumes of wholesale gas and electricity to meet customers’ needs in the winter.

Kwasi Kwarteng, the business secretary, can free up more taxpayers’ money for the company if needed, court documents show.

Bulb, which was founded in 2015, was unable to withstand rising wholesale prices that have also precipitated the demise of more than 20 other smaller suppliers since August.

The two million customers of these other failed suppliers have been moved to solvent companies who were appointed as the “supplier of last resort”. Consumers are already facing a huge bill expected to run to billions of pounds to reimburse suppliers for the costs they incur through taking on customers from failed suppliers.

However, this process was deemed unworkable for Bulb because of its size, so it has instead gone into the special administration regime that has never before been used in the energy sector.

The eventual bill for Bulb’s demise is unclear since special administrators will seek to minimise and recoup costs where possible. They are expected to look to sell off Bulb’s customers and assets, potentially in a more benign wholesale price environment next year.

Several companies had expressed interest in buying Bulb before it collapsed but balked at its liabilities. Earlier, Kwarteng said: “We do not want this company to be in this temporary state longer than is absolutely necessary.”

At a hearing in the High Court in London, Justice Adam Johnson said that the administration was designed “to keep the energy supply company going with a view to it being rescued if that is possible”. Appointing a supplier of last resort was “thought to be impractical here given the size and importance of Bulb as a supplier”, he said.

The judge added that the GBP1.7 billion would be “of existential importance to Bulb”; court documents show that Bulb would otherwise have been unable to keep operating beyond mid-December.

Greg Hands, energy minister, said: “The administrators will take temporary charge of operating Bulb, and that includes ensuring, if a new owner cannot be found, that customers are safely moved to another supplier.” It was reported last night that Interpath had been appointed as administrator to the parent company of Bulb at the behest of the supplier’s largest lender.

Sequoia Economic Infrastructure Income Fund, a FTSE 250 fund, is owed GBP55 million by Bulb. The loan is guaranteed by Simple Energy, Bulb’s parent company. Sky News reported that Sequoia had pushed for Interpath to be appointed as administrators to Simple in preference to AlixPartners as it seeks to safeguard its interests.

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Taxpayer provides GBP1.7bn loan to support Bulb Energy through crisis

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