Joint HM Treasury and Bank of England Energy Markets Financing Scheme (EMFS) – Market Notice 7 December 2022

This Market Notice sets out how energy firms and their commercial lenders can apply to participate in the EMFS, which was announced by the Bank of England and HM Treasury on 8 September 2022.
Published on 17 October 2022
This Market Notice was last updated on 7 December and replaces the currently effective provisions of the Market Notice dated 17 October 2022 in relation to the EMFS.

Market Notice

This Market Notice forms part of and should be read alongside the EMFS legal documentation and, in the event of any conflict, this Market Notice shall prevail.

Purpose of the Scheme

In the run up to and following the invasion of Ukraine, unprecedented price volatility in wholesale energy markets has been observed. As a result of this, energy firms that are of good credit quality may face large liquidity needs stemming from initial cash and variation cash margin calls arising from their hedging activity which they undertake to prudently manage energy price risks.

Recognising this, on 8 September 2022, HM Treasury (HMT) and the Bank of England (the Bank) announced a joint scheme designed to address the extraordinary liquidity requirements faced by energy firms operating in UK gas and/or electricity markets. 

The Energy Markets Financing Scheme (EMFS or Scheme) has been open to applications since 17 October 2022. It will enable the provision of short-term financial support to energy firms of good credit quality for the purpose of meeting collateral requirements that arise due to hedging activity in over-the-counter (OTC) and exchange-traded markets, and where the purpose is to reduce the risk or costs of contractual commitments related to the purchase or sale of electricity or gas which is intended for ultimate supply in the UK domestic market. 

This financing will help avoid the risk that the current extraordinary circumstances result in firms being unable to meet margin calls. By doing so, the Scheme will support wider confidence in the market and also increase liquidity as energy firms will be able to continue to engage in hedging activity. 

The Scheme will issue a guarantee that will apply to an additional tranche of a specified existing credit facility. The Scheme is priced with a commercial entry fee but penal pricing upon drawdown to ensure it is only used if commercial and competitively priced financing is unavailable. EMFS financing will be provided via credit facilities from commercial lenders who will receive a full coverage guarantee from the Bank to ensure that they have the capacity to support the UK energy sector.

The EMFS is not designed to replace commercial lender activity in UK gas or electricity markets, and commercial lenders are strongly encouraged to continue offering new and existing credit facilities outside of the Scheme.

Operation of the Scheme

Initial applications to participate in the Scheme should be sent to the Bank. More information on applying to participate in the Scheme is provided below.

Upon receiving an application to participate in the Scheme, the Bank will perform an initial application screening against the eligibility criteria outlined below.  

Thereafter, prospective applications will be subject to a phase of further detailed due diligence overseen by HMT. HMT will maintain final discretion as to which applicants enter the due diligence phase.  

To support the due diligence phase, HMT has appointed and will convene an Advisory Committee that will advise HMT on the credit risks associated with each application individually. The credit limit for each applicant will be determined by HMT, informed by the conclusions of the Advisory Committee. During the due diligence phase, applicants will be required to provide to HMT and their advisors further detailed financial information. This will include evidence of their outstanding positions, margin arrangements and available liquidity headroom, to inform the assessment of the required credit limit.

HMT will share information with the Bank in advance of taking a decision. HMT ministers will make a decision on whether to approve or reject an application.

Once an application is approved, the Bank will issue a guarantee that will apply to an additional tranche of a specified existing credit facility. Consistent with the Bank’s agency role under the EMFS, the Bank will issue a guarantee in accordance with HMT’s final decision, subject to due consideration of non-financial risks relevant to the Bank as guarantor.

The commercial lenders that provide the specified credit facility will be the beneficiaries of the guarantee for each agreed additional tranche of that credit facility. 

HMT, supported by UK Government Investments, will be responsible for the management and monitoring of the Scheme. Commercial lenders will be required to provide regular reporting to HMT. The content of these reports will be consistent with information that commercial lenders typically collate as part of their usual practices. Commercial lenders are required to provide HMT with any data or reporting they possess that increases HMT’s ability to monitor that the Energy Firm’s use of proceeds are in line with the eligible purpose, and that the Energy Firm maintains an appropriate credit risk rating. Data or reporting sharing will be subject to the terms of the guarantee. Further details on reporting will be provided upon completion of the application process.

