There are interests showing up for lenders in Japan’s vast growing offshore wind power sector. There have also been relatively decent returns, along with many yen liquidity, as well as sustainability guarantees. Although there have been pressures on inflation and potential project delays, this offshore wind power sector is a good opportunity. The latest borrower launching a renewable power project financing is Green Power Ishikari. The firm creates a 122MW offshore wind farm located in Hokkaido. The firm’s loan in Japanese is the second transaction with the port project.
The calculation covers the $454m or 19-year borrowing paying a margin of 110bp over Tibor. This is already in line with a ¥80bn or 20-year financing that Marubeni consortium raised previously in 2020. Previously, they developed a 140MW offshore wind farm in both Akita and Noshiro ports in northern Japan. Meanwhile, Japan’s core consumer inflation rate has accelerated to an eight-year high which is 3%. So, there is a challenge for the central bank to resolve its ultra-easy policy stance when the yen is decreasing. Asako Haga, a vice president in MUFG’s renewable energy project finance department delivered arguments. He argued that construction prices for wind turbines would be prone to inflation effects.
However, in the perspective of the loan market, there have been fluctuations as well in the base rate that give more impact on the margins. Haga added that offshore wind power is a Japanese sector where regional banks would like to work on, especially following ESG trends. Thus there is no much increase in the margins. The government has targeted around 10GW of offshore wind capacity by 2030 and 45GW by 2040.
