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Contracting Strategy
The document discusses contracting strategies for geothermal energy projects. It outlines two main alternatives: the EPC (engineering, procurement, construction) model where one contractor is responsible for the entire fixed-price turnkey project; and the EPCM (engineering, procurement, construction, management) model where the owner manages separate contracts under the guidance of an engineering consultant. The EPCM approach is preferred as it allows for more accurate bidding on separate project components, greater owner control and flexibility, promotes local participation, and better quality control, while still transferring construction risks to contractors.
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Contracting Strategy
- 1. Contracting Strategy Sigurður St.Arnalds Director of Energy March 2013
- 2. International consultancy inthe fields of research, engineering, management and EPCM services. • Founded 1963 • 400 Employees • Fully Employee-owned • Management Systems certified: ISO 9001, ISO 14001, OHSAS 18001 FS 551557 EMS 567779 OHS 567778
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- 4. Icelandic geothermal consultantsserve on all continents.
- 8. Steam Supply 42% •Wells • Supply System Civil Works 13% • Power Station • Infrastructure e.g. Roads Equipment 45% • Turbines, Generators, Condensers and Cooling towers • Control System • Transformers • Other equipment
- 10. Dams 12% Tunnel 24% CivilPower Station 22% Electro Mechanical 33% Steel Penstocks and Gates 6% Transformers and various 3%
- 11. Alternative 1: • TurnKey Fixed Price – EPC (Engineering, Procurement, Construction) • By one Contractor directly for Owner • Owner supported by Owner´s Engineer • All purchasing by Contractor • Construction risks mainly with Contractor Alternative 2: • EPCM (Engineering, Procurement, Construction, Management) • By Engineering Consultant directly for Owner • Or by various integration with Owner • Mix of Reimbursable and Fixed prices • Owner involved (approval) in all purchasing • Construction risks mainly with Owner
- 13. Reasons: • Lowest overallcost is a sum of many favorable bids • Breakdown in contracts is aimed at separate supply markets • Owner approves each purchase component • Local participation is frequently promoted • Promoting local participation is social responsibility • Better quality control is normally applied • Risk is only paid for if the risk element occurs • Flexibility for changed situations or better solutions All main Icelandic Power Projects have been EPCM Concept with strong Owner involvement
- 14. Established power companiesbase financing on solid cost estimates (by EPCM consultant) supported by bids for main components. Independent Developers may be required to provide firm EPC bids including all risks to enable financing. Bids for EPC Fixed Price Contract are less accurate than bids for separate contracts in the EPCM Concept.
- 15. Is EPC asimple solution for the Owner? • It is more expensive. • The end result may not be the best possible power plant. Is EPCM complicated for the Owner? • Well managed projects have a greater chance of success
- 16. Total ca. 1000billion ISK – ca. 9 billion USD Energy Intensive Industry 25% Other 25% Tourism and transport 25% Marine Industry 25% Positive Trade Balance 14 %