Localisation requirements delay financial close for wpd’s Yunlin project

Company cites preparatory work over the supply chain, including local content requirements, for delay over Taiwan’s 640MW wind project.

German offshore wind developer wpd announced it had reached financial close on its €2.7 billion Yunlin project in Taiwan, after recruiting a Japanese consortium as equity partner and securing debt financing from 19 international banks.

“By achieving this important step, we now can concentrate on the realisation of the project,” Achim Berge Olson, chief operating officer of wpd, said in a statement. “We are aware of the special responsibility being the first large offshore wind project with local supply chain in Taiwan.”

The 640MW offshore wind plant, which wpd said would be the largest in Taiwan, will be located off the west coast of the island. The company said the project was scheduled to be completed by December 2021.

Previously, wpd estimated that the funding package for the site would be completed by the end of 2018, and described the project capital as being “several times oversubscribed.”

Asked about the delay in reaching financial close, Helge Rau, wpd’s head of M&A, told Infrastructure Investor: “A lot of work has been spent on arranging the supply chain, including the local content element.” Last year, the Taiwanese government established strict localisation requirements for offshore wind developers, requiring them to move part of the supply chain to the island.

“Furthermore, arranging project finance with a club of 19 banks plus the respective ECAs [export credit agencies] is a complex task that needs its time,” Rau said.

The financing group comprises three export credit agencies, four Taiwanese banks and 15 international banks. The latter include BNP Paribas, Crédit Agricole Corporate and Investment Bank, DBS Bank, Deutsche Bank and Natixis.

A consortium of Japanese investors led by trading house Sojitz acquired a 27 percent stake in the project in April, according to a statement from the Tokyo-based firm. The other investors are JXTG Nippon Oil & Energy, Chugoku Electric Power, Shikoku Electric Power and Chudenko.

“Through participation in this offshore wind power project in Taiwan, […] Sojitz aims to acquire the expertise to contribute to the expansion of the offshore wind industry domestically,” the statement said.

Sojitz and wpd declined to provide details on the value of the transaction.

Japan is expected to become an offshore wind hub in the Asia-Pacific region. Its government, which aims to develop at least 10GW of onshore and offshore wind capacity by 2030, passed legislation to facilitate the development of offshore projects at the end of 2018. Infrastructure Investor understands that auctions will start in late 2019 or early 2020.

Rau said wpd might consider selling down further equity stakes in Yunlin “at an appropriate time”. In previous statements, the company said it might sell up to 49 percent of the project.

In 2018, the Taiwanese government awarded wpd 1GW of offshore wind energy capacity for its Yunlin and Guanyin projects. The Yunlin project has secured a 20-year PPA agreement with state-owned Taiwan Power under the country’s 2018 feed-in-tariff regime, which offers 5.850 New Taiwan Dollars ($0.19; €0.16) per MWh for 20 years.

In January, wpd threatened to scrap its 350MW Guanyin project if the government went ahead with its planned 12.7 percent reduction in feed-in-tariffs for 2019. By the end of that month, the government had backpedalled on its proposal – wpd was not the only developer threatening to cancel projects – and settled instead on a 5.7 percent reduction. As a result, wpd is understood to be moving forward with the project.