Project finance — Checklist for hedging policy

Introductory note:
In project finance transaction, project lenders often require hedging arrangements to be put in place for large scale projects (especially international projects) to address market risks associated with the financing of the project. It is not uncommon for lenders to require the borrower to agree a "hedging policy" as a condition precedent to first drawdown. The hedging policy summarises the pre-agreed strategy for hedging and must be complied with over the tenor of the loans.