Project Finance with Asian Wind Swaps: Are 'Average Price' Derivatives Bankable in Australia's NEM?

This article examines whether zonal average-price wind swaps, more accurately defined as Asian wind swaps, are a 'bankable' instrument. Specifically, can a derivative that references the wind fleet's average price underwrite a bespoke project financed new entrant wind farm in Australia’s National Electricity Market? Prima facie, long -dated Asian swaps referencing the wind fleet’s dispatch-weighted average price present as a material departure from convention, viz. site-specific fixed price (run-of-plant) Power Purchase Agreements. Using South Australia as a deliberately demanding test case, ten years of chronologically matched 30-minute spot-price and wind-production data are block-bootstrapped into 10,000 synthetic years of market data. This data is the n utilised within a hedge optimisation and stochastic project finance models across heterogeneous wind farms with explicit strike -price calibration and debt-sizing to stress-test the 'bankability' of Asian wind swaps. Results confirm when hedge quantities are optimised, and strike prices calibrated to entry costs, Asian wind swaps reduce revenue volatility and support project finance, with debt sizing at broadly equivalent levels to a conventional PPA. Findings suggest an Asian wind swap can plausibly replace bespoke government-originated CfDs, which in turn raises the prospect of seamless divisible re-trading and the creation of liquid secondary markets – a necessary precondition for a healthy retail supplier market.