Taiwan Life becomes first insurer to back local offshore wind

The firm is part of a consortium of 20 international and local lenders that will provide project financing for the Macquarie Capital-backed Formosa II.

A local insurance company is participating for the first time in the financing of an offshore wind project in Taiwan, two sources with direct knowledge of the situation have confirmed to Infrastructure Investor.

Taiwan Life has joined a consortium of 20 international and local lenders that will provide 62.4 billion new Taiwan dollars ($2.0 billion; €1.8 billion) to finance the Formosa II offshore wind farm. The project is jointly owned by Macquarie Capital, Stonepeak-backed Swancor Renewables and Japan’s JERA.

“I hope this is a step towards having more life insurance firms participating in the market,” one of the sources said.

According to the source, the institutional investor has been able to bypass local restrictions on investment in greenfield projects because the debt acquired is fully guaranteed by the export credit agencies involved in the project.

“Taiwan Life likely lobbied Taiwan’s financial supervisor to be able to participate in the financing of Formosa II,” said Raoul Kubitschek, Taipei-based director at The Renewables Consulting Group. “Furthermore, there are several insurance companies waiting for or ready to seek the supervisor’s approval to acquire equity stakes in other offshore wind projects in Taiwan.”

The insurer confirmed its involvement in the deal, but declined to provide further details. Taiwan’s Financial Regulatory Commission did not reply to a request for comment.

Taiwan Life has ramped up its exposure to infrastructure during the past 12 months. According to Infrastructure Investor data, it has invested in Morgan Stanley’s North Haven Infrastructure Partners III, Antin Infrastructure Partners IV, Global Infrastructure Partners IV, Ardian Infrastructure Fund V and EQT Infrastructure Fund IV.

Last year, the insurance provider also signed a memorandum of understanding with Denmark’s Copenhagen Infrastructure Partners to participate in financing its offshore wind projects in the country, which will provide a total generating capacity of 900MW.

The sources said that, in addition to Taiwan Life, the consortium providing project financing for Formosa II comprises five Taiwanese banks, including Taiwan Fubon Commercial Bank and Cathay United Bank; and 14 international lenders, including BNP Paribas, Crédit Agricole, DBS Bank, HSBC, Natixis and Société Générale.

Belgium’s Credendo, Denmark’s EKF, Korea’s K-Sure and UK Export Finance have guaranteed approximately 50 percent of the debt, one of the sources said.

The Taiwanese financial institutions are providing approximately 30 percent of the project financing, according to our second source.

Financing challenges

“The main challenge for offshore wind projects is still to attract local capital to invest in them,” Kubitschek said.

In recent months, industry insiders have warned that Taiwan’s offshore wind projects might face challenges in securing financing because of domestic banks’ limited involvement in the market and because concentration risk may make it harder for international lenders to return there.

“Taiwanese banks don’t have large project finance teams, and are not used to seeing that much deal activity, so they are a bit stretched in terms of resources,” one of the sources said. “But once the projects become operational, there will be more local participation, and we will see international players recycling capital by selling [their] debt to local players.”

Macquarie said in October that it expected the 376MW Formosa II to become operational in 2021. JERA, a joint venture between Tokyo Electric Power Group and Chubu Electric Power, acquired 49 percent of the asset in October, while Macquarie Capital and Stonepeak-backed Swancor Renewables own 26 and 25 percent stakes in the project, respectively.

In a statement, Macquarie’s Green Investment Group said Macquarie Capital would invest and develop green energy projects in Taiwan, including the Formosa II project, through GIG.

A source close to the firm said the change meant Macquarie Capital was “rebranding” as GIG for green activities in Taiwan, and that it did not indicate “a change to Macquarie’s business or the legal structure of its investments”.