IN THE MATTER OF: BULB ENERGY LIMITED

An energy supply company administration order may be made where the statutory jurisdictional conditions are met, even though the legislation does not require the court to be satisfied that the administration objective is reasonably likely to be achieved. The likelihood of achieving that objective remains relevant to the court’s discretion.

Energy administrators have broad powers to borrow money, make necessary or incidental payments, and depart from ordinary creditor priorities where they think that doing so is likely to assist achievement of the administration purpose. A funding agreement may therefore be authorised where it is essential to continued trading and the statutory objective, provided that entering into it is a proper exercise of the administrators’ powers.

Ofgem applied for an energy supply company administration order in respect of Bulb Energy Limited under the statutory regime created by the Energy Act 2004 and Energy Act 2011. The proposed administrators sought directions concerning a Government funding agreement, including a working capital facility and arrangements affecting the priority of creditor payments.

The court considered whether Bulb was unable, or likely to become unable, to pay its debts; whether the administration objective was relevant to the discretionary decision to make the order; whether the proposed administrators had power to enter into the funding agreement and make payments outside the usual priority rules; and whether doing so would be an appropriate exercise of that power.

1. The court abridged or dispensed with the relevant notice periods because of the urgency of the applications, exercising the power under rule 3.1(2) of the Civil Procedure Rules 1998 as applied by rule 198.2 of the Energy Supply Company Administration Rules.
2. The jurisdictional requirements for an energy supply company administration order were satisfied. Bulb was balance-sheet insolvent and met the cash-flow test. The latter includes debts falling due in the reasonably near future, assessed in light of the nature of the company’s business, as explained in BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc [2013] UKSC 28.
3. Unlike the ordinary company administration test under paragraph 11 of Schedule B1, the legislation contains no requirement that the court be satisfied that the energy administration objective is reasonably likely to be achieved. Nevertheless, that question is relevant to the exercise of the discretion to make an order: Secretary of State for Education v Hadlow College [2019] EWHC 2035 (Ch). Here, continued trading and the statutory objective depended on the proposed funding.
4. The administrators had power to enter into the funding agreement. Paragraphs 3 and 9 of Schedule 1A and paragraph 13 of Schedule 1 to the Insolvency Act 1986 supported borrowing, executing documents and making necessary or incidental payments. Paragraph 66 of Schedule B1 gave a wider power to make payments otherwise than in accordance with ordinary priority rules where the administrators thought that doing so was likely to assist achievement of the administration purpose. The court followed the analysis in MG Rover Espana [2006] BCC 599.
5. Entering into the funding agreement was a proper exercise of power. It was the only available funding and was essential to Bulb’s ability to trade and pursue the administration objective. The court authorised the administrators to enter into it, treating that decision as sufficiently momentous to justify the court’s imprimatur, applying the approach in Re Nortel Networks UK Ltd (No 2) [2016] EWHC 2769.
6. The ESCA order, the direction concerning the funding agreement and the practical Day 1 directions were ordered.

First-instance decision. No appeal history is stated in the judgment.