Renewable Energy Sector

Credit Evaluation and Support

Non “Fund” clients of MFX in this space are not required to have an external credit rating. However, these clients are required either to have credit insurance (secured by MFX and charged to the client) or to post cash collateral.   If a client wants to avoid the collateral requirement it will have to submit to credit due-diligence form MFX’s credit insurance partner.  The lender for the project will also have to agree to provide seniority to MFX in the event of default.   Credit insurance will be priced into MFX’s rate quote so the hedge cost can be compared to other options.

For clients who prefer to save the additional cost of credit insurance and post collateral, standard collateral terms are:

Renewable Energy Sector

Renewable energy projects in developing countries, – be they a solar electricity array feeding into a local grid under a feed-in tariff, a company selling distributed solar systems to businesses or households in developing countries , or a wind power project using globally sourced components – face the problem of currency risk when they are financed in dollars or euros.  MFX’s ability to cover almost any currency – from Mexico to Madagascar, Poland to Paraguay, Kenya to Kyrgyzstan – means we can support projects in almost any market.

In many cases renewable energy projects are financed by government development institutions (DFIs) or via supplier finance.  When the lending for the project is from one of these sources, MFX can provide hedging to the project on terms which reduce or eliminate the requirement for collateral.

MFX’s job is to find the best hedge rates available for its impact investor clients.  As a market intermediary, MFX finds the best hedge rate among its trading partners and adds a fixed margin of 50 bps to cover MFX’s costs and the cost of its guarantees.  This is the rate offered to clients.  As a facility dedicated to supporting international development, all clients are treated the same and pricing is fully transparent.    All fees are included in the hedge rate so rates can be compared to other hedge providers.