How can so many Energy Companies Fail?- who's next? AVRO? IGLOO? SYMBIO? COLORADO? NEON REEF?

ihatetrump

Dig a little deeper into Avro accounts and you'll see that in 2019 they paid £2.25m to Sentido Marketing Limited for Management Services (just another way of syphoning cash) - Sentido is owned by Jake Brown et al - and yes if you then look at the Sentido Accounts - there's this little note about Directors Loans:




When the Administrators/Liquidators are finally appointed, they should have a field day!

Swipe

Won't these  these director loans need to be repaid if they go into administration?

ihatetrump

Yep - but Sentido won't go to the wall - it looks like a Directors cash cow for syphoning money out of Avro - Avro pays management services fees to Sentido - because Avro doesn't make any money it can't pay dividends, so it pays this way instead - by the back door.

Camorra

The bottom line with all these pseudo energy companies is that they get their supply from British Gas/Centrica and charge their customers slightly less (almost negligible in some cases) in return for less profit than British Gas/Centrica. For the sake of a few hundred pounds per year or less, what was the point of switching to flaky energy suppliers like Avro & competitors? Most people spend more in interest/charges on their mobile phone contracts / contract hire cars / cable tv, as part of this subscription based 'buy now pay later' society, then they will ever save by switching energy supplier.

[Deleted User]

Camorra said:

The bottom line with all these pseudo energy companies is that they get their supply from British Gas/Centrica and charge their customers slightly less (almost negligible in some cases) in return for less profit than British Gas/Centrica. For the sake of a few hundred pounds per year or less, what was the point of switching to flaky energy suppliers like Avro & competitors? Most people spend more in interest/charges on their mobile phone contracts / contract hire cars / cable tv, as part of this subscription based 'buy now pay later' society, then they will ever save by switching energy supplier.

Most people?

Probably not here on a money saving forum where I'd guess most people actually make wise purchase decisions and save every penny they can.

Energy is probably the most compelling product to buy at the cheapest rate possible because the end product is identical regardless of supplier. My morning toast and coffee is exactly the same regardless of which supplier bills me for the electricity and my shower is just as nice with any gas supplier so why waste money paying more for nothing extra?

jimjames

ihatetrump said:

Sadly, ML et al have for years advocated switching to the cheapest deals on the market and, Lemming like, consumers have followed this advice in their droves. If people chose a supplier with unusually low prices, then they really shouldn’t be surprised when their chosen supplier is the first to go under. That said, this crisis is unusual: many well run suppliers will also go under because they failed to foresee a 5 fold increase in wholesale gas prices or a shortage of wind.

Yes - very true - couldn't agree more.

Well (financially) Structured Companies can usually weather market downturns, those not well structured have been built on sand and are destined to collapse when the tide turns against them.

Thanks for that detailed analysis of the accounts, very interesting reading and great that someone has gone to that level of depth to look at it - shame some of the media haven't looked in the same way as it might shed light on the current situation.

Fascinating to read the follow up about service companies. Much the same process used by failed mini bonds such as Blackmore to extract money from the business via fees paid to linked companies for services.

Biggus_Dickus

niktheguru said:

Quite a deepdive into the company accounts.

What I do wonder is that there is current outrage at the situation, but i didn't really see people complaining too much when these smaller companies were offering customers extremely cheap electricity and gas unit rates. Like dolor says, if we go back to nationalised energy, we'll be back to paying high prices with no choice.

If people don't like the smaller companies they can quite easily just go with british gas for their gas and eon/edf etc for electricity and pay what they offer.

I completely agree that ofgem and the government haven't covered themselves in glory here, and the whole system needs to be better regulated but at the end of the day NO ONE will be without electricity and gas when these companies fail, Credit balances are PROTECTED and so you won't be "directly" out of pocket. The only inconvenience is the lengthy solr process and the fact now that when the small companies that you've fixed low prices with fail, you'll end up having to pay the higher/standard prices from the bigger companies.

Good post that, @niktheguru

However, the ‘credit balances’ are, I believe,  paid out of the SOLRs’ own funds and I wonder what may happen if there is an avalanche of failures and the SOLR’s don’t have the resources to cover such liabilities?

 Will we see the guaranteed ‘protection’ level start to slowly erode?...75%...50%...??

Energy companies can volunteer to be a SOLR,...alternatively, OFGEM can force any Energy company (volunteer or not)  to take on the mantle of SOLR.

I’d imagine the Big-6 are twitching atm. 😯

 

merchcon55

I would be reasonably confident that part of yesterday discussions with the Big 6 and the Business Secretary were to discuss the Government underwriting the "payback" of the credit in exchange for taking on customers that, with the price cap, are in fact loss making - and the Government might be on the hook for those losses as well.

Of course these Government payments will need to be paid for by all of us - either a raise of General Taxation - or a energy levy (on top of others that already exist) in our future energy bills.

niktheguru

Biggus_Dickus said:

Good post that, @niktheguru

However, the ‘credit balances’ are, I believe,  paid out of the SOLRs’ own funds and I wonder what may happen if there is an avalanche of failures and the SOLR’s don’t have the resources to cover such liabilities?

 Will we see the guaranteed ‘protection’ level start to slowly erode?...75%...50%...??

Energy companies can volunteer to be a SOLR,...alternatively, OFGEM can force any Energy company (volunteer or not)  to take on the mantle of SOLR.

I’d imagine the Big-6 are twitching atm. 😯

 

Thank you.

I agree, the upcoming death of most smaller companies will only heap pressure on the big 6. I suspect they will no longer be keenly volunteering for these customers as quite rightly they wont have hedged enough for the energy supply for these additional people.

The fact of the matter is the public are going to have to suck it up and realise that prices are going to rise. If your cheap fix with cheap company fails, then unfortunately you're going to end up on a tariff at current high prices. Its a shame and it sucks, but theres no point in whinging about it.

The big 6 are most definitely trying to work out a deal with government to fund the huge influx of customers from failed companies. Looks like the government are dragging their heels though. They were quite keen to give their mates multimillion pound PPE contracts, but not so keen on trying to support or reform the energy sector.

danlightbulb

niktheguru said:

The fact of the matter is the public are going to have to suck it up and realise that prices are going to rise. If your cheap fix with cheap company fails, then unfortunately you're going to end up on a tariff at current high prices. Its a shame and it sucks, but theres no point in whinging about it.

The big 6 are most definitely trying to work out a deal with government to fund the huge influx of customers from failed companies. Looks like the government are dragging their heels though. They were quite keen to give their mates multimillion pound PPE contracts, but not so keen on trying to support or reform the energy sector.

You're right, prices will rise, but that doesn't mean people shouldn't be vocal about it. Can't blame people for picking the cheapest switching deals. This situation is a massive failure of policy at the national wholesale and regulatory level.