International Construction Law Review
CONSTRUCTION CONTRACTS FOR OFFSHORE WIND FARMS
RALPH BUSCH
Rechtsanwalt, Counsel, White & Case LLP, Düsseldorf
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I. INTRODUCTION
Germany, the Netherlands, the UK and France pursue ambitious aims in the field of offshore wind as a tool to fulfil their climate targets, with the German government seeing it even as a cornerstone of the ongoing conversion of Europe’s biggest economy to run mainly on renewable energy. Such emphasis on offshore wind power is based on good reasons: there is not only more space offshore than onshore, where many conflicting interests, such as the sensibilities of adjacent residents and the impact on landscape, need to be considered, but sponsors can also expect significantly higher energy yields and revenues, since winds blow more consistently, allowing an annual average of about 4,000 full load hours2.
But as always, this comes at a price, here being substantially higher costs and risks than onshore. Major challenges are that the offshore wind industry, particularly in deep waters, is still more or less in its infancy and that the construction risks discourage, and will for the foreseeable future discourage, construction companies in offering turnkey solutions. A sponsor who is prepared to invest in offshore wind projects will always see a good chance that such higher costs and risks will, in the long run, be amortised once an offshore wind farm has entered into (stable) operation. They are, however, a heavy burden for (project) financing. Sponsors, lenders and contractors should, therefore, understand intimately the risks associated with the construction of offshore wind farms within a multi-contracting structure and accelerate the pace of learning from previous experience3.
This article seeks to make a contribution to such better understanding by offering (i) a more detailed overview over the specific risks of offshore
1 The author specialises in infrastructure and project finance issues, particularly in the energy sector. He would like to thank his colleague Professor Anthony Lavers of White & Case, London, for his valuable and unfailing input and assistance.
2 Roland Berger, study “Offshore Wind toward 2020 – on the pathway to cost competitiveness”, 2013 at p. 4 (available at: http://www.rolandberger.com/media/publications/2013-05-06-rbsc-pub-Offshore_wind_toward_2020.html) (Last accessed 25 September 2014).
3 Christopher Hughes-Rees, “Risk off” in Project Finance, issue 340, June 2013 at p. 32.
Pt 4] Construction Contracts for Offshore Wind Farms
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