Network owner says it sought to wind up leading renewable retailer due to outstanding debts

The owner of the electricity network in the home state of collapsed energy retailer Zen Energy says that it sought a winding up order against the company because of outstanding debts.

Zen Energy last week announced that it had appointed voluntary administrators, despite the sale of its development assets and the proposed sale of its retail business, blaming the volatility in wholesale electricity prices.

Various media reports have pointed to large losses incurred by Zen Energy, particularly relating to its hedging strategy and its failure to get finance for some major projects.

But it appears that its issues had been ongoing for some time, and a week before the appointment of administrators, SA Power Networks – which owns and operates the distribution grid in South Australia – made a winding up order against the company in the Federal Court.

It has now explained why it took that action.

“SA Power Networks acknowledges Zen Energy Retail’s contribution to the energy sector, particularly through the development of green energy retail products,” it said in an emailed statement to Renew Economy.

“Over the past two and a half years, SA Power Networks has engaged constructively with Zen Energy Retail, providing substantial and ongoing commercial support to assist their continued participation in the electricity market.

“However, due to Zen Energy Retail’s outstanding debt, SA Power Networks lodged a winding up application with the Federal Court on Friday 26 June to ensure we could confidently recover amounts owed for electricity usage that have been incurred as well as amounts owed for ongoing usage.”

Around the same time as SAPN made the winding up order, the Australian Competition and Consumer Commission and the Australian Energy Regulator both granted approvals for the sale of Zen Energy’s retail business to Swiss commodities trader Gunvor.

But that sale did not proceed, with some energy insiders suggesting that banks may have decided their prospects were better with a controlled administration rather than a sale. The AER’s approval for the sale of the retail business was conditional on having sufficient finance to support the business.

The Zen Energy board announced the appointment of McGrathNicol as voluntary administrators last Friday, and it was also revealed that Zen’s development and infrastructure asset pipeline had already been sold. Details of the transaction, including the price and buyer, have not been revealed.

SAPN says in its statement that it will continue “open dialogue” with the administrators of Zen Energy Retail.

The AER, meanwhile, said it had removed Zen Energy’s authorisation to retail electricity as of midnight on Monday, July 6, and implanted its retailer of last resort process.

This means that Zen Energy’s business customers in South Australia, New South Wales, Queensland, Victoria and the Australian Capital Territory will be transferred to one of the country’s dominant big three retailers.

In its home state of South Australia, this will mean AGL Energy, which presumably includes the $1.5 billion long term contract with the state government. Customers in other states will be transferred to AGL, Origin Energy or EnergyAustralia, depending on their location.

“Customers are not required to take any immediate action,” the AER said in its statement. “Customers are under no obligation to remain with their new retailer once they are transferred.”

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