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TEPCO and Ørsted agree to establish a joint venture company for offshore wind in Choshi

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TEPCO and Ørsted agree to establish a joint venture company for offshore wind in Choshi. Image: Orsted
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TEPCO and Ørsted signed a memorandum of understanding to work jointly on offshore wind projects and have since then been working together to establish a framework and organizational structure for joint development of the Choshi Offshore Wind Project.

TEPCO and Ørsted, having formalized their collaboration to develop the Choshi Offshore Wind Project, will submit a joint bid in the Round 1 auction once the Japanese government officially designates the Choshi-city offshore wind promotion area, and further work together on future offshore wind opportunities in the area.

TEPCO Representative Executive Officer and President, Tomoaki Kobayakawa, says “TEPCO and Ørsted have been making excellent progress in developing our partnership and we are ready to see successful development of the Choshi Offshore Wind Project. Our two companies have agreed to establish a unique framework that enables us to effectively integrate and leverage strengths and expertise from both sides. We are confident this is key to succeed in the Choshi Offshore Wind Project.”

“In April this year, TEPCO will launch its renewable energy business arm, TEPCO Renewable Power, to make renewable energy a core generating source. The partnership with Ørsted and the establishment of Choshi Offshore Wind Farm K.K. will help drive business growth for the TEPCO group and TEPCO Renewable Power.”

Ørsted Chief Executive Officer, Henrik Poulsen, says “I am pleased to see our close collaboration with TEPCO for more than one year has led to the successful establishment of the joint venture company for the Choshi Offshore Wind Project. With Ørsted’s strong global capabilities and TEPCO’s local expertise, we are well prepared and dedicated to participating in the upcoming auction.”

“This joint venture is not only a significant step in Ørsted and TEPCO’s efforts to deliver on Japan’s ambitions for domestic renewable power generation, but also a landmark moment for Ørsted’s market entry in Japan and for our aspirations to help Japan become a leading offshore wind market in Asia Pacific.”

Oil and Gas

COVID-19 and oil price war could derail two-thirds of the world’s oil & gas project sanctioning in 2020

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COVID-19 and oil price war could derail two-thirds of the world's oil & gas project sanctioning in 2020. Image: Rystad Energy
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The effect of the COVID-19 virus on global demand for oil and gas, along with an ongoing price war that has sent oil prices tumbling at an unprecedented rate, are poised to wreak havoc on new project development plans for this year. According to an impact analysis from Rystad Energy, exploration and production (E&P) companies are likely to reduce project sanctioning by up to $131 billion, or about 68% year-on-year, as they batten down the hatches to weather the storm.

In 2019 total onshore and offshore project sanctioning reached some $192 billion. At the outset of this year, Rystad Energy forecast that projects representing about $190 billion worth of investments would be sanctioned this year. Recent developments, however, have spawned a major revision to that estimate.

If price of Brent crude averages around $30 per barrel in 2020, which we see as an increasingly likely scenario, we estimate that total project sanctioning will be reduced to just $61 billion. Some $30 billion of the overall expenditure is tied to onshore projects and $31 billion to offshore.

“Upstream players will have to take a close look at their cost levels and investment plans to counter the financial impact of lower prices and demand. Companies have already started reducing their annual capital spending for 2020,” says Audun Martinsen, Rystad Energy’s Head of Energy Service Research.

In a $40 per barrel price scenario, which is getting more distant by the day, total sanctioning would still be heavily slashed year-on-year, with Rystad Energy estimating a collective sum of $82 billion, representing a decline of 57%.

In North America, multi-billion dollar oil projects, including LLOG-operated Shenandoah Phase 1 and the Shell-operated Whale development, could face short-term delays in the offshore sector due to low oil prices, while in the onshore sector operators are expected to wait for the situation to stabilize before committing to new projects.

Project sanctioning schedules are expected to face delays of several months – even for those with breakeven requirements of less than $40 per barrel, let alone those with higher costs – as most oil companies will prefer to wait for the spread of Covid-19 to slow down and for the market to start to recover.

Still, one of the major projects this is expected to get sanctioned this year is ExxonMobil’s Greater Liza development off Guyana, which encompasses the Payara and Pacora discoveries.

