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    Taiwan, China Infrastructure Competitive Landscape


    May 18, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Taiwan, China Infrastructure Competitive Landscape

      • 21 Apr 2022
      • Taiwan
      • Infrastructure

      Key View: Civil engineering projects in Taiwan, China are dominated by local contractors, but non-Taiwan, China-based engineering companies have established a strong position in a number of high-value niches, such as desalination projects, offshore wind installations as well as LNG projects.

      There is a mix of domestic and non-Taiwan, China-based contractors operating in the construction sector, with a notable European presence mostly working on projects in the burgeoning offshore wind sector. Based on data from our proprietary Infrastructure Key Projects Database, 44% of contractor roles have been awarded to locally based contractors.

      Although there are more than 8,000 construction companies operating in Taiwan, China, 90% of these are micro-businesses and about 80% of total construction output is controlled by a handful of major construction companies or conglomerates with contracting subsidiaries. There is a noticeable absence of Mainland Chinese contractors, the increasing presence of which in external construction markets around the world has been accelerated by Beijing’s Belt and Road Initiative.

      The domestic scene is dominated by CTCI Corp, who is contractor to the Green and Blue lines of Danshui Light Rail Project in Taipei County, as well as the Linkou Coal Power Plant Retrofit Project and the Tung Hsiao CCGT Power Plant. Other major local players include Ta Tong Marine Group, CSBC Corp and China Steel Construction (a Taiwan, China-based company incorporated in Kaohsiung).

      European Contractors Dominate Wind Projects
      Taiwan, China - Share Of Construction Roles By Companies' Home Market

      Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Fitch Solutions Key Projects Database

      European involvement is represented by companies such as Netherlands-based Heerema Marine Contractors, Belgium-based DEME Group, Luxembourg-based Jan De Nul Group and Denmark-based A2SEA, which all possess the specialised and advanced technology required to implement offshore wind projects, and have worked on offshore wind projects across the world. For example, Jan De Nul is currently working on laying the foundations and submarine cable systems for the 376MW Formosa 2 Offshore Wind Project located off the coast of Miaoli County. While Jan De Nul is in charge of more technically challenging construction works, general onshore construction works are undertaken by its local partner Fortune Electric.

      European players are expected to continue their important role in the expansion of Taiwan, China’s offshore wind capacity, especially in light of the authorities' eagerness to shift towards renewable energy production. In December 2021, RWE announced an agreement with Taiwan, China-based Asia Cement Corporation to jointly develop floating and fixed offshore wind power projects in the waters off Hsinchu, Taichung and Changhua counties. Our Power team currently holds a bullish forecast for Taiwan, China’s offshore wind sector and expects it to be one of the largest offshore wind markets worldwide.

      Offshore Wind Supported By European Lenders
      Taiwan, China - Share Of Financier Roles By Companies' Home Market

      Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Fitch Solutions Key Projects Database

      As a consequence of Taiwan, China’s increasing reliance on European contractors for the construction of offshore wind projects, there is also a considerable European presence as financiers to projects. Taiwan, China-based lenders account for 47% of all financier roles, with major domestic banks such as Taipei Fubon Bank, Chang Hwa Commercial Bank and Cathay United Bank all involved in various infrastructure financing deals, not just in the offshore wind sector, but also in other sectors such as rail and road.

      Similarly, as a consequence of the involvement of European contractors, European lenders are also heavily involved as financiers, but this is mostly limited to Taiwan, China’s burgeoning offshore wind sector. These lenders include BNP Paribas, Deutsche Bank and the ING Group. In April 2020, the 589MW Changfang and Xidao Wind Farm off the coast of Changhua County reached financial close. More than 20 lenders were involved in this deal, including Deutsche Bank, which agreed to provide a contingent interest rate swap facility for hedging purposes. Players in the insurance space, such as Taiwan Life Insurance and TransGlobe Life Insurance, are involved as well.

      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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