Consent issued by the Gas and Electricity Markets Authority (the ‘Authority’) under paragraph3 of standard condition E2 (Regulatory Accounts) of the offshore transmission licence granted under section 6 of the Electricity Act 1989 to TC Barrow OFTO Limited
Whereas

  1. TC Barrow OFTO Limited (the ‘Licensee’) is the holder of an offshore transmission licence granted under section 6 of the Electricity Act 1989 (the ‘Licence’).
  2. Standard condition E2 (Regulatory Accounts) (the ‘Condition’) of the Licence requires the Licensee to prepare regulatory accounts for each financial year ending the 31 March and to publish these accounts by the 31 July following the end of the financial year to which the accounts relate.
  3. Paragraph 3 of the Condition lists the information the Licensee is obliged to provide, unless the Authority otherwise consents.
  4. Paragraph 13 of the Condition permits the Authority to make any consent given under paragraph 3 subject to such conditions as the Authority thinks appropriate or necessary.
  5. International Public Partnerships Limited is the ultimate parent company of TC Barrow OFTO Limited.
  6. On 9 May 2014 the Licensee requested that the Authority consider consenting to alternative arrangements in relation to the preparation of the Licensee’s regulatory accounts. The Licensee wishes to provide regulatory accounts for each reporting period in the rest of the 18.5 year revenue periodon a consolidated basis for both TC BarrowOFTO Limited and TC Barrow Holdco Limited.
  7. For the purposes of paragraphs6, 11 and 15 and on the basis of the notification given by the licensee in paragraph6, ‘consolidated’ shall have the meaning attributed to it by the definition of ‘consolidated financial statements’ contained within all relevant accounting and reporting standards currently in force which have been issued or adopted by the Accounting Standards Board or, where appropriate, by the International Accounting Standards Board.
  8. The Licensee has notified the Authority that:
  9. TC Barrow OFTO Limited is wholly owned by TC Barrow Holdco Limited and these two legal entities are managed together on a unifiedbasis. The terms and conditions concerning the external debt facilities including asset security, covenants and protections provided to senior lenders are also monitored and controlled on a unified, consolidated business basis.
  10. TC Barrow Holdco Limited has been established with the principal activity of procuring and providing finance to TC Barrow OFTO Limited. It does not conduct any other business, nor does it own any other investments or assets and it is ringfenced from the rest of International Public Partnership Limited’s investments.

Considerations in relation to the decision

  1. The Authority has considered the request in light of the Licensee’s particular circumstances and the extent to which the alternative arrangements proposed by the Licensee meet the requirements of the Condition.
  2. The business ofTC Barrow OFTO Limited and TC Barrow Holdco Limited arelinked and they are managed together on a unified, consolidated basis. TC Barrow Holdco Limited obtained shareholder and external debt finance and on-lent this to TC Barrow OFTO Limited to enable TC BarrowOFTO Limited to acquire the Barrow transmission assets.
  3. The provision of consolidated regulatory accounts for TC Barrow OFTO Limited and TC Barrow Holdco Limited should aid transparency in presenting the performance and position of the transmission business on a consolidated basis, as this more accurately reflects the commercial substance of the arrangements (i.e. by showing the presence of external debt financing as part of the OFTO’s funding arrangements).
  4. In this context consolidated accounts are also expected to meet the policy aims of the regulatory accounts condition. Specifically the consolidated accounts will provide readers of the accounts with an understanding of the financial position and performance and governance arrangements of the OFTO. Consolidated accounts are helpful in this context for accurately reflecting the economic reality of the OFTO’s financing. This level of transparency is helpful for building public understanding of the regulated business and the associated regulatory regime.
  5. The Authorityconsiders that the proposedalternative arrangements are appropriate to enable the Licensee to meet the requirements of the Condition whilst providing greater transparency of its financial arrangements.

Consent

  1. The Authority hereby gives consent under paragraphs 3 and 13 of the Condition to the Licensee not providing the information specified in paragraph 3(b) of the Condition.Such consent is subject to the receipt of consolidatedregulatory accounts asdetailed in paragraph 15below as an alternative arrangement for the Licensee to comply with the Condition. The consent is also subject to paragraphs16 and 17.
  2. The Licensee shall produce consolidated regulatory accounts for the year ended 31 March 2014 and each year thereafter.For the avoidance of doubt, the accounts which are permitted to be consolidated within the scope of this consent shall be those ofTC Barrow OFTO Limited and TC Barrow Holdco Limited only.
  3. In the event of any change in the organisational structure or the activities of TC Barrow OFTO Limited and TC Barrow Holdco Limited this consent shall cease to have effect. For the avoidance of doubt, nothing in this consent authorises the Licensee not to comply with the Condition.
  4. In the event that the Authority is not satisfied that the information provided by way of consolidated regulatory accounts is sufficient for the Licensee to comply with its obligations under the Condition, the Authority shall notify the Licensee, revoking the consent provided. Following such notification, the Authority shall not accept consolidated regulatory accounts as a means of the Licensee complying with the Condition for any subsequent financial year.

Notice of reasons

  1. This document also constitutes the Notice under section 49A of the Electricity Act 1989 of the reasons for the decision of the Authority to give this consent pursuant to the Condition.

Min Zhu

Associate Director, Offshore Transmission

Duly authorised on behalf of the

Gas and Electricity Markets AuthorityDate: 10July 2014