Mr. James Huang
Partner

James Huang is a partner at the Banking and Capital Market Department of Lee and Li.

Mr. Huang has extensive experience in syndicated loans, acquisition finance, project finance, disposal of non-performing loans by financial institutions, and loans securitization. He has been representing borrowers and financial institutions in numerous syndicated loan transactions involving various industries, including the 2016 NT$80 billion syndicated loan to Micron group, the 2018 NT$43.75 billion syndicated loan to Innolux Corporation. Recently, and the 2023 NT$118 billion (approximately US$4 billion) syndicated loan to Hai Long offshore wind project. Mr. Huang has advised many syndicated loans to developers of solar energy projects as well as contractor/ supplier in off-shore wind farm project.

Mr. Huang also advises local and international banks, securities firms, insurance companies, financial holding companies and other financial institutions on relevant transactions and regulatory compliance issues. In addition, he has been representing clients in many high profile M & A transactions, including transactions by SinoPac Financial Holding Company, China Development Financial Holding Corp., and Morgan Stanley PE.

Mr. Odin Hsu
Associate Partner

Odin Hsu is an associate partner at Lee and Li. He graduated from the law school of National Taiwan University with double degrees in LL.B and BB.A in accounting. He also completed two LLM programs respectively at Fu-Jen Catholic University (Taiwan) and Boston University (U.S.). He is admitted to practice law in Taiwan. He specializes in company act, securitisation, mergers and acquisitions, trust act and financing.

He advises local and international banks, securities firms, securities investment trust enterprises, securities investment consulting enterprises, financial holding companies and other financial institutions on drafting and review of relevant transaction documents, regulatory compliance issues and applications and permits for relevant business. He also has extensive experience in syndicated loans, securitization, and merger of financial institutions.

He has been representing clients (both banks and borrowers) in many syndication loan transactions and project financing transactions, including many solar energy project financing transactions, battery electricity storage system project financing transactions, onshore windfarm project financing transactions, and most of Taiwan offshore windfarm project financing transactions which have been reached financial close.

Renewable Energy and Project Financing in Taiwan

Taiwan’s Renewable Energy Policy and Development

Taiwan is a resource-scarce small island nation, making energy supply an important issue. In order to reduce dependence on imported energy, minimize environmental impact and become nuclear-free by 2025, Taiwan government actively promotes the development of renewable energy. The main objective of Taiwan’s renewable energy policy is to increase the proportion of renewable energy in the energy structure and reduce reliance on fossil fuels. The government has implemented a series of measures and policies to encourage the development of renewable energy, including providing subsidies and incentives, as well as establishing relevant regulations and standards.

Taiwan’s installed capacity of renewable energy continues to increase, and the generation of solar and wind energy is also increasing year by year. In addition, the proportion of renewable energy in Taiwan’s energy structure is gradually increasing. These achievements are due to the government’s policy support and the active participation of investors. As of today, solar energy and offshore wind power are the main forces driving renewable energy development in Taiwan.

Solar Energy

Due to abundant sunshine and sufficient sunlight, Taiwan has excellent conditions for solar power generation. Therefore, solar power generation is the most promising renewable energy source and also a clean power generation method that takes into account environmental protection and ecology.

Taiwan government has launched a solar energy development plan to encourage individuals and businesses to install solar power systems. The government provides subsidies and tax incentives and has established standards and certification systems for solar power generation. These measures have led to rapid development of solar power in Taiwan, making it one of the main sources of renewable energy in the country.

Wind Energy

According to a study conducted by international engineering consultancy firm 4C Offshore in 2014 on global “23-year average wind speed observations,” it was surprisingly found that out of the top 20 offshore wind farms with the strongest wind power in the world, 16 of them are located in the Taiwan Strait. Furthermore, the majority of these wind farms are situated off the coast of Changhua County. Based on the above advantages, Taiwan government has been continuously developing onshore wind power in recent years, and also has plans to gradually develop offshore wind power. Taiwan remains at the forefront of offshore wind power in the Asia Pacific region. This can be attributed to the “Thousand Wind Turbines Project” initiated by Taiwan government, aiming to produce 5.7 GW of offshore wind energy by 2025, equivalent to around 20% of Taiwan’s overall electricity production, and 15 GW by 2035. Currently, nineteen offshore wind projects have been granted grid capacity and are in the process of signing grid allocation contracts with Taiwan government.

In addition to the development of offshore wind power itself and addressing the electricity demand, Taiwan government is also promoting the localization of the upstream and downstream industries of offshore wind power through policy guidance. It aims to establish a complete industrial chain for the offshore wind power industry through this policy guidance, maintain the leading advantage in the Asia-Pacific region, and hope to become a technology exporting country in the offshore wind power industry in the future.

