Eligible energy firms
The EMFS is aimed at firms that play a significant role in UK gas and/or electricity markets as generators, shippers and/or suppliers. Additionally, only energy firms that make a material contribution to gas or electricity markets in the UK will be eligible for the EMFS.
The EMFS is only open to energy firms that are licensed by Ofgem or the Utility Regulator in Northern Ireland, or firms than have an affiliate thus licensed. Energy firms under state ownership or control and those that are part of a financial services group will be ineligible for the scheme. To be deemed eligible, energy firms must meet a minimum credit rating of BB-/Ba3.
Further details of the eligibility requirements for EMFS, including what is needed to satisfy the material contribution requirement and minimum credit rating can be found in the EMFS Market Notice.
Submitting an application
There are three application forms as part of EMFS, which can be found below.
Prior to submitting an application, energy firms should consult their commercial lenders in how best to approach their application, giving thought to how to evidence the criteria for the scheme.
Form 1 – For completion by the energy firm
Form 1 should be completed by the energy firm. It should include details of the credit facility for which a guarantee is being requested. The energy firm should instruct their commercial lender to complete Form 2 (and Form 3 if required) and submit it directly to the Bank.
Forms 2 and 3 – For completion by the commercial lender
Form 2 should be completed by the commercial lender upon request from the energy firm once they have decided to proceed with an application.
Form 2 includes more detailed information about the commercial lender and the credit facility for which a guarantee is being requested. There is no need for the commercial lender to include the energy firm in correspondence with the Bank around this form if the commercial lender would like to provide the information confidentially.
Form 3 is a one-time form for completion by the commercial lender. This form binds the lender to the Bank’s application process and disclosure policy and enables collection of operational information. Form 3 only needs to be submitted once, irrespective of the number of energy firm applications that a commercial lender is supporting. Commercial lenders may submit Form 3 to the Bank separately from and in advance of any specific application from an energy firm.
All signed application forms, along with any necessary supporting documentation outlined below, should be sent to the Bank at EMFS-Applications@bankofengland.co.uk.
Supporting documentation with an application
Alongside an application it will be necessary to submit supporting documentation as requested by the Bank. This should include copies of the energy firm’s latest financial statements and an organisational chart for the energy firm’s group (where applicable).
Energy firms must sign the Confidentiality and Undertaking Agreement and submit it alongside their application form. The Confidentiality and Undertaking Agreement is provided below along with guidance on how to provide evidence of the signatory’s authority:
The application process
All signed application forms should be sent to the Bank at EMFS-Applications@bankofengland.co.uk.
Once the Bank has received all required forms, it will conduct an initial screening before passing prospective applications to HMT.
HMT will then conduct further due diligence, during which time applicants may be required to provide further information to HMT as set out in the EMFS Market Notice.
To participate in the scheme HMT will require energy firms to agree to certain conditions, the details of which will be set out in a direct letter of undertaking agreed between the energy firm and HMT.
A pro forma direct letter of undertaking is available below and provides more detail on the conditions that will apply to all energy firms. A signed letter will be requested from the energy firm by HMT during their due diligence phase.
Unless stated otherwise, conditions will apply for 12 months from the time the additional guaranteed tranche of the credit facility is drawn down, or until the end of 2023, whichever is sooner.
As part of Form 1 the energy firm should propose the value of the additional tranche that they are seeking to be guaranteed. HMT will review the request and confirm the agreed limit during their due diligence phase.
The Bank will issue a guarantee to the commercial lender once the Agreement Fee has been received by the Bank and all other steps of the application process have been completed to the satisfaction of the Bank. A template of the guarantee can be found below.
Evidence of the authority of all signatories will be required. Where a commercial lender is a Sterling Monetary Framework (SMF) participant and the intended signatory to the guarantee has already been included in the SMF Authorised Signatory Form, no further evidence will be required.
Where a commercial lender is not already an SMF participant, or where intended signatories are not included in an existing SMF Authorised Signatory Form, evidence of signatory authority can be provided as set out in the signatory guidance document which is available below.