Pushing for Wind Power in a Rush Could Ignite a Financial Storm

  Pushing for Wind Power in a Rush Could Ignite a Financial Storm

China Times Editorial (Taipei, Taiwan)

May 11, 2018

 Translation of an Excerpt

The Ministry of Economic Affairs (MOEA) officially announced a list of firms for developing wind power, and subsequently in June will again make public another list, thus starting the massive wind power program that the Tsai government relies on for the backbone of power supply. However, the uncertainties of wind power are too numerous, while the Tsai government has shown rashness in promoting the development of wind power. Moreover, it lacks professional underpinnings for energy sources, leading to high risks in the future. If Taiwan becomes mired, as a result, in a composite disaster including the “green financial storm,” then both the DPP and incumbent MOEA officials would be an infamy in history.

After the firms have been determined for the development of wind power, the next step would be to sign contracts and seek financing; the proportion of financing for each developer will vary from case to case, but according to business practices, the minimum would be around 50%. Currently, most of the developers plan to ask domestic banks, seeking syndicated loans. The problem is that, in actuality, domestic financial institutions completely lack the experience and capacity in professional financing for projects such as wind power; abruptly facing demands for up to a trillion NT dollars, how many have the capacity to do the financing and vetting?

Currently, the majority of wind power developers will all talk about credit extension based on “project financing without the right of recourse”; in other words, the future repayment of debt is entirely dependent on the cash flow (revenue of power generation) after the completion of construction. From a certain angle, this would be tantamount to asking the banks to shoulder all the risks: delays in engineering or even inability to complete the projects, or failure to coordinate power transmission and distribution after completion of the job, even the loss of revenue due to equipment damage caused by natural disasters such as typhoons, the loans extended by the consortium of banks would be tantamount to not a dime in debt repayment. With such risks, how much can Taiwan’s banks shoulder? What is even more worrisome is that in order to push for wind power, the Financial Supervisory Commission has eased the conditions and calculation methods for bank financing of green power. The government further wants government-controlled banks to "collaborate with policy." This is tantamount to asking the domestic financial system to swallow all the wind power risks, which, with the slightest carelessness, could brew a "green financial storm."

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