• Trade Finance, Dossier Sustainable Finance, Macro and Markets

    Taiwan’s green energy revolution

09 July 2021

By attracting international corporates and financing with a partnership approach to offshore wind farms, Taiwan is driving renewable energy growth. flow’s Clarissa Dann provides an overview of two large, syndicated export credit agency deals

When Taiwan’s first female president, Tsai Ing-wen, swept to power in 2016, she made the phasing out of nuclear power and the expansion of renewable energy a strategic priority. Green energy was one of the ‘five pillar industries’, with climate protection central to her government’s policy. 

“This was very exciting,” says Ingrid Chang, Head of Corporate Coverage at Deutsche Bank AG’s Taipei Branch. She explains that the government set ambitious renewable energy targets to be met by 2025, when 20% of the country’s electricity supply must come from renewable resources. 

According to the Brussels-based Global Wind Energy Council’s (GWEC’s) Global Wind Report 2019, which was published in March 2020, the global offshore wind industry installed a record 6.1 gigawatts (GW) of new capacity in 2019, bringing total offshore capacity to 29.1GW. “This growth was led by China, which remains in the number-one position for new offshore capacity with 2.3GW installed in 2019. In terms of cumulative offshore wind capacity, the UK remains in the top spot with 9.7GW, accounting for nearly one-third of the 29.1GW of total global capacity,” the GWEC announced in a press summary at the time.1

Asia is therefore very much regarded as a growth opportunity. Denmark’s Ørsted, the world’s largest owner of offshore wind power sites (previously known as DONG Energy), told Reuters in 2018 that Taiwan is seen “as a stepping stone into Asia Pacific”.2

Achim Berge Olsen, Chief Operating Officer, wpd"The success of projects in Taiwan is key to its role as a preferred market for investors and a hub for the region"
Achim Berge Olsen, Chief Operating Officer, wpd

Attractive feed-in tariffs, a stable regulatory framework, supportive government policies and the country’s strategic location have attracted a number of top offshore wind developers to invest in renewable energy infrastructure in the country. Among them is Germany’s Bremen-based wpd. Set up in 1996, it has installed 2,200 turbines around the world with a total of 4,450 megawatts (MW) of combined offshore and onshore capacity. The company’s offshore Yunlin project in Taiwan is set to deliver 640MW by 2022.3 Its Chief Operating Officer, Achim Berge Olsen, notes that “the success of projects in Taiwan is key to its role as a preferred market for investors and a hub for the region”. 

As a client of Deutsche Bank that has much of its onshore installed capacity in Germany, it was natural that wpd turned to the bank for support in developing capacity in the country. “It was a privilege to be part of the team helping the Taiwan government reach its renewable energy target” says Chang, who, as an on-the-ground Mandarin-speaking Taiwanese, is well placed to work with the government, its energy regulator and local banks.

Market opportunities and challenges

Taiwan’s offshore wind resources have helped it establish itself as an attractive market for offshore wind in Asia, with speeds of up to 12 metres per second in the Taiwan Strait. However, frequent earthquakes and typhoons can, notes law firm Watson Farley & Williams, “reduce the window for construction, increase the risk of component fatigue and affect how risk is allocated between the parties”.4

In January 2018, Taiwan’s government announced its intention to achieve a target of 5.5GW of offshore wind energy capacity by 2025. According to the GWEC, it has since added a further 10GW to its offshore wind capacity target for 2026–2035.5 This, says Chang, “provides the long-term visibility needed to generate a local offshore wind industry and supply chain”. 

To support the development of renewable energy, in 2009 the government passed the Renewable Energy Development Act, which provides for a feed-in tariff system and offers a range of incentives to renewable power producers. 

The country’s Electricity Business Act was also subject to substantial reform in 2017, including provision for the future liberalisation of the electricity market. It also addressed the development of renewable energy by providing for preferential measures – for example, priority grid connection and dispatch – for renewable power producers. Further regulatory changes, such as incentives and subsidies, helpful land-use zoning, and construction arrangements, have sought to facilitate the expansion of Taiwan’s offshore wind sector. 

As well as legislative and regulatory measures, the government has announced steps to streamline approval of Watson Farley & Williams’ planning processes for new developments, and has earmarked significant investment in infrastructure to facilitate the development of renewable energy. 

