Ann: ERM Power signs offtake agreement with Sunset Power, page-14

To summarise what is happening here....

EPW has a large market exposure to power prices that it hedges. This is by virtue of the agreements signed up with its commercial clients. The hedges are with physical power generators who also then require you to put up collateral to support the potential mark to market exposures of your hedges - and the amount of collateral required of you depends upon your assessed credit quality. So if you carry a formal investment grade rating (BBB or better) you would require less collateral than an unrated counterparty.

In this instance, St Baker and other interests through a private company (Sunset Power) has acquired Vales Point power Station. EPW has entered into hedge contracts with Sunset Power for their hedging needs on more favourable terms that then allows the company to free up capital that has been locked in as collateral in the past.

This is a good thing for the company - and one would think that as they grow there is potential for additional hedges with Sunset Power in the future given the size of the Vales Point generation capacity.