The CEO of Manx Gas’ parent company has said Manx Utilities refused to let it hedge when buying gas as it considered it a credit risk.
Jo Cox was appearing in front of the Economic Policy Review Committee when she admitted the decision of the gov owned utilities company.
Mrs Cox was asked about Manx Gas’ relationship with Manx Utilities and whether it is something the company would ‘remould’ by Jason Moorhouse MHK.
In her response, Mrs Cox said the two businesses are in ‘regular engagement’ and that the dialogue is ‘open’.
However, she added: ‘We obviously have recently tried to hedge and were perceived as a credit risk and therefore the hedging was declined. We would like to continue to hedge. The reticence around it is that its in-effect free credit because they buy forward on our behalf.
‘If we hedge elsewhere, which we are going to be doing, there is collateral that we need to put forward of several million [pounds] in order to do that. So therefore, we’re going to have to take a different option to hedge and buy forward via different banking options as opposed from the MUA, which comes at a cost.’
Asked to clarify this by chairwoman Claire Christian MHK, Mrs Cox restated that the MUA has declined Manx Gas’ bid to forward buy on its behalf last October with that reasoning being that ‘we were perceived as a credit risk’.
Mrs Cox added: ‘As you can imagine, forward buying gas is millions and millions of pounds, at that time they were concerned that we wouldn’t be able to pay that back and therefore we were determined as a credit risk and that hedging was declined.’
The CEO, when asked by John Wannenburgh MHK, added that the option of putting down collateral with the MUA, like Manx Gas will be required if it buys gas from elsewhere was ‘never an option from the MUA, that was never proposed’.
How Bad Was It?
Mr Moorhouse, returning to the October period when the decision to refuse the request was made, ask whether Manx Gas had reached a point where it was at risk of having to call in administrators, which Mrs Cox denied saying ‘there’s always multiple things we can do before getting to that point’.
She added: ‘It was a difficult time, we were losing significant money month to month and so the regulation framework was imperative. If the regulation framework hadn’t been approved, then it would have been very difficult for us.’
Mrs Cox did add that Manx Utilities had also refused a request to move its payment period from every 30 days to 90 days.
We have approached Manx Utilities for a comment as to why this decision and by who.