Northland and Macquarie shine light on Taiwan

Taiwan’s offshore market has always struck us as something of a curiosity. We are well aware that firms have been setting up offices on the Asian island to establish a place in Asia’s nascent offshore market. But, as yet, the market has not taken off.

Often it takes one project to get people to take a market seriously. In the US, it was the 468MW Cape Wind that established the country as having major offshore plans. Cape Wind may not have happened, but it still boosted the industry’s credibility.

And it looks like Taiwan is now reaching that point.

Last week, Canadian developer Northland Power and Singaporean firm Enterprize Energy’s subsidiary Yushan Energy announced they have formed a 60:40 joint venture to develop an up-to-1GW wind farm in the Taiwan Strait. Both companies have track records of offshore wind farm development, and applying that in Taiwan could give Asia a significant boost.

Northland and Enterprize are not alone. Dong Energy set up an office in Taiwan in August, and wants to help the government deliver 4GW of offshore wind farms by 2030 as well as gain a foothold in the Asia-Pacific offshore market. It has not committed to specific projects but we expect to hear more in the next year.

Meanwhile, Taiwanese state-owned utility Taipower is planning to install 1.8GW of offshore capacity in the next 15 years; and Formosa Wind Energy, part of manufacturing company Swancor, has started offshore construction on the 8MW two-turbine first phase of the 128MW Formosa 1 development in the Taiwan Strait.

Formosa is set to miss a deadline to complete this first phase by the end of 2016, and the developer is now seeking a new contractor after problems with A2SEA. It may be a disappointing delay, but we do not see it as a huge crisis. Formosa is not the first firm to struggle as it seeks to help establish a new offshore market.

The developer plans to complete the 32-turbine 120MW second phase by the end of 2019, but has not said whether problems on the first phase would delay these plans.

But the story here is still largely positive: developers are moving in – and investors are too.

This week, Macquarie Capital agreed a deal with the government to invest $790m in the country’s offshore wind sector over the next three years. We are sure that the Japanese investors who have been completing deals in offshore wind farms in European waters in recent years will be eyeing Taiwan with great interest.

When you take all of these stories together it means that Taiwan has a fast-growing pool of experienced developers, investors and advisers. This gives us great hope.

And this means that companies through the supply chain with offshore experience should see how they can get involved. Taiwan’s offshore sector does not yet have an established supply chain, which is understandable given that there is only one small project being built, but there is an opportunity to work with established developers.

Smaller firms should also not be put off by the fact they have larger competitors. The problems at Formosa show that even large contractors can struggle in a new market, and Taiwan still represents a great opportunity for those looking to grow in Asia.

We are also intrigued to see which manufacturers take the lead in Taiwan, and thus in the Asian offshore market more widely. It should give Chinese firms the chance to further establish their offshore credentials on developments close to home.

But they will find stiff competition from established firms, and notably MHI Vestas, which has made great strides in Europe and is half-owned by Japan’s Mitsubishi Heavy Industries.

We fully expect MHI Vestas to seek to take the expertise it is gaining in Europe and apply it to Taiwan. There is a chance for other firms in the supply chain to do so too.

Taiwan’s offshore market has always struck us as something of a curiosity. We are well aware that firms have been setting up offices on the Asian island to establish a place in Asia’s nascent offshore market. But, as yet, the market has not taken off.

Often it takes one project to get people to take a market seriously. In the US, it was the 468MW Cape Wind that established the country as having major offshore plans. Cape Wind may not have happened, but it still boosted the industry’s credibility.

And it looks like Taiwan is now reaching that point.

Last week, Canadian developer Northland Power and Singaporean firm Enterprize Energy’s subsidiary Yushan Energy announced they have formed a 60:40 joint venture to develop an up-to-1GW wind farm in the Taiwan Strait. Both companies have track records of offshore wind farm development, and applying that in Taiwan could give Asia a significant boost.

Northland and Enterprize are not alone. Dong Energy set up an office in Taiwan in August, and wants to help the government deliver 4GW of offshore wind farms by 2030 as well as gain a foothold in the Asia-Pacific offshore market. It has not committed to specific projects but we expect to hear more in the next year.

Meanwhile, Taiwanese state-owned utility Taipower is planning to install 1.8GW of offshore capacity in the next 15 years; and Formosa Wind Energy, part of manufacturing company Swancor, has started offshore construction on the 8MW two-turbine first phase of the 128MW Formosa 1 development in the Taiwan Strait.

Formosa is set to miss a deadline to complete this first phase by the end of 2016, and the developer is now seeking a new contractor after problems with A2SEA. It may be a disappointing delay, but we do not see it as a huge crisis. Formosa is not the first firm to struggle as it seeks to help establish a new offshore market.

