Deal of the year, Asia: CTBC Bank

Energy Risk Asia Awards 2020: Taiwanese bank boosts burgeoning domestic offshore wind market with record project-financing deal

Matthew Liaw, CTBC Bank

Taiwan-headquartered CTBC Bank provided a significant boost to the country’s growing offshore wind sector this year with its role in the largest project financing to date, which attracted local and international, private and public participants.

CTBC was the joint financial adviser, mandated lead arranger, bookrunner and bond issuer for the 18-year deal, as well as being the largest lender to the project. Financing for the 589 megawatt Changfang and Xidao offshore wind farm was launched in July 2019 and closed, 10% oversubscribed, in February 2020. The multi-tranche, NT$90 billion (US$3.15 billion) financing is the largest debt package so far in Taiwan’s offshore wind market.

CTBC Bank’s extensive experience and knowledge of the local energy and infrastructure sector enabled it to bring all of the necessary elements together to ensure the financing closed – in just seven months – without the usual delays encountered by such projects in the region, says Matthew Liaw, executive vice-president and head of the global structured finance division at CTBC.

A total of 25 local and international financial institutions participated in the deal, alongside six export credit agencies (ECAs) – four from Europe and two from Asia – that provided government-backed guarantees to encourage lenders and investors from their home countries to participate. CTBC played an essential role in assisting the ECAs to connect with local firms. Significantly, the involvement of Nippon Export and Investment Insurance (Nexi) marked a first for Japanese ECA financing of the nascent Taiwanese offshore wind sector.

As a result of its significant role in the funding, CTBC was also able to provide vital support to local suppliers in this new market. Due to government involvement, the project had to draw 30% of its resources from the local economy, for example by using local equipment manufacturers. This is the highest ever local content requirement for an Asia-Pacific offshore wind project, according to CTBC.

“If we had not helped some of the local supply chain, they may have found it more challenging to get financing elsewhere,” explains Phoebe Li, senior vice-president and head of the corporate finance department at CTBC.

The complexity of the project and the fact that offshore wind development is at an early stage in Taiwan, increased the risks involved in financing suppliers. However, since loan repayments would be based on the project meeting its deadlines, CTBC’s in-depth knowledge of the entire project life-cycle made it more comfortable with the credit risk involved in these loans.

“Because we are the adviser for the whole project and one of the arrangers – the only local co-ordinating bookrunner – CTBC knew the project better than other lenders and so could help local supply-chain players by financing them and making the whole transaction feasible,” Li says.

CTBC also brought a range of other players to the table, including international banks with experience in European offshore wind, such as HSBC and Santander. “We have completed many other transactions with these banks in Apac, so we have a relationship and we were an important contact for them to facilitate entry into the Taiwanese wind sector,” Liaw says.

In addition, local insurance companies Taiwan Life Insurance and TransGlobe Life both took stakes in the project in February 2020, bringing a new category of investor to Taiwan’s offshore wind market. “We helped the sponsor to diversify the funding sources for this project, not only on the debt side but also on the equity side,” Liaw adds.

The project highlights the development of offshore wind in Taiwan, which is underpinned by the government’s aim to develop 15.5 gigawatts of offshore wind capacity by 2035 as part of its energy transition policy.

Liaw believes the deal is a “key milestone” on the country’s energy transition journey, while Anders Eldrup, Apac chairman of project developer Copenhagen Infrastructure Partners, believes it will “lead the way” for the wider Apac region.