In the event of a verified guarantee claim from a commercial lender, HMT will agree to settle the claim in accordance with the guarantee, and the Bank will make the payment. HMT will fully indemnify the Bank for its role in the EMFS and the Bank will bear no credit risk.

The Bank and HMT reserve the right at their sole discretion to deem any firm ineligible for any reason and at any stage of the application process, prior to a guarantee being entered into. Under the terms of the guarantee, the Bank and HMT may also terminate or suspend an Energy Firm’s access to the Scheme. As a result, the commercial lender shall not advance any further funding to that Firm under the guaranteed facility. Funds previously drawn down shall remain covered by the guarantee.

Duration of the Scheme

The Scheme will be open to applications from 17 October 2022 until noon GMT on 27 January 2023. 

The guarantees provided in the Scheme will cover a period of up to twelve months from the date of issuance of the guarantee.

It will be possible to terminate a guarantee early. The commercial lender has the right to terminate a guarantee at any point, subject to a 30-day notice period and the terms of the guarantee. The Energy Firm may be able to request that their commercial lender terminates the guarantee, subject to the terms of any arrangements between the Energy Firm and the commercial lender. Energy Firms will not be able to re-apply to the scheme once the guarantee has been terminated. 

Eligible Energy Firms

The EMFS is aimed at firms that play a significant role in UK gas and/or electricity markets as generators (firms that generate electricity), shippers (firms that buy and sell gas and arrange for the transportation of gas through the UK network) and/or suppliers (firms that sell energy to customers) and that are potentially exposed to large margin calls on their hedging activity. This Market Notice collectively refers to these as ‘Energy Firms’.  

The EMFS is only open to Energy Firms that are Ofgem-licensed, or where another entity in the Energy Firm’s group is Ofgem-licensed, and Energy Firms (or affiliates of firms) that are licensed by the Utility Regulator in Northern Ireland.

The EMFS is not aimed at firms that trade in, or otherwise interact with, energy markets unless they are also an Energy Firm. For example, consumer energy purchasing groups, energy consultants or energy traders are not in scope unless they are also an Energy Firm as set out above. 

Energy Firms that are ultimately owned by banks, building societies, insurance companies and other financial sector entities regulated by the Bank or the Financial Conduct Authority will not be eligible. Energy Firms within groups that are predominantly active in business subject to financial sector regulation will not be eligible. 

An Energy Firm will not be eligible to participate in the Scheme if state-owned entities, national and/or regional governments and/or municipalities hold, directly or indirectly, more than 25 per cent of its issued securities and/or voting rights, or if such entities exercise direct or indirect control over the Energy Firm.

If the ownership of the firm changes so that the above criteria for exclusion are met, no further loans shall be advanced under the Scheme.

Material contribution to gas and/or electricity markets in the UK

In addition to the above, only Energy Firms (including their finance subsidiaries) that make a material contribution to gas or electricity markets in the UK will be eligible. The material contribution of firms in Northern Ireland will be considered on a case-by-case basis by reference to that market.

Energy Firms, including those with foreign incorporated parents, that satisfy (or have affiliates that satisfy) one or more of the following conditions related to operating activity in the UK market will normally be regarded as meeting the material contribution requirement: 

  1. Domestic retail suppliers of gas and/or electricity that supply more than 750,000 domestic meter points*;
  2. Commercial electricity suppliers that supply more than 1 million MWh*;
  3. Small business gas suppliers that supply more than 4,800 non-domestic supply points*;
  4. Large business gas suppliers where their average sum of supply point annual quantity is more than 2 million MWh*;
  5. Gas shippers with per year total annual demand of more than 0.45 billion cubic metres**; or
  6. Electricity generators with de-rated capacity of more than 500 MW***.

* Based on the monthly average over the period May-July 2022.
** Based on Xoserve Annual Quantities and direct NTS supply.
*** Based on ESO Electricity Capacity Report, May 2022.

