What is the current legal landscape for Project Finance in your jurisdiction?

Project Finance in Taiwan is a well-developed and increasingly sophisticated financing structure, which has gained notable momentum in recent years, particularly in light of the jurisdiction’s policy-driven transition toward renewable energy. In the absence of a single unified statute governing project finance, the legal environment is instead shaped by a combination of civil, corporate, and industry-specific regulations, which collectively provide a generally stable and workable framework for structuring infrastructure and energy-related investments.

A Project Finance structure in Taiwan typically engages the following key legal areas with a view to supporting enforceability and bankability considerations:

The Security Framework

While the Civil Code provides the foundational rules governing contracts and the creation of security interests, the practical treatment of project assets is further supplemented by the Personal Property Secured Transactions Act. This regime enables lenders to register security interests over movable assets such as machinery and equipment, while allowing the project company to retain operational control and continued use of such assets.

By facilitating non-possessory security interests, the legal framework supports the creation of a commonly adopted security arrangement that seeks to balance creditor protection with uninterrupted project operations. In practice, this mechanism is widely utilised in infrastructure and energy financings in Taiwan.

Corporate Controls and the SPV

The use of a Special Purpose Vehicle (“SPV”) is a standard feature in project finance structures in Taiwan, primarily aimed at isolating project-related risks. However, given the typically limited capitalisation of SPVs, financial support from sponsors or parent companies is often required in practice.

In the Taiwan market, it is common for sponsors to provide guarantees or issue support letters in connection with financing arrangements. Such support is typically structured to address credit considerations while remaining subject to applicable corporate law requirements, including restrictions under the Company Act regarding the provision of guarantees.

Sector-Specific Drivers

In addition to general civil and corporate law principles, project financing structures are often shaped by sector-specific regulatory regimes. The nature of the underlying project—such as offshore wind, solar photovoltaic, or Energy Storage Systems—may materially influence the structuring of financing arrangements.

In particular, different asset classes typically require tailored financing terms, including conditions precedent, covenants, and collateral arrangements. These requirements are further influenced by applicable licensing regimes and regulatory approvals, and therefore must be assessed and structured on a case-by-case basis in light of the relevant industry framework.

Conclusion

Taiwan’s Project Finance environment is supported by a well-established and evolving legal and regulatory framework. Although no single statute governs project finance as a standalone structure, the interaction of civil, corporate, and sector-specific laws provides a practical and workable foundation for structuring financing transactions.

 

What three essential pieces of advice would you give to clients involved in Project Finance matters?

Navigating Project Finance in Taiwan requires a sophisticated understanding of local market practices and regulatory nuances. To ensure a successful transaction, we recommend that clients prioritize the following three strategic pillars:

Strategic Planning for the Security Package

In Taiwan, security arrangements in project finance transactions often extend beyond conventional asset security and typically require early-stage coordination at both administrative and corporate levels.

Promissory notes and related authorisation are frequently utilised in syndicated lending transactions as part of the broader security documentation package. The scope and form of such instruments are generally driven by market practice and lender requirements.

In addition, lenders commonly request equity security over the shares of the relevant SPV. Where share certificates are issued in physical form, the perfection of such security may require endorsement and delivery of the relevant certificates. Accordingly, the timing and procedural requirements associated with share certificate issuance and pledge registration should be considered at an early stage of the transaction to facilitate a smooth financing process.

While SPV structures are typically designed to provide a limited-recourse framework, it is also common for lenders to request additional credit support from sponsors or parent companies, including guarantees or similar undertakings. The allocation of such credit support is typically a key negotiation point between lenders and sponsors.

Managing Regulatory Complexity and Social Risks

Project viability in Taiwan, particularly within the renewable energy sector, is often contingent upon a multi-layered permitting and regulatory approval process.

Permit Contingency: Key regulatory milestones, such as environmental impact assessments and grid connection reviews by Taiwan Power Company, are not merely procedural steps but are generally regarded as material prerequisites for project development and financing considerations, particularly from a bankability perspective.

Regulatory Developments: As Taiwan’s energy transition framework continues to evolve, regulatory requirements remain subject to periodic amendments. Accordingly, project stakeholders typically need to take into account potential regulatory changes when assessing compliance and structuring implementation strategies.

Stakeholder and Social Considerations: In addition to formal regulatory approvals, social acceptance and stakeholder engagement may constitute relevant factors in project development. In certain circumstances, local opposition has been observed to affect the implementation of approved projects, including delays or challenges to existing permits. As such, early-stage stakeholder engagement is commonly considered an important component of overall project risk management, alongside technical and legal compliance.

