House of Commons · Written Ministerial Statement
Energy Update
17 October 2022 · Treasury
Proposed by Jeremy Hunt Con Godalming and Ash
Summarised by AI from the official record, so it can contain mistakes.
At a glance
Key points
- The HM Treasury created a contingent liability related to the Energy Markets Finance Scheme (EMFS) due to energy market volatility.
- The EMFS offers a 100 percent guarantee to commercial banks for additional lending to UK-based energy firms experiencing large margin calls.
- The scheme sets total liability limits per firm but has no cap on the total amount of facilities it can provide.
Issue summary
The statement addresses the creation of a contingent liability related to the Energy Markets Finance Scheme (EMFS) by HM Treasury in response to energy market volatility.
Action requested
HM Treasury is announcing the launch of the EMFS, which provides a 100% guarantee to commercial banks for additional lending to UK-based energy firms facing large margin calls. The scheme has no cap on facilities but sets total liability limits per firm during application. It aims to ensure cost-effective risk management and reduce costs for businesses and consumers.
Key facts
- HM Treasury is creating a contingent liability related to the EMFS.
- The scheme opens for applications today, with a special urgency timeline of 14 days after this minute's issuance.
- The total liability will depend on take-up and specific circumstances of each applicant firm.
- Firms must evidence their exposure to margin calls and comply with eligibility criteria including UK presence and sound financial health.
- Facilities have no cap but require firms to meet a minimum credit rating threshold of BB-.
- The scheme is designed as a last resort, charging penal interest rates above market rate.
- Commercial banks will charge arrangement fees and commitment fees; proceeds flow back to the Exchequer.
- HM Treasury, supported by UK Government Investments, will manage and monitor the scheme post-launch.