PFI Japan Offshore Wind Roundtable 2020

PFI Japan Offshore Wind Roundtable 2020
3 min read

Welcome to the transcript of Refinitiv Project Finance International’s Japan Offshore Wind virtual roundtable webinar event sponsored by Linklaters and Fitch Ratings.

The event, held in November, attracted a top range of speakers and a large audience. Offshore wind is one of the hottest sectors right now in the project finance arena, and Japanese lenders and sponsors have been at the forefront of the development of the sector. Combining the two in one event was expected to garner interest.

That said, while offshore wind and Japanese involvement in the sector go hand in hand around the globe, the development of the Japanese offshore wind industry in Japan itself has been slow to take off. The webinar was held to discuss the fact this is about to change.

The first pilot project, the 140MW Akita Port and Noshiro Port scheme, was financed in 2020. The Japanese government is seeking to encourage the ongoing development of the sector and has put various schemes out to tender.

Late last year, the government announced ambitious targets for offshore wind energy. Japan aims to have 10GW by 2030 by adding 1GW of capacity per year, and then multiply that by 4.5x to achieve a huge 45GW of offshore wind energy by 2040.

The Ministry of Economy, Trade & Industry (METI) and the Ministry of Land, Infrastructure, Transport & Tourism (MLIT) are heavily involved in formulating the government’s energy policy and administering the bidding process for offshore wind and solar.

Bids have been submitted for the pilot 21MW Goto floating offshore wind scheme, and tenders have been launched for four other fixed-bottom sites, each offering a capacity of 300MW-400MW. The sites are Noshiro City, Mitane Town and Oga City in Akita prefecture; north and south areas of Yurihonjo City in Akita prefecture; and offshore Choshi City in Chiba prefecture. Submissions are due in May.

The opportunity is therefore presenting itself and plenty of local and international developers, investors and project financiers are seeking to take part. But as with any new sector, the opportunity presents plenty of challenges. These were discussed at length during the 90-minute discussion.

Linklaters’ Hirofumi Taba set out some of the key points developers are working through including ceiling prices for tariffs, scheduled commercial operation dates, the market driven subsidy regime, curtailment risk, and the interests of fishing communities. He said METI/MLTI have been working through the issues and have been very open to discussion. “Despite the issues with the Covid-19 pandemic there have been significant milestones achieved. These are very interesting and exciting times.”

Fitch Ratings’ Sajal Kishore said there are a few other regulatory or contractual issues that need to be looked at. And those will need to be mitigated in a sufficient manner to give comfort to long-term backers invested in these projects. “There is a lot of potential out there; it’s really about getting the framework right,” he said.

To see the digital version of this roundtable, please click here

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