Foreign investors have committed more than US$10 billion to long-term infrastructure and property development projects in Taiwan in just the last four years.
While the international media often warns of geopolitical tensions over Taiwan, foreign investors are quietly pouring billions of dollars into long-term infrastructure and real estate projects on the island. Since 2018, foreign companies have invested, or committed to invest, more than US$10 billion in Taiwan wind farms and property-related developments. Such a large increase in investments in long-term projects represents a vote of confidence by foreign investors in peace and stability in the Taiwan Strait.
According to publicly available information, foreign investment commitments in Taiwan wind farms and related infrastructure since 2018 exceeds US$9.5 billion. In addition, foreign investment commitments in property and related sectors since 2018 is estimated to exceed US$820 million, according to public information and the conservative estimates of equity research firm Cross Pacific Partners. (See Table 1 below).
As Table 2 illustrates in more detail, in the property and related sectors, foreign investors are aggressively building and investing in 5-star hotels, gleaming office towers, and luxury condominiums, while also developing huge, upscale shopping centers.
The extent of this foreign investment bonanza has been generally overlooked – both domestically and internationally – for a number of reasons. One is that Taiwan government statistics on foreign investment in specific long-term mega-projects, such as wind farms or property developments, are not widely disseminated.
In addition, Taiwan’s wind industry is generally not closely followed by major international securities firms compared to their coverage of, for example, Taiwan’s semiconductor industry. One result is that while the foreign media closely follows tech heavyweights such as the Taiwan Semiconductor Manufacturing Co. (TSMC) and Hon Hai Precision Industry Co. (also known as Foxconn), relatively little attention is paid to Taiwan’s wind and renewables industry. Outside of specialist trade publications, Taiwan’s boom in wind power doesn’t receive much coverage.
This lack of attention from media and financial services sector observers is even more pronounced with regard to Taiwan’s real estate market, with the result that the large foreign investments in property developments in Taiwan have largely gone unreported.
The positive implications of this foreign investment are numerous and clear. The investment in wind farms will help quickly reduce air pollution and bring Taiwan closer to its ambitious goal of deriving 20% of its electricity needs from renewable energy by 2025.
For Taiwan industries, purchasing electricity generated by wind or other renewables can be a fast way to reduce their carbon footprint. Apple Inc. has set a target of becoming carbon neutral for its manufacturing supply chain and products by 2030.
Taiwan’s wind power industry has vaulted into the top tier globally. In July 2020, TSMC and Danish renewables company Ørsted A/S signed the world’s largest-ever renewable energy corporate power purchase agreement (CPPA). Under the 20-year, fixed-price contract, TSMC will purchase all the electricity produced by the giant Greater Changhua 2b & 4 wind farm, which is expected to begin commercial operation in 2025 or 2026 with a capacity of 920 MW.
Needless to say, the investment in wind power in Taiwan by leading global infrastructure companies is a clear sign of foreign investor confidence over the coming decades.
To finance these multi-billion-dollar wind projects, international banks are also making decisions with very long investment time horizons. In June 2018, the Formosa 1 wind farm received 16-year project financing for NT$18.7 billion from a consortium of 11 international and local Taiwanese banks, plus the Denmark Export Credit Agency. This wind farm project is a joint venture, the initial shareholders of which are Ørsted (35%), Swancor Renewable Energy Co. Ltd. (15%), and Australian institutional investor Macquarie Capital (50%).
Savvy private equity players from North America and Australia are making a big push in Taiwan. These firms understand China and the geopolitical risks involved in making large investments in Taiwan. Starting in 2017, Macquarie made an early move into the Taiwan wind business with its investment in the Formosa 1 wind farm. Financial close was in June 2018 for NT$18.7 billion. At that time, Macquarie had a 50% stake in the project.
In December 2020, one of Canada’s largest institutional investors, CDPQ (Caisse de dépôt et placement du Québec), together with Cathay Capital PE led an international consortium to buy 50% of Ørsted’s stake in the Greater Changhua 1 Offshore Wind Farm for NT$75 billion. CDPQ manages a total of CAD$365.5 billion (US$292 billion) and since 1984 has been investing in private equity internationally. With offices in Singapore and Shanghai, CDPQ has extensive experience investing in China.
As in the renewables industry, foreign investments in property and related sectors often have a time horizon of 10 years or more.
Added up, the recent surge of long-term foreign investments will likely help boost Taiwan’s economic competitiveness in the decades ahead.