Assessing Policy Continuity and Political Risk

Taiwan’s project finance market is currently supported by various governmental policy measures and incentives, particularly in relation to infrastructure and renewable energy development. However, for long-term projects, it is generally necessary to take into account potential policy evolution over time.

Incentive Frameworks: The current development of the market is supported by a range of policy instruments, including energy policy initiatives and regulatory adjustments affecting financing capacity. These measures are typically implemented pursuant to prevailing governmental policy priorities and may be subject to revision over time.

Policy Developments and Administrative Changes: As Taiwan operates under a democratic system, changes in government administration may from time to time result in adjustments to policy direction, including those relating to energy transition frameworks or subsidy regimes. Accordingly, project sponsors and lenders commonly consider policy continuity risk as part of their overall project assessment, including through sensitivity analysis in financial modelling and risk evaluation.

What are the greatest threats and opportunities in Project Finance law in the next 12 months?

Looking ahead, Taiwan’s Project Finance market is expected to remain active and evolving. While infrastructure development and the energy transition continue to present financing opportunities, ongoing economic and regulatory developments may introduce additional structuring considerations for market participants.

Key Opportunities: Continued Development in Energy and Infrastructure

Demand for project financing is generally expected to remain supported by a number of policy and market-driven factors.

Industrial Relocation and Domestic Investment: The continued implementation of investment promotion policies, including programs encouraging the relocation or expansion of manufacturing activities in Taiwan, has contributed to increased demand for industrial infrastructure and renewable energy supply solutions to support domestic operations.

Sector Diversification: In addition to traditional renewable energy sectors such as wind and solar, market participants are increasingly observing interest in adjacent areas, including energy storage systems and grid modernisation projects, which are aligned with Taiwan’s broader net-zero transition objectives.

Emerging Considerations: Transition Toward the CPPA Model

One of the key developments in Taiwan’s renewable energy financing landscape, particularly in the offshore wind sector, is the gradual shift from feed-in tariff arrangements to corporate power purchase agreement (“CPPA”) structures. This transition may have implications for risk allocation and contractual structuring.

Offtaker Credit Considerations: Under a CPPA-based model, electricity is typically sold to private offtakers rather than a state-owned utility (including Taiwan Power Company). As a result, lenders generally place greater emphasis on assessing offtaker creditworthiness, which may influence the risk allocation and terms of financing documentation.

Contractual Alignment and Lender Requirements: In practice, lenders may request that CPPA arrangements include certain protective provisions to address financing requirements. Accordingly, financing structures often involve a coordinated review of project agreements to ensure consistency with bankability considerations across the overall contractual framework.

Revenue and Cost Structuring Considerations: Given the capital-intensive nature of certain renewable energy projects, particularly offshore wind, financing structures typically require careful alignment between projected revenue streams under CPPA arrangements and debt servicing obligations. This often necessitates detailed financial modelling and contractual risk allocation analysis.

How do you ensure high client satisfaction levels are maintained by your practice?

LCS & Partners is committed to providing legal services with a strong client-focused approach. Our practice is structured around three core operational pillars:

Cross-Disciplinary Integration

Project finance matters typically involve multiple intersecting areas of law. Drawing on experience across investment, financing, and real estate-related matters, the firm adopts a cross-disciplinary approach to legal analysis.

Rather than reviewing financing documentation in isolation, we consider the broader interaction between project development, regulatory requirements, and transaction structuring, with the aim of providing integrated legal support tailored to the specific needs of each matter.

Alignment of Legal Analysis with Commercial Considerations

The firm places emphasis on delivering legal advice that is both technically robust and practically implementable. In sectors such as energy and infrastructure, where the firm has experience, legal risk analysis is undertaken with consideration of execution realities, including risk allocation and enforcement mechanics.

This approach is intended to support the development of financing structures that are legally sound, commercially workable, and aligned with the long-term objectives of clients.

What technological advancements are reshaping Project Finance law and how can clients benefit from them?

Technological developments, in particular the increasing use of artificial intelligence-based tools, are gradually influencing the practice of project finance in Taiwan. These technologies are primarily being applied in areas such as document review, due diligence processes, and issue-spotting across large volumes of transactional data.

From a practical perspective, such tools may assist in identifying potential legal or contractual issues at an earlier stage and may improve the efficiency of reviewing complex financing documentation. In this context, they may also contribute to reducing information asymmetry between project sponsors and lenders, thereby potentially facilitating a more streamlined due diligence process.

Questions devised by Legal 500 Comparative Guide Editorial Board.