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South Korea's Taegisan Wind Farm Project

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Expertise in Wind Power Generation and Advanced Financial Technologies Are Combined

As South Korea is actively promoting renewable energy under a national policy of "low carbon and green growth," you can find a magnificent view of huge several-tens-of-meter-high windmills standing together in large numbers in a mountainous area in Kangwon-do, which is located in the northeastern part of the country.

By arranging a syndication for the Taegisan Wind Farm project, Mizuho is contributing to the popularization of renewable energy in South Korea.

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Project Site

Arranging a Syndicated Loan to Finance a Wind Power Generation Project that Has Garnered High Local Expectations

To realize a low-carbon society, South Korea focuses on the spread of renewable energies, such as wind and photovoltaic power generation. Under the "Renewable Energy R&D Basic Plan" announced at the end of 2003, the South Korean government set a target of 2,250 megawatts for introducing wind power generation in fiscal 2011 and adopted preferential prices for purchasing electricity generated by wind power.

The Taegisan wind power plant, which commenced operations in December 2008, is one of the power plants that benefitted from such governmental support. The Taegisan plant has the nation's leading wind generation capacity of 40 megawatts, supplying electric power that can cover 25,000 general households. The plant's production has the effect of reducing CO2 emissions by about 60,000 tons a year.

Jointly with the Korea Development Bank (KDB), Mizuho Corporate Bank arranged a syndicated loan amounting to JPY 4,100 million, which corresponds to 60% of the total construction cost, in June 2009. The Taegisan Wind Farm project was jointly carried out by Eurus Energy Holdings Corporation-Japan's leading wind power generation company-and POSCO Engineering and Construction-South Korea's leading construction company.

Taking Advantage of Our Accumulated Expertise in Wind Generation

Wind power generation is subject to unique risks. In particular, the amount of electricity generated depends on wind conditions and the purchase prices for electricity depend on the nation's policies. Arranging a finance package for a wind power generation project therefore requires professional knowledge and technological expertise.

Mizuho Corporate Bank was among the first Japanese banks to finance wind power generation projects. We have already accumulated experience in financing wind power generation projects in Spain, Bulgaria and elsewhere. The Bank's financing staff includes certified weather forecasters who have professional knowledge about wind.

Taking advantage of such expertise, we provided financial support for the Taegisan Wind Farm project by arranging the syndication jointly with another lead arranger, the Korean Development Bank. Specifically, we prepared reports on predicting wind conditions with the cooperation of environmental consultants and carefully analyzed the risks concerning the sales prices for electricity by verifying the guarantee of the aforementioned preferential prices for the purchase of wind-generated electricity to obtain the understanding of the investors and participating financial institutions.

Mizuho Corporate Bank's experienced finance arranging capability, combined with the trust of the South Korean financial market through the Korean Development Bank, produced a competitive finance package that enabled the commencement of the Taegisan Wind Farm project.

Contributing to the Realization of a Low-Carbon Society by Financing Environmental Projects

Another significant aspect of the Taegisan Wind Farm project is that the large-scale loan for it was enabled in a severe business environment in the wake of a worldwide financial crisis. What enabled the realization of this project was not only the South Korean government's preferential treatment but also social expectations for such environmental projects. Mizuho Corporate Bank emphasizes the project's potential for profit, but it is also in a position to share and support the business owners' or investors' passion for environmental conservation. While assessing risks from various aspects in the capacity of a financial institution, we support the realization of a project that can contribute to reducing the environmental burden. That is a method of social contribution by a financial institution.

Being a business that contributes to achieving the South Korean government's wind power generation target, the Taegisan Wind Farm project has garnered high expectations. This project was also approved as a Clean Development Mechanism (CDM) according to the Kyoto Protocol in July 2008, which means it contributes to the acquisition of emission credits by Japanese companies as well..

Mizuho Corporate Bank considers this involvement in a project that can benefit both Japan and South Korea as a valuable experience. We will continue to accumulate knowledge on renewable energy, including wind power generation, thereby supporting projects throughout the world that contribute to the realization of a low-carbon society.

Manager's Comments

Utilizing the knowledge and technologies obtained through projects worldwide

To arrange a project financing successfully, we investigate the project to reveal project risks, including a possible impact on the project's future cash flows (i.e., a source for repaying the loan), and individually analyze and fairly allocate those risks among the project's concerned parties. Because this project relates to wind power, the prediction of wind conditions was a critical issue. Based on our experience in similar projects in other nations, we were able to calculate the project's future cash flows and set an appropriate level of financing for the project.

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Yasushi Honda
Environmental Finance Team, Global Structured Finance Department
Mizuho Corporate Bank

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