Yahoo Finance NatWest in emergency talks to rescue energy suppliers
NatWest is in talks with ministers over a rescue scheme for struggling energy companies as part of efforts to avoid a Treasury bailout.
The taxpayer-owned bank has been drafted into discussions aimed at helping to ease financial burdens on the industry, as fears mount that consumer bills will soar to £2,000 when the price cap increases in April.
Ofgem, the industry watchdog, is seeking to protect providers and the public after 26 suppliers went bust last year in the face of soaring wholesale gas prices.
It has already set out plans to establish a private sector loan scheme to help providers cover the substantial upfront costs of taking on customers when rivals go bust.
However, the watchdog's own documents show that only one, unnamed, lender has signed up for this scheme in a sign of deep scepticism across the City. Major banks including HSBC, Santander and Lloyds have not committed to providing loans.
Sources close to NatWest - in which the Government has a 55pc stake - said it is involved in wider talks about how to ease financial pressures on energy suppliers. Discussions are at an early stage and it is not yet known what support the taxpayer-backed bank could provide.
Industry leaders have said energy price rises are by far the biggest financial threat they face, with companies fearful they will be stung with up to £20bn of costs.
Wholesale natural gas prices climbed another 4pc on Wednesday to 236p per therm in the UK, far above their long-term average of about 50p per therm.
Prices have been pushed up by a global supply squeeze as societies reopened after Covid, with Russia accused of adding to the pressure by restricting exports to Europe.
Consumers in Britain have so far been spared from a surge in their bills because of the energy price cap, although this has had the side effect of triggering a wave of bankruptcies because suppliers were unable to pass higher costs on.
The cap will be increased to reflect average wholesale prices in April, with its new level due to be announced by Ofgem within weeks.
Energy bosses have warned the Government that a large jump in tariffs could wreck Boris Johnson's chances of reelection, and the taxpayer is expected to face pressure to stump up funding if City institutions refuse to step in.
Sources close to Business Secretary Kwasi Kwarteng have continued to insist he was "sceptical of taxpayer support", but last night it emerged the Government was examining plans to extend a scheme offering households a £140 discount on bills.
A Whitehall insider said discussions on Wednesday between the industry and Mr Kwarteng were "constructive" and that the Government would continue to work with companies and Ofgem to find potential mitigations.
However, City sources warned that lenders will be reluctant to fund any rescue scheme unless their loans are guaranteed by the Government over fears that higher prices pose a long-term risk.
One investment banker even suggested that industry efforts to find a private sector solution are little more than a negotiating tactic to persuade the Treasury the only viable option is taxpayer help.
It is feared that more energy providers will go bust in coming months. Sky News reported on Wednesday that Together Energy could be insolvent within weeks without fresh funding.
The company, which has 170,000 customers and is 50pc-owned by Warrington Borough Council, said in November it was "looking to source strategic long-term funding for growth" and told Sky News on Wednesday it was still in "active conversations".
A statement on its website says the company is "stable and very much operating business as usual".
Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit, said: "This current consultation over supplier failures is sort of like a business rescue model, and if one lender is willing to take on the whole book, then yes, this could be done with one provider.
"But it's always preferable to have more than one lender to do the job because there will be a competitive offer for companies - and the banks can share the risk between them.
"But this situation is entirely unprecedented and very unexpected for Ofem and the Government. The parties unfortunately seem to be making up solutions as they go along.
A spokesman for Ofgem said: "We are continuing to work with the industry and several interested parties to deliver the proposals set out in the consultation last week."
