This month the HM Treasury has come together with the Bank of England to come up with a scheme to address the liquidity requirements faced by energy companies operating in the UK energy markets.
Recently the gas and electricity markets have been extremely volatile, which has caused issues for energy firms and consequently higher prices for consumers. For energy companies to protect themselves from price fluctuations, they must put a large amount of collateral up I order you to enter energy contracts or accept large credit exposure to their counterparties.
This scheme is estimated to cost around £40 billion and will improve resilience in energy markets and the economy. This scheme will now be available for energy firms from next month and will provide short-term financial support for companies that need it.
Energy companies will now be able to operate and manage risks in a cost-effective way while we are going through a time of unprecedented volatility. This will help balance out costs that energy consumers face in the long run.
The Energy Markets Financing Scheme will only be available to companies that need it and meet eligibility requirements. For example, energy companies must be in sound finical health in every other area and able to make a material contribution to the liquidity of UK energy markets.
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