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What Interest rate risk management strategy would you use for the company attached and please explain why? Gaoithe is an Irish offshore wind energy business.

What Interest rate risk management strategy would you use for the company attached and please explain why?

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Gaoithe is an Irish offshore wind energy business. It has received approval for the development of a 700Mw wind farm off the coast of Cork that will begin installation in the Summer 2021. The project is part financed by EUR200m in bank borrowing and this is provided by a consortium of five banks. The banks have provided Gaoithe with a loan facility of EUR200m and it will draw down the borrowing in The company intends to draw down the debt in slices as needed. The business expects that it will drawdown some of the loans in the following timeframe: Mid-April 2021EUR 20 million Mid-July 2021 EUR 20 million Mid-October 2021 EUR 80 million The Finance Director thinks that the remainder would then be drawn down in equal instalments of EUR 20 million every 4 months. The wind farm will not begin to make substantial repayments on this debt for several years and is likely to still have most of the EUR200m still outstanding in seven years time. It hopes to reduce the principal to EUR100m in the following three years but it likely to need to keep borrowing levels close to EUR100m for the foreseeable future after that. EURIBOR EUR Rates EUR Swap Rates Overnight 1 Year -0.51% 1 Week -0.561% 2 Years 0.10% 1 Month -0.555% 3 Years 0.50% 2 Months -0.552% 4 Years 0.90% 3 Months -0.550% 5 Years 1.20% 6 Months -0.530% 6 Years 1.90% 9 Months -0.520% 7 Years 2.00% 12 Months -0.510% 8 Years 2.10% 9 years 2.50% 10 years 2.50% The business' interest rate on borrowings is tied to the EURIBOR rate. The interest rate for each rollover is set at the prevailing EUIBOR rate plus 250 basis points. The business has very no experience of hedging market risks and would like your advice on how it can manage interest rate risk on this borrowing. The Finance Director is also not knowledgeable about the outlook for the Euro interest rates over the coming years

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