Some of the most energy-intensive businesses are currently highly exposed to Gazprom.
It has been reported that Gazprom Energy, which provides nearly 20% of gas used by British firms, seeks a buyer to avoid collapse.
Reports claim that if Gazprom Energy failed, it would be put into taxpayer-funded special administration, as occurred in November with Bulb, Britain’s seventh biggest residential energy supplier.
During a hearing on energy price and the future of the energy market, Nishma Patel, Policy Director at Chemical Industries Association, said: “I think the key challenges is those contracts and commercial agreements that businesses have with Gazprom whether they are short-term, how long they will take to unwind, is the framework that is currently provided by the regulator fit to allow commercial organisations to unwind these contracts.
“And what are the legal consequences of doing so. So, we have had a couple of good examples of what does it mean for a company if they do decide to unwind, what penalties do they face and equally what does it mean if a supplier decides to rightfully reject unwinding a contract because there are terms and payments outstanding.
“I think that’s the bit the companies are really struggling to unwind with at the moment.”
A government spokesperson told ELN: “We are aware that Gazprom Energy has a large presence in the non-domestic energy retail market. Gazprom’s retail business continues to trade in the UK and customers should exercise their own commercial judgement with regards to energy supply contracts they have in place at the moment.”
Dr Richard Leese, Chair at Energy Intensive Users Group has called for orderly management of Gazprom, including honouring its existing contracts, reducing policy and network costs, and ensuring security of supply.
Dr Leese said: “I think the average exposure of non-domestics to Gazprom is 21%. We do have certain strategically important sectors and subsectors within the Energy Intensive Users Group that have much higher exposure to Gazprom, 50% or two-thirds of sectors are exposed. So, there is real importance here to have a managed exit.
“It’s really important for those healthy businesses that have taken the responsible thing to do, which is hedge their energy exposure, they did it with Gazprom, that needs to be honoured in terms of contractual obligations. The prices need to be honoured when, or if, that business gets transferred to either an administrator or new ownership.”
A few days ago, energy consultancy Inspired PLC predicted it could have a potential impact of up to £3 million on its expected EBITDA if Gazprom Energy ceases trading.
ELN contacted Ofgem – the regulator declined to comment on speculate on specific suppliers’ finances or position.
