NCGA and Eight Major Banks Extend CPPA Guarantees to 44 Enterprises Under the Green Energy Credit Insurance Mechanism.
NCGA and Eight Major Banks Extend CPPA Guarantees to 44 Enterprises Under the Green Energy Credit Insurance Mechanism.
The Ministry of Economic Affairs (MOEA) is spearheading the Green Energy Corporate Power Purchase Agreement (CPPA) Credit Insurance Mechanism, which is set to be unveiled soon. The plan involves providing credit guarantees by the eight major domestic banks for the CPPA of electricity purchasing companies. The National Credit Insurance Administration (NCGA) will further reinsure these contracts, offering a 20-year guarantee period.
This mechanism will benefit 44 large domestic corporate groups. Additionally, developers who secure bids for the 3-1 and 3-2 phases of offshore wind zonal development will be able to obtain financing through this mechanism.
Green Energy CPPA Credit Insurance Mechanism
The Ministry of Economic Affairs (MOEA) has officially released the selection regulations for the offshore wind 3.2 stage, set to be open for auction in April 2024. Developers who successfully bid for the 3.1 stage are poised to secure financing in the first quarter of 2024. The "Green Power CPPA Credit Guarantee Mechanism" is on the horizon, with the MOEA having concluded negotiations with the Ministry of Finance (MOF), the National Development Council (NDC), the eight major banks, and developers. The mechanism is expected to be operational by the end of the year, aiming for the eight major banks to issue performance guarantees before June 2024, coinciding with the financing arrangements for 3-1 phase developers.
As large domestic corporate groups demand green energy, financing banks mandate developers to sign CPPAs with international credit ratings for wind farm financing. However, unlike TSMC, few domestic corporate groups possess international credit ratings. To address this, the nation has instituted the CPPA Green Energy Credit Guarantee Mechanism, offering credit guarantees for CPPAs to purchasing power enterprises. In cases of non-payment due to operational challenges, the Green Energy Credit Insurance Mechanism and the eight major banks step in for compensation, complemented by Taipower's surplus electricity repurchase and resale mechanism.
Operation Mechanism:
1. Companies procuring green energy must first pay insurance premiums to the eight major banks contracted with the National Credit Guarantee Association (NCGA). The eight banks then apply for credit insurance from the NCGA, which issues a Letter of Guarantee to the banks. The banks, in turn, provide credit guarantees to the purchasing companies' Corporate Power Purchase Agreements (CPPA).
2. Wind power developers can secure project finance based on CPPAs guaranteed by the nation. When companies cannot cover the costs of green energy procurement, the Green Energy Credit Guarantee Mechanism intervenes. The compensation is 80% covered by the NCGA, with banks shouldering the remaining 20%. The maximum coverage for a single enterprise is capped at NT$8 billion.
According to the plan, two types of Green Power Purchase Agreement (CPPA) buyers are expected to receive credit insurance guarantees. The first type includes those with a long or short-term credit rating of twBBB or a short-term credit rating of twA-3 or higher. The second type encompasses enterprises with an average annual electricity consumption exceeding 500 million kWh over the past 5 years. Based on last year's electricity usage, there are approximately 44 corporate groups in the country with an annual consumption exceeding 500 million kWh.
According to the plan, two types of Green Power Purchase Agreement (CPPA) buyers are expected to receive credit insurance guarantees. The first type includes those with a long or short-term credit rating of twBBB or a short-term credit rating of twA-3 or higher. The second type encompasses enterprises with an average annual electricity consumption exceeding 500 million kWh over the past 5 years. Based on last year's electricity usage, there are approximately 44 corporate groups in the country with an annual consumption exceeding 500 million kWh.
Reference: money.udn (Economic Daily Taiwan)
