Independent Energy collapses with customers still owing £119m in bills

Michael Harrison,Business Editor
Saturday 09 September 2000 00:00
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Independent Energy, the biggest of the new electricity and gas suppliers, collapsed yesterday, calling in the receivers after being overwhelmed by its mounting customer billing problems.

Independent Energy, the biggest of the new electricity and gas suppliers, collapsed yesterday, calling in the receivers after being overwhelmed by its mounting customer billing problems.

Shares in the Solihull-based group were suspended and administrative receivers appointed from KPMG after Independent Energy failed to find a rescuer and its banks withdrew financial support.

The company has debts of at least £165m and at the last count was owed £119m by customers to whom it had supplied electricity but had been unable to bill. Independent Energy has 242,000 customers, of which just under 200,000 are domestic. It had difficulties billing because of problems in obtaining customer meter readings from previous suppliers.

Myles Halley, of KPMG Corporate Recovery, one of the two joint receivers, said that the company would continue to trade as normal, adding that two expressions of interest had already been received.

Independent Energy was floated in 1996 for just £13m and rose in value to more than £1bn, making a multi-millionaire out its founder John Sulley. The billing problems emerged in February, sending the company's shares crashing.

The stock was suspended yesterday morning at 500p, valuing the company at £200m.

The energy regulator, Callum McCarthy of Ofgem, said there was no question of any customers of Independent Energy being disconnected but cautioned that they would be liable to pay for any energy they used and advised consumers to take a meter reading.

Ofgem ordered Independent Energy to stop signing more domestic customers in May after its billing problems began to worsen but yesterday Ogem was criticised by consumer groups for not acting quickly enough. Rodney Brooke, chairman of the national Electricity Consumers Council, said: "We have repeatedly expressed our concerns about the problems of Independent Energy. We do not believe this situation should have been allowed to arise. The regulator must now explain whether enough was done and whether he should have stepped in sooner."

Despite the mounting billing problems and the severe shortage of working capital, Independent Energy continued to report healthy profits. In May it announced a 12-fold rise in profits to £21.7m for the nine months to the end of March. However, its cash position was worsening. In May it had to seek an extra £80m to keep it going until the end of this month and in June it was forced to put itself up for sale.

Industry sources say part of the problem lay in the company's accounting practices. It was selling energy for less than the cost of purchasing it but amortising these costs over very long time periods, enabling it to report profits.

Ofgem said it was now monitoring the situation closely and was in contact with the receivers. Unless a buyer can be found quickly, it will be Ofgem's job to arrange the orderly transfer of Independent Energy's customers to new suppliers.

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