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Maritime

CIP reaches financial close on 589 MW offshore wind project, Changfang and Xidao, off the coast of Changhua County, Taiwan

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CIP reaches financial close on 589 MW offshore wind project, Changfang and Xidao, off the coast of Changhua County, Taiwan. Image: CIP
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Copenhagen Infrastructure Partners (CIP) has through its funds Copenhagen Infrastructure II (CI II) and Copenhagen Infrastructure III (CI III) reached financial close on the 589 MW offshore wind project Changfang and Xidao off the coast of Changhua County, Taiwan.

CIP has reached financial close and start of construction of the Changfang and Xidao project. The project has contracted experienced international and local contractors under 8 key construction agreements. The project received approval of its local content plan in December 2019 by the Taiwan government and is the offshore wind project with the highest localization percentage in the Asia Pacific region. The Changfang and Xidao project will localize the jacket foundation, pin piles, onshore sub station, transport and installation contracts and more than 15 wind turbine components. The wind turbines will be supplied by MHI Vestas who will deliver 62 9.5MW turbines.

The 589 MW offshore wind farm will be financed through a combination of equity and senior loans from a consortium of 25 international and Taiwan banks and financial institutions (including CI II, Taiwan Life Insurance and TransGlobe Life Insurance), as well as 6 export credit agencies. The total project financing raised from the banks and financial institutions amounts to approximately USD 3 billion (NT$ 90 billion).

CIP acquired the Changfang and Xidao project in 2017 and the project obtained grid allocation in 2018. In 2019, the project entered into a 20-year PPA with the state-owned Taiwan Power Company. The Changfang and Xidao project is owned by CI II and CI III and a minority stake is owned by two local life insurance companies, Taiwan Life Insurance and TransGlobe Life Insurance. CIP will lead the project through its construction phase with expected start of commercial operations in Q1 2024.

“This project, besides being a remarkable project in Taiwan where it marks the continuation of the offshore wind build out, is part of leading the way for the complete APAC region going into offshore wind” says Anders Eldrup, CIP APAC Chairman

“Reaching financial close marks a major milestone for the Changfang and Xidao project and we are really excited about entering the construction phase of the project and will once commercial operation start provide clean energy to more than 600,000 households in Taiwan” says Michael Hannibal, CIP Partner.

“Since we entered the Taiwan offshore wind market in 2017 we have worked intensively with Taiwanese companies and the government to build up the local supply chain and we are therefore proud to deliver the project with the highest extent of localization in Taiwan to date” explained CEO of Changfang Xidao, Jesper Krarup Holst.

MUFG acted as Financial Advisor and CTBC as the local Financial Advisor for the project debt financing. White & Case acted as legal advisor and Baker McKenzie as the local legal advisor. FIH Partners acted as Financial Advisor to CIP.

CIP engaged Copenhagen Offshore Partners (COP) in 2017 to lead the development and construction of the Changfang Xidao project. COP has established a specialist offshore wind team comprising 70 people in Taipei covering all aspects of the project including permitting, engineering, design, procurement and stakeholder engagement. To support the development the Changfang and Xidao project has entered into contracts with the following companies: New Power Partners, PeakWind, Lautec, Wood Thilsted Partners, Bech Bruun, C2Wind and JUM BO Consulting Group.

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Maritime

Zhong Neng agreement underscores considerable localisation progress for MHI Vestas Offshore Wind in Taiwan

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Zhong Neng agreement underscores considerable localisation progress for MHI Vestas Offshore Wind in Taiwan. Image: MHI Vestas Offshore WInd
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On the heels of its selection as preferred wind turbine supplier for the 300 MW Zhong Neng Offshore Wind Farm, MHI Vestas has reaffirmed its commitment to the nascent sector as it moves into prime position to deliver the industry’s most comprehensive local supply chain.

Zhong Neng, a joint venture project between China Steel Corporation (CSC) and Copenhagen Infrastructure Partners (CIP), affirms MHI Vestas’ commercial activity in the market, paving the way for local industrial partnerships to be announced in the coming weeks.

“MHI Vestas has been an active and dedicated partner in the development of the local supply chain for more than two years. In close collaboration with our customers and the government, we are putting the finishing touches on the sector’s most ambitious localisation plan,” said Maida Zahirovic, MHI Vestas Business Director, Taiwan.

“We applaud the steps our local partners are taking to prepare for offshore wind and to become globally competitive. Our passion and motivation has always been to deliver on the promise of offshore wind in Taiwan. Together with our industrial partners, we are doing that.”

While there are no specific details yet for upcoming announcements, MHI Vestas is poised to unveil its progress in Taiwan in the coming weeks.

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