Other Renewable Energy

In addition to the main development of solar and wind power, Taiwan government also encourages the development of tidal, bioenergy and geothermal energy. The government provides corresponding subsidies and incentives, and supports related research and development projects. In addition, Taiwan has also begun actively developing energy storage plants in recent years.

In general, Taiwan’s promotion and development of renewable energy policies have achieved certain results. The proportion of renewable energy in Taiwan’s energy structure continues to increase and has become an important driving force for Taiwan’s energy transition. In the future, Taiwan government will continue to increase its support for renewable energy and further promote its development to achieve sustainable energy development.

The development of renewable energy drives the development of project financing in Taiwan

The development of project financing in Taiwan began in the 1990s. However, before Taiwan government began to vigorously develop renewable energy in 2017, there were not many project financing cases in Taiwan and the more well-known ones were only project financing in relation to the construction of the Taiwan high speed rail and several traditional private power plants. Since Taiwan government began developing renewable energy in 2017, project financing has provided financial support for various renewable energy projects. The construction and operation of renewable energy projects require significant financial investment, including equipment procurement and engineering construction. However, due to the long-term returns and higher risks associated with renewable energy projects, traditional bank loans often fail to meet their funding needs. The emergence of project financing fills this gap by raising funds from the financial institutions to provide necessary financial support for renewable energy projects.

Despite this, due to lack of experience in project financing and ability to assess the risks associated with the renewable energy industry, there were not many Taiwanese banks involved in project financing for renewable energy in the initial stage of its development. However, as time passed, Taiwanese banks began to acquire the necessary capabilities, and as a result, there are now more and more project financing cases for renewable energy – among them, the largest number of cases is for solar energy projects, while the project financing for offshore wind power projects has higher amounts (with financing amounts for individual projects being at least over US$1 billion and the project with the highest amount is the Hai Long offshore wind project, which just completed the signing of financing documents in September 2023. The project financing amount is approximately NT$118 billion (approximately US$4 billion), making it the largest offshore wind power project financing in Taiwan and the Asia-Pacific region to date).

Solar Energy Project Financing

For solar projects with lower construction costs, banks may tend to choose to provide funding through a bilateral loan. However, for larger projects, project financing is usually adopted. In addition to traditional ground-mounted and rooftop solar power plants, there are also fishery-solar power plants that involve more complicated risk assessment and regulatory compliance analysis. Some solar projects still involve sponsors’ guarantees even though the financing arrangement is generally structured as project financing.

Wind Energy Project Financing

Compared to solar energy project financing, the project financing for wind power in Taiwan (both onshore and offshore) mostly follows a typical project financing structure, especially for offshore wind power plants. Starting from the project financing of the first offshore wind power plant in 2018, due to the unfamiliarity of Taiwanese banks with the risks of offshore wind power plants at that time, the process was initially led by foreign banks with relevant experience. Taiwanese banks had very limited participation (in terms of the number of transactions and loan amounts). However, as time passed, Taiwanese banks have become more capable of understanding the risks of offshore wind power generation. Some Taiwanese banks are even capable of serving as financial advisors for offshore wind power project financing cases.

In addition, localization requirements also create financing needs in the offshore wind power industry (typical financing structures, rather than project financing).

It is also worth mentioning that, with the increasing demand for green energy in the industry, there are currently more and more corporate power purchase agreements (CPPAs) being signed. However, under the framework of project financing, some companies that require green energy do not meet specific financial requirements, resulting in power generators in project financing unable to sell electricity to such companies. In order to solve this problem and assist small and medium-sized industries in obtaining green energy, Taiwan government announced in June 2023 the “National Financing Guarantee Mechanism Promotion Plan”. Under such plan, a corporate offtaker who participate in such plan may apply for a guarantee from the financial institutions authorized by the National Credit Guarantee Administration in respect of its obligations to purchase renewable energy under a CPPA.

In general, in recent years, with the vigorous development of the renewable energy industry, Taiwanese banks have been handling more and more project financing cases in addition to traditional financing. They have become more familiar with the structure of project financing. Overall, besides a few private banks that were already active, some other private banks and insurance companies that had concerns about the risks of renewable energy have also started to participate in related (project) financing. However, currently, the main large state-owned banks have not yet participated in offshore wind power project financing. As local private banks already provided significant amounts of loans to offshore wind power projects and may have limited ability to participate in similar projects in the future due to risk management requirements under the banking regulations, the policy of these large state-owned banks may be an important factor for future offshore wind power project financing.