Minimum credit rating

To be deemed eligible, Energy Firms must have a current minimum long-term issuer credit rating (or equivalent) of BB-/Ba3 from at least one of the major credit rating agencies.

Energy Firms with split ratings where one or more rating is below the minimum will not be eligible.

The Bank and HMT reserves the right to reject applications based on aged ratings.  

Where no public agency rating is available, the Bank and HMT will take into account relevant credit information about the Energy Firm’s current financial condition from other qualified sources, including private agency ratings confidentially shared with the Bank and HMT by the Energy Firm or commercial lender, and commercial lender ratings shared with the Bank and HMT by the commercial lender(s) or via relevant third party sources. 

If an Energy Firm is downgraded below the minimum credit rating of BB-/Ba3 during the life of the guarantee issued by the Bank, no further loans shall be advanced under the credit facility unless agreed by HMT, after a further assessment by the Advisory Committee. This will not invalidate the executed guarantee. Please see Q&A section of the EMFS webpage for further details on this process.

Energy Firms that do not have existing credit facilities that meet the requirements outlined below will not be eligible for the Scheme. 

Credit facilities

The Bank will offer full coverage guarantees only on additional tranches of existing Revolving Credit Facilities (RCFs) or economically equivalent products. 

The expectation is that the guarantor’s claim will rank pari passu with that of the commercial lender (or lenders) that provides the RCF. Where the credit facility to be guaranteed by the Bank is borrowed at subsidiary level and other group entities provide parental or other guarantees to commercial lenders, the Bank will expect a similar set of guarantees to be made available to support the guaranteed tranche. This is so that the Bank is not exposed to any greater structural subordination risk than the commercial lenders and has recourse to the Energy Firm at an appropriate level.

The Bank will only guarantee one credit facility per Energy Firm.

The Bank and HMT reserve the right at their sole discretion to deem any credit facility ineligible for any reason.

All Energy Firms who may wish to participate in the Scheme should first discuss their application with the commercial lender(s) that offers the credit facility that the Energy Firm has proposed for guarantee. More information on applying to participate in the Scheme is provided below.

Eligible lenders

In the first instance, this guarantee will be available on credit facilities extended by banks regulated by the Prudential Regulation Authority (‘PRA’) including any branch of an overseas bank regulated by the PRA.

In the event that applications relate to credit facilities provided by commercial lenders regulated in other jurisdictions (or by syndicates where at least one commercial lender is regulated in another jurisdiction), the Bank and HMT will take a case-by-case approach to eligibility. Credit facilities extended by non-bank and/or non-regulated commercial lenders will not be eligible but the Bank and HMT may review this restriction on a case-by-case basis, for example if these entities are involved in a syndicated credit facility. 


There are three fees payable by Energy Firms for participation in the EMFS:

  • The Arrangement Fee is payable after confirmation of eligibility and credit limit but before the guarantee is executed by the Bank and is a one off payment required in order to receive the guarantee. The Arrangement fee is expressed as a percentage of the credit limit agreed by HMT.
  • The Commitment Fee will be charged on the amount that remains undrawn from the additional guaranteed tranche of the credit facility. The Commitment Fee will accrue on a daily basis from the first business day following the day the guarantee is executed, and will be payable on a quarterly basis in arrears. 
  • The Scheme Interest Rate will be charged on the amount drawn from the additional guaranteed tranche of the credit facility. The Scheme Interest Rate is composed of the Benchmark Rate (SONIA) plus the Interest Margin. Interest will accrue on a daily basis from the first day the credit is drawn, and will be payable on a quarterly basis in arrears.

The Commitment Fee and the Interest Margin will vary depending on the credit rating of the Energy Firm and are expressed below in basis points of the relevant underlying value outlined above:

Credit Rating (or equivalent)  Arrangement Fee (bps)  Commitment Fee (bps)   Benchmark Rate  Interest Margin (bps) 
 A- and above 20  35  SONIA  400 
BBB+, BBB or BBB-  20  55  SONIA  600 
BB+, BB or BB-  20  105  SONIA  1200 

If needed in order to reflect commercial practices, the Commitment Fee and the Scheme Interest Rate are expected to change in a way that aligns with any mechanism, in the existing credit facility provided by the commercial lender, that determines changes in similar fees as credit ratings change.

