HEDGING SOLUTIONS
Our hedging solutions are customised. So no matter what energy product you wish to hedge, we can offer...
Read moreKeeping energy costs within a predictable range protects you from unexpected changes in the price of energy. Changes that could otherwise seriously impact your budget and profit margin.
Fix your price below the market price in exchange for setting a upper protection limit with a Capped Swap. The Capped Swap is a combination of a bought swap and sold call option. It offers the swap buyer a lower swap level in exchange for limited upside protection.
Here's an example of how it works
To begin, you and Global agree upon:
Month 1
Monthly average settles at 115 (20 above the Fixed Price, but below Cap level). Global pays you in full, 20 x volume.
Month 2
Monthly average settles at 90 (5 below the Fixed Price). You pay Global 5 x volume.
Month 3
Monthly average settles at 130 (35 above the Fixed Price and 10 above the Cap). Global pays you up to Cap level; 25 x volume.
Result
Protection against increasing prices - from a below-market starting point - up to a level where you do not need the protection anymore.
At the end of each calendar month, the settlement amount is based on the difference between the monthly average of the price index and the reduced Fixed Price, up to the point where the Cap level is exceeded.
Three good reasons to use this strategy:
Benefits | Disadvantages |
Tailor-made coverage | Limited upside protection |
Flexibility in physical supply | Potential basis risk |
Reduced swap price |
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