CDPQ's First Step Into Taiwan's Renewable Energy Market
An offshore wind farm project in Taiwan has received a USD 2.7 billion investment from Canadian institutional investor Caisse de dépôt et placement du Québec (CDPQ).
CDPQ’s co-investment into the 605MW Greater Changhua 1 Offshore Wind Farm (Greater Changhua 1) alongside local investor Cathay PE, will result in their acquisition of a 50% stake in the wind farm.
Greater Changhua 1 is being developed and constructed by Ørsted. Ørsted recently secured consent from the United Kingdom’s secretary of state for business, energy, and industrial strategy, Alok Sharma, for one of the world's largest wind farms located off the North Norfolk coast.
The equal share partnership is the first of its kind in the Asia Pacific offshore wind sector. It is hoped that the investment will help drive the creation of further opportunities in the Taiwanese market.
For CDPQ, this is its first direct investment in Taiwan, made via its infrastructure team which has maintained an strong track record for investments in the renewable energy industry.
Greater Changhua 1, which will be located off the coast of Changhua County, will generate a capacity of approximately 605 Megawatts (MW), supplying clean energy to more than 650,000 Taiwanese households.
The project’s construction has already begun and is expected to be completed in 2022.
Head of infrastructure and executive vice president at CDPQ, Emmanuel Jaclot, said in a statement that the investment will enable CDPQ “to further diversify [its] presence in Asia”, adding that the company seeks “this kind of greenfield opportunity to contribute to the transition towards a low carbon economy”.
Ørsted head of partnerships and structured solutions and vice president, Kunal Patel, also stated: “With a long term agenda in Taiwan, we remain committed to the Greater Changhua 1 project and will also reutilise the capital into further developing new offshore wind projects to assist Taiwan in achieving its energy transition goals.”
Magic Circle law firm Clifford Chance acted as legal counsel to CDPQ and the special purpose vehicle purchaser on the tender and acquisition process, as well as the negotiation for the construction, operation and related commercial arrangement for the wind farm, and the financing of the purchase price.
Clifford Chance Singapore partner and advisory team leader Ross Howard said in a separate statement that the transaction “mobilises global capital to support Taiwan's transition to a low carbon economy”.
Howard was assisted by Singapore and Perth lead associates Jordan Knowles and Dominik Kepinski, respectively.
An Amsterdam-based team of lawyers from Clifford Chance advised Rabobank, as lender, on the EUR 500 million financing and development of the Netherland's largest onshore wind farm, Windpark Zeewolde, in July last year.
I don't know why this is making headlines now as CDPQ announced this deal at the end of last year (December 28, bad time to make a big announcement) and posted this press release:
Ørsted announced today that it has signed an agreement with a consortium of world-leading investors, which consists of global institutional investor Caisse de dépôt et placement du Québec (CDPQ) and established local investor Cathay PE, to co-invest in the 605MW Greater Changhua 1 Offshore Wind Farm (Greater Changhua 1). CDPQ and Cathay PE will jointly own 50% of the Greater Changhua 1 and Ørsted will retain a 50% share. The majority of the deal amount of approximately TWD 75 billion (approximately DKK 16 billion, or 3.4 billion CAD) will be used to pay for the EPC services for Greater Changhua 1.
The transaction is still subject to all customary and regulatory approvals by Taiwanese authorities.
Matthias Bausenwein, President of Ørsted Asia-Pacific, says: “It has been our commitment to share our vast offshore wind financing experience with Taiwan's financial community since the early stages of developing the Greater Changhua projects. We are glad to successfully achieve this important milestone by bringing our reliable and experienced partner CDPQ to Taiwan for the first time. We are equally thrilled to collaborate with our local partner Cathay PE, so that the Greater Changhua 1 will also be locally owned.”
Kunal Patel, Vice President and Ørsted Head of Partnerships & Structured Solutions, says: “This transaction marks the evolution of our partnership model into Taiwan, leveraging our extensive track record of development, construction and operation of large offshore wind farms. With a long term agenda in Taiwan, we remain committed to the Greater Changhua 1 project and will also reutilize the capital into further developing new offshore wind projects to assist Taiwan in achieving its energy transition goals.”
Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure, CDPQ, says: “This investment in Taiwan, which represents an attractive market for CDPQ, allows us to further diversify our presence in Asia. As an investor with vast experience in renewable energy, we seek this kind of greenfield opportunity to contribute to the transition towards a low carbon economy. Working alongside our long-term partner Ørsted, and experienced local investor Cathay PE, we are proud to support the Greater Changhua 1 Offshore Wind Farm, which will supply clean power to over 650,000 Taiwanese families.”
Cyril Cabanes, Managing Director, Infrastructure, Asia Pacific, CDPQ, adds: "We are excited to take this first step in Taiwan’s renewable energy market, where we see many prospects and opportunities to collaborate with esteemed international and local partners who share our interest in developing high-quality infrastructure. We are also committed to further expand our renewables and energy footprint in Asia Pacific, building upon this investment and other successful platforms that we have developed in India and Australia over the past few years.”
This investment in Greater Changhua 1 is an important step for CDPQ’s CAD 28-billion infrastructure portfolio. Indeed, this marks the first time that CDPQ is investing in an offshore wind farm in Asia Pacific, which reflects CDPQ’s confidence in Ørsted’s track record and adds the asset to the institutional investor’s long list of investments in solar and wind energy across the Americas, Europe and India.
Jeff Chang, Chairman, Cathay PE, says: “We are delighted to team up with CDPQ to invest alongside Ørsted in the Greater Changhua 1 Offshore Wind Farm project. This landmark transaction represents an important milestone in Taiwan’s energy transition towards a low-carbon future and fits perfectly with Cathay PE’s investment mandate to invest in high quality energy infrastructure projects alongside world class partners.”
The 50-50 partnership is the first of its kind in the APAC offshore wind sector and will help stimulate further opportunities in the Taiwanese market for offshore wind. Ørsted will retain 50% share of the Greater Changhua 1, which will be financed by its corporate balance sheet and will deliver the long-term operations and maintenance (O&M) services to the project. Greater Changhua 1 is part of the 900MW Greater Changhua 1 & 2a Offshore Wind Farms, which Ørsted is currently constructing and expects to be completed in 2022.
CDPQ and Cathay PE will acquire a 50% share of the Greater Changhua 1 via a multi-tranche financing package from 15 international and local banks and two local life insurance companies: Cathay United Bank, CTBC Bank, E-SUN Bank, Taipei Fubon Bank, Cathay Life Insurance Co., Taiwan Life Insurance Co., BNP Paribas, Crédit Agricole, Deutsche Bank, DZ Bank, HSBC, Oversea-Chinese Banking Corporation, Korea Development Bank, Siemens Bank, Société Générale, Standard Chartered and Sumitomo Mitsui Banking Corporation.
The financing package, which was structured and led by Ørsted, will be partially supported by guarantees and/or loans from five international export credit agencies (ECAs); Eksport Kredit Fonden (EKF) of Denmark, UK Export Finance (UKEF), Atradius of the Netherlands, Korea Trade Insurance Corporation (KSURE), and Export Development Canada (EDC), which participates for the first time in an offshore wind farm deal in Taiwan.
About Ørsted in Taiwan
The Greater Changhua 1 & 2a Offshore Wind Farm will be located 35-60 kilometers off the coast of Changhua County and have a capacity of approx. 900MW. The construction of the offshore wind farm will be finalized in 2022.
In June 2018, Ørsted was awarded the right to build another 920MW offshore wind farm in Taiwan through its Greater Changhua 2b & 4 sites. Changhua 2b & 4 are to be built in 2025, subject to grid availability and Ørsted’s final investment decision in 2023.
Ørsted is also the biggest shareholder and co-owner of Taiwan’s first commercial-scale offshore wind project, Formosa 1, which was extended from a capacity of 8MW to 128MW in 2019.
As the world leader in offshore wind, Ørsted has installed more than 1,500 offshore wind turbines, with an installed offshore wind capacity accounting for one third of the world’s total. Ørsted has installed approx. 7.6GW offshore wind capacity and has a further 2.3GW under construction, including Changhua 1 &2a. In addition, Ørsted has secured the rights to build approx. 2.9GW offshore wind in the US, approx. 1.1GW in Germany, and approx. 0.9GW in Taiwan. It is Ørsted’s ambition to install a total of 15GW offshore wind capacity worldwide by 2025.
