ebcc meeting th october 2016€¦ · • 2.3 focus for 2016/17 • 2.4 security review • 2.5...
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EBCC MEETING
24th October 2016
AGENDA
• 1.0 Introduction & Status Review
• 1.1 Approval of Minutes
• 1.2 Actions
• 2.0 Operational Update
• 2.1 Update at September 16
• 2.2 12 Month Review
• 2.3 Focus for 2016/17
• 2.4 Security Review
• 2.5 Brexit
• 2.6 Project Update
• 3.0 Modifications
• 4.0 AOB
• 5.0 Diary Planning
Outstanding Actions
Operational Update
Operational Update
• September 2016 – Cash Collection 96.91%
– Rolling 12 Months 99.28%
– 3 Failure to Pay Invoice Notices issued
– No Cash Calls issued
– No Further Security Request Notices Issued
– No Failure to Pay Cash Call Notices issued
Cash Collection
92%
93%
94%
95%
96%
97%
98%
99%
100%
Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
94.79%
100.00% 100.00% 99.98% 99.86% 100.00% 99.99% 99.87% 100.00% 99.98% 100.00%
96.91%
% O
f C
as
h C
olle
cte
d
Monthly Breakdown Of Cash Collected At Payment Due Date
Target PDD Collected PDD Collected PDD
Cash Collection
95%
96%
97%
98%
99%
100%
2011 2012 2013 2014 2015 2016
98% 98% 98% 98% 98% 98%
99.26%
99.73% 99.90%99.63%
99.28% 99.28%
% O
f C
ash
Co
lle
cte
d
Yearly Cash Collection Targets Payment Due Date
Target PDD Collected PDD
Cash Call Issued
This Graph provides a yearly breakdown of cash calls issued.
64
55
17
25
13
0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016
No
. Of C
ash
Cal
ls
Yearly Total Of Cash Calls Issued
Value of Cash Call Issued
This graph is a year To Date breakdown by financial value and should be viewed in
conjunction with the yearly breakdown of cash calls issued.
£20,582,000
£17,998,000
£3,752,000
£9,770,851
£5,890,000
£0
£5,000,000
£10,000,000
£15,000,000
£20,000,000
£25,000,000
2012 2013 2014 2015 2016
Val
ue
(£'s
)
Yearly Total Value Of Cash Calls Issued
FTPCCN’s – issued & paid
This graph is a yearly breakdown of Failure to Pay Cash Call Notices issued and paid.
1
2
1
2
1
0
0.5
1
1.5
2
2.5
2012 2013 2014 2015 2016
No
. of
Cas
h C
alls
Yearly Total of FTPCCN's Issued & Paid
Review since 2015
Review of Last 12 Months
• Cash Collection figures saw challenges in October 2015 and
September 16 However, the rolling 12 month performance remains
above 99%.
• Continued pro-active engagement with Users reaching 70% of
indebtedness to minimise Cash Calls.
• Up front payment of Cash Calls limited to 3 times implemented
• Security Renewals 100%
• Worked with National Grid to appoint a new Market Operator wef
24/2/16
• Implemented Mod 568 Security Requirements and Invoice Payment
Settlement Cycle for the Trading System Clearer, resulting in daily
billing to the Market Operator wef 1/8/16.
Review of Last 12 Months
• Proactively working with Users to support change – looking at the
removal of the minimum Security requirement & seasonal energy
balancing credit cover
• Energy Balancing Credit Rules were revised March 2016
• Continue to support development of - EU Reform & Gemini
Consequential Change
• Worked with Treasury to open new bank accounts to ‘spread the risk’
Currently moving cash collateral supported by a non registrable
Deposit Deed approx £40M
• The Credit Team continue with their ICM training with 6 members of
the team completing the Business Law module
Focus for 2016
Focus for 2016/17
Proposed Focus for 2016/17
• Committee membership\Profile
• Risk Management
- Spreading Profile
- Pension Protection Fund/ABTA/ATOL/Motor Insurance Bureau
• Team
- CICM Training programme
- Performance Excellence
- Review of Structure
• Change Programme
- Gemini Consequential change (UK Link Replacement programme)
- EU Reform
- FGO
Energy Balancing Security Review
Bank Ratings Current Position
• DZ Bank was upgraded from Aa2 to Aa1 then subsequently downgraded back to Aa2
• Standard Chartered was downgraded from Aa2 to Aa3 by Moodys and from A+ to A by S & P
• BNP Paribas was downgraded from A+ to A by S & P
• Santander upgraded from A1 to Aa3 by Moodys
Note any rating below Moodys A3 or Standard and Poors A- is not acceptable - the lowest prevailing rating is always used
FI Risk Profile
The following chart provides a summary of customers exposures to each
rating category
• We have seen a move over the last 12 months in to the lower acceptable rating
categories
• We no longer have any FI’s in the AA+/Aa1 or AA/Aa2 rating categories.
• There are now more FI’s in the A2 category equating to 46% and currently have 1 FI
in the lowest acceptable rating category or A3
25%
25%
46%
4% FI Ratings Sept' 2016
>AA-/Aa3
>A+/A1
>A/A2
>A-/A3
Spread of FI Exposure
The movement since Sept’ 2015 to Sept’ 2016 is a decrease of overall
value in LOC’s to £305m. However, the spread of risk is heavily weighted
in favour of the lower band. This is demonstrated by the absence of
securities held within the Aa1 & Aa2 rating bands.
