Sunak’s Home Energy Rebate Bill Could Be Enticing | Nils Pratley

Jhe early version of Rishi Sunak’s big market for the retail energy sector, which will be presented in full on Thursday, seems reasonable. All households are likely to benefit from a £200 rebate on their bills, which will be funded by vast loans to supply companies; and low-income and vulnerable customers will receive additional support from the public purse.

In his own words, that’s consistent: cut the sharp edges off April’s bill hike and pray that wholesale gasoline prices will plunge before next winter. But let’s hope the Chancellor answers this question: what’s plan B if wholesale prices don’t fall during the year?

This is, unfortunately, what the future looks like now. Regulator Ofgem, also in action on Thursday, is set to raise its price cap from £1,277 to around £2,000, but the worst is about to happen. Analysts are currently predicting the mechanical formula will cough up around £2,300 for an average dual-fuel bill at the October trim.

If that materialized, would Sunak sanction even more loans to delay the moment when the full burst of higher prices is felt by high-income customers? Remember Bulb is already listed on the state book, backed by a £1.7billion loan. If the exercise of £200 per household implies £5.5bn (this is how the calculations on 27m homes come out), it takes little imagination to see how exposure to government loans could quickly approach the £10 billion mark. This is a significant sum, especially when more business losses are expected.

Doing nothing was not an option for Sunak, but finding a safe exit from this mammoth intervention might prove the hardest part. The bet here is not that every billion will return to the Treasury.

Vodafone progress pending

The cynical way to view chief executive Nick Read’s latest speech to ailing Vodafone shareholders is to call it another spread of the ‘give us time’ routine. But Read may be right: you can’t just compose offers.

Talk of pursuing deals with ‘multiple parties in multiple markets’ is really a way of saying Vodafone is in for a place of ‘market consolidation’, in the jargon, if only regulators and other companies can be persuaded to play ball.

Has a work-from-home pandemic reset the contest rules? Will EU regulators now tolerate a reduction to three major mobile operators in a member state if a faster rollout of, say, 5G is promised in return? If so, Vodafone could arrive somewhere in Spain, Italy and Portugal. And the UK, where a Vodafone-Three tie-up is constantly rumored, can ignore Brussels if it wants these days. But it takes two to tango, which seems to be one of Vodafone’s problems.

Likewise, Read can claim that he tried to shake things up on the mast side. Separating Vantage Towers via a Frankfurt listing did nothing for Vodafone’s share price as an 82% stake was retained, but the core of a “European champion”, as he puts it, has been created. It just needs one or both from Deutsche Telekom or Orange in France to do their own internal re-jigs.

In theory, Cevian’s arrival as an activist investor puts a rocket under management. In practice, simplification can be a slower burn than everyone wants. In the meantime, Vodafone could do itself a favor by finding non-executives with telecoms expertise; on this point, at least, he has no excuse to delay.

Shaking hands

Annington Homes’ threat to sue the MoD was all but warranted when the landlord cried ‘expropriation’ last week after the MoD said it would explore ways to regain control of 38,000 homes servicemen by exercising “legal emancipation rights”.

The new twist on Wednesday was an offer from Annington, controlled by Guy Hands’ private equity firm Terra Firma, to settle the dispute peacefully. Would the MoD like a one-off payment of £105million for the refurbishment? Or perhaps he would prefer to buy the entire portfolio at its market price (or CBRE appraiser’s estimate of a market price) of £7.97 billion?

At first glance, it’s hard to see why the MoD would jump on either proposition. A sum of £105million is hardly a knockout blow considering that Annington paid out a dividend of £794million last autumn. With regard to the purchase of the whole properties, the MoD’s objective in launching a test case was certainly to establish, firstly, whether the principle of emancipation applies, and, secondly, where an independent appraiser set a market price.

This battle may not go the distance, but it is suspected that there are still a few rounds left. As it stands, the MoD may be slightly encouraged by the developments. Sounds of shaking hands.