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Energy Update

17 October 2022

Proposing MP
Jeremy Hunt Con
Godalming and Ash
Type
Written Ministerial Statement
Department
Treasury
View on Parliament.uk -->

At a Glance

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.
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