Sunraysia solar farm delay could last till March, legal battle a lot longer

The main contractor building the 200MW Sunraysia solar farm in south-west NSW says delays to the troubled project could extend to March, although the legal battle over the costs of the delay could last another 12-18 months.

The Sunraysia project, located near Balranald, has been mechanically complete since late last year, but has so-far failed to obtain registration from the Australian Energy Market Operator. That has sparked a fierce legal battle between the main contractor Decmil, and the project owners John Laing (90.1 per cent) and Maoneng over who should be responsible.

Decmil, in its annual accounts released on Tuesday, said puts the timetable for the project’s completion at March next year. It is facing a claim of $28 million in “liquidated damages” from the owners as a result of the delays, but has a counter-claim for $19 million for its milestone payments once the R2 testing is concluded. “The arbitration process is expected to take 12-18 months,” it says.

The problems with the registration have not been fully identified, although John Laing referred to issues with “transformers” when it released its interim accounts last week, when it revealed £43 million ($A79 million) in losses from the Sunraysia and Finley solar farm, which has also been hit by grid congestion issues that could curtail its output at certain times.

The problems experienced with Sunraysia, and grid connection issues in general, has caused widespread losses for both contractors and project owners, and caused some investors, such as John Laing, to quit the sector entirely. John Laing has stopped new investment in Australia and has put its assets up for sale, although the process for the two solar projects is on hold pending clarity over the output.

Decmil confirmed that it is following other major contractors by withdrawing from full EPC contracting in the wind and solar industry, although it remains keen for balance of plant contracts with no connection risks to tap into the predict investment boom in wind and solar over the next 20 years.

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

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

It has recently completed $151 million of projects at two big West Australia projects, the 212 Yandin wind farm and the 180MW warradarge wind farm, and has contracts with Vestas at a number of new projects including the Waddi, Hawkesdale and Berrybank projects.

It has been a tough year for Decmil, which reported a 28 per cent all in revenue to $479 million, primarily driven from challenges on Sunraysia Solar, a prisons project in New Zealand and a project with BHP. It led to a  net loss of $140 million and earlier this year sparked a reshuffle of executive ranks.