“Generally, Taiwan’s markets are relatively open and are thus attractive to the European players,” says Chang. “Plus, the scale of the offshore projects in Taiwan requires very substantial balance sheets and competent developers, and European companies are currently the most advanced in the offshore wind market.”

While Taiwan’s legal framework for the renewable energy sector is relatively friendly compared to other countries in Asia, one issue developers are facing is the localisation requirement, where developers have to use local equipment and services for the construction of their projects. This creates a concentration risk among local suppliers. 

“Increasing local content requirements may result in reduced export credit agency (ECA) participation, testing international lenders’ interest,” reflects Chang. However, Taiwan’s Bureau of Energy, Ministry of Economic Affairs has recognised that domestic suppliers, along with local banks, need to work collaboratively with international providers, with the collective expertise and scale making it possible to attract ECA support.

Environmental impact

Despite the Taiwanese government’s ambitious offshore renewable energy targets, there is no corner-cutting when it comes to checking and monitoring environmental impact. Projects selected by the government are subject to environmental assessments, which involve consultation with various authorities to gain Environmental Impact Assessment (EIA) approval. Once the approval is granted, the projects are then awarded grid capacity. All of this must be in place before financing can be signed off. 

Through the environment and social impact due diligence process, the assessments submitted to gain EIA approval are designed to align with the following standards:

  • International Finance Corporation (IFC) Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts;
  • IFC Performance Standard 5: Land Acquisition and Involuntary Resettlement;
  • IFC Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources.

Deutsche Bank engagement

Chang reports that Deutsche Bank has been active in Taiwan’s wind farm projects since 2006. However, over the past two years, this activity has intensified, with ECA deal structuring and the bank acting as the sole deal contingent interest rate swap hedge arranger in the Yunlin project financing. “Deutsche Bank’s competitive advantages lie in strong market risk appetite and execution capabilities, along with established expertise,” she notes.  

By leveraging its deep expertise of offshore wind farm projects in Europe, Taiwan Country Chief and Head of Investment and Corporate Banking, Cynthia Chan, was keen for the bank to build its renewable energy portfolio in the country, and she encouraged Chang to make it happen. 

Due to their lack of expertise in the offshore wind farm sector, and deterred by the complexity of non-recourse project financing, state-owned local banks were initially reluctant to participate in offshore wind farm project financings. But their participation was critical for the industry’s ongoing development as they had Taiwanese dollar (TWD) liquidity. One of Chang’s first tasks was to explain to them how the industry worked, and provide support on risk mitigation, such as managing interest rate volatility with swaps. This involved giving a number of ‘roadshows’ and training courses. 

“We have a very close dialogue − I would say partnership − with the government,” says Chang. “We always get the very latest regulation updates and are more like a consultant in the industry right now.” She believes this also differentiates Deutsche Bank Taipei from other foreign banks in the capital. 

Ingrid Chang, Head of Corporate Coverage Taiwan, Deutsche Bank"It was a privilege to be part of the team helping the Taiwan government reach its renewable energy target"
Ingrid Chang, Head of Corporate Coverage Taiwan, Deutsche Bank

Yunlin monopiles made by Steelwind Nordenham arriving in Tainan, Taiwan


The work to attract local banks paid off, and the region’s first deal that really moved the needle was the 18-year tenor award-winning6 Yunneng Wind Power TWD82bn (€2.3bn equivalent) EKF, Euler Hermes, and Atradius-covered loan and commercial loan financing, signed with 19 Taiwanese and international banks on 24 May 2019. 

The Yunneng Wind Power Co. was a special purpose vehicle (SPV) established to run the construction and operation of a 640MW offshore wind farm project located near Yunlin County on the west coast of Taiwan. The SPV was jointly owned by wpd AG (73%) and a Japanese consortium led by the Sojitz Corporation (27%). 

Syndication of the financing was successfully closed with a 34% oversubscription four months after the launch. Given the tight timeline for drawdown after the 24 May signing, Deutsche Bank, together with the initial group of lenders, pre-funded the financing prior to close of syndication. 

