Global reinsurer Munich Re has been named as the capacity provider for a wind proxy hedge risk transfer product structured using a solution from kWh Analytics, for a 59MW, 14-turbine wind project in Maine.
This innovative product was developed by a Greenbacker Capital Management-affiliated investment vehicle with expertise in sustainable infrastructure assets.
It 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 and for debt sizing.
Led by MUFG, which acted as a Sole Lead Arranger for the debt financing, the structure’s implementation enabled the project sponsor to raise roughly 20% more debt capital for this project.
Bill MacLauchlan, Chief Executive Officer, Munich Re Trading LLC, commented, “Deep project finance knowledge was crucial in structuring this transaction. 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.”
Geoffrey Lehv, Head of US Accounts, kWh Analytics, added, “We provided a proprietary debt structure, applying modeling, analysis, and risk management expertise to assist Munich Re in incorporating its parametric solution to a 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.”
The companies note that wind is a notoriously volatile resource, resulting in distributions with tail events that can severely impact debt sizing.
“Wind speed variability far exceeds that of solar irradiance, presenting unique challenges for project financing. The wind proxy hedge paired with the kWh Analytics Indifference Structure addresses this volatility, significantly improving the project’s P99 scenario by adding investment-grade cash flow above the P99 wind speed. This credit enhancement makes the project more attractive to lenders, leading to increased debt capacity. By incorporating the wind proxy hedge and kWh Indifference Structure, each dollar of premium paid for the product resulted in ~$6 of additional loan proceeds,” explain the firms.
Alberto Mihelcic Bazzana, Director, MUFG, concluded, “As a leader in project finance, MUFG is pleased to partner with Greenbacker, kWh Analytics, and Munich Re in developing new financing solutions that can expedite the energy transition process.”
