Vaisala Supplies Data to Endurance for Innovative Wind Hedge
Long-term contract affords Australian electricity supplier Meridian Energy protection against production and earnings volatility
Vaisala is providing the long-term wind measurement data required by Endurance Specialty Holdings Ltd. (NYSE:ENH), a provider of property and casualty insurance and reinsurance, to complete a multi-year wind hedging transaction with Meridian Energy Australia, a leading Australian electricity supplier. The contract provides financial protection against the risk of low annual earnings from price and volume variability at Meridian's Mt. Millar wind farm in South Australia.
Securing a power purchase agreement (PPA) at a reasonable price is becoming a greater challenge for wind projects around the world. In some markets this is due to the rapid growth of wind power and fierce competition driving down PPA prices. In others it is the result of reduced or disappearing subsidies creating extremely thin margins for wind projects. Regardless of the cause, more wind projects are now operating on a merchant basis and using wind hedging contracts to better weather the ups and downs of volatile spot markets.
Endurance Global Weather, via its customized WindLock® product, offers customized risk protection for companies needing to manage the wind variability of operating assets as well as assets in development. However, pricing and structuring these transactions requires access to reliable long-term climate analysis. With an industry-leading approach using advanced weather models to predict wind power production over long-term climatological windows, Vaisala was selected by Endurance to report and quality-control data for the WindLock transaction with Meridian.
Mr. Martin Malinow, Endurance Global Weather's President, said, "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."
Meridian Energy Australia General Manager, Energy Trading, Mr. James Waldren commented, "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."
Mr. Pascal Storck, Global Manager of Energy Services at Vaisala, commented, "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."
Mr. 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."