Elektrizitätswerk Dahlenburg has entered a precipitation swap with Element Reinsurance in which the electric utility receives a pay out if precipitation rises above an agreed level during the summer. Rainfall has a direct impact on Elektrizitätswerk Dahlenburg's revenue because many of the utility's customers are farmers using electric power for irrigation during periods of low rainfall. The swap is designed to hedge against a fall in revenue during periods of high precipitation, according to Nicholas Ward, head of new markets at Spectron, which brokered the transaction. Ward declined to detail the size of the deal.
Weather traders said the deal had been in the market for around six months and though modestly sized--with the pay out capped at EUR30,000 (USD25,746) on a notional swap size of EUR2,000--is nevertheless noteworthy as one of a growing number of international deals. Officials at Elektrizitätswerk Dahlenburg could not be reached by press time.
