Notice

Category A Project supported: Hai Long 2 and 3 Offshore Windfarm

Published 8 January 2024

1. Name of Project

UK Export Finance has agreed to provide support to the Hai Long 2 Offshore Wind Power Co., Ltd. and Hai Long 3 Offshore Wind Power Co., Ltd. (together, the Project Company) for the construction of the Hai Long 2 and Hai Long 3 windfarms (together ‘the Project’). This involves the design construction and operation of an offshore windfarm in the Formosa Strait off the western coast of Taiwan. The project consists of 73 wind turbine generators (WTGs) distributed across two offshore areas, and with a capacity of 1040MW. These will be connected via two offshore substations, an onshore substation dedicated to the project and further to two Taiwan Power Company operated substations for wider grid connection.

A key aim of the Project is to supply up to 1040MW of renewable energy to Taiwan’s energy system.

The Project includes:

• Design

• Supply of equipment

• Construction

• Operation and maintenance services

Other ECAs involved are Credendo, EDC, EFA, EKSFIN, JBIC, and NEXI. International Bank involved are MUFG, Deutsche Bank, ANZ, DBS, HSBC, Mizuho, Standard Chartered, SMBC, KDB. Taiwanese lenders involved are Shinsei Bank, Fubon Bank, Taiwan Life and King’s Town Bank

2. Project sector

The Project is in the Renewable Energy sector.

3. Project sponsors

The Project is being developed by Hai Long 2 Offshore Wind Power Co., Ltd. and Hai Long 3 Offshore Wind Power Co., Ltd.

4. UK Exporters

Various including Siemens Gamesa Renewable Energy Limited, Tekmar, Seajacks, Aon insurance and other smaller contributions.

5. Export Credit Agent Bank

MUFG Bank

6. Amount of UK Export Finance support

The principal value of UKEF’s support is approximately US$480 million.

7. OECD Common Approaches and Equator Principles

UK Export Finance categorised the Project as Category A i.e. having potentially significant environmental, social and human rights (ESHR) impacts in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the Equator Principles (2020).

As required by the OECD Common Approaches, UK Export Finance disclosed its possible involvement in the Project. A notification was posted on the UK Export Finance web site on 23rd June 2023, which directed interested parties to the contact from where published ESHR information can be sourced. UK Export Finance did not receive any comments from interested parties.

K2 Management Ltd was commissioned by the Project Company to undertake an independent environmental and social due diligence review on behalf of the Lender group/ECAs

8. Environmental, Social and Human Rights standards

Project related ESHR documentation was reviewed for their alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines.

The applicable IFC PS were:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts;

• PS2: Labour and Working Conditions;

• PS3: Resource Efficiency and Pollution Prevention;

• PS4: Community Health, Safety and Security;

• PS5: Land Acquisition and Involuntary Resettlement;

• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources;

• PS8: Cultural Heritage;

The applicable World Bank Group EHS Guidelines were:

• General EHS Guidelines (2007);

• EHS Guidelines for Wind Energy (2015);

• EHS Guidelines for Electric power transmission and distribution (2007); and

• EHS Guidelines for Ports, Harbours and Terminals (2007)

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

• air pollution;

• health and safety;

• social and community impacts;

• marine habitats;

• biodiversity, particularly migratory birds;

• emergency planning and response;

• grievance mechanisms;

• worker conditions of contract and

• community engagement.

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed.

K2 Management was appointed as the Independent Environmental and Social Consultant (IESC) with a duty of care to the Lenders and were commissioned to undertake an ESDD assessment of the Project. The report formed the basis for UKEF’s evaluation of the Project’s alignment with the relevant standards and recommendations for compliance and monitoring. The review included:

• A site visit undertaken by the IESC in April 2022;

• Desk-based review of project-related documentation: Environmental and Social Impact Assessment, Environmental and Social Management Plans, and Stakeholder Engagement Plan; and

• Follow-up meetings and interviews with relevant Project representatives.

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

Taking account of the review, the Project was deemed to have potential to cause a number of adverse environmental and social impacts both during construction and operation. However, a proposed suite of controls as part of the Project’s environmental and social management systems should facilitate the management of these impacts.

11. Climate change considerations

UKEF considered the potential direct and indirect green house gas (GHG) emissions of the Project and effects of climate change factors on the Project as part of its ESHR review.

The Project will reduce Taiwan’s reliance on coal and nuclear power for the generation of electricity, and consequently help it to meet its climate change reduction goals.

The Project is not considered to be a carbon intensive undertaking (such as fossil fuels or petrochemical) and “high” GHG emissions in excess of relevant thresholds for quantification and reporting set by international standards were reasonably not envisaged.

The review revealed that the Project design has considered potential physical impacts of climate change such as changes to rainfall and weather patterns.

12. Design

Various actions have been agreed between the Project developer, operator, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. UKEF has therefore decided to provide its support in respect of the supply of goods and services by UK exporters to the Project.

A condition of support is that Project will be subject to monitoring and reporting in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.