Power developer/operator purchasing a wind farm where there is no Power Purchase Agreement (“PPA”) or Fixed Price Merchant Offtake.
Risk of reductions in (“floating”) power prices adversely impacting project economics.
Floating rate loan facility provided by an international bank with a mandatory requirement to enter a 14 year power hedge.
Bank proposed that they act as both swap execution agent and counterparty so limited transparency to the client.
The client had to fulfil a mandatory condition but with no price transparency could not ensure it was receiving “on-market” pricing.
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Ensure the client understood the market conventions, pricing methodology.
Provide transparency on the structure and pricing components.
Monitor a variety of pricing inputs (Natural Gas, Heat Rates, Spark Spreads) over time to reconcile with bank pricing.
Have you got a question about how you hedge your financial risks, or structure and arrange your debt?
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