Endurance in multi-year wind hedge with Meridian Energy Australia

by Artemis on February 10, 2016

Endurance Global Weather, a weather hedging and weather risk management focused unit of Bermudian specialty P&C insurance and reinsurance firm Endurance Specialty Holdings Ltd., has completed a multi-year wind hedge transaction with Meridian Energy Australia.

Meridian Energy Australia, a leading Australian electricity supplier that uses environmentally sustainable renewable resources, selected Endurance Global Weather to help it to better manage the impacts of wind variability on its revenues.

Endurance Global Weather, using its customisable WindLock® hedging product, offers financial protection to companies that need to manage the wind variability of operating assets, as well as of assets in development.

Gaining access to efficient risk capital to offset wind variability is essential for companies such as Meridian. Endurance, through its global insurance, reinsurance and third-party capital platform, and with the expertise of its weather risk management unit, is well-positioned to provide innovative solutions to meet the needs of renewable energy providers.

The completion of this transaction gives Meridian enhanced financial protection against the risk of lower annual earnings due to price and volume variability at its Mt. Millar wind farm in South Australia.

Martin Malinow, Endurance Global Weather’s President, commented on the announcement; “This transaction is noteworthy given the site-specific settlement data provided by Vaisala and the relatively long contract duration. Endurance Global Weather has a successful track record of pioneering tailored solutions for its global client base and was delighted to work with Meridian to execute this WindLock transaction.”

James Waldren, Meridian Energy Australia’s General Manager of Energy Trading, added; “As a merchant renewable energy company, we see this transaction as an innovative way of complementing our existing portfolio of risk management solutions to provide greater earnings certainty for Meridian.”

Ed McManus, CEO of Powershop, Meridian Australia’s electricity retail business, explained; “This solution is consistent with our innovative approach to electricity supply which our customers have grown to expect from Powershop.”

The wind data used for trigger and settlement data for the WindLock® hedging contract will be supplied by Vaisala, a leading weather measurement and renewable energy consultancy. Vaisala will report and quality-control the wind data used for the settlement of the weather hedging transaction.

Pascal Storck, Global Manager of Energy Services at Vaisala, said; “We’re excited to play such a key role in this ground-breaking transaction. By providing accurate wind measurements at Mt. Millar, where there is no public weather station at the relevant hub height, we are able to reduce potential basis risk for Meridian.”

Malinow added; “We know from working with our wind clients that effective risk management can facilitate project finance by securing advantageous terms for debt and equity while potentially allowing developers to allocate their equity across a greater diversity of projects. There is also a benefit to the counterparties to power purchase agreements in passing the financial risk of volumetric uncertainty to weather-diverse third parties like Endurance Global Weather.”

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