Commercial, Finance, Industrial, Wind - March 22, 2017
Microsoft wind deal recognized for financial innovation
The innovative financial structure utilized in Microsoft's recent purchase of wind energy from the 178-MW Bloom Wind project in Kansas was recently named North American Wind Deal of the Year by infrastructure and project finance magazine IJGlobal.
The structure was developed in partnership with the project owner — Alberta-based power producer Capital Power — and Allianz Global Corporate & Specialty SE subsidiary Allianz Risk Transfer, or ART.
According to a March 15 news release from the companies, the project utilized an innovative 10-year proxy revenue swap agreement with ART that had been created and commercialized through a partnership among ART, Nephila Capital Ltd., REsurety Inc. and Altenex LLC. That agreement swaps the floating revenues of the wind farm — those driven by the hourly wind resource and power prices — for a fixed annual payment.
Microsoft in November became the first buyer to participate in the structure and is acquiring the Bloom project's environmental attributes, according to the joint news release. The combined output from Bloom and a Wyoming wind farm will produce enough energy on an annual basis to cover the annual energy used at Microsoft's data center in Cheyenne, Wyo.
In an interview posted on the Microsoft's environment blog, director of energy strategy Brian Janous called the finance model, designed to help project owners manage the revenue risk associated with developing large-scale wind projects, "efficient and cost-effective."
Every major infrastructure project, whether a bridge, housing development, or wind project, requires as much financial engineering as it does architectural engineering with tools and raw materials. This project represents the first time that the reinsurance market was used to transfer risk away from a project—in this case the risk of uncertain production output when the wind doesn’t blow—benefiting both the project owner (energy producer) and the off-taker (energy buyer).
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