Allianz Risk Transfer swap hedges wind farm revenues
The 10-year proxy revenue swap hedge for a Kansas wind farm ensures stable revenues despite variable wind resource.
The 10-year proxy revenue swap hedge for a Kansas wind farm ensures stable revenues despite variable wind resource.
Bermuda-based insurer Allianz Risk Transfer (ART) and partners have developed an innovative risk management solution for hedging wind volume risks for wind farms. ART has executed a 10-year proxy revenue swap with Capital Power’s Bloom Wind Farm, to be constructed near Dodge City, Kansas. This new product for the wind power industry was developed via a partnership between ART, Nephila Capital, REsurety and Altenex. The 10-year agreement will secure long-term predictable revenues and mitigate power generation volume uncertainty related to wind resources for the 178 megawatt (MW) Bloom Wind Farm.
The newly-created proxy revenue swap is described as an entirely new form of revenue risk management for the wind power industry. Similar in concept to a tolling agreement or capacity payment, the structure swaps the floating revenues of a wind farm – those driven by the hourly wind resource and power prices – for a fixed annual payment. The transaction is the first in a robust pipeline of future wind financings and ART confirms that it would also be feasible in other wind farm markets globally beyond the US.
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