Wando Geumil offshore wind breaks ground next year with 1 trillion won national growth fund

Original Korean article: Asia Today

The Wando Geumil offshore wind project, which initially targeted construction commencement in October, is expected to enter full construction next year following major contracts and capital contributions in November. Korea South-East Power (KOEN) maintains that the schedule has not been delayed, but securing policy and private financing including the National Growth Fund will be critical to the project's direction, as project costs have increased to 4.5 trillion won.

According to industry sources on the 18th, KOEN plans to conclude an engineering, procurement, and construction (EPC) main contract with a Hyundai Engineering and Construction consortium in November, finalize a turbine supply agreement (TSA) with Vestas, and complete special purpose company (SPC) capital contributions. Detailed design and price and commercial condition negotiations are in their final stages.

Of the project cost, approximately 900 billion won, or 20 percent, will be covered by shareholder capital contributions, while the remaining approximately 3.6 trillion won will be secured through project financing (PF) backed by power sales revenues. Since the structure involves conducting construction preparation and equipment procurement first with capital contributions, then injecting PF funds from the second half of next year, the financial closing scheduled for year-end to early next year must be supported for the November contract to lead to full construction.

The core of the PF is the National Growth Fund, which is being pursued with a target of around 1 trillion won. The Sinan Ui offshore wind project secured 750 billion won from the National Growth Fund and 544 billion won from the Future Energy Fund, but Wando Geumil has not yet formally applied. A KOEN official stated, "We expect support at a similar or higher level to Sinan Ui," and added, "We have consulted with the Korea Development Bank and are submitting materials through the Korea Energy Agency in line with the Financial Services Commission's review."

Additional equity capital procurement is also necessary. KOEN, which holds 51 percent of development rights, must contribute 450 billion to 460 billion won, but is seeking a strategic investor (SI) or financial investor (FI) to share the burden with Green Harbor Fund. Development rights are held by KOEN at 51 percent, Green Harbor Fund at 48.5 percent, and Yeongrim Industries at 0.5 percent, with final shareholders to be confirmed in the fourth quarter.

Creditor negotiations are underway, and the possibility of immediate financing disruptions is not large. However, project delays and increases in inflation and equipment prices have raised project costs from 3.271 trillion won in 2024 to 4.5 trillion won. Since initial construction must begin with capital contributions and transition to PF funds, delayed financial closing could shake shareholder burden and construction schedules.

A development fund of 150 billion won, which includes 4 percent community participation and "wind pension" revenues utilizing those proceeds as well as fishery loss compensation and civil complaint costs, has taken shape. However, community acceptance and permitting negotiations have not been completely finalized. Remaining issues include agreement on excess profit sharing and coordination with the Air Force Air Defense Command for alternative radar installation.

Wando Geumil is the first large-scale offshore wind project led by a state-owned enterprise, and the success or failure of its financing is expected to determine the financial model for subsequent public projects. With the government planning to supply 6.3 gigawatts (GW) of power for the southwestern semiconductor industrial complex through regional renewable energy and nuclear power, whether 4.5 trillion won in financing can be connected to 600 megawatt (MW) of power generation capacity may serve as a benchmark for assessing the feasibility of the power supply plan.

Climate, Energy and Environment Minister Kim Sung-hwan stated at a press briefing at the Government Sejong Complex on this day, "There is strong public aspiration for new advanced industries to enter Honam and high expectations from local residents for early construction commencement and completion," adding, "Taking this into account, we will proceed with the process in a compressed manner."

KWI project profile — Wando Geumil Offshore Wind

Compiled from the KWI database. Not part of the source article.

Project data: KWI database — Electricity Business Licence records, EIA filings (ME2022C019), and Electricity Regulatory Commission minutes.