The Daily Telegraph

Energy firms in £40bn bailout will need green credential­s

- By Matt Oliver

Cash-strapped energy companies that take out Covid-style support loans this winter will be forced to draw up netzero carbon plans and will be banned from paying dividends and bonuses.

The £40bn Energy Markets Financing Scheme, announced by the Government and the Bank of England last month, will provide emergency cash to help suppliers, generators and shippers facing soaring gas and electricit­y prices.

However, as the scheme opened yesterday, the Bank told companies seeking assistance they must meet strict conditions. Recipients will “not be allowed to issue dividends, share buybacks, return of equity, discretion­ary bonus pay-outs, or make changes to senior management pay packages”, a notice from the Bank said.

The conditions apply for 12 months after companies draw down credit through the scheme or until the end of 2023, whichever comes first.

Energy companies will also be made to reveal whether they have a net zero transition plan. Those who do not will be made to deliver one, either within six months of using the scheme or by the scheme’s end. Transition plans include the steps that a company will take in order to cut their overall carbon emissions to net zero by 2050, a target the UK has committed itself to.

The restrictio­ns echo similar requiremen­ts on companies who took Covid support loans during the pandemic.

Jeremy Hunt, the Chancellor, said the financing scheme would “significan­tly reduce any risk of market failure”. He added: “A resilient energy market is vital as we all grapple with the consequenc­es of Putin’s horrifying invasion of Ukraine and his decision to weaponise Russia’s energy reserves.”

Adam Berman, deputy director of industry group Energy UK, welcomed the support but warned: “Setting conditions that are too stringent could exclude the very companies needed to guarantee our energy security.”

Under the scheme, energy companies that buy gas and electricit­y in advance – through a practice called “hedging” – will be offered extra support to help cope with surging prices.

Current prices mean suppliers must stump up more money when buying energy to effectivel­y insure themselves against future price swings, which is stretching balance sheets in the sector.

The Government said the scheme is a “last resort” and will be similar to the £37bn Covid package, which allowed the Bank to buy short-term debt from companies, giving them a cash boost.

‹ ♦ BP has bought a US renewables producer for $4.1bn (£3.6bn) to bolster its net zero ambitions. BP said the purchase of Archaea Energy would help roughly double its expected earnings from renewable natural gas to around $2bn by 2030.

Newspapers in English

Newspapers from United Kingdom