Union Gas Credit Requirements
Union Gas incurs credit exposure when entering into any transaction where:
- goods or services are provided to a shipper where payment is expected at a future date
- a contract is entered into which may or will require the shipper to deliver cash, goods, services or
other consideration at a future date
Dependent upon the creditworthiness of the shipper, financial assurances
may be a condition of obtaining and or continuing service with Union
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
review will be required to provide financial assurances. Section
1.1 outlines the acceptable forms of financial assurances.
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
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
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.
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.
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
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.
year-end financial statements with comparative year-end results. These
Acceptable types of financial statements:
- Statement of net income
- Statement of cash flows
- Balance sheet
- Statement of shareholder's equity
- Complete notes to financial statements
Credit ratings from Moody's, S&P and any other reliable ratings service
Dunn & Bradstreet report
Legal corporate structure
Parent company and guarantor information if applicable
Links to main sites or sources of credit review information
Payment history with Union Gas
Such information that may be mutually agreed to
by both Union Gas and shipper
- Audited (other types of financial
statements may be considered subject to further discussion)
1.6 Additional Information
Please contact your account manager for additional