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Global opportunities for Taiwanese companies and investors

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Managing your international business risks in 2019

Executive summary

Amid global market uncertainties and shifting regulatory priorities, where the only constant is change, Taiwanese businesses still can plot strategic pathways to success.

Welcome to our fourth report on global trends and opportunities for Taiwanese companies and investors conducting business internationally.

Although disruptive forces continue to buffet markets worldwide, advantages exist for savvy business leaders who pay close attention to global trends and act accordingly.

With the United States focusing more and more on China's technology industry as a national security priority, Taiwanese companies should take specific steps to decrease their risk of becoming collateral damage in a US-China "tech war." Similarly, despite a heightening US-China trade war, careful assessments of any supply chains that include China-made parts and related actions can help protect Taiwanese companies' access to US markets.

Design patents offer increasingly useful protections for design-focused Taiwanese companies that operate in the US. In the energy sector, Taiwan's offshore wind sector demonstrates vibrant potential for growth, particularly if Taiwan successfully resolves a few key challenges.

A new dynamism in the European Union's approach to antitrust enforcement provides guidance for growth-focused Taiwanese companies. And a recent change to US antitrust enforcement policy provides a compelling incentive for Taiwanese businesses to review their internal compliance programs and controls.

We hope you find this useful, and we look forward to seeing Taiwanese businesses grow and thrive in the year ahead.


How to avoid becoming collateral damage in the US-China “tech war”

The benefits of paying close attention to details of US export controls and economic sanctions

Risks and risk management for Taiwan exporters using China-origin parts

Despite a volatile, uncertain trade environment, you can take steps to protect your US market share

Gale force momentum in Taiwan’s offshore wind sector

After many years of careful planning the Taiwan offshore wind sector is gaining traction, but challenges remain

US design patents: An increasingly useful option

How design-focused Taiwanese businesses can craft a design patent protection strategy

Taiwanese companies beware: A new dynamism in EU antitrust enforcement?

The European Commission is moving quickly in a new investigation, seeking interim measures for the first time in two decades

How to take advantage of the new US antitrust compliance credit

What a change in US criminal antitrust charging policy means for Taiwanese businesses

Gale force momentum in Taiwan’s offshore wind sector

After many years of careful planning the Taiwan offshore wind sector is gaining traction, but challenges remain

5 min read

The success of the offshore wind sector in Taiwan is also encouraging activity in other new offshore wind markets in the region, including Japan, Korea, India, Vietnam and Australia.

This year is proving to be a threshold year of achievement for the Taiwan offshore wind sector, with many years of careful planning and development activity starting to deliver results.

German developer wpd's 640 MW Yunlin offshore wind project reached financial close in June 2019, becoming the first large-scale offshore wind project to reach financial close in Asia- Pacific. A strong pipeline of projects follows hot on the heels of Yunlin's success, including Macquarie/ Swancor's 378 MW Formosa 2 project, Copenhagen Infrastructure Partners' 600 MW Changfang and Xidao project, Ørsted's 605 MW Changfang 1 project and wpd's 350 MW Guanyin project. A string of further planned Taiwan offshore wind projects are forming an orderly queue.

This impressive rollout of development activity promises to keep Taiwan's offshore wind market participants busy for many years to come.

In addition, the success of the offshore wind sector in Taiwan is also encouraging activity in other new offshore wind markets in the region, including Japan, Korea, India, Vietnam and Australia. The offshore wind sector took its first cautious steps off the coast of Denmark in 1991, and it is now making confident strides around the Asia-Pacific region.


Yunlin as a key step forward

The Yunlin project was an important milestone in the offshore wind sector for many reasons:

  • Although the earlier 128 MW Formosa 1 project proved the concept, the much larger Yunlin project rigorously tested the international and local New Taiwanese Dollar debt capacity for offshore wind power in Taiwan
  • It attracted the support of three export credit agencies (ECAs)—from Denmark, Germany and the Netherlands—together with further cover provided by IPEX-KfW Bank. Broad ECA support is critical to the continuing viability of this sector in the near term
  • It was the first to test the market's acceptance of the complicated "Grid Contract" concept introduced by Taiwan's Ministry of Economic Affairs
  • It reaffirmed the basic bankability of the risk allocation dynamic of the Taiwan offshore wind sector, centered around a pragmatic analysis of Taipower's power purchase agreement

The successful equity sell-down process on Yunlin was an equally important step forward for the market. A consortium of Japanese investors led by Sojitz Corporation acquired a 27 percent stake, emerging victorious from a hotly contested auction process involving a number of large players in global infrastructure investment.


Current challenges to resolve

The Taiwan offshore wind sector has been a key catalyst in attracting the attention of many of the world's largest infrastructure fund investors to the Asian infrastructure market. The exceptionally deep pools of global infrastructure fund capital are increasingly focused on infrastructure in the region.

This trend is certain to have important consequences both for Taiwan specifically and for the Asian infrastructure market more broadly. If well-structured projects can tap into this interest effectively, it will fundamentally improve the prospects for addressing the region's huge gap between infrastructure demand and development.

Still, important challenges remain to be addressed for the Taiwan offshore wind project pipeline to prove itself sustainable in the medium term:

  • Step-in rights—Discussions with Taiwanese authorities continue as to the nature of direct step-in rights that can be accommodated for the benefit of finance parties. Direct step-in rights are widely accepted internationally as fundamental for limited recourse infrastructure financing, and it is critical to the near-term sustainability of the Taiwan offshore wind sector that these rights be accommodated.
  • Taiwanese bank participation—Taiwanese authorities ask project developers to commit to a minimum of 20 percent Taiwanese bank debt funding, yet the appetite and capacity of local banks remain a challenge. In particular, only privately owned Taiwanese banks participated in the funding of the Formosa 1 and Yunlin projects, with the large state-owned Taiwanese banks remaining on the sidelines. The participation of Taiwanese state-owned banks would be a significant boost to the sustainability of the project pipeline, and developers are eagerly seeking this. In addition, there are also prospects of funding from Taiwan life insurance companies in the sector. Achieving this milestone would be a similarly important step forward.
  • ECA coverage and local content requirements—To attract Taiwanese bank funding, developers are seeking to maximize the available debt guarantee coverage from ECAs. Therefore, a conundrum is emerging for developers: Taiwanese authorities are also driving a strong local content agenda for construction of the projects. This has the inherent impact of reducing international content, which is the necessary pre-condition for the support of international ECAs. A pragmatic and flexible approach by the authorities to the application of local content requirements is necessary. We expect the range of ECAs active in the Taiwan offshore wind sector will continue to increase in the near term, as developers seek to manage these competing priorities.
  • Environment and community—The ECAs active in the offshore wind market focus intently on the treatment of local communities—including, importantly, fishing communities—as well as the protection of local habitats and wildlife. These responsibilities are at the forefront of developers' minds, including effectively managing compliance with a convergence of local regulation and international standards.
  • Insurance market capacity—An expanding offshore wind project pipeline in Taiwan depends on the insurance market having sufficient capacity to absorb the key risks involved in the construction and operation of the projects.

Although challenges remain, the Taiwan offshore wind sector is surging forward. Other offshore wind markets around the region will follow in its wake.

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