BORDERS electricity and gas supplier Spark is in merger negotiations, having missed a £14.4 million renewables obligation payment, with its chief executive claiming the UK Government’s price cap has caused “chaos” in the sector.
Spark, which has around 297,000 energy customers and employs more than 400 of its 430-strong workforce at its Selkirk head office, is in “ongoing” talks with industry regulator Ofgem over the missed payment.
The company, which specialises in providing energy to the residential letting sector and is one of the largest private-sector employers in the Scottish Borders, said: “Due to its strong growth, Spark is eligible for annual Renewables Obligation Certificates (ROC) payments, and despite having met all its payments in previous years, this year it missed its annual payment which was due by October 31 – in common with an unprecedented number of other suppliers. The payment has been deferred pending further discussions with Ofgem.”
Spark, which has an annual turnover of about £230 million and describes itself as “profitable”, said it was in merger talks with another medium-sized energy company, believed to be based in England.
Chief executive Chris Gauld, who led a management buy-out of Spark in 2016, highlighted the aim of creating “a sustainable business of scale”. He flagged the impact of rises in wholesale energy costs, as well as the price cap.
Mr Gauld said: “There is little doubt that these are difficult times in the industry. You only have to open the newspapers to see coverage of how the price cap and wholesale costs are impacting suppliers, big and small, across the country.
“We’ve built up a strong, growing energy business over the past 11 years. However, the UK Government’s announcement in September that it was capping domestic energy bills at £1,137 a year based on a typical dual fuel customer has caused chaos in the industry.”
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Mr Gauld revealed Spark had been in discussions with a “number of other energy companies” in recent weeks.
He added: “As a result, we are now in merger negotiations with another, medium-sized UK energy supplier and both of us believe this offers a long-term solution which would create a sustainable business of scale. However, we are taking nothing for granted.”
Mr Gauld described recent events in the industry as “enormously frustrating” and predicted that the UK Government’s decision to impose a price cap at the level implemented could force other independent entrants to the energy sector to the wall.
He said: “The UK Government has said that it wants to introduce meaningful competition into the marketplace, and I believe this merger will create a strong new player in the industry…
“If we can make it happen, the merged company will have a sustainable, long-term future.”
Spark said the UK Government’s recent announcement that it was capping domestic energy bills had put “huge pressure on the margins of energy companies across the country”.
The company works with letting and estate agents, large social landlords and property managers to supply energy to tenants.
In April last year, Spark became a multi-utility supplier when it acquired Home Telecom, a Sussex-based broadband company, in a deal described at the time by Mr Gauld as “a perfect fit”.
Energy supply remains by far the biggest part of Spark’s business. The Borders company has around 15,000 home telecom customers.
In late 2016, First Minister Nicola Sturgeon officially opened The Spark Academy. This in-house training centre is located at Spark’s headquarters in the former Ettrick Riverside tweed mill.
Ms Sturgeon said then: “Since the official opening of Spark back in 2007, this highly innovative company has gone from strength to strength.”
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