As Chang indicates, Deutsche Bank acted as the sole hedge coordinator and arranged a 10-year deal contingent interest rate swap hedge solution to enable the client to lock in a TWD fixed interest rate cost. By way of background, a deal contingent hedge is one of the most sophisticated solutions that allows a client to hedge a critical risk linked to a transaction before the underlying transaction is confirmed, with the client bearing no liability or cost for the hedge should the transaction fall through. 

Construction of the project is currently underway with foundations being laid, and it is scheduled to be completed by the end of 2021. The production of the foundations is split between local companies and suppliers in Europe. 

When completed, Yunlin will be one of the largest wind farms in Taiwan and will provide ‘clean’ electricity to more than 450,000 Taiwanese homes, while offsetting 916,000 tonnes of CO2 emissions each year. It will be home to 80 SG 8.0-167 DD offshore wind turbines manufactured by Siemens Gamesa Renewable Energy, and will be the first wind farm in the APAC region to use such turbines.

Monopiles offloading at Mailiao Harbor, Yunlin, Taiwan. The Mailiao monopiles will be welded by Taiwanese company Formosa Heavy Industries

Changfang and Xidao

After the success of Yunlin, the Deutsche Bank team continued the momentum, acting as mandated lead arranger and hedging bank for the 589MW Changfang and Xidao offshore wind farm. This time, the project owner was Copenhagen Infrastructure Partners (CIP) alongside two Taiwanese life insurance companies that held a minority share. 

Closed in February 2020, this was another 18-year tenor large financing, to the tune of TWD90bn (€2.6bn), inclusive of commercial loans, ECA-covered loans, a decommissioning bond facility, a performance bond facility and a contractor guarantee facility. Lenders also had the comfort of a long-term fixed price offtake agreement with the state-owned Taiwan Power Company (TPC), ensuring future revenues could repay the loan.

The deal comprised equity and senior loans from a consortium of 25 international and Taiwanese banks and financial institutions (including CI-II, Taiwan Life Insurance and TransGlobe Life Insurance), as well as six export credit agencies, demonstrating increased confidence from ECAs in these projects. They comprised:

  • GIEK (Denmark);
  • NEXI (Japan);
  • EKF (Norway);
  • Atradius (Netherlands);
  • UKEF (UK); and
  • K-Sure (South Korea). 

CIP had acquired the Changfang and Xidao project in 2017 and it obtained grid allocation the next year. In 2019, the project entered into a 20-year power purchase agreement with the TPC. Commercial operations are planned to start in Q1 2024, once the construction phase is complete. 

“This project, besides being a remarkable one in Taiwan where it marks the continuation of the offshore wind build-out, is part of leading the way for the complete APAC region going into offshore wind,” said Anders Eldrup, CIP APAC Chairman, in a press release when the deal was closed. “Reaching financial close marks a major milestone for the Changfang and Xidao project and we are really excited about entering the construction phase,” added CIP Partner Michael Hannibal. He noted that once commercial operations start, the wind farm will “provide clean energy to more than 600,000 households in Taiwan”.7

A sizeable force

The track record established by project financing deals such as Yunlin, together with Changfang and Xidao, has clearly played its part in confirming Taiwan as the most attractive offshore market in the APAC region. As Somik Das, Senior Power Analyst at GlobalData, commented in August 2020, “Taiwan is blessed with high offshore potential, providing greater market size and stability, [a] conducive policy environment, [an] established power purchase agreement market, and project financing ease.”8

It would seem that the country’s aims of reaching total offshore wind capacity of more than 5.5GW by 2025, and 15.5GW by 2035, are currently on track. Given that, as at 2019, there was only 29GW of installed offshore capacity in the whole world, that has got to be a game-changer.


1 See https://bit.ly/3a5kPoW at gwec.net
2 See https://reut.rs/3jAa1Cx at reuters.com
3 See https://bit.ly/3jBQ2mN at wpd.de
4 See https://bit.ly/3v0mbdj at wfw.com
5 See https://bit.ly/3jAa94Z at gwec.net
6 See https://bit.ly/3d65cjf at gtreview.com
7 See https://bit.ly/3tK9x17 at cipartners.dk
8 See https://bit.ly/3rFGxpv at globaldata.com

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