The company behind the low-cost district heating scheme in Aberdeen is to terminate its contract with Russian state-owned Gazprom.
Aberdeen Heat & Power said the decision had been made due to the “terrible invasion of Ukraine and the suffering of its people”.
The contract with Gazprom UK had been due to end this October – but Aberdeen Heat & Power said it wanted to start the process of finding a new supplier now.
However, there have also been concerns Gazprom UK could be facing administration in the coming days after a customer exodus following Vladimir Putin’s invasion of Ukraine.
Aberdeen Heat & Power was set up by Aberdeen City Council in 2002 and aims to alleviate fuel poverty in the city by supplying 4,000 homes with heating and hot water.
Savings of up to 40% have been secured for thousands of tenants under the not-for-profit system, which uses boilers and generators to heat and power several blocks of flats in one area.
Many other public buildings have been connected to the network, including Marischal College, Aberdeen Sports Village and Aquatic Centre, Aberdeen Beach Leisure Centre and the Beach Ballroom.
North East Scotland College (NESCol) also switched to the organisation to deliver both heat and hot water to its city centre campus in the Gallowgate in a deal worth £1 million.
A spokesman for NESCol said: “As service users, we support Aberdeen Heat & Power in its decision in relation to the Gazprom contract.”
“As an institution we are committed to playing our part in the wider response to the war in Ukraine and our college community is united behind all those who are affected, with care and support available to students and staff as well as a valuable contribution being made to the aid effort locally.”
Aberdeen Heat & Power said it had not been contacted by either Gazprom UK or the UK Government about the company potentially entering administration.
A spokeswoman said: “We’ve not been contacted by Gazprom UK or the government as of yet and await advice on a potential administration, so that continuity plans are in place.
“For the past 20 years, we’ve worked to alleviate fuel poverty and currently supply 4,000 homes in the city with low-cost heat on a not-for-profit basis.
“We contracted with Gazprom UK in 2019, carefully following OJEU procurement protocols.
“However, following the terrible invasion of Ukraine and the suffering of its people we served notice that we are terminating our arrangement when our contractual obligations are met in October.”
Manchester-based Gazprom UK supplies energy to thousands of companies across the UK and is one of the largest business energy suppliers in Britain.
Aberdeen Heat & Power, which also supplies heat to a number of schools run by the city council, said it wanted to “reassure customers” that there would be no impact on continuity of their heat and power supply in the event of any sanctions against Gazprom UK.
The group admitted that it is facing the same challenges as “all other householders and businesses” as the global price of oil and gas surges, which have given rise to concerns of a cost-of-living crisis across the UK.
But a spokeswoman for the company said its budget for the year starting on April 1 2022 “took into account expected increases in gas prices and the company has agreed a strategy to contract gas once the current contract is concluded”.
A UK Government spokesperson said: “The UK is in no way dependent on Russian gas, which makes up less than 4% of our supply.
“Our highly diverse sources of gas supply and a diverse electricity mix ensures that households, businesses, and heavy industry get the energy they need.
“We are aware that Gazprom Energy has a large presence in the non-domestic energy retail market.
“Gazprom’s retail business continues to trade in the UK and customers should exercise their own commercial judgment with regards to energy supply contracts they have in place at the moment.”
There are no current UK sanctions against Gazprom UK, so Aberdeen Heat and Power would need to see through its contractual obligations to the end of the contract.
If it does transpire that the UK arm of Gazprom collapses, it could be put into a “special administration” where it is temporarily run on behalf of the government at a possible cost to the taxpayer of £4 billion.