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case study



Our role in the process was to advise manage, benchmark and execute the IR, FX and CPI hedging risk contained in the project. Given the diverse mix of lenders, debt structures and inherent financial risk, it was a key requirement to demonstrate a clear and competitive process.


The project was a landmark transaction in the renewable sector with multiple funding sources, including a commercial bank syndicate, institutional fixed rate and institutional inflation linked debt. There were also multi-currency construction costs to hedge back into the base currency together with on-going operational foreign exchange exposure and a tranche of CPI linked debt that was provided on a CPI linked basis. The client was keen to offer all lending banks/hedge providers the opportunity to compete for the hedging and the FX. There was also a requirement to ensure that the hedge pricing and process was transparent. Hedge effectiveness reporting of the FC hedging was also required post execution.

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Ian MacFarlane


E: Ian.MacFarlane@jcrauk.com
T: +44 (0) 207 493 3310

Our approach

All interest rate and FX hedge execution roles were competed among the relevant interested and qualified parties to ensure a competitive process resulted

Commercial bank hedging was split between an execution bank fronting the majority of the syndicate banks

Novating down the pro-rata hedge positions post financial close, plus two additional institutional lenders who provided fixed rate/CPI linked debt

The total debt was structured into four tranches and split between three providers including a CPI tranche

The required FX hedging was divided up between three of the commercial bank lenders and executed in two separate tranches

A series of dry run pricing exercises were undertaken in the run up to FC to demonstrate that pricing reflected the agreed execution pricing and process

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Benefits of our approach

  • A comprehensive execution protocol was drawn up to manage the execution process to ensure a smooth financial close procedure.
  • The financial model required a number of  optimisation procedures at various stages during the execution process, and the quantum of FX hedging required dictated separate execution calls with the FX execution banks so as to manage the market risk efficiently. 
  • The final execution process was managed over a 2 ½ hour period.
  • Material client value driven through hedge execution competition process and benchmarking resulting in better than expected execution margins for IR and FX.
  • A very successful transaction that has benefitted from significantly lower debt costs than had been originally estimated at the outset of the project. 
  • A hedge effectives report was provided to cover the FC hedging and subsequently we provided ongoing hedge accounting.

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