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Technical considerations in Renewable Energy EPC Contracts


Over the next few months I will be writing up on technical factors to consider when drafting and negotiating EPC Contracts for renewable energy projects.  I will be doing this as an engineer and project manager; i.e. I am not a lawyer.  This is based on my experience on some pretty tough renewables projects in South Africa, under REIPPP.  Working on these projects gave me a very good sense of where technical risks manifest, and how the contract forms an incredibly important part of mitigating against risk.  For now, I will only be focusing on fully-wrapped, lump-sum EPC Contracts, and will not be looking at split contract structures.

The series will be mainly aimed at protecting the Employer, but there is natural overlap for items that protect the Lender/Investor.  In addition, ensuring that certain items are adequately clarified will help to protect the Contractor, through the avoidance of misinterpretation or ambiguity.

In parallel to the posts, I will be writing up a series of documents that will be available for sale.  The posts will focus on some key issues, but the long form documents will go into some of the details, and include some quick ‘watch-it’s and checks.

As a taster, I will be breaking my writing down into the following topics and themes:

Scope of works

  • Contractor’s obligations/general scope of works
  • Technical specifications/Employer’s requirements
  • Changes and Variations

Milestones and scheduling

  • Milestone schedules
  • Payment schedules & processing of claims
  • EPC programme of works
  • Certification of completed works

Construction management

  • Onsite management and obligations
  • Contractor competency
  • Sub-contracting

Quality and inspections

  • Reporting and inspection requirements
  • Testing and commissioning

Guarantees and warranties

  • Defects and product warranties
  • Liquidated damages
  • Performance guarantees

Other contractual considerations

  • Definitions
  • Conditions precedent
  • Horizontal defence clauses
  • Pass through principals
  • Employer’s obligations

The above may be expanded on as I go.