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Letter of Credit Issuer Concentration CWG/MCWG October 30, 2014 ERCOT Public

Letter of Credit Issuer Concentration CWG/MCWG October 30, 2014 ERCOT Public. Letter of Credit Concentration Limits. In its April 26, 2013 meeting CWG approved a methodology for setting Letter of Credit concentration limits

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Letter of Credit Issuer Concentration CWG/MCWG October 30, 2014 ERCOT Public

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  1. Letter of Credit Issuer Concentration CWG/MCWG October 30, 2014 ERCOT Public

  2. Letter of Credit Concentration Limits • In its April 26, 2013 meeting CWG approved a methodology for setting Letter of Credit concentration limits • F&A agreed to this approach in July. The Committee also requested that an alternative limit structure be tested that utilized Tier 1 Capital • It was agreed that the proposed limit structure would be tested throughout the summer months before seeking approval from F&A Sample report: ERCOT Public

  3. Proposed Limit Structure • Letter of Credit Limit calculated as the maximum of • $750M per Letter of Credit issuer • Tangible Net Worth adjusted for credit rating • Per F&A request, ERCOT also computed limits based on issuing bank Tier 1 Capital instead of Tangible Net Worth ERCOT Public

  4. Results Top 10 issuers comprise 90% of the value issued No issuer met or exceeded the overall limit nor had constrained capacity ERCOT Public

  5. Next Steps • ERCOT will report results to the Finance & Audit Committee on November 18th • ERCOT supports use of the Total Net Worth parameter rather than Tier 1 capital: • TNW more transparent for Market Participants • Consistent with current ERCOT credit calculations • ERCOT will continue to report outstanding LC concentration and unused limit by issuer ERCOT Public

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