RE-Talk South Korea:

Wind Webinar - Construction Risk

PRESENTER

Guzman Figar

Head of Business Development Offshore, Asia

EDPR / Engie JV

Andrei Naumovich

APAC Business Development Manager

Peikko

Hojung Jun

Senior Associate, Projects

Baker & McKenzie

Construction Challenge:

 

Development of supply chain: (START PREPARING EARLY)

  • In Korea the localization of the supply chain is critical for the sustainability of the offshore industry.

  • Development of supply chain was a very intensive effort in terms of procurement and especially in the negotiation of commercial agreements.

  • Necessary for supply chain to have strong faith in the project and in the technology to dedicate so many resources to a project of limited scale.

  • Korea is in a strong position due to its marine tradition and strong shipyards and ports. Also, a very mature power generation market.

 

Manufacturing of foundations: (OPTIMIZATION AND AUTOMATIZATION)

  • First time these platforms were constructed in these shipyards. First time this technology was every manufactured.

  • Extremely thick steel sections very difficult to bend and to weld

  • Design not optimized requires a lot of manual welding which is time consuming and prone to errors

 

Offshore installation: (ENSURE FULL USE OF WEATHER WINDOWS)

  • Limited weather windows due to tides, waves and wind

  • Multiple and complex interfaces: Foundation, Turbine, Cranes, Vessels, Electrical infrastructure, Interconnection

  • High standby costs and high mob / demob costs

 

Electrical infrastructure and interconnection: (PROJECT PLANNING)

  • Electrical infrastructure of KFW much more complex than WFA.

  1. Interconnection in the scope of the project

  2. Larger project size; longer distance to interconnection and deeper waters.

  3. Different possibilities being analyzed.

  • Electrical interconnection needs to be ready before start deploying turbines as having the turbines idle at sea is very costly and bad for the turbines.

  • 7,500 MW of projects under development in Ulsan grid integration is going to be a challenge.

Bankability and Construction contract:

 

Bankability requirements:

  • Contractual structure (risk mitigation and back to back)

  • Experienced sponsors

  • Stable & predictable cash flows

  • Proven technology, track record

 

Construction contract requirements:

  • Price and payment lump sum fixed price

  • Fixed completion date

  • EPC traditionally primary tool to allocate project risks between sponsors/owners and contractors

  • Sometimes some direct protections for lenders

  • Full turnkey design and construction responsibility on contractor

  • Greater risk allocation towards contractor than under the separate construction/installation contracts

 

Multiple construction / procurement contracts:

 

There is no single point of responsibility because of many players in wind projects.

Multi-contract / interface risks:

  • In relation to scope, design, program, execution, dispute resolution

  • Increased risk of cost overruns and impact upon project program

  • Impact on warranties/responsibilities

  • Impact on recourse

 

How to mitigate interface risks in contracts:

  • Matching boilerplate clauses related to project management rights, quality control, insurance, warranty, applicable law, documentation, dispute resolution

  • Same applicable standards and norms, design lifetime, grid code and certification requirements

  • Exchange of relevant interface design data and documents among contractors

  • Clarify consequences of mistakes liability for wrong information, no EOT/cost claims

  • Program with sufficient buffers, right to modify schedule/suspend, and inspection