ACES 2017 Renewable Energy Law

Transcription

1 ACES 2017 Renewable Energy Law EPC Contract Risk in Renewable Energy Projects Anthony Arrow Partner Finance & Projects Team Pinsent Masons (Australia)

2 A few hot topics 1. Connection risk + contractual mitigants 2. Technology risk + contractual mitigants 3. Performance risk + contractual mitigants

3 Connection risk Non-negotiable terms with NSPs can be onerous and passed through in full to EPC Contractor Connection Agreements agreed before EPC contracts are negotiated take it or leave it obligations Can be dependent on DA for connection works who absorbs planning risk?

4 Connection risk Complete connection works by [sunset date] how does this fit with EPC works timetable? Interface risk with connection works contractors Connect by [sunset date] completion and termination risk Comply with NER how does this apply to contractors vs. the owner/generator? Change in NER risk increased security of supply requirements in relation to design and functionality of plant

5 Connection risk contractual mitigants Flexibility in the Connection Agreement eg. extensions of time; termination only on reasonable grounds Clear delineation of responsibility under the EPC contract eg. risk matrix akin to those used for DA conditions Change in law regime may take on renewed importance in light of likely pace of change post-finkel Events of default third party causation exclusions Consequential loss are Connection Agreement termination costs consequential or direct?

6 Technology risk Hybrid solar/wind/battery/ renewable energy zones single EPC Contractor? single/separate dates for completion and connection? wrapped performance risk? Integration of newtech e.g. system inertia and fast frequency response more bespoke design and build of kit heightened market demand extended lead times and completion risk?

7 Technology risk Commissioning and Performance risk new/untested in large-scale, grid connected projects terms and cost of component warranties connection risk if completed plant is not successfully commissioned by sunset dates.

8 Technology risk contractual mitigants Clear scopes of work EPC vs. construct-only Early procurement of major components Phased completion and commissioning dates Clear performance requirements and measurement criteria during commissioning and early operations Minimum terms for component warranties, including warranty periods and cost.

9 Performance risk Performance guarantees not common in all industry sectors some contractors unfamiliar with such concepts importance can be overlooked and drafting can be unclear/underdeveloped/inconsistent with contract obligations. Interface with Operations and Maintenance When does performance risk pass? Exclusions for Operator and other third party failures? Carve outs for warranted components?

10 Performance risk contractual mitigants Clear and thorough drafted testing procedure, performance targets and consequences Clear measurement criteria and timing requirements Clear pass/fail distinctions What happens if tests are failed? Cross-check EPC with O&M performance regimes ensure no overlap/double counting/gaps Ensure technical drafting is consistent with legal obligations under the contract Inclusion of worked examples.

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