Mitsubishi Corporation has decided to withdraw its participation in three large offshore wind projects in Japan, arguing that the current economic outlook has made their development unfeasible. The initiatives were located off the coasts of Akita and Chiba prefectures, and were awarded in the first national auction of offshore energy in 2021.
The decision comes after an exhaustive re-evaluation of the business plans, carried out by Mitsubishi Corporation Offshore Wind Ltd. The company pointed out that factors such as the increase in construction costs, exchange rate volatility and the sustained increase in interest rates have generated an insurmountable imbalance between the projected investment and the expected income.
Rising costs jeopardize planned wind projects
Since its selection as operator, Mitsubishi has faced a significant escalation in operating costs, which have more than doubled the estimates made in 2021. Despite attempted schedule adjustments, supply chain restructuring and profitability analyses, the consortium determined that an acceptable return on investment would not be achieved.
The economic impact is not limited to Mitsubishi. Chubu Electric Powerone of the project partners, anticipates a loss of approximately 17 billion yen. Most of the write-downs were already reflected in previous accounting periods.
Government will seek to reactivate the zones with new tenders
The Ministry of Economy, Trade and Industry described the withdrawal as “regrettable”, and warned of the risk it poses to confidence in the deployment of renewable energies.. Relisting of the affected sites is contemplated, although the international context has also held back other major players in the sector, such as Orsted and Shell.
Mitsubishi stated that it continues to consider offshore wind offshore wind as a key pillar for the country’s energy transition, but stressed the need to adapt any new proposals to current economic realities. For now, its approach will be to closely monitor the market before re-entering with future projects.
Source: Mitsubishi Corporation
Photo: Shutterstock
