Enerjen Capital preparing to launch a solve for airlines to hedge against the expected spike in fuel bills

News // 01.14.19

 HEDGING — London-based Enerjen Capital is preparing to launch a bespoke solution for airlines to hedge against the expected spike in fuel bills when new International Civil Aviation Organization’s (ICAO) CORSIA regulations come into force from 2021. Set up by former Vitol, Bank of America and Moller-Maersk executives and advised by veteran ex-BP oil trader Andy Hall, Enerjen says its mission is “to help our clients navigate through the transition to a clean energy future.” The firm has already launched an IMO 2020 hedging vehicle to allow shippers to protect themselves against the expected spike in diesel prices when new International Maritime Organization (IMO) limits on sulfur take effect next year (JFI Oct.29’18). That offering is due to close next month with the funds raised used to buy long only hedges through to September 2019, before diesel prices start to spike (p1). “Within the Note is a curated hedge basket that applies our specialty expertise in the crude oil and refined products markets with upside leverage to protect against a more general ‘oil spike’ risk to create an optimal hedging strategy for consumers,” says Enerjen. The company says its IMO 2020 vehicle will be cashed out and profits distributed to clients in early 2021. Crucially for often cash-strapped shippers and airlines, such Notes are classed as securities rather than derivatives on balance sheets and can be easier to finance. Only 4% of shippers are thought to have fuel hedging programs. For airlines the figure is higher but still relatively low. The majority of airlines will start participating in ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation on a voluntary basis from the start of 2021, before the scheme becomes mandatory for all carriers in 2027 (JFI Nov.12’18). See page 4 of JET FUEL INTELLIGENCE® (Article)