Chris O'Shea is the CEO of British Gas owner, Centrica, and he is looking for a quick, easy-to-grasp lesson on insolvency. We Brits have already lost 30 energy suppliers in the past 18 months and Chris reckons there are some larger ones staring into the abyss, “struggling for cash” and already likely to be trading while technically insolvent.
We in the NTI newsroom wonder how many FT readers, as they glanced over a report on the energy sector in their paper this morning (Tuesday 29 November), knew what 'technical insolvency' actually means. How useful would the NTI Compendium have been if it had been proudly sitting behind the boiled egg and bread and butter soldiers on their kitchen tables?
Asked whether he believed some suppliers were trading while technically insolvent, Chris replied “yes”, and warned that the “cash flow” created by Government support schemes was one of the few things keeping “companies that are struggling for cash” afloat.
"Which one are you going for, Chris? Sub-sub section (e) of section 123(1)? Unable to pay debts as they fall due?"
"Er, sure ..."
On firmer ground, Chris said a decision by Britain’s energy regulator last week not to force suppliers to ringfence customers’ cash was “deeply flawed” and an admission that “there are companies in our market that are unable to raise the capital required to properly back their business”.
Companies would have bought forward electricity and gas in October and November, but losses would have been made when expected levels of consumption did not arise. Warmer than normal months in October and November would have added to the increasing challenges of energy companies as knackered Brits refused to put their heating on.
At 'best guess' a further five, larger energy suppliers are at risk over the next few months. This means that five (ish) sets of directors need emergency training on the topic of section 214, wrongful trading, as they are, as we turn off the middle bars on our heaters, trading at a time when they know (or ought to conclude) there is no reasonable prospect of avoiding insolvent Liquidation (according to Chris O'Shea).
Lessons in insolvency, anyone?
