Constructing a curve

Spanish construction firm Cintra was forced to restructure a project finance hedge following a sharp appreciation of the Chilean peso. Its response was an 18-year cross-currency swap, with Spain's credit export financing agency acting as intermediary. Hann Ho investigates

Project finance deals are notoriously complex to hedge at the best of times. Schemes such as public transport and toll roads require large investments in single-purpose assets, and the two main phases - construction and operation - are characterised by very different risks and cashflows. There is also a duration mismatch in long-term project finance transactions - the bulk of the capital expenditure is concentrated in the initial construction phase, while revenues accrue only after operation has