The developer plans to complete the 32-turbine 120MW second phase by the end of 2019, but has not said whether problems on the first phase would delay these plans.

But the story here is still largely positive: developers are moving in – and investors are too.

This week, Macquarie Capital agreed a deal with the government to invest $790m in the country’s offshore wind sector over the next three years. We are sure that the Japanese investors who have been completing deals in offshore wind farms in European waters in recent years will be eyeing Taiwan with great interest.

When you take all of these stories together it means that Taiwan has a fast-growing pool of experienced developers, investors and advisers. This gives us great hope.

And this means that companies through the supply chain with offshore experience should see how they can get involved. Taiwan’s offshore sector does not yet have an established supply chain, which is understandable given that there is only one small project being built, but there is an opportunity to work with established developers.

Smaller firms should also not be put off by the fact they have larger competitors. The problems at Formosa show that even large contractors can struggle in a new market, and Taiwan still represents a great opportunity for those looking to grow in Asia.

We are also intrigued to see which manufacturers take the lead in Taiwan, and thus in the Asian offshore market more widely. It should give Chinese firms the chance to further establish their offshore credentials on developments close to home.

But they will find stiff competition from established firms, and notably MHI Vestas, which has made great strides in Europe and is half-owned by Japan’s Mitsubishi Heavy Industries.

We fully expect MHI Vestas to seek to take the expertise it is gaining in Europe and apply it to Taiwan. There is a chance for other firms in the supply chain to do so too.

Taiwan’s offshore market has always struck us as something of a curiosity. We are well aware that firms have been setting up offices on the Asian island to establish a place in Asia’s nascent offshore market. But, as yet, the market has not taken off.

Often it takes one project to get people to take a market seriously. In the US, it was the 468MW Cape Wind that established the country as having major offshore plans. Cape Wind may not have happened, but it still boosted the industry’s credibility.

And it looks like Taiwan is now reaching that point.

Last week, Canadian developer Northland Power and Singaporean firm Enterprize Energy’s subsidiary Yushan Energy announced they have formed a 60:40 joint venture to develop an up-to-1GW wind farm in the Taiwan Strait. Both companies have track records of offshore wind farm development, and applying that in Taiwan could give Asia a significant boost.

Northland and Enterprize are not alone. Dong Energy set up an office in Taiwan in August, and wants to help the government deliver 4GW of offshore wind farms by 2030 as well as gain a foothold in the Asia-Pacific offshore market. It has not committed to specific projects but we expect to hear more in the next year.

Meanwhile, Taiwanese state-owned utility Taipower is planning to install 1.8GW of offshore capacity in the next 15 years; and Formosa Wind Energy, part of manufacturing company Swancor, has started offshore construction on the 8MW two-turbine first phase of the 128MW Formosa 1 development in the Taiwan Strait.

Formosa is set to miss a deadline to complete this first phase by the end of 2016, and the developer is now seeking a new contractor after problems with A2SEA. It may be a disappointing delay, but we do not see it as a huge crisis. Formosa is not the first firm to struggle as it seeks to help establish a new offshore market.

The developer plans to complete the 32-turbine 120MW second phase by the end of 2019, but has not said whether problems on the first phase would delay these plans.

But the story here is still largely positive: developers are moving in – and investors are too.

This week, Macquarie Capital agreed a deal with the government to invest $790m in the country’s offshore wind sector over the next three years. We are sure that the Japanese investors who have been completing deals in offshore wind farms in European waters in recent years will be eyeing Taiwan with great interest.

When you take all of these stories together it means that Taiwan has a fast-growing pool of experienced developers, investors and advisers. This gives us great hope.

And this means that companies through the supply chain with offshore experience should see how they can get involved. Taiwan’s offshore sector does not yet have an established supply chain, which is understandable given that there is only one small project being built, but there is an opportunity to work with established developers.

Smaller firms should also not be put off by the fact they have larger competitors. The problems at Formosa show that even large contractors can struggle in a new market, and Taiwan still represents a great opportunity for those looking to grow in Asia.

We are also intrigued to see which manufacturers take the lead in Taiwan, and thus in the Asian offshore market more widely. It should give Chinese firms the chance to further establish their offshore credentials on developments close to home.

But they will find stiff competition from established firms, and notably MHI Vestas, which has made great strides in Europe and is half-owned by Japan’s Mitsubishi Heavy Industries.

We fully expect MHI Vestas to seek to take the expertise it is gaining in Europe and apply it to Taiwan. There is a chance for other firms in the supply chain to do so too.