Northleaf insures Texas wind farm against weather risk

The project is the second insured under Allianz' revenue swap product, which aims to protect renewables investors against intermittency.

Northleaf Capital has agreed to an insurance scheme with Allianz Risk Transfer (ART) under which it will swap the revenue generated by a Texas wind farm it bought last week for a fixed annual payment.

Northleaf and minority shareholder Apex Clean Energy, owners of the 151.2MW Old Settler Wind Farm, will receive a guaranteed 10-year payment in exchange for letting ART take over the project’s production revenue. The scheme, which ART calls a “proxy revenue swap”, is a product infrastructure insurers are beginning to offer to decrease the risk of intermittent production from wind farms.

Northleaf was quick to adopt this insurance product, announcing last week that it had acquired a majority stake in the Old Settler project along with the 50.4MW Cotton Plains wind farm and the 15.4MW Phantom solar plant. Once operational, the Old Settler is expected to power 51,000 homes in the area, while the Cotton Plains and the Phantom Solar is under contract to power the US Army Garrison Fort Hood.

This is Allianz’ second project insured under its revenue swap product, after the German firm sealed a 10-year agreement with Capital Power’s 178MW Bloom Wind Farm, currently under construction in Kansas, in May.

Matt Martins, manager for business development at Capital Power, recently explained how a risk transfer mechanism can help alleviate the pressure created by power-purchase agreements, under which a wind asset is typically expected to produce a certain amount of energy per day.

“What Allianz does is they take that long history and they are able to get comfortable with the wind regime and essentially provide an insurance product around it. Allianz, from our perspective, is the offtake. They will ultimately re-market that power,” he told Infrastructure Investor during an interview last month.

Weather risk analysts have reported that parts of the US are experiencing lower wind speeds than normal, causing some investors to avoid wind projects due to intermittent production. The resulting uncertainty is proving a fertile ground for ART and other insurers, such as GCube Insurance Services, to launch proxy revenue swap products.