Windlab told to wear costs of Kennedy project delays in key ruling for renewables industry

The developers of the Kennedy Energy Park have been told to bear the costs of delays to the world-leading project, in an adjudication decision that may have serious implications for a renewables industry already facing challenges to getting projects connected to the grid.

In effect, the developers, that include project lead Windlab, have been told to carry the cost burden of delays to the Kennedy Energy Park, which will likely raise concerns for other projects caught in a backlog of grid connection and commissioning delays. Windlab has been ordered to pay more than $7.5 million in outstanding milestone payments.

The adjudication is the first stage in a dispute resolution process between Windlab and its construction partner and was made under Queensland laws administered by the Queensland Building and Construction Commission. The laws were established to provide a means for contractors to enforce outstanding payments.

“Such a determination is not a final determination of the parties’ rights but rather an interim payment decision and is currently under review for enforceability,” Windlab said in a statement to the Australian Stock Exchange.

The dispute relates to lengthy delays to the completion of the Kennedy Energy Park, which will integrate wind, solar and battery storage technologies, and is being developed by a joint venture that is 50 per cent owned by Windlab.

The project has been unable to commence operation, due in part to a failure by the engineering, procurement and construction (EPC) contractor, a joint venture between wind turbine manufacturer Vesta and Quanta Services, to secure a workable Generator Performance Standard for the project that must be submitted to the Australian Energy Market Operator.

Both sides of the dispute have sought an adjudication under Queensland Building Industry Fairness laws, with Windlab seeking liquidated damages for delays in the project completion, while the EPC contractor sought payment of outstanding project milestone payments.

According to a Windlab statement issued to the ASX, Windlab has been ordered to pay the EPC contractors $949,740 in milestone payments that had been withheld, and an additional $6,592,075 in variation claims and delay costs.

The adjudication also “reversed” invoices issued by Windlab to the EPC contractor for “delay liquidated damages” and indemnity costs to cover the costs of delays to the completion of the Kennedy Energy Park.

The adjudication, however, did not require Windlab to pay a further $19,615,375 in payments that had been sought by the EPC contractor.

Claims for “liquidated damages” have become common place in the Australian renewable energy market, with delays to large scale wind and solar farms now common because of bottlenecks for connections, or difficulties in commissioning and securing a GPS.

The Kennedy Energy Park is to consist of 43MW of wind turbines, 15MW of solar panels combined with 2MW/4MWh of Tesla battery storage. The ultimate aim is for the project to be expanded to supply up to 1,200MW of wind and solar power to Northern Queensland.

In November last year, Windlab said in a statement to the ASX that the project had fallen 13 months behind schedule and would not be complete for a further four to five months.

While adjudication has occurred under a particular set of Queensland laws, it may have more significant flow-on effects for the wider industry, with the burden of project delays being shifted back onto project developers.

Windlab has engaged with its project finance partner, the Clean Energy Finance Corporation, and its joint venture partner Eurus Energy to source bridging funding to cover the payments ordered under the adjudication.

Windlab stressed that the adjudication is currently being “reviewed for enforceability” and that the company indicated that it would consider further legal proceedings if necessary.

“If found to be enforceable, the determination will be the subject of future legal proceedings that will finally resolve the dispute between the parties, including Kennedy’s entitlement to liquidated damages and indemnity costs,” Windlab’s statement to the ASX said.

As reported by RenewEconomy yesterday, Windlab shares were placed in a trading halt being the release of the adjudication decision.

Windlab shares opened lower on Friday morning, dropping briefly below 90 cents per share, before recovering to trade around 93.5 cents.

Windlab is currently subject to a takeover offer from Federation Asset Management, which has made a bid to acquire all outstanding shares in Windlab at $1.00 per share.