Macquarie and Aquila link to offer Australian weather hedges

Australia's leading investment bank has signed up with the US' Aquila to market weather derivatives in Australia and New Zealand.

The two firms will target the energy, agriculture, construction and entertainment industries. "We estimate that the agriculture market alone has the potential to be a major user of weather derivatives," said Macquarie treasury and commodities associate director Ted Robson.

The value of Asian weather contr acts grew nearly tenfold to $46.1 million last year, according to a survey by the Weather Risk Management Association (WRMA) and consultants PricewaterhouseCoopers. Traders said volumes this year would be even higher, although there have been some concerns about pricing.

Aquila will assist its Australian partner to build a Web-based weather derivatives pricing engine based on its own worldwide service, GuaranteedWeather.com. Users will be able to structure and price customised weather hedges via the net.

"The partnership with Macquarie allows us to combine their top-notch derivatives structuring ability with our global weather portfolio and derivative trading skills," said Aquila's weather group general manager Ravi Nathan, who is also president of the WRMA.

Aquila struck up a similar deal earlier this year with Mitsui Marine for the Japanese market-place.