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FX Hedging Facility
The FX Hedging Facility is a customizable currency hedging product designed to lower costs for foreign investors in India's renewable energy sector by targeting 'tail risk' (extreme currency depreciation). Compared to commercial cross-currency swaps, the facility aims to eliminate counterparty credit and liquidity risks and provide a more efficient use of public grants. In a sample transaction, the facility could reduce hedging costs by approximately 30% and mobilize at least $9 of foreign investment per dollar of donor grant, with a greater than 50% probability of recovering the donor grant. The facility is currently in an advanced conceptual phase, with interest from a commercial bank as a guarantor and potential users such as Hudson Clean Energy Partners, who are interested in investing USD 500 million in utility-scale renewable energy projects.
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Document type: Fact sheet