International reinsurance agency Munich Re has supplied the capability to assist a parametric wind proxy hedge danger switch product structured utilizing an answer from kWh Analytics, for a 59MW, 14-turbine wind challenge in Maine, developed by a Greenbacker Capital Administration affiliated funding automobile.
The monetary construction options the embedded wind proxy hedge, supplied by reinsurer Munich Re, suggested by kWh Analytics, and utilizing its kWh Analytics Indifference Construction for debt sizing.
It marks the primary time a parametric wind hedge has been paired with kWh Analytics’ Indifference Construction, with the intention being to cut back fairness necessities for a challenge sponsor.
Due to the inclusion of this progressive construction, it has enabled the challenge sponsor to lift round 20% extra debt capital for the wind energy challenge, led by financial institution MUFG.
The purpose is to mitigate the consequences of wind pace variability, which might have an effect on the power of challenge sponsors to lift financing.
Utilizing a parametric wind danger switch hedge permits the sponsor to offset a number of the danger of future energy manufacturing shortfalls as a result of wind variability, which provides financiers extra confidence and leads to higher outcomes for its debt capital placement.
It acts as a king of credit score enhancement, heightening the tasks attraction to lenders, resulting in elevated debt capability.
“By incorporating the wind proxy hedge and kWh Indifference Construction, every greenback of premium paid for the product resulted in ~$6 of extra mortgage proceeds,” kWh Analytics defined.
Geoffrey Lehv, Head of US Accounts for kWh Analytics, commented, “We supplied a proprietary debt construction, making use of modeling, evaluation, and danger administration experience to help Munich Re in incorporating its parametric answer to a challenge financing. The ensuing credit score enhancement not solely mitigates draw back danger but additionally optimizes capital construction. That is about extra than simply monetary engineering – it’s about accelerating the transition to scrub power by making wind tasks extra bankable and enticing to buyers.”
Invoice MacLauchlan, CEO Munich Re Buying and selling LLC, added, “Deep challenge finance data was essential in structuring this transaction. By leveraging our group’s long-standing experience in designing parametric risk-transfer options, collaborating intently with MUFG, and using kWh Analytics’ distinctive place out there, we efficiently applied an progressive danger switch answer for this Sponsor.”
Alberto Mihelcic Bazzana, Director at MUFG, additionally mentioned, “As a frontrunner in challenge finance, MUFG is happy to associate with Greenbacker, kWh Analytics, and Munich Re in growing new financing options that may expedite the power transition course of.”
The the kWh Analytics Indifference Construction might be utilized in each wind and solar energy contexts, so gives a means for builders and funders of those tasks to offset the climate variability part utilizing a hedging mechanism that encompasses a parametric set off.
