Typical PF Structure
SURPLUS REAL ESTATE
Where does EPC fit in?
Except as otherwise stated in the Contract:
the Contractor shall be deemed to have obtained all necessary information as to risks,
contingencies and other circumstances which may influence or affect the Works;
by signing the Contract, the Contractor accepts total responsibility for having foreseen
all difficulties and costs of successfully completing the Works; and
the Contract Price shall – Engineering Procurement and Construction
EPC not be adjusted to take account of any unforeseen difficulties or
LSTK – Lump Sum Turnkey
Yellow Book: design/build contract
electrical/mechanical works, including plant supply
and construction works; allocation of risk on basis of
insurability, project management principles and
ability to foresee and mitigate
Silver Book: fixed-price, date-certain, lump-sum turnkey contract:
Little risk of price increase (but higher price) or delay for
Shift of risks to Contractor: design and execution
General risk profile: Shift of
• Employer’s Engineer is Employer’s risks
(No) Unforeseeable difficulties &
verification/ interpretation of Employer data
(incl. sub-surface, hydrological and
General design obligations, design error
Shift of risks, cont’d
No extension of Time for Completion for:
exceptionally adverse climatic conditions
unforeseeable shortages in personnel or
goods by epidemic or government actions
Errors in Employer’s Requirements
Unforeseeable physical conditions
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General risk profile:
key employer issues
Contractor fully responsible for design and design
coordination (including Employer design)
Full ground condition risk to Contractor
Employer to retain influence over project
Right to Variations
Limited scope for Contractor claims for time/money;
Price these risks, so increase initial Contract Sum
Do extensive due diligence to mitigate, leading to delay in
Payment & security:
key employer issues
Fixed price lump sum payments against schedule of
payments & Performance Certificate
Long payment period
No claim for additional time or money for e.g.
Variations/innovations, ‘in country” Force Majeure,
Unforeseen ground conditions, setting out or discovery of
Robust security package: advance payment bond,
performance bond, retention of money
Warranty bond after Taking Over (> 2yrs)
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Testing and defects,
insurance: key employer
Suitable testing regime
Employer technical advisors to set
performance/reliability standards and regime for
testing/ performance guarantee levels
Liquidated Damages for performance (10 – 20 %, > ?)
Defects liability period (1 – 2 yrs): default is 1 yr
Liability cap, sub-caps and ‘carve-outs’
Project specific insurance provisions; all insurance
monies go in separate insurance proceeds account
for benefit Employer
Permits, change in law,
FM: key employer issues
• Employer planning, environmental/
Contractor construction and transport:
Change in law after contract signing/ in
force, EH&S developments
Exhaustive FM list ?
Location of FM, “in country” FM: costs in
addition to EOT ?
contracting: key features
Turnkey-, date certain-, fixed price-, Engineering, Procurement
& Construction (EPC) contract
Including Start-up, Testing & Commissioning
Detailed scope of work (Employer’s requirements)
Performance testing & guarantees
LD’s for delay & performance
Assurances of creditworthiness
Experience, reputation, resources, credit Contractor
Increase in construction costs
Delay in completion
Force majeure (& contractual co-ordination/ resurrection)
Building materials: steel
Construction related facilities
Raw materials & utilities
Coordination with employer/ other contractors
IP rights/ escrows
What are the ‘Works’ ? WTG’s, SCADA, foundations, crane
hardstands, roads, cables, substation, FCU ?
Partial and deemed take over
Are all ‘Defects’ created equal ? Serial defects ?
How are measurements done ? SCADA, cup anemometers,
metmast, Lidar ?
How is green and grey metering doen ? By whom ?
Grid connection interface
Site risks (nature, archeology, fossils, ordinance, boulders,
Operation & Maintenance
Issues similar to EPC contract
Creditworthy, experienced Operator: turbine supplier ?
Performance guarantees with LD’s:
Can the Operator be replaced ?
What is ‘Operation” ? Scope of work
Agreed upon performance criteria at fixed/ predictable OPEX
Increased OPEX through latent defects/ new technology: typically
defects warranty ends after 2-5 years
Availability, power curve, sound
cover variety of costs, but also PPA damages ?
but usually low caps. What if operator cannot be replaced ?
Operation & Maintenance
What is the maintenance standard ?
Does maintenance include replacement of ‘Components”:
blades, nacelle, tower, gearbox ?
Balance of Plant ?
Is maintenance work warranted for design, materials,
workmanship ? Serial defects ?
Is there access to the site for components ?
Is there an on-site stock and what’s in it ?
How long will spares remain available ?
Condition of the Works at the end of the maintenance term ?
Power Purchase Agreements
Linchpin energy project financing
Financing & operating agreement
Linkage with EPC/O&M
CP’s & milestones
Delay in COD, testing, early production (at opex + price ?)
Failure to construct or acheive nameplate capacity
Approval by purchaser of project doc’s, e.g. pass-through
Take-or-pay is not an absolute
Delivery point, connection & transport
Main linkages EPC, O&M
Approval project contracts
CP’s & Milestone schedule
Testing procedures & take pver
Delay LD’s up to COD
Nameplate capacity, defects- & performance LD’s
Early production revenues
Capacity and energy payments
Delivery point & connection, metering
Term & termination
Third party sales, RFR’s
Change in law
IN SHORT: EVERYTHING !