Financial close under the Green Gas Support Scheme (GGSS): what applicants need to know

Under the Green Gas Support Scheme (GGSS), financial close is a critical milestone in the tariff guarantee application process. Positioned at Stage 2 of the process, it acts as a key assurance checkpoint before a tariff guarantee can be awarded. EnviroSense conducted the first GGSS Stage 2 tariff guarantee financial close verification and the client was successful in their awarded the tariff guarantee by Ofgem.

What is financial close under GGSS?

In practice, this should be relatively straightforward. Financial close often cannot be achieved, if external funding dictates this, unless the tariff guarantee is awarded. This may be a condition precedent of the external funding. Such a scenario creates a paradox, which we can explain in further detail as each case arises.

As stated in GGSS guidance, financial close is defined as a project finance requirement. The wording in the GGSS Regulation 2021 is “financial close” means the date on which the applicant has entered into all financing agreements in relation to all the funding required for the production and injection of biomethane. Therefore, in general terms, financial close is reached when an applicant can demonstrate that:

• All funds required to fully construct the project are available.
• Those funds are formally committed to the project.

Applicants must submit evidence of financial close within three weeks of the Provisional Tariff Guarantee Notice (PTGN) being issued. If sufficient evidence is not provided by this deadline, the application will be rejected.

Stage 2 of the tariff guarantee process

Stage 2 focuses entirely on confirming that the project is genuinely finance-ready. The guidance makes clear that tariff guarantees are only intended for projects that are realistically capable of completion. This is the purpose of Stage 2: to effectively weed-out projects that may be speculative which can then have budgetary consequences for Ofgem if the project is not realised.

To demonstrate financial close, applicants must provide evidence showing both the availability and commitment of funds covering the entire construction cost of the proposed project. Commitment can be demonstrated in several ways, depending on the funding. Evidence may include:

• Investment or shareholder agreements
• Loan or third-party funding agreements
• Share agreements
• Bank statements or accounts
• Other legal or contractual documentation

Independent auditor verification – EnviroSense
A central requirement of Stage 2 is independent assurance. EnviroSense has a strong track record of conducting verification and delivering transparent, accurate ISAE 3000 (Revised) assurance reports for Ofgem to enable a decision to be made. In our opinion, there is a specific format and content for the assurance report that exceeds the minimum requirement.

Additional evidence Ofgem may request

Applications are assessed on a case-by-case basis, reflecting the wide variation in project size, structure, and funding arrangements.

In addition to the auditor’s report, Ofgem will almost definitely request evidence which EnviroSense normally requests as ancillary information for use in the ISAE 3000 (Revised) assurance engagement. This might include:

• Detailed capital expenditure (CAPEX) estimates
• Loan facility offers or signed loan agreements
• Engineering, procurement and construction (EPC) contracts
• Operation and maintenance agreements
• Land ownership or lease documentation
• Planning permissions and environmental permits
• Fuel supply, heat use, or energy offtake agreements
• Evidence of project sponsor experience

Where contracts have not yet been signed, applicants are expected to provide drafts or a clear statement explaining when signed versions will be in place.

Achieving financial close

Once financial close is approved and a tariff guarantee is awarded, budget is reserved for that project and cannot be allocated elsewhere. You will need to monitor your inbox for Ofgem emails as Ofgem will ask for project updates and achievement of key milestones.

Contact us

We have completed over 50 ISAE 3000 (Revised) assurance financial close engagements in the renewable energy industry in the UK alone, including the Green Gas Support Scheme (GGSS) and the Renewables Heat Incentive (RHI) Scheme. As stated, we were the first verifier to complete a Stage 2 financial close verification for the GGSS which resulted in the applicant being awarded the tariff guarantee.

Contact:
E: robin@envirosenselimited.co.uk
M: 07799 032253