Windlab shares stop trading pending news on Kennedy contractor dispute

Shares in wind farm operator and developer Windlab went into a trading halt on Thursday, pending news of an adjudication of a contractual dispute between Windlab and the engineering and construction companies engaged to build the troubled Kennedy Energy Park.

Pending the release of the adjudication decision, Windlab has placed its shares into a trading halt. A statement from Windlab on the outcomes of the adjudication decision is expected before the open of the share market on Friday.

The relationship between Windlab and its engineering, procurement and construction contractor (which itself is a joint venture between wind turbine manufacturer Vesta and Quanta Services) became strained after the Kennedy Energy Park project fell massively behind schedule.

The Kennedy Energy Park is to consist of 43MW of wind, 15MW of solar panels combined with 2MW/4MWh of Tesla battery storage. The project was supposed to take just 11 months to complete, but in an announcement to the Australian Stock Exchange in November, Windlab said the project was 13 months behind schedule and would not be complete for a further four to five months.

The project has faced lengthy delays in completion, which has been blamed in part on the failure to agree with the Australian Energy Market Operator (AEMO) on a satisfactory Generator Performance Standard, which is necessary to allow the project to be registered and participate in the National Electricity Market.

The project is located just outside the North Queensland town of Hughenden, and Windlab hopes it will serve as the first step towards a much larger project, potentially totalling 1,200MW that will utilise the mix of solar, wind and energy storage technologies.

Windlab, which is developing the Kennedy Energy Park in partnership with Japanese firm Eurus Energy Holdings Corp,  sought to enforce clauses in the contract with the EPC contractor that allowed Windlab to issue invoices for “Delay Liquidated Damages”, to provide a degree of financial compensation for the delays.

The EPC issued a cross-claim for outstanding payment of project milestones, which Windlab disputed as the conditions for the milestones had not been completed by the EPC contractor.

The dispute was subsequently taken to the Queensland Building and Construction Commission for adjudication, as Windlab revealed in an ASX announcement in November. The EPC contractor sought the enforcement of a “security of payment” determination from the adjudicator, to compel Windlab to pay the milestone payments.

In its statement, Windlab said that it believed it was well placed in the dispute, and did not accept the claims of the EPC contractor that the milestone payments were eligible to be paid.

“The EPC contractor also made numerous claims for extensions of time and variations against the EPC contract which are not accepted by KEP (Kennedy Energy Park),” the company said in the statement to the ASX.

“Windlab believes that Kennedy Energy Park has recourse under the terms of the EPC contract for these ongoing delays and costs if substantive legal proceedings become necessary.”

Both Windlab and the EPC contractor are understood to remain committed to the completion of the project.

Windlab is currently subject to a takeover offer, made by invest fund Federation Asset Management, which has made a $68 million offer to acquire all of the outstanding shares in the Canberra-based wind farm company.