Innovative weather risk solutions for energy generating portfolios
The Weather and Commodity Group's tailored risk management solutions provide financial relief to entities whose revenues are sensitive to changes in the weather and/or commodity prices. We offer financially settled weather derivatives to manage non-catastrophic weather outcomes that impact our clients’ financial key performance indicators. These weather risks include excess or insufficient temperatures, precipitation, wind, irradiation and can be combined with price indices for natural gas or electricity. Our products typically take on the legal form of financially settled derivative contracts.
Solutions for virtually any power-generation-related risk
- Pays the counterparty if realized weather falls outside an established range. The operative weather index can be based on variables such as temperature, wind speed, precipitation or irradiation.
Dual-Trigger Derivatives ("Quantos"):
- Benefits the counterparty if both realized weather falls outside an established range and the price of a related commodity also falls outside an established range.
Power and Gas demand variability:
- In a power-intensive world with ever-higher outputs and demands on technology economies, power plant owners, investors and end-customers depend on an uninterrupted service. Our power and gas products are tailor-made to ensure your company is indemnified for adverse weather outcomes.
Temperature and HDD/CDD swaps and options can be used to help mitigate exposure to gas and power demand, gas and power prices risks
Renewable generation output variability:
Weather is a key driver of renewable power generation, and the volume of renewable generation fed into the power grid has in turn become a strong driver of power prices.
Smoothing revenues with our "Lack of Sun" cover is an essential component of state-of-the-art project risk management. The index-based coverage to compensate solar farm owners for lost revenues/extra costs due to low levels of sunlight.
- Wind Speed / Solar Irradiation are a good proxy for actual output and transactions can be structured to lock in the financial value of the expected generation volume or to create a floor for that value.
- RISK: Power Generation and Power Prices
- Proxy Generation Swaps, Options, Collars
- Proxy Revenue Swap, Floor
Smoothing earnings volatility provides for financial stability even in years with record average temperatures and little rain during the summer. With the right weather risk management tool, poor years for hydroelectric generation are no longer an excuse for posting a substantial loss of profit. This may bring value to your business in terms of credit rating.
- Structures can help mitigate exposure to low or high output time periods.
- RISK: Generation given streamflow or precipitation, Power Prices
All of the above structures may have a contingent commodity exposure, the Weather and Commodity Group can provide structured products that explicitly mitigate both the volumetric risk as well as the contingent commodity risk.