Lawyers’ picnic, and $47m at play, as Sunraysia solar farm faces further delays

It’s lawyers at 20 paces. And it has become an all-too-familiar feature of Australia’s large scale solar industry as developers and contractors battle over who should take the blame, or at least the bear the cost, of the sometime lengthy connection delays that have afflicted new projects.

Now, one major contracting group, because of the prospectus requirements for a public fund raising, has given rare insight into the details of the disputes which has caused developers to take major write-offs and losses, and contractors to be hit hard by cost overruns and damages claims for delays, leading some of the leading players to either collapse or quit the industry.

The 200MW Sunraysia solar farm in NSW is facing further connection delays and may not obtain its registration certificate until December this year – nearly 12 months behind schedule – as the legal battle between the project owners, the principal contractor, and the inverter supplier continues.

The listed contracting group Decmil first revealed problems at the solar project last year, and has unveiled new details about the depth of the dispute over what should be the state’s biggest solar farm, which was to have been completed in December last year.

Construction was completed on time, the contractor says, but the solar farm has so far failed to obtain the R1 certificate essential to complete connection and commissioning, and now the lawyers are involved as the project owners and contractors issue claim and counter claim.

The nature of these claims – which have become widespread in the industry, in part due to growing issues with grid congestion and new connection requirements – is usually hidden or only obliquely referred to, or not mentioned at all in the case of unlisted companies.

Decmil provides rare insight because it had to reveal all the details in a prospectus that is seeking to raise $50 million from investors, in part to re-boot it coffers depleted by this and other disputes in is mining and general construction practices.

The prospectus reveals that Decmil is facing a claim of up to $28.7 million – being 10 per cent of the value of the solar farm contract – in the form of “liquidated damages” from the project owners, UK infrastructure giant John Laing which has a majority stake and Australian-based Maoneng.

Liquidated damages are often claimed by project owners against contractors to make up for lost revenue when a new project fails to begin generating on time. The “LDs” are usually capped. The owners of the Sunraysia solar farm have already drawn down part of this claim by drawing on security bonds and making deductions from amounts payable.

Decmil is fighting this claim, saying it has done all it could to deliver the project, and says the R1 certificate is the client’s responsibility. It has made a counter claim of $19 million for the payment of what it says are outstanding fees for the completion of the project.

The inverter manufacturer, Schneider Electric, has also been drawn into the dispute. The solar farm owners say the inverters are “not contractually compliant”. Decmil says that the inverters played no role in the delay, but is making a claim against Schneider, saying it has detected issues with the inverters. It says it could receive up to $28 million as a result of this action.

The prospectus reveals the focus of the dispute – which has gone into arbitration – revolves around the delays, and the cause, and centres on how generator performance standards (GPS) issues were handled, the detailed PSCAD modelling, and the alleged failure to perform additional testing and deal with variations to PSCAD assessments.

Sunraysia is one of a number of projects caught up in delays and bottlenecks in what is known as the West Murray region of the grid, where new connections were put on hold while the “voltage oscillation” problems at five solar farms were resolved.

That process to seven months, saw the output of the five solar farms cut in half, and caused the connection and commissioning process of more than a dozen other wind and solar projects delayed.

Decmil does not go into the detailed reasons for the failure to secure the R1 certificate, other than to note that many projects in that part of the grid had been delayed due to “excess harmonic distortion” in the transmission grid, and that “delays are as a result of the AEMO and related Transgrid involvement in the approval process”. AEMO is the Australian Energy Market Operator and Transgrid is the local transmission owner.

“Separately, Decmil identified, through the additional testing performed, an issue concerning the operation of the invertor transformers, which is being treated as a defect by Decmil under the Schneider Contract. In Decmil’s opinion, this should not prevent R1 registration,” it says.

“Decmil’s position is that once the effect of its extension of time claim is determined the Project was not delayed.

“In relation to the R1 registration, Decmil’s view is that it has provided everything necessary to obtain R1 registration, and anything further required is simply part of assisting the client in obtaining its registration. Decmil does not have a direct involvement in obtaining the registration, it can only be obtained by the client.”

Both John Laing and Maoneng declined to comment on the issue.

Decmil is one of a number of contractors that have been hit be either cost over-runs, of delays. Some, like RCR Tomlinson, Downer Group and Biosar have withdrawn from the new project market, while others like Decmil are taking on only “balance of plant” contracts and avoiding risk or responsibility for grid connections.

The delays have also hit major developers. John Laing suffered significant write-offs of its development portfolio – it is not clear if this includes Sunraysia – and is selling its Australian portfolio. Neoen has suffered losses from delays to its Bulgana wind and battery project in Victoria, Enel Green Power has suffered the same at Bungala 2 solar farm, as has Windlab at its Kennedy wind, solar and battery energy hub in Queensland.

Decmil is currently working on two wind projects in Western Australia – the 214MW Yandin project and the 180MW Warradarge project.

It reveals in its prospectus and associated documents that it is bidding for contracts on a range of other proposed developments, including the wind component of the huge DP Energy/Iberdrola wind and solar project near Port Augusta, the Waddi wind project in W.A., the Hawesdale and Berrybank wind projects in Victoria, and a confidential “solar and gas works” in W.A.

“Decmil has a unique opportunity to take market share and win new work in the fast growing renewables construction market,” it says in its documents.

“In recent years, various competitors (including Downer) have exited the sector because they have been unable to get comfortable with the increased risk profile associated with such projects.

“Decmil will only accept balance of plant projects in renewables projects and is very careful to avoid any interconnection risks,” it says.

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