£25,605,000 £62,000,000
£0
£125,3
20,0
00
£98,4
91,9
20
£16,0
29,0
00
£89,1
50,0
00
£3,5
00,0
00
£19,9
25,0
00
£128,6
25,0
00
£96,8
29,4
20
£106,0
34,0
00
£0
£0
£13,0
60,0
00
£100,9
96,0
00
£90,2
48,5
00
£100,8
64,0
00
£0
£0
£0
£20,000,000
£40,000,000
£60,000,000
£80,000,000
£100,000,000
£120,000,000
£140,000,000
A3/A
-
A2/A
A1/A
+
Aa3
/AA
-
Aa2
/AA
>A
a1/A
A+
Aggregate secured credit by rating band
Sep-15
Mar-16
Sep-16
Current Outlook
• Moodys anticipate their next review of FI’s
to take place in April 2017. Moody’s have
affirmed the ratings for 12 FI’s which equates
to half the existing portfolio of FI’s. A
Committee within Moody’s determines if a
rating is affirmed and this results in a longer
view of the FI.
• The 3 FI’s subject to a downgrade (Bank of
Tokyo-Mitsubishi(A1), Standard Chartered
Bank(Aa3) & Sumitomo Mitsui Banking
Corp’(A1)) equate to £46m.
* S & P - Since September 2015 there have
been five FI’s placed on negative outlook;
Barclays, Royal Bank of Canada (London),
HSBC, Lloyds Bank & Santander. Negative
outlook exposure (9 FI’s) is £137m. Particular
concern is Barclays plc (A-) and any further
downgrade will result in re-assignment to
alternative FI’s.
50%
29%
13%
8%
Moody's Sept' 2016
Rating Affirmation
Upgrade
Downgrade
Confirm Only (P.R)
62%
38%
S&P Sept' 2016
stable
negative
Deposit Deeds
• Value of credit secured via Deposit Deed and LOC – comparison between Sept’
2014 to Sept’ 2016
£0
£50,000,000
£100,000,000
£150,000,000
£200,000,000
£250,000,000
£300,000,000
£350,000,000
£400,000,000
Sep-14 Apr-15 Sep-15 Apr-16 Sep-16
£3
57
,90
5,0
00
£3
59
,21
4,9
20
£3
50
,51
7,9
20
£3
51
,41
3,4
20
£3
05
,16
8,5
00
£3
8,5
79
,00
0
£3
8,5
30
,08
0
£4
3,9
83
,00
0
£4
5,9
86
,00
0
£3
7,9
60
,90
0
LOC
Deposit Deed
90.27%
9.73%
90.31%
9.69%
88.85%
11.15%
88.43%
11.57%
88.94%
11.06%
Summary
• We have seen an decrease in the overall value of security (LOC’s) during the period Sept’ 2015
to Sept’ 2016 by £46m. This has been driven by a number of Users who have had their security reduced. For example one User has had the security reduced by almost £20m. The lower rating band holds £204m of the value of (LOC) security held. The prospect of adverse conditions for FI’s post Article 50 particularly for Barclays Bank plc are challenging as any further downgrade will result in a B Grade Rating and will require re-assignment of securities. The remaining FI’s within the lower band can withstand one rating downgrade. The securities in band Aa3/AA- (£90m) are on the lowest rating within the upper band and any further downgrade will affect six FI’s. We continue to monitor the risk posed by 18 financial institutions which sit in the lower rating band and where most of the securities are held.
• S & P maintains a more risk averse approach to ratings compared to Moody’s. S & P have placed Barclays, Royal Bank of Canada (London), HSBC, Lloyds Bank & Santander on negative outlook.
• We continue to monitor those FI’s which are currently on possible negative outlook with Standard & Poors & Moody’s
• Deposit Deeds held have seen a decrease of £6m in the last 12 months. Driven by a refund of monies and User’s re-alignment of security. Continue to take over an 11% share of overall security. Deposit Deed funds were held in Barclays however we are currently moving the funds to Lloyds.
Brexit
• The UK will be leaving the E.U following results of the E.U Referendum on 23rd June 2016.
• We have carried out some analysis along with sources from Moody’s and S & P with the following possible
outcomes;
• E.U. likely to take a strong position on trade negotiations to ensure other E.U. Members are discouraged
from exiting. UK likely to reach an agreement on trade but not on all sectors. Uncertainty in economy likely
to lead to increase in inflation.
• Article 50 of the Lisbon Treaty permits a member state a minimum of 2 years from the date it
submits its application to exit the E.U (not from the date of the referendum). The longer the period
for completing the exit, the greater the likelihood of uncertainty within the economy.
• Possible short term adverse impact on FI’s ratings after Article 50 activated, until Markets stabilise.
• UK Banks will see downward pressure resulting from economic uncertainty. B of E four pronged stimulus
package identified risk; rate cut to 0.25%, quantitative easing, corporate debt buys and Term Funding
Scheme for banks. In order to prepare Markets for post Article 50 impact.
Project Update
• DN Sales – UAT completed on the interim solution. Analysis
underway for enduring solution post Nexus
• EU Phase 4a – Scope of this release is being finalised. Target
implementation date of Apr-2017 with a further release in Oct-2017
• iGMS Evolution programme – Ongoing issues resulting in incorrect
data being sent to Gemini. Analysis ongoing
• Gas Deficit Emergency – 1st usage test of live system completed and
all results were as expected
Modifications
Modifications
• Mod 0587 - Seasonal Energy Balancing Credit Cover on 20/10/16
the UNC Modification Panel recommended implementation to
become effective from May 2017 on a User Pays basis
AOB
Credit Rules Update
Customer Satisfaction
New Members Introduction
Members Profiles
Any Questions?
Date of Next Meeting
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