The structured electricity swaptions involve Contact Energy, Mercury NZ and Meridian Energy
Russell McVeagh has assisted Genesis Energy with its watershed 10-year term Huntly Firming Options (HFOs) involving counterparties Contact Energy, Mercury NZ and Meridian Energy.
Under the options, 150 MW of option capacity has been contracted. The structured electricity swaptions grant each counterparty virtual access to Genesis' Rankine Unit generation capacity at the Huntly Power Station, according to Russell McVeagh.
The HFOs merge bilateral swaption agreements with a multiparty framework that determines fuel procurement and the establishment of a joint strategic reserve fuel stockpile. They are designed to support the national security of electricity supply during dry winters with low hydro inflows.
The option’s structure is similar to Genesis' fuel supply chain logistics and generation process, which requires counterparties to notionally order fuel to support underlying swaps. On delivery of the fuel, counterparties may execute the HFO any time with a maximum of four swaps in any combination.
Throughout the 10-year term, counterparties may call unlimited swaps. The arrangements consider a negotiated transition to lower-emissions biomass as a backing fuel when commercially viable, given that the options are supported by coal-fired generation at present.
Russell McVeagh banking and finance partner Jesse Fairley took the lead on this transaction alongside senior associate Ling Yan Pang. The firm’s team handled all aspects of structuring and implementing the transaction, collaborating with the Genesis team.
Bell Gully advised Contact Energy and guided Genesis on the Commerce Act authorisation application. Chapman Tripp assisted Mercury NZ, while MinterEllisonRuddWatts advised Meridian Energy.
