EGL60500 - Attribution rules for joint ventures and group companies with minority investors: introduction and layout of guidance

There are special rules that deal with both qualifying joint ventures (referred to as a JV in this guidance) and group companies with significant minority investors that attribute generation receipts to participants and minority shareholders.

A JV or group company might sell its generation to a member which then sells into the market. Depending on the pricing of that intermediate sale, without additional rules it is possible that too few, or too many, generation receipts might be taken into account when calculating EGL compared with the overall transaction. See EGL61000+ and EGL62000+ for JV and group companies respectively.

Similarly, where a JV or group company sells its generation to a third party, a member may enter into a hedging arrangement in relation to its share of that generation. There could be unfair outcomes if such arrangements are not taken into account when calculating liability to EGL. See EGL61400 and EGL62300 for JV and group companies respectively.

The EGL legislation features a set of attribution rules and makes provision for the surrender of “shortfall amounts” but there is an alternative approach that allows the participants in a joint venture or the minority shareholders to elect to be treated as though they are members of a partnership.

As an alternative to the rules mentioned immediately above, there is an option to elect for a JV or group company to be treated as transparent, which means that generation will be attributed to members in the same way as for a partnership, see EGL64000+.

The guidance on these EGL attribution rules is set out as follows –

EGL61000 – Joint ventures

EGL61100 – Attribution of receipts to participants

EGL61200 – Treatment of JV generation supplied to participants

EGL61300 – Treatment of JV generation supplied to participants: extended example

EGL61400 – Participants realising amounts relating to JV generation

EGL61500 – Additional examples for surrenders in respect of qualifying joint ventures

EGL62000 – Significant minority shareholders in group companies

EGL62100 – Introduction

EGL62200 - Treatment of generation supplied to minority shareholders

EGL62300 – Significant minority shareholders realising amounts relating to generation

EGL62400 – Additional examples for surrenders in respect of significant minority shareholders

EGL63000 – Surrender of shortfall amounts

EGL63100 – Introduction

EGL63200 – The surrender mechanism

EGL63300 – Calculation of shortfall amounts

EGL63400 – Administration

EGL64000 – Transparency elections

EGL64100 –Introduction

EGL64200 – Conditions for making an election

EGL64300 – Effect of making an election

Further guidance

The definition of a JV for EGL purposes and the identification of its members are explained at EGL51000.

The definition of a significant minority shareholder in a group company is explained at EGL52000.

Guidance on the treatment of partnerships is at EGL40000