About Ørsted
The Ørsted vision is a world that runs entirely on green energy. Ørsted develops, constructs and operates offshore and onshore wind farms, solar farms, energy storage facilities, and bioenergy plants, and provides energy products to its customers. Ørsted ranks #1 in Corporate Knights' 2020 index of the Global 100 most sustainable corporations in the world and is recognized on the CDP Climate Change A List as a global leader on climate action. Headquartered in Denmark, Ørsted employs 6,120 people. Ørsted's shares are listed on Nasdaq Copenhagen (Orsted). In 2019, the group's revenue was DKK 67.8 billion (EUR 9.1 billion). Visit orsted.com or follow us on Facebook, LinkedIn, Instagram and Twitter.
Alright, this is another great deal for CDPQ's Infrastructure team led by Emmanuel Jaclot. I will also give credit to Cyril Cabanes, Managing Director, Infrastructure, Asia Pacific, as he and his team did the work on this deal.
CDPQ is co-investing alongside local partner Cathay PE and Ørsted which is the world leader in offshore wind.
According to the press release, CDPQ and Cathay PE will jointly own 50% of the Greater Changhua 1 and Ørsted will retain a 50% share.
Also, the majority of the deal amount of approximately TWD 75 billion (approximately DKK 16 billion, or 3.4 billion CAD) will be used to pay for the EPC services for Greater Changhua 1.
I believe the article above misquoted stating CDPQ is ponying up the entire USD $2.7 billion (CAD $3.4 billion).
In any case, it's a sizable transaction and the financing of deal is interesting:
CDPQ and Cathay PE will acquire a 50% share of the Greater Changhua 1 via a multi-tranche financing package from 15 international and local banks and two local life insurance companies: Cathay United Bank, CTBC Bank, E-SUN Bank, Taipei Fubon Bank, Cathay Life Insurance Co., Taiwan Life Insurance Co., BNP Paribas, Crédit Agricole, Deutsche Bank, DZ Bank, HSBC, Oversea-Chinese Banking Corporation, Korea Development Bank, Siemens Bank, Société Générale, Standard Chartered and Sumitomo Mitsui Banking Corporation.
The financing package, which was structured and led by Ørsted, will be partially supported by guarantees and/or loans from five international export credit agencies (ECAs); Eksport Kredit Fonden (EKF) of Denmark, UK Export Finance (UKEF), Atradius of the Netherlands, Korea Trade Insurance Corporation (KSURE), and Export Development Canada (EDC), which participates for the first time in an offshore wind farm deal in Taiwan.
You have a lot of banks and international export credit agencies (including Canada's EDC) financing this mammoth deal.
They are all sharing the risk of financing the deal and I believe this will be the first of many more deals for CDPQ's Infrastructure team in Asia Pacific, a very competitive growth market for renewable energy.
Taiwan, like most other developed nations, is looking to lower its carbon footprint and wind farms will play a critical role in its long term renewable energy strategy.
A friend of mine who is a bit skeptical on wind farms recently told me: "They're immensely profitable because of all the subsidies, that's why Canada's big pensions are doing these deals, but in terms of climate change, nothing beats nuclear reactor plants. The problem is no Canadian pension is going to build any nuclear reactor plant, only OMERS owns one (Bruce Power)."
He also thinks wind farms kill tons of birds and are bad for the ecosystem, which I cannot confirm (mixed messaging here from environmentalists).
Anyway, regardless of what you think of wind farms, this is a good long term deal for CDPQ and its members, one they will build on for many more deals in the region.
Below, Ørsted develops, constructs and operates offshore wind farms that provide power to 11.3 million people, roughly a quarter of the world’s offshore wind market. The wind farms are part of the global leader’s shift away from fossil fuels and toward renewable energy. It plans to fully phase out coal by 2023 and wants to increase its offshore wind capacity to 15 gigawatts by 2025 – enough to power more than 30 million people.
To reach its goals, Ørsted relies on a digital strategy that includes advanced analytics and artificial intelligence (AI) with Microsoft technology. The software helps the company transform data from its 1,300 offshore wind turbines into insights for predictive maintenance that saves time and resources.
Update: After reading this article, my friend sent me this article on understanding the threat wind farms pose to birds and another one on how wind turbines kill birds and this incredible simple trick saves them. He added: "The wind turbine industry really obfuscates the data because it would damage the industry."
If you have anything to add on birds and wind turbines, please let me know.
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