Major Hartlepool employer Utility Alliance owed 250 creditors more than £4 million when it collapsed
An energy business had debts exceeding £4 million when it went into administration earlier this year, a new report has revealed.
Utility Alliance which had been one of Hartlepool’s largest employers, went into administration in February this year leading to 245 people losing their jobs.
A report by administrators FRP has now been published detailing the circumstances that led up to business’s collapse and its current financial state.
It shows that the energy broker and consultancy business had 251 creditors who were owed more than £4.1 million in total.
And the company has an estimated financial deficit of £5,681,996.
Employees, who are classed as preferential creditors, are owed a total of £417,583 comprising pay arrears, holiday pay and unpaid pension contributions.
But the report says it is anticipated they will be paid in full subject to the approval of a Company Voluntary Arrangement (CVA).
It details how Utility Alliance enjoyed rapid growth from 2015 by earning commissions from “energy price uplifts” they agreed between energy suppliers and clients.
At the start of 2017 the business relocated to Hartlepool Marina and at its peak employed over 300 members of staff, opening other offices in Newcastle and Sheffield.
Energy suppliers were entitled to claw back money such as when the end client did not use as much energy as expected.
Utility Alliance held a back percentage of each contract’s value to take care of any clawbacks but it became not enough.
And following Covid-19, supplier clawback roughly doubled to £11.5m as they began claiming them sooner.
Utility Alliance’s client businesses were also using much less energy after home working became more popular.
It led to the company’s £3m cash reserves being completely wiped out and the situation was made worse by falling sales.
The report stated: "Based on the reduced sales, the company was unable to fund the clawback demands of the energy companies whilst still meeting its ongoing trading commitments.
"Attempts to renegotiate the rate of clawback deductions with energy suppliers were unsuccessful.
"By the second week in December 2020 it was clear that no alternative funding would be forthcoming and the company’s cash reserves would be entirely depleted within the month.”
The business was the subject of a takeover bid last March but the potential buyer pulled out when the pandemic hit.
Then towards the end of last year two energy suppliers demanded over £2m in unpaid clawbacks and the company furloughed staff.
Meanwhile the directors brought in FRP as advisors and sought a new buyer or investors.
In December, FRP contacted 451 parties who had an expressed an interest in the business with 16 showing significant interest.
But the report stated: “Following the initial period of marketing meetings were held with several interested parties and it became apparent that a solvent sale of the company would not be achieved”.
Reasons included the likelihood of further clawbacks and the company’s immediate short-term cash requirements.
An application for a £4m government-backed loan was unsuccessful.
Of the company’s creditors, HM Revenue and Customs is owed £2.4 million as a secondary creditor but is expected to receive only 20.8p in the pound.
Utility Alliance went into administration on February 12.