The pricing of the Scheme has been designed to incorporate the costs of the commercial lenders, the Bank and HMT. As such, commercial lenders should not impose additional fees on Energy Firms to those outlined above for the additional guaranteed tranche of the credit facility. 

Commercial lenders are permitted to retain a proportion of the Arrangement Fee, Commitment Fee and Scheme Interest Rate in order to cover their costs, up to a maximum of:

Arrangement Fee (bps)  Commitment Fee (bps)  Scheme Interest Rate (bps) 
16  72 

All fees and interest will be paid by Energy Firms to their commercial lenders as per arrangements made between each commercial lender and Energy Firm. It is the responsibility of the Energy Firm to ensure fees and interest are paid to the commercial lender on time. 

Commercial lenders will retain the agreed portion of the funds to cover their costs and pay the remaining funds to the Bank. It is the responsibility of the commercial lender to ensure the relevant funds are paid to the Bank on time. Payment instructions will be relayed during the course of the application process.

In the event that the Energy Firm requests to terminate the additional guaranteed tranche of the credit facility early, a Cancellation Fee may be payable subject to the terms of any arrangement between the Energy Firm and the commercial lender on the underlying credit facility. Where a Cancellation Fee is payable, and has not been waived by the commercial lender, the fee will be equal to the value of the outstanding Commitment Fee that would have been payable at the then applying Commitment Fee rate if the additional tranche had remained undrawn until the end of the guarantee’s coverage, as defined in the guarantee. The lender will be entitled to retain up to 16bps of that fee, with the remainder being paid to the Bank.


The Bank will guarantee additional tranches of existing credit facilities under limits set by HMT, in relation to each application.

Energy Firms should propose the value of the additional tranche that they are seeking to be guaranteed in their application form to the EMFS. More information on applying to participate in the Scheme is provided below.


In exchange for accessing the EMFS and benefitting from the guarantee on the additional tranche of credit, HMT will require Energy Firms to agree to certain conditions. These conditions will be set out in detail in a direct letter of undertaking agreed between the Energy Firm and HMT. 

The following conditions will apply in all cases:

  1. Credit drawn under additional guaranteed tranches should be used to meet collateral margin requirements relating to hedging of price fluctuations in the UK gas and/or electricity market only. The purpose of hedging contracts should be the reduction of risk or costs. The underlying purchase or sale of electricity or gas should be intended for ultimate supply in the UK domestic market. This includes both initial cash margin and variation cash margin payments, and both OTC and exchange-traded hedging activity. Energy Firms will be expected to provide evidence to HMT and their commercial lender(s) that all proceeds of the EMFS Facility are used only for the eligible purpose.
  2. Energy Firms will not be allowed to issue dividends, share buybacks, return of equity, discretionary bonus pay-outs, or make changes to senior management pay packages;
  3. Energy Firms will provide undertakings that they are compliant with all relevant regulations and laws which apply to them; and
  4. Energy Firms listed in the UK must disclose whether they have a net zero transition plan and, if so, deliver it to HMT within 6 months of drawdown on the facility or before termination of the guarantee, whichever is sooner. All Energy Firms are required to deliver proportionate climate-related financial information in line with the guidance of the Taskforce on Climate-related Financial Disclosures (TCFD) to HMT, within 6 months of drawdown of the guaranteed tranche of the credit facility or before termination of the guarantee, whichever is sooner. For example, this should include information on the Energy Firm’s approach to the transition to a low emission world consistent with the TCFD guidance on targets, metrics and transition plans from October 2021.
  5. Energy Firms will promptly notify the lender and HMT if their circumstances change and they no longer meet the EMFS eligibility criteria.

Unless stated otherwise, conditions will apply from the time the additional guaranteed tranche of the credit facility is drawn down for 12 months or until the end of 2023, whichever is sooner. If the guarantee is terminated, the conditions will cease to apply from the date of termination.

