Svend Poulsen, Senior Project Manager, COWI International User's Conference, London 6 december 2016 FIDIC Renewable Contracts Initiative

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1 1 Svend Poulsen, Senior Project Manager, COWI 1 Agenda Background Objective Who is behind this initiative? Contract issues relating to new technology The needs of renewable projects FIDIC s basic principles will benefit the industry Suitable and reasonable set of contract conditions The next steps 2

2 2 Background The Renewable Energy Market Sector is diverse Encompassing: biomass hydropower wind geothermal something not yet thought of 3 Background Off-shore Windfarm Industry is quickly growing In Europe alone the figures are *) : 12.9 GW installed by mid GW could be carried out during the next decade 63.5 GW of such projects in the planning phase In general the Renewable Energy Industry is growing Ideas becomes projects based on new technology with a limited amount of experience i.e. resulting in higher risks *) source: 4

3 3 Background - use of FIDIC Contracts FIDIC forms of Contract in general, and the FIDIC Yellow Book 1999 Edition in particular, have been increasingly used, and in particular in the windfarm sector Many project specific requirements lead to the development of particular conditions to accommodate those Despite this being business as usual when it comes to using standard forms of contract such as FIDIC forms, this takes a prominent effort and extent when it comes to offshore windfarm projects 5 Background June 2014 FIDIC was hosting a Business Day in Copenhagen The theme was Forms of Contracts for the Renewable Energy Industry The Renewables Contract Initiative was born after the Copenhagen Business Day A Market Survey was conducted end 2015 with a positive result 6

4 4 Issues considered Usual offshore construction features, for example insurance requirements and the role of a Marine Warranty Surveyor the management of vessels/barges and any related standby time and high associated costs the uncertainty of subsea conditions, or the knock for knock liability principles Typically this necessitate the development of repetitive particular conditions of contract on every project 7 Who are we taking the initiative? FIDIC representatives Task Group No 14 Leo Grutters Martin Sandgren Svend Poulsen 8

5 5 Industry involvement Industry representatives Wind Europe supports the initiative in general Members are subject to approval by the FIDIC CC Engineering background preferred Investor? Developer? Contractor 9 FIDIC objectives and principles Provide the industry with a suitable and reasonable set of conditions Ensure a fair and balances risk allocation Provide a set of conditions to be agreed by the industry thus resulting in a more reasonable and uniform approach to renewable energy projects Save the industry time and effort when drafting contracts for renewable energy projects Utilise FIDIC's dispute resolution mechanisms The Engineer administers the Contract 10

6 6 Task Group Objectives The first objective of the Task Group is to consider whether: a set of standard particular conditions based on the FIDIC Yellow Book 2 nd Edition, due to be released 2017 or a full new book should be developed for offshore windfarm projects 11 Task Group Objectives The second objective of the Task Group is to advise whether: other renewable energy subsectors should be given in future a drafting attention and if so which subsectors and why? Drafting will be based on the typical FIDIC Contracts structure 12

7 7 Market Survey The survey was sent at mid-january 2016 to persons within the Renewable Energy industry. Altogether 33 people responded to the survey, out of the 165 contacted, hence a 20% feedback rate which was found acceptable by FIDIC What were the advantages the respondents identified? Save negotiation time/cost and/or decrease the risk of the parties not reaching an agreement at all Contribute towards a more fair, balanced and/or more transparent risk balance in the contracts 13 Market Survey Task Group should further advise whether other renewable energy subsectors should be given a contract drafting attention in future, and whether a set of standard particular conditions is definitely the way forward or what could be named the plug-in approach (supported by 55% of the market survey respondents) versus a full "new book approach" (supported by 30% of market survey respondents) 14

8 8 Topics to be covered Technology related: Intellectual Property Rights Right/access to drawings and design/use of BIM Certification Grid: Codes/Connection/Availability/Stability Handling new technology and techniques Administering the Contract The Engineer Sort out uncertain legal/regulatory environment 15 Topics to be covered Offshore related: Vessel The Marine Warranty Surveyor Weather Sub-sea conditions Site definition Liabilities and indemnities (e.g., knock-for-knock v. liability) 16

9 9 Topics to be covered Other: Interface issues Other issues that will be identified at the outset of and during the drafting process 17 The next steps Kick-off when the full team is in place Analysis of the optimum approach contract addendum particular conditions guideline as per the results from the 2015-survey and by consulting a Standard Core Friendly Review Group 18

10 10 Review by the Industry Standing Core Friendly Review Group a group of industry representatives will be heard to ensure that relevant aspects are covered conditions are balanced the group will be invited to review and comment on working drafts Wider Friendly Review Group a group of industry players wanting to be involved a group of reviewers customary to the FIDIC drafting projects 19 Thank you for your interest 20

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