Panama Insures Price of Bunker Fuel for Electricity

A hedging transaction has been created by use of a financial instrument called an "Option-call" which has similar features to an insurance policy.

Tuesday, August 23, 2016

From a statement issued by the Ministry of Economy and Finance (MEF):

Government adopts measures to stabilize electricity prices in the short term, for the next two years. 

The Government of the Republic of Panama recently conducted a hedge transaction on the price of "Bunker C" fuel used for power generation which makes it a key element in setting electricity tariffs.

"This action will mitigate the tax exposure of the Republic to the price fluctuations of Bunker C, setting a ceiling on expenditures related to electrical subsidies granted by the Government. Furthermore, it avoids the incidence of adverse effects on the national economy as a result of price indexation of Bunker C to electricity tariffs," said Katyuska Correa, director of Public Finance, at the Ministry of Economy and Finance (MEF).

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