Financial Arrangement
Korea Midland Power’s Shinan-Wi offshore wind power project has finalised its financial arrangements and is proceeding with the groundbreaking ceremony.
As a major commercial project entering the South Korean offshore wind market in earnest, attention is being drawn to whether it will accelerate the expansion of renewable energy and the development of a related industrial ecosystem.
The Shinan-Wi Offshore Wind Project is a major offshore wind initiative with a capacity of 390 MW. The total project cost is around 3.4 trillion Korean won, and 26 15MW offshore wind turbines will be installed.
Upon completion, the project is expected to generate around 950,000 MWh (megawatt hours) of electricity per year — enough to power around 240,000 households for a year. Korea Midland Power estimates that the project will reduce greenhouse gas emissions by around 420,000 tonnes per year.
The project also signifies a transition for a public enterprise to diversify its power generation portfolio, which has centred on coal and liquefied natural gas (LNG), towards renewable energy.
The project is significant in terms of expanding South Korea’s offshore wind supply chain. Korea Midland Power plans to introduce the country’s first commercial offshore substation and procure the necessary equipment and cables for the offshore substation and onshore switchyard from domestic companies.
The offshore wind power industry encompasses a variety of related sectors, including turbine manufacturing, subsea cable production, substation equipment manufacturing, and installation and operational services.
Industry experts estimate that large-scale projects could generate demand for domestic equipment manufacturers and construction and operation companies.
Notably, this project could also increase the involvement of domestic firms in the offshore wind equipment market, which has traditionally been dominated by foreign companies.
Korea Midland Power signed a project financing (PF) agreement worth 2.89 trillion Korean won. KDB and KB Kookmin Bank participated as co-lead arrangers, and the project was selected as an investment initiative under the government’s ‘National Growth Fund No. 1’ policy fund, securing a long-term loan of 750 billion Korean won.
An additional 544 billion Korean won was invested through the Future Energy Fund. This structure combines policy, finance and private capital in order to reduce the financial burden of large-scale renewable energy projects. Amid rising interest rates and raw material costs, securing long-term funding is also seen as a factor enhancing the project’s stability.
Regional cooperation is another key challenge. Korea Midland Power plans to collaborate with local governments to implement a profit-sharing model, distributing part of the project’s revenue to the community.
During construction and operation, the company intends to prioritise employment of the local workforce and expand participation from regional businesses. As public acceptance — particularly with regard to conflicts with fishing activities and marine use — is critical to the project’s success, establishing a stable system of cooperation with the local community is essential.
Post-groundbreaking variables, such as negotiations over fishing rights, maritime traffic management and environmental oversight, also require continuous communication. Stable grid connectivity and safety management during offshore construction are also essential.
