The Ministry of Finance reported that in the last six months the Dominican State has received compensation of US $ 33,393,207.97 for the contracted natural gas coverage, after an income of US $ 6,893,249.93 was recorded in November for this concept.
Timely purchase of insurance (“Call option”) in April of this year has allowed the Dominican Government to receive an additional US $ 20,601,208 at the cost of the contract premium, which was US $ 12,791,999.97, according to a statement sent by the Ministry of Finance.
The compensation cited is due to the increase in prices of this commodity in international markets. Since the option was contracted, natural gas prices have registered an increase of 85.0%, reaching their maximum price in October where it represented an increase of 130.4%.
Natural gas represents approximately 50% of the country’s electricity generation matrix. Therefore, taking out the insurance has mitigated the upward effect on the cost of power generation.
The result of the hedge guarantees that the price of this fuel does not exceed US $ 3.25 MMBtu. The contract was carried out in a staggered manner, covering 80% of the import of this fuel from May to December 2021, 60% from 2022 and 40% from 2023.
The contracting of insurance is part of the strategic measures implemented by the Ministry of Finance to guarantee budget stability in the face of unfavorable trends in raw material prices.
With this, the government has managed to counteract the impact of this fuel prices on the electricity subsidy and, therefore, on public finances. In addition, the acquisition of the insurance has resulted in an additional benefit to the national treasury.
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