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SPPs Requirements and Use of Audited Financials

SPPs Requirements and Use of Audited Financials. July 18, 2013. Scott Smith ssmith@spp.org · 501.614.3339. Issue Related to Financial Statements:. SPP has traditionally interpreted the Credit Policy such that only Annual Financial Statements prepared in U.S. GAAP are used for analysis

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SPPs Requirements and Use of Audited Financials

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  1. SPPs Requirements and Use of Audited Financials July 18, 2013 Scott Smithssmith@spp.org · 501.614.3339

  2. Issue Related to Financial Statements: • SPP has traditionally interpreted the Credit Policy such that only Annual Financial Statements prepared in U.S. GAAP are used for analysis • Prior to the Integrated Marketplace registration deadline (June 2013) SPP had not received many foreign prepared statements for consideration • For Financial Only Registration (June 2013), SPP received Canadian GAAP and International Financial Reporting Standards (IFRS) prepared financials

  3. Financial Statement Used For: • Determination of Minimum Criteria for Market Participation • Total Asset and Tangible Net Worth minimums • Assessment of creditworthiness and unsecured allowance amount • Financial ratios • Tangible Net Worth • Notes to financial statements ( for both qualitative and quantitative information)

  4. SPP Financial Statement Requirements: • Section 3.1 – Minimum Criteria for Market Participation • 3.1.1.1 – Audited Financial Statements & Related Info • “All annual Financial Statements submitted must be audited” • Entities with SEC reporting requirements: 3 years of 10-K, current years 10-Q, 8-K (material changes) • Entities without SEC requirements: 3 years of Report of Independent Accountants , audited statements (IS, BS, CF, SE), notes to financial statements, managements discussion, quarterlies can be unaudited • Not-For-Profit entities may have alternate requirements specified by SPP

  5. SPP Financial Statement Requirements: • Appendix “D” – Guarantee Agreement • Guarantor must meet Credit Policy requirements • Section 14(e) – requires audited financial statements: “in conformity with United States generally accepted accounting principles” • Section 4.2 – Composite Credit Score • “SPP will apply all measures used to determine Composite Credit Scores in a consistent manner”

  6. Other RTO Polices and Practices: • MISO • Financial statements must be audited; also silent on preparation • Allows both Non-Foreign (US & Canada) and Foreign Guarantee agreements (with significant provisions) • Foreign Guarantor must provide audited financials in US GAAP, Canadian GAAP, or IFRS • PJM • Similar to MISO approach: “GAAP format or other format acceptable to PJMSettlement”

  7. CPWG Considerations: • Should SPP consider non-U.S. GAAP audited financials for purposes of: • Minimum Criteria for Market Participation • Establishment of Unsecured Credit Allowance • Should SPP create a separate Guarantee Agreement Template and associated tariff language for foreign entities?

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