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UK offshore wind farm refinancing – IR hedging
Case studies

UK offshore wind farm refinancing – IR hedging

Background
  • A consortium of three sponsors of a UK offshore wind farm was looking to refinance its stake
  • The sponsors’ existing debt and corresponding hedges were held with six banks
  • The sponsors were planning to refinance with seven new banks
  • JCRA worked alongside the group of sponsors and their financial adviser to define an optimal hedging strategy for the new debt, as well as managing the existing hedges
  • The sponsors were also interested in hedging their inflation linked revenues
Our Approach
  • Conducted a cost analysis for breaking existing out-of-the-money interest rate swaps vs restructuring the existing swaps and novating them to the new hedge counterparties
  • Provided information on the hedge accounting implications of each strategy
  • Recommended the overall optimal IR hedging strategy, which was to novate and restructure the existing hedges
  • Competed credit spreads between the seven new banks
  • Assisted in appointing a sole hedge co-ordinating bank
  • Benchmarked mid-market levels to ensure fair pricing
  • JCRA evaluated the feasibility of entering into a hedge for the project’s inflation linked revenues
Benefits
  • The refinancing of the project was successful and achieved the objectives required by the sponsors
  • Smooth financial close and novation of the interest rate swaps occurred on time
  • The sponsors achieved competitive execution, competitive credit pricing and a substantial xVA rebate, negotiated by JCRA
  • Sponsors avoided paying any break costs on the existing hedges
 

More case studies

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Hospital PFI refinancing
Project Finance & Infrastructure August 2019
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River hydro project FX hedging
Project Finance & Infrastructure August 2019
Case studies
Infrastructure Fund: Refinancing risks and the potential effect on IRR
Project Finance & Infrastructure April 2019

Contact us

If you need hedging or debt advice or would like to speak to the team, please get in touch.