UK subsidies for Octopus takeover of rival unlawful, court told

LONDON, Feb 28 (Reuters) - The British government granted billions of pounds in unlawful subsidies to Octopus Energy to take over collapsed energy supplier Bulb, three major rivals told a London court on Tuesday as they try to overturn the deal.

British Gas, E.ON and Scottish Power are challenging the acquisition of Bulb, which was one of the largest energy suppliers to collapse in 2021 due to soaring wholesale gas and electricity prices.

The deal for Octopus to buy Bulb, which had around 1.5 million domestic customers, was approved by the Department for Business, Energy and Industrial Strategy in October.

Octopus' takeover went ahead in December, when the government said it would provide up to 4.5 billion pounds ($5.4 billion) to fund the deal - although the extent of government support could be less, depending on energy prices.

British Gas, E.ON and Scottish Power say the government unlawfully committed billions of pounds of taxpayers' money to prop up Bulb, without considering the potential impact on the wider energy market.

However, Octopus argues the deal is now expected to be "extremely beneficial" for the taxpayer and will make a profit of around 1.2 billion pounds for the British government.

The three rival suppliers are asking London's High Court to overturn the government's approval of the deal because Octopus was offered support which was not offered to them.

British Gas' lawyer Paul Harris said that, if his client had been told about government support, "there would have been a bid by British Gas and (there) would have been a lower taxpayer cost".

But the government, Octopus and Bulb's administrators all argue the case should be dismissed and emphasise the impact unwinding the takeover would have on customers.

The administrators said in court filings they were entitled to ask potential buyers what they would need to make the deal work, which "allowed for the possibility that a bid requiring no or little (government) support might be made".

Octopus' lawyers also said the company had taken "operational and reputational risks in the course of completing the transaction". (Reporting by Sam Tobin Editing by Mark Potter)