UK energy firms using £40bn support scheme blocked from paying bonuses
Energy companies attempting to tap a £40bn government scheme to protect them from volatile prices will be blocked from paying bonuses to executives and dividends to shareholders.
The energy markets financing scheme (EMFS), devised by the Treasury and the Bank of England, is intended to offer a safety net to help energy firms facing short-term financing problems.
The government is concerned that unpredictable conditions in the wholesale gas market, exacerbated by the war in Ukraine, could leave energy suppliers exposed.
Energy companies typically sell power in advance to secure a fixed price but must maintain a “minimum margin” deposit in case of default before they supply the power. This cost has risen sharply as gas prices have escalated rapidly this year, leaving companies struggling to find funds to cover this.
Liz Truss announced the support scheme last month, alongside support for households and businesses to bring down bills this winter. Applications to the scheme, which will be handled by commercial banks, opened on Monday.
The Bank laid out the conditions for applications to the scheme, and said “energy firms will not be allowed to issue dividends, share buybacks, return of equity, discretionary bonus payouts, or make changes to senior management pay packages”.
The Bank also stressed that credit must be used in relation to hedging of price fluctuations in the UK gas and electricity market for the “reduction of risk or costs”.
It only wants to hand the support to companies in sound financial health. Energy suppliers’ balance sheets have been in the spotlight since the industry crisis began to escalate last year. More than 30 companies collapsed as the surge in wholesale costs exposed their fragile finances, raising
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