Windlab gains further extension for “truce” in dispute over Kennedy project delays

Windlab has announced further delays to the resolution of a dispute over the company’s flagship Kennedy Energy Park project, with an outcome potentially not being reached until the end of May.

In an update to the ASX on Monday, Windlab said that it had extended the period of a ‘stand-still’ agreement with the Kennedy project’s EPC contractor until 29 May, to provide additional time to settle a dispute that has prevented the project from sending power into the grid.

During the stand-still period, Windlab and its EPC contractor will refrain from further escalating the dispute through additional legal proceedings, and the two parties will negotiate in good faith to try and find a resolution to the remaining issues at the project.

Due to the delays, Windlab also announced that it had negotiated an extension to the ‘sunset clause’ within the power purchase agreement struck with the Queensland government owned CS Energy. Under the new terms, Windlab will have until 31 December 2020 to get the project up and running and sell power and renewable energy certificates to CS Energy, otherwise the contract will lapse.

The dispute escalated at the start of the year, when the EPC contractor, a joint venture between wind turbine manufacturer Vesta and Quanta Services, sought a ruling from the Queensland Building and Construction Commission to enforce project milestone payments from Windlab, and which largely ruled in the contractor’s favour.

Construction activities have largely been completed at the Kennedy Energy Park, which has involved the construction of 43.2MW of wind capacity, 15MW of solar capacity combined with a 2MW/4MWh energy storage facility.

The core of the dispute with the project’s EPC contractor is a failure to deliver a working model demonstrating the project’s compliance with Generator Performance Standards to AEMO.

Until such compliance can be demonstrated, AEMO will not allow the project to connect to the electricity network and start delivering power to the grid, and a dispute has emerged over who is responsible for ensuring the necessary compliance.

Windlab said that once the registration issues are resolved, the Kennedy Energy Park will be ready to commence commissioning and operation.

“Once registered Kennedy will immediately commencing testing and progress towards commercial operation,” Windlab said in the statement.

Windlab announced that it had struck the 10-year power purchase agreement with CS Energy back in 2017.

At the time, the project was expected to commence operation by the second half of 2018 but is now running almost two years behind schedule.

Windlab was forced to record an almost $30 million write down on the Kennedy project, as delays in commissioning reduced expected revenues, which were further exacerbated by recent falls in wholesale electricity prices, forcing the company to further reduce future revenues.

In the update, Windlab said that it was continuing to work “diligently” with the Australian Energy Market Operator to resolve outstanding registration issues at the project.

The Kennedy Energy Park is intended to be the first stage of a much larger, 1,200MW project, planned for the Kennedy region.

In March, Windlab secured a $20 million loan from a consortium that is seeking to take over the company, which includes resources billionaire Andrew Forrest, in part to help cover the costs of the delays to the Kennedy project, which have deprived the companies of expected revenues.

RenewEconomy and the Smart Energy Council will be co-hosting a “virtual conference” on May 6, focusing on a renewables-led economic recovery, featuring industry leaders, analysts and advocates. More information and registration here.

RenewEconomy and its sister sites One Step Off The Grid and The Driven will continue to publish throughout the Covid-19 crisis, posting good news about technology and project development, and holding government, regulators and business to account. But as the conference market evaporates, and some advertisers pull in their budgets, readers can help by making a voluntary donation here to help ensure we can continue to offer the service free of charge and to as wide an audience as possible. Thankyou for your support.