Credit support and reserve capacity security
Under the WEM Rules, Market Participants are required to provide AEMO with Credit Support or Reserve Capacity Security in certain circumstances. Credit Support is required to adequately cover a Market Participant’s operational exposure in the market, while Reserve Capacity Security is required for projects that have been assigned Capacity Credits which are in development or under construction.
In accordance with the WEM Rules, AEMO accepts Credit Support and Reserve Capacity Security in the form of a Security Deposit (accompanied by a deed) or a Bank Guarantee from an entity that meets the Acceptable Credit Criteria. Market Participants must provide Credit Support or Reserve Capacity Security in the format prescribed by AEMO in the relevant sections below.
The following sections provide instructions to assist Market Participants in providing Credit Support and Reserve Capacity Security. These instructions should be read in conjunction with the WEM Rules, the Market Procedures for Reserve Capacity Security and the Market Procedure for Prudential Requirements. Market Procedures are available on the Market Web Site here.
Reserve Capacity Security guideline
AEMO has developed a guideline to assist Market Participants to submit Reserve Capacity Security, which can be downloaded below.
|Guideline: Reserve Capacity Security
(602 KB, pdf)
The following templates must be used when providing a Bank Guarantee for Credit Support or Reserve Capacity Security in accordance with clauses 2.38.4(a) and 4.13.5(a) of the WEM Rules:
|Bank Guarantee for Reserve Capacity Security or Credit Support|
AEMO requires that payment under a Bank Guarantee for Credit Support must be made within 90 minutes of being requested as detailed in clause 9.23.1(c) of the WEM Rules.
Bank Guarantees for Reserve Capacity Security or Credit Support must be provided from an entity that meet the Acceptable Credit Criteria detailed in clause 2.38.6 of the WEM Rules.
AEMO maintains on the Market Web Site a list of entities that meet the Acceptable Credit Criteria. If a Market Participant elects to provide Credit Support or Reserve Capacity Security from an entity that is not currently included in the list of entities that meet the Acceptable Credit Criteria, the Market Participant must provide AEMO with a completed Acceptable Credit Criteria Application form.
Market Participants must provide AEMO with contact details for an internal contact and the relevant contact at the entity providing the Bank Guarantee using the Contact details for Bank Guarantee provider form. Any updates to the details above must be submitted using the Change of contact details for Bank Guarantees provider form.
|List of Entities that meet the Acceptable Credit Criteria (136 KB, pdf)|
|Form – Acceptable Credit Criteria Application|
|Form – Contact details for Bank Guarantee provider|
|Form - Change of contact details for Bank Guarantees provider|
The following Security Deposit Deed templates must be used when providing a Security Deposit for Credit Support or Reserve Capacity Security in accordance with clauses 2.38.4(b) and 4.13.5(b) of the WEM Rules:
A Security Deposit deed must be provided for each Security Deposit lodged with AEMO.
When amending the amount of a Security Deposit for Credit Support, Market Participants may provide AEMO with a Security Deposit direction for Credit Support rather than a replacement deed provided the original Security Deposit deed for Credit Support is in the above format (v 5.0 or later).
The instructions for lodging a Security Deposit with AEMO are as follows. Security Deposits must be deposited into the following account:
Bank: National Australia Bank
Branch: National Australia Bank, 100 St Georges Terrace WA 6000
Account Name: Australian Energy Market Operator Ltd on account of Western Australia Settlements
Please note that AEMO must be notified once funds have been deposited and all funds must be cleared by the appropriate date. Once cleared funds are available, AEMO will deposit the funds into an interest-bearing trust account. Interest will be payable to the Participant as per the Security Deposit – Investment Policy.
Security Deposits – Investment Policy
Under clause 2.38.5 and 4.13.6 of the WEM Rules, AEMO must pay the market participant the interest accumulated on the deposit less any liabilities and expenses incurred by AEMO, including bank fees and charges. AEMO also registers its security interests on the Personal Property Securities Register. The investment policy document, basis for determining the bank bill rate and Personal Property Securities details can be found here.
A Market Participant may make a voluntary prepayment to AEMO, at any time, to reduce its Outstanding Amount and thereby increase its Trading Margin as per clause 2.40.1(c) of the WEM Rules. For each voluntary prepayment, a Market Participant must provide a completed Prepayment Direction and cleared funds into the Security Deposit bank account noted above.