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Very interesting. Could you expand a little on this, ie what exactly his bet on interest rates is? Is he expecting them to stay low or go up?
by technotony 14y ago
Very interesting. Could you expand a little on this, ie what exactly his bet on interest rates is? Is he expecting them to stay low or go up?
- _delirium 14y agoHe's betting that they'll stay lowish, or at least lower than whatever return he's getting here (not enough information in the article to tell). If you treat this investment, in return for a 20-year guaranteed rate, as sort of like a 20-year bond, it shares the characteristics of long-term bonds that you're betting against any unexpected increase in interest rates. If interest rates increase more than was priced in at the beginning, e.g. there's a big rate spike in 2017, then you would've been better off keeping your money in short-term bonds where you can take advantage of any upwards movements, rather than locking in a fixed return for 20 years.
- antr 14y agoAgree to your comment, but all PPAs I've seen/been part off, are indexed/hedged to CPI/energy CPI and/or oil & gas prices. It would be irresponsible for whomever negotiated and valued the PPA not to factor these. No PPA without this type of hedge/terms is financeable - today more than ever.