kWh Analytics closes first-of-its-kind wind proxy hedge with Munich Re

kWh Analytics closes first-of-its-kind wind proxy hedge with Munich Re | Insurance Business Asia

Reinsurance

kWh Analytics closes first-of-its-kind wind proxy hedge with Munich Re

Risk transfer product involves a 59MW wind project in Maine

Reinsurance

By
Kenneth Araullo

kWh Analytics has announced the successful close of a wind proxy hedge risk transfer product for a 59MW, 14-turbine wind project in Maine. The project was developed by a Greenbacker Capital Management affiliated investment vehicle that invests in sustainable infrastructure assets.

The financial structure included a wind proxy hedge provided by global reinsurer Munich Re, advised by kWh Analytics, and utilized the kWh Analytics Indifference Structure for debt sizing.

This also marks the first time a parametric wind hedge has been paired with the kWh Analytics Indifference Structure to reduce equity requirements for a project sponsor, enabling the sponsor to raise approximately 20% more debt capital, led by MUFG.

Wind resources are notably volatile, resulting in distributions with tail events (P99) that can significantly impact debt sizing. Wind speed variability exceeds that of solar irradiance, presenting unique challenges for project financing.

The wind proxy hedge, combined with the kWh Analytics Indifference Structure, addresses this volatility by improving the project’s P99 scenario with investment-grade cash flow above the P99 wind speed.

This credit enhancement increases the project’s attractiveness to lenders, resulting in greater debt capacity. Incorporating the wind proxy hedge and kWh Indifference Structure, each dollar of premium paid for the product yielded approximately $6 of additional loan proceeds.

Geoffrey Lehv (pictured above), head of US accounts for kWh Analytics, stated that the company provided a proprietary debt structure, applying modeling, analysis, and risk management expertise to assist Munich Re in incorporating its parametric solution into project financing.

“The resulting credit enhancement not only mitigates downside risk but also optimizes capital structure. This is about more than just financial engineering – it’s about accelerating the transition to clean energy by making wind projects more bankable and attractive to investors,” Lehv said.

“Deep project finance knowledge was crucial in structuring this transaction,” said Bill MacLauchlan, CEO of Munich Re Trading LLC. “By leveraging our team’s long-standing expertise in designing parametric risk-transfer solutions, collaborating closely with MUFG, and utilizing kWh Analytics’ unique position in the market, we successfully implemented an innovative risk transfer solution for this sponsor.”

kWh Analytics served as an advisor to Munich Re during the structuring process, drawing on its expertise in designing risk transfer products for renewable energy, such as the Solar Revenue Put and Property Insurance. MUFG acted as the sole lead arranger for the debt financing.

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