Windlab reaches “stand-still” agreement in bid to resolve Kennedy dispute

Renewable energy developer Windlab has reached an agreement with contractors for a four week truce on disputes over the troubled Kennedy Energy Park in a bid to resolve the outstanding issues with the project.

The “stand still” agreement between Windlab ,at the request of the engineering, procurement and construction (EPC) contractor for the Kennedy project follows an adjudication by a Queensland construction commission that ruled that Windlab must pay the contractor an outstanding $7.5 million in project milestone payments.

At the time, Windlab indicated that it would look to challenge the decision, which could result in the commencement of formal legal proceedings in the Queensland Civil and Administrative Tribunal.

Rather than be dragged into costly and lengthy legal proceedings, the EPC contractor requested that parties hold off from progressing a legal challenge to the adjudication, to provide time for a resolution to be negotiated outside of the courts.

Windlab agreed to the truce and has executed the four-week agreement during which Windlab will not need to make the milestone payments to the contractor, but will also hold off from challenging the adjudication.

“For the stand-still period, the parties have agreed to stay payments and not commence or prosecute any claims or disputes under the contract nor challenge the adjudication determination, subject to certain conditions,” Windlab said in a statement to the ASX.

“During this stand-still the parties will in good faith seek an overall commercial resolution of all disputed claims and provide [Kennedy Energy Park] with certainty concerning the outstanding network system registration and commercial operation of the project.”

The Kennedy Energy Park is a 50-50 joint venture between Windlab and Japanese firm Company Eurus Energy and consists of 42MW of wind capacity, 15MW of solar and 2MW/4MWh of battery storage.

The EPC contractor to the project is a joint venture between Vestas and Quanta Services.

The innovative project, which co-locates different clean energy sources in the one location, aims to provide a reliable source of zero emissions electricity. The $100 million project won the backing of both the Australian Renewable Energy Agency which provided an $18 million grant and the Clean Energy Finance Corporation which provided debt finance to the project.

Windlab is aiming to use the project as a platform for expanding the project to up to 1,200MW, using the same mix of technologies at a larger scale, but the future expansion now remains uncertain.

The adjudication denied Windlab the ability to seek liquidated damages to compensate for the delays in the project, leaving the wind farm developer to bear the cost of the problems experienced by the project.

The agreement will provide both sides of the dispute time to negotiate and seek a mutually agreed path forward, and could potentially avoid the need for costly and lengthy legal proceedings.

The primary focus of the dispute has been the inability of the EPC contractor to deliver a suitable generator performance standard for the wind, solar and storage project, that much be accepted by the Australian Energy Market Operator (AEMO) before the project can commence operation.

The issue has to the project running around 18 months behind schedule.