QUADGAS FINANCE PLC
(LEGAL ENTITY IDENTIFIER: 549300VISZ55A4JZIN65)
Ofgem gas shipper support open letter
On 2 June 2020 Ofgem published an open letter (the "Letter") addressed to the Gas Distribution Networks (including Cadent Gas Limited ("Cadent"), the operating subsidiary in the Issuer's group) amongst others.
The Letter is available at: https://www.ofgem.gov.uk/system/files/docs/2020/06/open_letter_on_relaxing_network_charge_payment_terms_0.pdf
The Letter sets out what support is available for energy shippers and suppliers (Cadent's direct customers are shippers) who are facing cash flow challenges as a result of COVID-19, with the aim of: (i) ensuring energy consumers are offered the support and service they need, (ii) minimising disruption for consumers and other market participants that could arise should companies exit the energy market in a disorderly way over the next few month; (iii) mitigating the risk to consumers of a material decline in competition arising from the potential exit of otherwise efficient suppliers; (iv) whilst doing so in a way that is financially viable for Distribution Network companies such as Cadent.
The Letter details a scheme whereby the Gas Distribution Networks, including Cadent, will offer an extended credit period to eligible shippers through a modification to the Uniform Network Code (this being the multi-party regulatory contract between gas transporters and gas shippers setting the normal commercial terms applicable to payment of invoices) (the "Scheme").
The Scheme will be sized and available so as not to threaten a network's ability to comply with its financial covenants and credit metrics and will be withdrawn by a given network company if at any time any entity in that network company's group would breach any of its financial covenants by continuing to provide the scheme. Ofgem would expect suppliers and shippers to only access the Scheme as a last resort.
Under the Scheme, eligible shippers will be able to defer up to 75% of their monthly invoice amount in July, August and September (capped at £1m per shipper, per Cadent network) and repayments will be due in instalments before March 2021. It has been further agreed that Cadent's total capped amount of liquidity extends to a maximum of £50m. Ofgem propose to treat any interest accrued, net of the cost of capital, by network companies as revenue under the price control.
Cadent has engaged with Ofgem on the practical and financial considerations surrounding the implementation of the Scheme. Cadent continues to monitor the impact of the Scheme and the impact of COVID-19 more generally.
For further information, please contact:
Helena Norgate
Ashbrook Court Prologis Park
Central Boulevard
Coventry
CV7 8PE
Email: [email protected]