Star Energy Group, a London-based gas, oil and electricity producer, is looking to hedge its dollar exposure for 2005 after a year's break due to the dollar's weakness in the spot market. The group has dollar revenues, but its liabilities are in sterling.
Colin Judd, group financial director in London, explained Star Energy intended to hedge its dollar exposure last year, but postponed the trade because of the fall in the greenback. In the past it has paid around USD2 million (notional) a month in swaps and fixed the exchange rate for the swaps in autumn for the year ahead. Star Energy is looking for the dollar to strengthen against sterling to around USD1.75 and will likely hedge this autumn if the dollar reaches that level. Dollar/sterling was trading at USD1.77 on Wednesday.
Star Energy also hedges its oil exposure, said Judd. The group enters swaps in which it receives fixed and pays floating on Brent crude oil with its senior debt provider, ABN AMRO.
