Supply chain risks and their threat to capital expenditure

Transcription

1 Supply chain risks and their threat to capital expenditure David Robertson and Mark Cowling Technical by nature

2 Project CAPEX (GBP M / MW) [inflation adjusted] Offshore Wind Projects CAPEX Trends 4.0 Setana Beatrice Alpha Ventus Thornton Bank II Belwind Phase 1 Greater Gabbard Lincs Ormonde Borkum West II Rudong Sheringham Demonstrator Shoal Borkum Riffgrund Walney Phase I 3.0 Tuno Knob Thanet Rhyl Flats Rodsand II Teeside London Array Anholt Gwynt y Mor Gunfleet Phase I & II Dong Hai 2.0 Irene Vorrink Bockstigen Horns Rev North Hoyle Princess Amalia (Q7) Kentish Flats Robin Rigg Barrow Burbo Horns Rev II Egmond LID Baltic I 1.0 Scroby Sands Blyth Samsø Nysted Utgrunden Yttre Stengrund Middelgrunden Lillgrund Operational Under Construction Contracted Bubble Area represents capacity of wind farm Year of Commissioning

3 Case Study 1: 400MW Offshore Wind 30m LAT CAPEX Financial Close: CAPEX Outturn Cost: 1.4bn CAPEX Overspend 2.5bn

4 Case Study 2: 500MW Offshore Wind 30m LAT CAPEX Financial Close: CAPEX Outturn Cost: 1.75bn One single incident 2.05bn

5 CAPEX Trend and Case Studies CAPEX trends and case studies demonstrate: CAPEX has been consistently increasing over the past 10 years Outturn costs are significantly higher than CAPEX agreed at Financial Close Individual issues and resulting claims can increase CAPEX by 300m Opportunity to reduce CAPEX overspend through improving management of the supply chain

6 Problems within the Supply Chain Lack of understanding of the project supply chain components

7 Problems within the Supply Chain Manufacture: Single Contract Nacelle Main Bearing Main Shaft Gearbox Generator Power take-off Control system Yaw & Pitch system Rotor Blades Tower Steel Export Cable Array Cable Cable protection WTG Foundation Transition Piece Access System J Tube Substation Installation: Export Cable Laying Foundation Installation Array Cable Laying Construction Port Rent Substation Installation Guard Vessel Turbine Installation Commissioning Absence of contractual agreements between vendors leads to multiple installation contracts being affected by events on a single supply contract Multiple Contracts

8 Problems within the Supply Chain Equity 1 Equity 2 Equity 3 Equity 4 Equity 5 Stakeholder Map Turbine Supply Electricity Offtake Difficulties with Variation Order Approval Substation Supply Foundation Pre-piling Foundation Transport Developer Grid Connection Service & Maintenance Operational Management Foundation Supply Financial Advisor Cable Supply Banks & Lenders Technical DD Legal DD Insurance DD Model Audit

9 Supply Chain Management Procurement Develop: Financial Close Construction Implement: Project Close Corporate QHSE Procedures Corporate QHSE Procedures Project QHSE Plans Project QHSE Plans Project Execution Plan Project Execution Plan Risk Management Risk Management Planning / Scheduling Planning / Scheduling Interface Management Interface Management Supply Chain Management Supply Chain Management Document Management Document Management Change Management Change Management QA/QC Audit QA/QC Audit Contract / Commercial Contract / Commercial

10 Status Developer (Developer / Project Company) PMC (Project Management) Contractor 1 (WTG Foundation Supply) Contractor 2 (WTG Supply) Contractor 3 (Substation Supply) Contractor 4 (Cable Supply) Contractor 5 (Foundation & Substation Installer) Contractor 6 (WTG Installer) Contractor 7 (Cable Installer) Interface & Scope Matrix A - Project Management and Control Interface Name (Brief description based on physical location) L = Lead Responsibility S = Support Responsibility Detail Description A External interfaces Use of Construction Port Aim: Management of the Construction Port Action: Allocate usage of the Construction Port to contractors for shelter during storms, crew transfer and storage purposes. All other interface contractors will use the Construction Port for personnel transfer only. S S S S L S 2 Fisheries liaison Aim: Provision of Fisheries Liaison Action: Carry out all fisheries liaison. L S S S S S 3 Permits Aim: T o obtain all permits in due time to permit construction Action: Obtain all necessary permissions. Contractors to provide all inputs requested to support permit applications / submissions. L S S S S S S S S 4 Press releases and publicity Aim: T o control all contact with the media to ensure correct information is sent out and ensure non Disclosure Agreements are not breached. Action: Instigate or approve all press communications and media contact. All contractors to seek specific approval for all press releases. L S S S S S S S S 5 Deutsche T elekom Aim: T o ensure cable crossing agreements and working near to cable procedures are agreed. Action: Cable/installation contractor to work together to agree working methods with relevant third parties. 6 Grid provider Aim: T o ensure Grid Connection is available at the correct time. Action: Coordinate fabrication and installation activities and agree with Grid Provider when grid connection shall be available. 7 Marine Warranty Surveyor Aim: Provision of Marine Warranty Surveyor Action: A Marine Warranty Surveyor will be engaged. The Contractors are required to liaise with the Marine Warranty Surveyor and provide documentation and information necessary for the Marine Warranty Surveyor to perform his work. A Construction sequence / coordination 8 Construction sequence / coordination Aim: Provision of construction sequence / coordination Action: Contractors will work with Marine Supervisor to ensure safe and effective coordination of vessel movements at the work site. Installation Contractor will coordinate and prioritise vessel movements via a Marine Supervisor. Each Contractor will appoint a nominated vessel coordinator to manage and control their vessel movements. The Contractors' vessel coordinators will liaise with the Marine Supervisor. If 9 10 Provision of Guard Vessel Maintenance of installation progress at Worksite Aim: T o ensure all offshore works are carried out with a guard vessel in attendance. Action: Installation Contractors to provide a suitable guard vessel to warn other sea users of any installation works. Each contractor to ensure his Aim: vessels Coordination are protected. of worksite activities by Installation Contractor Action: All contractors will provide daily progress on site to enable preparation of up-to-date plots of data for issue and use by other contractors. Data to include installation of Foundations, Cables, WT Gs and all seabed obstructions such as jack-up footprints and anchor locations. L S S S S L S S L S S S S S L S S S S S S L S S S S S S S L L L L

11 Interface & Scope Matrix Foundation Vessel Bubble Curtain Vessel Foundation Vessel ROV Managing Interfaces = Prevention of delays = Cost avoidance

12 Risk Register Contractor 1 Contractor 3 Contractor 2 Project Risk? Contractor 4

13 Risk Register Risk: Delay in preparation of the foundations which may result in a requirement to postpone delivery of the cable. Mitigation: Optional 30-day delay mechanism agreed with the inter array cable supply and install contractor at no additional cost. Risk #1 Managing Risks = Prevention of Delays = Cost avoidance

14 Procurement Criticality Rating Early supply chain engagement = Prevention of Delays = Cost avoidance

15 Recommendations Improving management of the supply chain will help reduce: Industry risk profile CAPEX overspend

16 Contact Details: David Robertson Head of Project Management Services Phone: +44 (0) Mark Cowling Project Management Consultant Phone: +44 (0)