Leading engineering group Decmil has threatened further action in an ongoing dispute over payments at the heavily delayed Sunraysia solar farm in New South Wales, one of dozens of large scale wind and solar projects to have their connection and commissioning pushed back by months, or in some cases years.
Decmil revealed in December that it was booking a $14 million hit to its cash flow as a result of a dispute over payments at the 200MW Sunraysia solar farm. The failure to obtain an R1 registration with the Australian Energy Market Operator, meant the solar plant, the biggest in NSW, could not proceed to formal commissioning and begin sending output to the grid.
Sunraysia – owned by John Laing and Maoneng, and located near Balranald in the south-west of the state – is one of a number of wind and solar farms that have been fully installed, but are unable to connect because of various issues – some relating to bottlenecks and restrictions on the grid, some to new connection rules, and some for other matters.
Decmil said in December that Sunraysia Solar has refused to award an extension of time and an associated adjustment to the contracted date for substantial completion. That meant it faces delays in progress payments, including the completion milestone payment, until the issue is resolved.
Last week it said the dispute is ongoing and an AEMO report on marginal loss factors released earlier this month noted that Sunraysia is still not registered.
“Decmil is continuing to pursue its rights under the disputed solar farm contract with Sunraysia,” the company said in a statement to the stock exchange. “Decmil has received robust legal advice in support of its position. If current negotiations to resolve the dispute are not successful, the dispute will move into arbitration.”
Contractual disputes similar to this have emerged all across the market, and the risk of connection and commissioning delays and the threat of “liquidated damages” imposed by developers to cover lost revenue has seen some major contractors quit the large-scale solar market in Australia.
Downer Group announced it would do no more solar farm contracting last month, declaring it is “too hard”, and Decmil is one of a number of companies thought to have also quite the full EPC contracting market, although it is still interested in “balance of plant” contracts.
Another major listed contractor, RCR Tomlinson, collapsed in late 2018 under the weight of cost over-runs and project delays in the solar sector, and Windlab has been engaged in a drawn out dispute with its EPC contractors over who should carry the cost of the delays to the Kennedy wind, solar, battery project that has now run for more than a year.
John Laing has announced it will put its Australia wind and solar portfolio on the market, declaring that the sector in Australia had become too difficult. It made a $100 million plus write down on several of its projects in the first half, largely as a result of the uncertainty and downgrades of marginal loss factors, a method of calculating transmission losses that is no longer considered fit for purpose by many in the industry.
The Sunraysia solar farm is not the only problem facing Decmil, whose shares have been suspended for several weeks following news that it had lost a contract for a prisons facility in New Zealand, and was seeking to recover between $50 and $60 million. That dispute led to the suspension of its shares and a delay in its interim accounts.
Comment has been sought from Maoneng and John Laing.