Enel Green Power North America, a subsidiary of Italy's Enel, has begun construction of the 450-MW High Lonesome wind farm in Upton and Crockett Counties in Texas. Once completed, High Lonesome will be the largest wind farm in Enel’s global renewables portfolio. The energy generated by a 295 MW portion of the wind farm will be hedged through a Proxy Revenue Swap (“PRS”), a risk management strategy aimed at minimizing price and weather-related risks.
One of Enel's wind farms in Mexico (Enel Green Power)
“The start of construction of our largest wind project to-date represents a major commitment to growing our business in the US and specifically in Texas,” said Antonio Cammisecra, Head of Enel Green Power.
Investment in the construction of High Lonesome amounts to approximately $600 million and is part of the investment outlined in Enel’s 2019-2021 strategic plan. The project is currently financed through the Group’s own resources and is expected to enter into operations by the end of 2019. Once fully operational, the wind farm will be able to generate around 1.7 TWh annually, while avoiding the emission of an estimated 1.1 million tons of CO2 per year.
Enel has entered into a PRS for a 295 MW portion of the project with insurer Allianz Global Corporate & Specialty, Inc.'s Alternative Risk Transfer unit (Allianz), and Nephila Climate, a provider of weather and climate risk management products. The PRS is a financial derivative agreement designed to produce stable revenues for the project regardless of power price fluctuations and weather-driven intermittency, hedging shape risk in addition to risk associated to price and volume.
Under this agreement, High Lonesome will receive fixed payments based on the expected value of future energy production, with adjustments paid depending on how the realized proxy revenue of the project differs from the fixed payment. The PRS for High Lonesome, which is the largest by capacity for a single plant globally and the first agreement of its kind for Enel, was executed in collaboration with REsurety, Inc., a leader in renewable energy risk management and information services.
“Renewable energy projects are under increasing pressure to deliver predictable returns despite the increasing volatility of the value of intermittent generation,” said Lee Taylor, Co-Founder and CEO, REsurety. “We developed the Proxy Revenue Swap specifically to deliver unrivalled certainty of cash flows, regardless of power price volatility and weather-driven intermittency.”