Taipower and Foxwell Energy offshore wind dispute focuses on withheld guarantee

Taiwan’s offshore wind power construction has continued to advance in recent years. However, a contract dispute between Taiwan Power Company (TPC) and general contractor Fuwei Energy has surfaced in the landmark Phase II offshore wind project. The two parties are at odds over core issues, including the withholding of funds and mortgage rights on wind turbines, drawing significant market attention. Fuwei Energy recently publicly accused TPC of withholding nearly NT$6 billion in performance guarantees and project retention funds, severely impacting its financial flexibility and operations. In response, TPC issued a stern statement on the 29th, rejecting the accusations. It emphasized that the project has not yet been completed and accepted. Returning the guarantees and retention funds without meeting the contractual conditions would not only violate procurement regulations but also constitute an illegal act. This construction dispute highlights the complexities involved in executing large-scale green energy projects and has reignited widespread discussions regarding the costs of offshore wind development, contractual regulations, and the localization process.

According to TPC, the contract signed for the Phase II offshore wind project contains clear terms and milestones. The project must meet all contractual stipulations, be fully completed, and pass inspection before the associated performance guarantees and project retention funds are returned in stages as agreed. TPC noted that the project is currently in progress. Fuwei Energy’s demand for TPC to pay this substantial sum while the project remains incomplete is a violation of the spirit of the contract and lacks basic legal foundation. TPC further stressed that, as a state-owned enterprise, every budget and expenditure must strictly adhere to procurement laws and contracts. If TPC were to prematurely return nearly NT$6 billion to the contractor before completion, the relevant personnel would be liable for illegal dereliction of duty. Therefore, TPC categorically refuses this unreasonable demand.

Beyond the dispute over withheld funds, another flashpoint in the conflict concerns the disposition of wind turbine ownership. TPC revealed in its statement that while the project was incomplete and ownership had not been fully clarified, Fuwei Energy unilaterally mortgaged wind turbines whose ownership had already been transferred to its parent company, Senwei Energy. TPC severely accused this unauthorized mortgaging of assets of infringing upon TPC’s legal ownership of the wind farm assets. It also directly violated the procurement contract signed by both parties as well as the integrity and contractual responsibilities expected of a general contractor. This allegation involves issues of legal asset attribution and corporate governance integrity, escalating what was initially a dispute over construction progress and cash flow into potential litigation regarding asset preservation and contract breach across corporate groups.

Looking back at the development of offshore wind power in Taiwan, the government has actively promoted block development and the construction of potential sites to meet its 2025 non-nuclear home and renewable energy goals. As the primary electricity supplier in the country, TPC bears the heavy responsibility of ensuring stable power supply and driving the energy transition. Its Phase II offshore wind plan serves as a key indicator of the localization policy. However, large-scale offshore wind projects often cost tens or even hundreds of billions of dollars and frequently face multiple challenges during construction, including international supply chain disruptions, raw material price volatility, difficulties in vessel scheduling, and adverse sea conditions. Against this backdrop, disputes over financial pressure and cost sharing between general contractors and owners are not uncommon. The public confrontation between Fuwei and TPC is a microcosm of the severe challenges facing the execution of large-scale domestic green energy projects.

From an industrial and legal perspective, this dispute underscores the strictness and complexity of executing energy infrastructure contracts. The original intent behind performance guarantees and project retention funds is to ensure that contractors complete projects according to contractual quality and deadlines, and to provide a warranty period for defects after completion. If a contractor demands the early release of such funds due to financial pressure, the owner, citing the need to prevent unfinished projects and to comply with audit regulations, often finds it difficult to compromise. Furthermore, the allegation of private mortgaging of wind turbine assets touches on sensitive issues regarding corporate financing and asset independence. Future resolution of liability may require judicial proceedings or arbitration mechanisms. This controversy tests TPC’s contract management and crisis handling capabilities, while also prompting deeper reflection and vigilance regarding contractual norms and corporate governance within the domestic green energy industry.

(Source: CNA)