Sat, Nov 04, 2017 page12

• Offshore wind farm projects a challenge

  TIME-LIMITED: Projects on government-owned land are given a nine-year lease, while most financing is extended over 15 years, making private banks skeptical

  • By Ted Chen / Staff reporter
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  Local and foreign financial institutions and systems providers yesterday shed light on the challenges of securing financing for offshore wind farm projects in Taiwan.

  While Taiwan is an attractive destination for offshore and onshore wind projects, and the government has shown its support for such development, a number of lingering challenges remain, panelists said at a renewable energy finance summit organized by the Taiwan Academy of Banking and Finance in Taipei.

  For onshore wind farms, one of the most pressing difficulties is that projects are often built on government-owned land that comes with many limitations, said Yuni Wang (王雲怡), chairperson of Wpd Taiwan Energy Co Ltd (達德能源), the local subsidiary of German-based Wpd Group, a global renewable energy operator and developer.

  “Even if projects are approved, lenders remain concerned about financing plans that could span more than 15 years, while the government’s land use approvals are extended over nine-year intervals,” Wang said.

  She said that the nine-year limit is imposed on all types of endeavors on government-owned land, not just wind power projects.

  Although the government has shown an openness toward extending land use approvals on suitable endeavors such as wind farms, banks are still uneasy about the exact wording of the rules, Wang said.

  Government backing has greatly contributed to Europe’s rapidly developing renewable energy market, Wang said.

  Most notably, KfW, a German government-controlled development bank, provides state backing and guarantees, which greatly ease anxiety among private-sector lenders and has helped “green” energy development in the country. They have also been instrumental in promoting exports of German wind farm systems, Wang said.

  Without a matching commitment from the government, future wind farm projects would have little Taiwan content, despite the capabilities of the local supply chain, she said.

  In mature markets such as Europe, wind farms are often funded by project financing, an arrangement with little or no recourse to seek further compensation against default beyond collateral, Standard Chartered Bank project and export finance director Nikita Baryshnikov said.

  “The model of project financing goes against the core of Taiwan’s lenders, who are locked in the risk-averse mindset of the commercial banking business model,” Cathay Financial Holding Co (國泰金控) president Lee Chang-ken (李長庚) said.

  “It is nearly impossible to get local banks to invest in things they are not familiar with,” he added.

  Although Cathay Financial has plans for its venture capital, life insurance and private equity arms to quicken investments in renewable energy, as well as tap into the sector’s general insurance opportunities, Lee advised the government to take heed of potential risks of its “green” energy target for 2025.

  Such a target could cause the segment to overheat and impact long-term prospects beyond 2025.

  “All participants of the endeavor require more time to collect data and experience to ensure adequate risk management,” Lee said.

  Lee urged the government to consider making renewable energy into Taiwan’s next major industry, as the local supply chain has long served the manufacturing needs of international system providers.
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