Notice

Category A project supported: Formosa 2 Offshore Windfarm

Published 4 December 2019

1. Project description

UK Export Finance (UKEF) has agreed to provide export finance support to the project financing of the design, construction and operation of the Formosa 2 offshore windfarm. This is located 4 to 10 kilometres (km) off the west coast of Taiwan, in the Taiwan Straits, near Chunan Town, South West of Hsinch City (the Project).

Formosa 2 will have a capacity of 387 megawatts (MW) and will consist of 47 wind turbine generators (WTGs), together with associated jacket and transition piece WTG foundations. The WTGs will be established in water depths ranging from 35 to 55 m. The WTGs will be connected via 66 kilovolts (kV) submarine cables which will be extended to shore to a newly built onshore substation. The substation will have three 66 kV/ 161 kV transformers and there will be two 4.8km circuits of onshore cables that will connect it to the national grid system via Taiwan Power Company’s YingPan substation.

The Project will be implemented by means of three core engineering, procurement, construction and installation contracts (EPCI):

• WTG supply and installation
• Foundation and subsea cable supply and installation
• Onshore works supply and installation

Onshore construction works started in the fourth quarter of 2019 and offshore works will start in June 2020. Construction activities will be completed around December 2021. The operations and maintenance phase is planned to commence in 2022 and continue to 2051. Operations and maintenance will be undertaken by Swancor (one of the Project Sponsors) and / or its affiliates.

The Project does not include any Associated Facilities^{[footnote 1]}.

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

Other export credit agencies (ECAs) involved in the provision of financing are Credendo (Belgium), EKF (Denmark) and KSURE (South Korea).

2. Project sector

The Project is in the renewable energy sector.

3. Project sponsors

The Project is being developed by Formosa 2 Wind Power Company, Ltd (the Project Company). The Project Company is a special purpose vehicle that is wholly-owned by Formosa 2 International Investment Company, Ltd (the Holding Company). The Holding Company is 75% owned by Macquarie Corporate Holdings Pty Ltd (Macquarie) and 25% by Swancor Renewable Energy Company Ltd (Swancor).

4. UK exporters

Several UK companies, including Seajacks, will provide goods and services to the EPCI contractors.

5. Export credit agent bank

Mitsubishi UFJ Financial Group (MUFG) Bank, Ltd.

6. Amount of UKEF support

The principal value of the support is approximately £217 million.

7. OECD Common Approaches and Equator Principles

UKEF categorised the Project as a Category A (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 Equator Principles (2013).

As required by the OECD Common Approaches, UKEF disclosed its potential involvement in the Project in advance of its support. A notification was posted on the UKEF website on 31 July 2019, which provided a description of the Project, a contact point to signpost interested parties to environmental and social information, and links to a non-technical summary and the Project environmental impact assessment. No enquiries were received by UKEF or the contact point as a result of this notification.

8. Environmental, Social and Human Rights Standards

Project-related ESHR documentation was reviewed for 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 and World Bank Group EHS Guidelines 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

• World Bank Group EHS Guidelines, of which the following are relevant:

  – General EHS Guidelines (2007)

  – EHS Guidelines for Wind Energy (2015)

  – EHS Guidelines for Electric Power Transmission and Distribution (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:

• Noise and vibrations
• Hazardous material management
• Waste
• Air emissions
• Water quality
• Terrestrial, avifaunal and marine biodiversity, including species of conservation concern
• Livelihood impacts, especially to fishermen
• Management of third-party contractors and suppliers
• Grievance mechanisms
• Occupational and community health and safety
• Emergency planning and response
• Cumulative impacts
• Worker conditions of contract and accommodation
• Cultural heritage
• Visual impacts
• Community engagement
• Electromagnetics

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. The review was conducted with the support of an Independent Environmental and Social Consultant (IESC), who was commissioned to undertake an environmental and social due diligence assessment of the Project for the financing parties.

The review included:

• desk-based review of project-related documentation: Environmental Impact Assessment, Environmental and Social Management Plan, Stakeholder Engagement Plan, and Livelihood Restoration Plan
• site visit to the Project area, interviews with relevant personnel, and meetings with the Nanlong Fishery Association
• 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.

The review found that a suite of ESHR controls has been developed to mitigate and manage the Project-related environmental and social impacts and risks over time.

11. Decision

Various actions have been agreed between the Project developers, operators, 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 and UKEF therefore decided to provide its support in respect of the supply of capital goods and services by UK exporters to the Project.

A condition of support is that the Project will be subject to environmental and social monitoring by an IESC, in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

1. OECD Common Approaches defines “Associated Facilities” as: those facilities that are not a component of the project, but that would not be constructed or expanded if the project did not exist and on whose existence the viability of the project depends; such facilities may be funded, owned, managed, constructed and operated by the buyer and/or project sponsor or separately from the project. ↩