Union Gas Credit Requirements
Introduction
Union Gas incurs credit exposure when entering into any transaction where:
Dependent upon the creditworthiness of the Shipper, financial assurances may be a condition of obtaining and or continuing service with Union Gas.
1.0 Determination of Creditworthiness
Prior to commencement of contracting services, the creditworthiness of the Shipper will be evaluated by Union Gas. The determination is made using information provided by the Shipper and any information that may be publicly available. Section 1.5 outlines various credit and business information that Union Gas may use in assessing the creditworthiness of the Shipper.
Shippers that do not meet the credit requirements as a result of Union Gas' review will be required to provide financial assurances. Section 1.1 outlines the acceptable forms of financial assurances.
1.1 Acceptable Forms of Assurance
If a Shipper is required to provide financial assurances, the assurances must be in a form acceptable to Union Gas. Union Gas may accept one or more of the following forms of financial assurances.
a) Irrevocable Letter of Credit
Union Gas will provide Shippers with an approved standard
Letter of Credit (LOC)
template for received instruments. If a Shipper requests
changes to the standard template, Union Gas must approve prior to final
execution.
Letters of Credit will be accepted from financial institutions that maintain long term,
senior unsecured debt ratings of at least "A-" by S&P, "A3" by Moody’s,
or "A-" by Fitch.
For Letters of Credit provided in
support of specific payment obligations, the expiration date should
extend at least 30 days past the last payment date expected from the
Shipper, unless the parties have agreed to other terms in the agreement.
It is important to note that Union Gas will
make the final decision with regard to whether or not a draw should be
initiated under a Letter of Credit.
b) Cash Security Deposit
Cash security deposits will be held for the term of the
obligation. At the same time the cash deposit is made the Shipper
will be required to sign a
Cash Deposit
Agreement.
c) Parent or Affiliate Guarantee
If the Shipper has a
creditworthy parent or affiliate, the Shipper may be able to provide a
guarantee. A company serving as guarantor must undergo the same
credit evaluation as if it were the principal, contracting Shipper.
As with the irrevocable Letter of Credit, Union Gas will provide an approved
Standard Guarantee Template.
If a Shipper requests changes to the standard template, Union Gas must
approve prior to final execution.
Union Gas is unable to accept guarantees from guarantors lacking either
direct or indirect legal ownership interest in the Shipper.
1.2 Amount of Financial Assurances
Shippers that do no meet our credit requirements (including assignees) are required to provide financial assurances in an amount equal to the maximum exposure of all contracts inclusive. Maximum exposure shall not exceed the maximum allowable under the contract(s).
For facility additions or expansion, the Shipper will be required to provide acceptable financial assurances in an amount and term as determined in an agreement between Shipper and Union Gas.
1.3 Ongoing Review of Financial Assurance Requirements
Union Gas reviews the creditworthiness of Shippers annually, although it is within Union Gas' discretion to undertake a credit review at any time. The review may result in an increase or reduction in the financial assurances required.
1.4 Term of Financial Assurances
Financial assurances shall remain in place throughout the term of the contract(s), unless Shipper and Union Gas agree otherwise. The Shipper is required to notify Union Gas in the event of any changes to the financial assurances throughout the term.
1.5 Information
1.6 Additional Information
Please contact your Account Manager for additional information.
