Wind Farms construction contracts

Wind farms can generally be broken down into 2 separate areas of construction:

  • Turbines: supply, installation and commissioning of wind turbines and towers
  • Balance of Plant (BoP) works: everything else needed except the turbines (foundations, substations, cabling, etc.)

Several option are available to the developers:

BoP contracts types

The first option is that the wind farm Special Purpose Vehicle signs separate contracts for BoP and Supply and Installation:

If two or more separate contracts are signed, the interface risk is taken by developer.

Warranties are backed by the balance sheet of each contractor, clearly only for the works undertaken. In exchange for this risk taken by the developer, substantial savings are possible and a broader range of participant to the tender is possible.

Moreover, the project management will be more complicated and sometimes it is difficult to attribute the source of a delay or to define de interface between obligations.

Another option is an EPC structure:

In this case, we will have a fixed price and fixed delivery date, with no interface risk and a single point of contact for the developer.

On the downside, the price will increase as the wrapping entity will add his margin for taking the risk. Moreover, they are more complex and time consuming with an heavy legal cost.

The third option is an unincorporated joint venture:

In this case the subcontractors will delivery a project without the requirement to form a separate legal entity. There is a single contract between the wind farm developer and the consortium of suppliers.

This structure has the same advantage of the EPC (fixed price and delivery date, reduced interface risk) but additionally there is a greater security thanks to the exposure to balance sheets of all the company in the consortium.

Disadvantages: increased price, heavy documentation costs and complex coordination work.

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About Francesco Miceli

Hello! My name is Francesco and I'm a civil engineer specialized in EPC (that is, "turnkey") wind farms projects. I'm currently based in Hamburg, Germany and I'm developing several interesting project all around the world - southern Europe, LATAM and various other countries. If you want to contact me please don't leave a comment in the blog (I don't check them very often) - you can use the contact form. You can write me in English, Spanish and Italian. To find a (somewhat concise) description of my non-wind business activities you can visit my webpage - If you want to know more about my work, here you can download my CV - Hope you like the blog! Francesco

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