Project Financing for Moray East Offshore Wind Power Generation Project in the U.K.
Supporting Japanese Company Participating in the U.K. Offshore Wind Power Generation Market as part of Promoting Quality Infrastructure Investment for Environmental Preservation and Sustainable Growth

• Region: Europe
• Infrastructures
• Environment
• Overseas Investment Loans
• Project Finance

1. The Japan Bank for International Cooperation (JBIC; Governor: Tadashi Maeda) signed on November 28, a loan agreement in project financing^*1 amounting up to approximately GBP743 million (JBIC portion) with British company Moray Offshore Windfarm (East) Limited (MOWEL), invested in by Mitsubishi Corporation, Kansai Electric Power Co., Inc., Mitsubishi UFJ Lease & Finance Company Limited and others, for the Moray East offshore wind power generation project in the United Kingdom (the U.K.). The project financing is provided as part of JBIC's Global Facility to Promote Quality Infrastructure Investment for Environmental Preservation and Sustainable Growth (QI-ESG^*2). The loan is co-financed by private financial institutions and the total co-financing amount is approximately GBP1,517 million. EKF Denmark's Export Credit Agency will provide the guarantee for a part of the loan by the private financial institutions.
     
2. For this project, MOWEL will construct, own and operate an offshore wind farm with a total generation capacity of 950MW to be located 22 km off the coast of Moray, Scotland, in northern Great Britain. Under the Contracts for Difference (CfD) ^*3, a UK renewable energy subsidy scheme, MOWEL will sell electricity to power retailers for 15 years after the start of commercial operations.
     
3. In European countries, including the U.K., development of large-scale offshore wind farm is accelerating, and competition for obtaining concessions is intensifying among a number of foreign companies. Given these circumstances, JBIC's financial support for long-term overseas projects of Japanese companies will contribute to maintaining and strengthening the international competitiveness of Japanese companies.
     
4. In the "Export Strategy for Infrastructure System" revised in June 2018, the Japanese government expressed its intention to promote expanding orders for infrastructure systems, including design, construction, operation and management of infrastructure, as well as increasing investments in local projects. Also, based on the Paris Agreement, the Japanese government is actively pursuing a policy of responding to the need of host country for the export of low carbon infrastructure, including renewable energy, in order to lead global decarbonization efforts. In addition, in the Basic Energy Plan released in July 2018, the Japanese government is calling for the strengthening of the international competitiveness and overseas expansion of the energy industry through promotion of the market entry by Japanese utility companies, supported by the use of policy based finances. This project is thus in line with these Japanese government policies.
     

5. In 2008, the UK government enacted its Climate Change Act 2008, setting a target of reducing greenhouse gas emissions to 80% of 1990 levels by 2050. Furthermore, in 2013, the UK government enacted its Energy Act 2013, which intends to replace existing old power plants with low carbon energy generation through the CfD scheme. This project will therefore assist the UK government in accomplishing its goals by contributing to the reduction of greenhouse gas emissions in the country.
   
   

6. As Japan's policy-based financial institution, JBIC will continue to provide financial support to assist Japanese companies in expanding overseas infrastructure businesses by drawing on its various financial instruments for structuring projects, and by performing its risk-taking function.
     

Note

1. *1 
   Project finance is a financing scheme in which repayments for a loan are made solely from the cash flows generated by the project.
2. *2 
   JBIC launched QI-ESG on July 1, 2018.  This facility is aimed to provide a wide range of financing support for infrastructure development, including renewable energy projects which is expected to help to preserve the global environment. For more details, see the Announcement on June 28, 2018.
3. *3 
   CfD is a contract between the UK government's wholly owned Low Carbon Contracts Company and power developers, and the scheme ensures long-term income for power developers by adjusting for the difference between the price determined by the UK government and the index price in the power market.