Adjudication: Windlab to bear costs of delays at Kennedy solar-wind-battery park

ASX-listed renewables developer Windlab will be the sole party to bear the costs of delays at the Kennedy Energy Park, Australia’s first project on a major grid to combine wind, solar and battery technologies. Under an adjudication decision that is likely to raise concerns among other projects plagued by grid delays, the EPC contractor – a joint venture between Danish Vestas Wind Systems and U.S. Quanta Services – is not requested to pay any delay liquidated damages and indemnity costs.

Pursuant to the adjudication determination under Queensland Building Industry Fairness, Windlab will have to pay the contractor $949,740 in milestone payments previously withheld, and a further $6.6 million in variation claims and delay costs. The adjudicator has also reversed Kennedy’s previously invoiced liquidated damaged and indemnity costs to the EPC contractor and denied payment of $19,615,375 of the EPC contractor’s claims.

“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 ASX. Namely, the adjudication is the initial phase of the dispute resolution under the Queensland laws which were established for contractors to enforce outstanding payments.

Construction of the Kennedy hub – combining 43 MW of wind, 15 MW of solar and a 2MW/4MWh Tesla battery – was completed in December 2018. The project was energized in August last year but its commercial operation has been delayed due to complications in the connection process.

In order to meet complex, extended connection requirements, Windlab had to add both a statcom for voltage regulation and a synchronous condenser for system strength, making the Kennedy hub the first project to do so in the Ergon Energy network. While the installation of additional components added to project costs, the developer also reported problems with its EPC contractor and inclement weather, as post-cyclone flooding prevented access to the site by network commissioning crews.

As it now takes longer for projects to get from energisation to full commissioning, many EPCs have felt the pinch and Australia’s leading contractor RCR Tomlinson fell victim to such delays. In June, Windlab claimed $2.6 million for its share of the Kennedy energy hub, suggesting the total liquidated damages on the project stood at $5.2 million. In November, the developer said the EPC contractor failed to deliver in time a fully functioning connection agreement also known as the Generator Performance Standard, stressing the project was lagging 13 months behind schedule.

The Kennedy Energy Park is jointly developed and owned by Windlab and Japan-based Eurus Energy. Located near Hughenden in North Queensland, the project has signed a 10-year PPA with Queensland state-owned generator CS Energy. Windlab revealed plans to grow the Kennedy hub much bigger to 1200 MW, but this was later deprioritized due to uncertainty around connection solutions.

In its statement to the ASX on Friday, Windlab said it was working with its project partners, the Clean Energy Finance Corporation and Eurus Energy, to source bridging funding to cover the payments ordered under the adjudication.