The EMFS was announced by the Prime Minister on 8 September, and in The Growth Plan the then Chancellor confirmed that it will provide a 100% guarantee to commercial banks to provide additional lending to energy firms.
Delivered with the Bank of England, this scheme addresses the extraordinary liquidity requirements faced by energy firms operating in UK wholesale gas and electricity markets as a result of margin calls.
Energy prices have been high and volatile in recent months. As a result, large amounts of collateral are required to enter into contracts firms use to effectively insure themselves from price fluctuations, or otherwise firms must accept large credit exposures to their counterparties.
The details of the scheme are being announced today, and firms can start to apply via the Bank of England. Applications will be accepted for a period of three months.
The scheme is aimed at providing a backstop to support energy firms facing large and unexpected margin calls. Pricing and conditions will reflect this objective. The scheme will provide resilience to energy markets and therefore help to reduce the eventual cost for businesses and consumers.
