【Mirror Media Interview】Richard Liu highlighting the frustrations faced by developers in the offshore wind sector in Taiwan

"Setting aside state-owned enterprises, when we consider the current capital structures and fundraising capabilities of the developers involved in Taiwan's offshore wind projects, it is highly likely that only one company could confidently develop 1 GW or even more. This is primarily because most developers heavily rely on project financing from banks to secure the necessary funds for wind farm construction. In essence, a 1 GW wind farm would typically require securing approximately 100 billion New Taiwan Dollars (NTD) from the banking system. Only a very limited number of developers have the capacity to provide guarantees or assets to secure this 100 billion NTD financing, while others must resort to project-specific financing," said Richard Liu.

In market rumors, it has been suggested that the installation capacity limit for the second stage of development in the third phase of offshore wind power blocks may be raised to 1 GW.

According to Liu, domestic banks in Taiwan can provide developers with approximately 3 billion NTD, while foreign banks may offer slightly more, averaging around 3.6 billion NTD. This limitation primarily stems from the regulatory requirement that banks cannot concentrate their lending excessively; they must diversify to mitigate risks, making an upper limit necessary.

In other words, assuming that all 25 foreign banks currently participating in Taiwan's offshore wind power projects are willing to lend money, along with domestic banks, the maximum amount that can be raised is roughly 110 to 120 billion NTD, which is just enough to develop a 1 GW project. In reality, there have been instances where developers, despite securing a larger installation capacity, faced challenges in arranging syndicated loans for over a year without resolution.

In all fairness, TRE actually possesses the capability to construct wind farms with larger installation capacities. However, they are constrained by the size of their own available capital, which limits their choice of projects to those that align with their financial resources.

"Overseas developers come in various sizes, ranging from large to mid-sized to small developers. From a macro perspective and from the standpoint of the nation's interests, it is essential for the offshore wind power market to accommodate diverse types of developers. This diversity is crucial for the healthy development of the sector," noted Liu.

Liu is further stating that in the case of TRE, if the government were to allocate 1 GW for development, TRE might respond that they are unable to undertake such a project. However, this inability isn't due to a lack of technical capability but rather other factors. However, if the government were to allocate 500 MW, TRE  would have the capacity to execute the project. On the other hand, if they were given 200 MW, they would still be unable to proceed because banks would not provide the necessary financing. For TRE, 500 MW represents the optimal scale that balances cost-effectiveness in their operations.

Recent developments in the Taiwan Strait have led to increased tensions, and this may potentially impact some foreign banks. It is worth noting that even if these foreign banks are not significantly affected by the Taiwan Strait tensions, they are still subject to limitations on the amount of loans they can extend to specific industries or companies. Therefore, in the future, foreign banks may gradually increase their lending amounts for Taiwan's offshore wind power projects, approaching the exposure limits.

It is foreseeable that financing will be a critically important issue for the development and construction of Taiwan's offshore wind power projects in the future.

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