Alternative eligible credit support arrangements

• Our current menu of alternative credit security arrangements offers a wide range of products to meet the differing needs and credit risks of our retailers.
• This ensures our offerings are not a one-size-fits-all approach and is based on the additional credit risk Southern Water is willing to share based on evidenced risk of the retailer.
• Whilst developed as bespoke arrangements, each of the alternative arrangements are offered to all retailers with an equivalent risk criteria and are based on objectively justifiable and transparent risk profiles.
• The menu provides a glide path of arrangements for a variety of retailers: small/new entrant retailers (£10k); good payment history (10/20%); external credit rating; investor grade.
• Other bespoke arrangements will be considered in good faith.
• Any such proposals will need to set out the why/how the retailer has justifiably different needs or risk factors to the alternative arrangements currently offered.
• All of the alternative credit security options are in addition to the credit security allowances provided in the Business Terms of the Market Code.

1. Payment performance

To access the payment performance (PP) unsecured credit allowance (UCA), a retailer must have at least six months of settlement charges (P1 or R1) including all reconciliation balances (R1, R2, R3, R4 and RF) paid to terms. The level of unsecured credit allowance discount is two-tiered:

• A 10% discount (equivalent to five days of wholesale charge) offered for six months or more settlement to terms of settlement charges and reconciliation balances.
• A 20% discount (equivalent to 10 days of wholesale charge) offered for 12 months or more settlement to terms of settlement charges and reconciliation balances.

2. Credit worthiness grade

For the purposes of this agreement means: the contracting retailer holds a Top Tier Credit Rating from at least two of the three Nominated Credit Reference Agencies and no less than a Second Tier Credit Rating from the one remaining agency of the three Nominated Credit Reference Agencies.

3. Investment grade status

For the purposes of this agreement means: a credit rating by one of the following credit rating agencies: Standard & Poor’s, Fitch, or Moody’s within the following listed credit grades.

Or direct or indirect majority ownership or control by the government of an EU member state, the government of a member state of the European Economic Area, the UK Government (or any devolved administration of the foregoing including the devolved Scottish, Welsh and Northern Ireland administrations).

4. Limited time and value

The contracting retailer shall not be required to provide any Eligible Credit Support to the contracting wholesaler in respect of its payment obligations under the Wholesale Contract on the first ten thousand pounds (£10,000) (such sum being the 'Credit Limit'). The Alternative Credit Support arrangement provided by this agreement is only available to the contracting retailer for a maximum period of 12 months from the Effective Date of the Wholesale Contract and is not renewable in any circumstances.

Please get in touch with your Southern Water Key Account Manager if you would like to know more.

Alternative Credit Support Agreements