A pro forma direct letter of undertaking is available below. A signed letter will be requested from the Energy Firm by HMT during the due diligence phase. 

In the event that the conditions in the direct letter of undertaking are not adhered to, HMT reserves the right to publish the content of the letter with details of such non-compliance.

Applications to the Scheme

The window for submitting applications to the Bank to participate in the Scheme as a commercial lender or Energy Firm opened on 17 October 2022.

For each credit facility that requires a guarantee, the forms detailed below should be submitted. In the event the credit facility is provided by a syndicate of commercial lenders, a lead commercial lender should be nominated to submit the relevant application forms and to be an ongoing contact for the application process. 

Energy Firms should complete and submit application form 1 in conjunction with their commercial lender. Commercial lenders should complete and submit application form 2.

Application forms 1 and 2 are available below.

Unsigned application forms will not be accepted. 

All Energy Firms are asked to share their latest financial statements and organisation chart alongside their application form.

Additionally, each commercial lender that intends to participate in the EMFS is also required to submit application form 3. Application form 3 is available below.

Application form 3 only needs to be submitted once by each commercial lender participating in the EMFS, irrespective of the number of Energy Firms they may be supporting. 

The Bank and HMT may request further information to be submitted by the Energy Firm or the commercial lenders during the course of the application process.

Application forms or any questions on applying to the Scheme should be submitted by email to

The Bank recognises that Energy Firms or some of their commercial lenders may not be regular counterparties of the Bank. To make usage as easy as possible, a set of frequently asked questions and answers has been published on the Bank's website.

Energy Firms are not permitted to reapply to the Scheme after they have terminated a guarantee extended under the Scheme.


The guarantee will be entered into by the Bank and the commercial lender that provides the additional tranche of the credit facility to be guaranteed. The guarantee template is available below:

Where a credit facility is provided by a syndicate of commercial lenders, the Bank's expectation is that each commercial lender contributing to the additional guaranteed tranche of credit will be required to sign the guarantee. The precise signing mechanics for each guarantee will however be considered as part of the application process. There will be one guarantee per guaranteed credit facility. 

The Bank will countersign and return the guarantee to the commercial lender(s) once the Arrangement Fee has been received by the Bank, as set out in the Pricing section of this Market Notice.

Evidence of authority of each signatory to the guarantee will be required by the Bank. 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.

Energy Firms are required to sign and submit the Confidentiality and Undertaking Agreement alongside their application form. The Agreement is available below. Evidence of authority of each signatory will be required by the Bank. Guidance on providing evidence of the signatory’s authority is also available below.

Further information on the application process has been published in the Q&A section of the website, including an indicative list of the information that HMT may require as part of their assessment process.

The Bank and HMT reserve the right to reject applications in their sole discretion. The Bank and HMT together reserve the right to update the terms of the Scheme including eligibility requirements and Scheme legal documentation. Guarantees already provided will remain valid.

Published information

When a sufficient number of guarantees have been issued, and no earlier than 31 December 2022, the Bank and HMT reserve the right to begin publishing on the Bank’s website the names of Energy Firms who have or have had an additional tranche of a credit facility guaranteed by the Bank. The Bank will give participants at least one week’s notice prior to the first publication.

If UK energy and gas markets have become less volatile and the risk of margin calls has reduced, then from June 2023 the Bank and HMT may agree to begin periodic disclosure of any significant usage of additional tranches of credit facilities guaranteed by the Bank. Any disclosure would be triggered by average utilisation greater than 10% of the agreed credit limit over a two week period. If the Bank and HMT judge that the relevant markets have become stable, the Bank will inform participants sufficiently far in advance that they can manage usage of the credit facility and the disclosure implications as they see fit. HMT and the Bank also reserve the right to publish such information in the last three months of the Scheme. 

Aggregated and anonymised information on, for example, the total number and size of additional guaranteed tranches of credit facilities and Scheme usage will also periodically be made public no earlier than 31 December 2022, where doing so does not allow specific Energy Firms to be identified.

Energy Firms are permitted to disclose their participation in the Scheme at their own discretion after a guarantee issued under the Scheme has been executed.