

Supply Chain Growth Tool Example: FTAA
The Funds Transfer Agent Agreement (FTAA) is a specialized financing facility designed to help eligible parties purchase natural gas without the typical requirement of posting a Letter of Credit. Developed in collaboration with Southern California Gas Co. (SoCalGas), Visage Energy, Union Bank of California, and the Department of Energy (DOE), the FTAA has successfully supported billions of dollars in natural gas transactions, thereby enhancing overall energy security and procurement flexibility. Historically, some companies lacked the credit support necessary to assure producers of payment, while Repurchasers worried about the reliability of delivery from less capitalized suppliers. By enabling more entities to participate in natural gas markets, the FTAA increases the number of potential suppliers, which can help Repurchasers avoid overreliance on a small number of large producers. This broader supplier base can also contribute to lower average costs for Repurchasers and bolster resilience against market disruptions.
The Funds Transfer Agent Agreement (FTAA) CD-ROM offers instructions and guidance on how to implement this financing mechanism.
By widening participation in natural gas markets and minimizing credit barriers, the FTAA serves as an effective tool for financing energy projects. It promotes energy security through a diversified supply chain, reduces concentration risk among large producers, and helps ensure a reliable and cost-competitive flow of energy.
Many Repurchasers are of the opinion that expansion of the supplier pipeline is an essential and profitable business practice. This practice allows Repurchasers to avoid the potential of being exposed to "undue Market Powers" being excreted by a few large Producer/Suppliers. Consequently, many of those Repurchasers will limit the amount of natural gas purchased from any one of the large Producers, thereby providing opportunities for medium and small companies to engage in the energy markets. Additionally, some Repurchasers have determined that they have been able to lower the average cost of their energy purchases because of the increased number of suppliers from whom they purchased the commodity.
Summary of Benefits for Participants in the FTAA Process
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Producer: Secures a contract with the FTA Bank, which obligates the bank to pay the producer using funds received from the repurchaser.
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Repurchaser: Receives energy commodity from a reliable source under a mirror back-to-back supply contract and simply agrees to pay the funds into the Bank Control Account for all energy received in accordance with the terms and conditions of the FTAA.
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Tier 3 Energy Supplier: Obtains the ability to sell energy to the Repurchaser and purchase energy from the Producer without being required to post a letter of credit by being able to utilize the FTAA process.
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FTA Bank: The bank's fiduciary responsibility is to represent to both Producer and the Repurchaser that there are matching deals with a positive spread. The FTA Bank signs contracts agreeing to receive the money from the Repurchaser and pay the Producer on the next business day. The bank does not have any obligation to pay the Producer if the funds are not received; however, there is minimal risk because the Repurchaser always pays for gas it has received. The FTA bank has use of multi-million dollars of FTAA funds for one business day and over the weekend if the funds are received on Friday. Additionally, the bank receives Community Reinvestment Act (CRA) credit for participating in the FTAA program.
