How is force majeure affecting you?

Have you heard the phrase ‘jingle post’? I hadn’t until the 2008 crash.

Richard Heap
April 9, 2020
How is force majeure affecting you?

Have you heard the phrase ‘jingle post’?

I hadn’t until the 2008 crash. Back then, I was writing for people in the commercial property industry, and learnt that 'jingle post' is the term for a landlord’s mail in a recession - due to the sound of tenants returning keys.

Every industry has terms that mainly come to prominence during a recession or downturn. One we’re hearing a lot in the wind industry right now is ‘force majeure’ notices. We expect speakers to touch on these in our webinar later today and, in truth, they could sustain a 45-minute discussion on their own.

Force majeure clauses are contractual clauses that alter the obligations of the parties to that contract if there is an extraordinary event or situation that is out of their control and prevents them from fulfilling one or more of their obligations. The Covid-19 pandemic, and the ensuing crisis, should qualify.

Use of force majeure

We have heard more talk from firms investing in the wind industry in the last month about an uptick in the quantity of force majeure notices.

Many developers and manufacturers started to receive them in February, when their component suppliers in key Asian markets, particularly China, wrote to warn them of delays to the production of vital parts.

These manufacturers will have received similar notices from their raw material suppliers; and most developers that received notices from manufacturers will have had to warn their customers too. You can’t build a wind farm without turbines, and the delays to project timelines will likely hit power deals too.

This means that force majeure notices will be a big part of the market this year and beyond. The Chinese government is lifting the Covid-19 lockdown in some cities, but we expect all countries with active wind markets to suffer in 2020.

Look at Spain. The ‘Financing & Investment Trends’ report from WindEurope, which was published on Tuesday, showed that 2.8GW of new wind projects in Spain secured €2.8bn of project finance in 2019. But much of the capacity where construction hasn't started is now likely to be delayed by Covid-19.

The UK’s active offshore wind market will suffer too. Bloomberg reported at the end of March that Iberdrola and Innogy were among the developers that had notified the UK government that they may need to declare force majeure to halt their contracts. The situation in the UK has worsened since then.

WindEurope has forecast that the capacity of wind farms financed in Europe in 2020 would be 25% lower than its previous forecast because of Covid-19: 13.6GW rather than 18.1GW.

It added that some of this capacity would not be financed at all in the coming years, which shows that Covid-19 will not just delay activity. It will end some projects as developers find themselves unable to cope with contractual delays.

Meeting PTC deadlines

Then there is the US, where the American Wind Energy Association has said 15GW of projects were due to complete this year, and developers also have until the end of 2020 to start building schemes so they can gain support under the federal production tax credit (PTC) regime.

The wind industry has so far been excluded from the federal support packages for Covid-19, so firms do not know if the PTC will be extended.

This can only cause further financial uncertainty for companies at a time when turbine orders and projects are being stalled, and raise the frequency of force majeure notices. Many of these notices only include scant information because none of us knows the full impact of Covid-19, when the industry will recover, and the long-term impacts on the supply chain.

Most recipients of these notices will tolerate some uncertainty, but only for so long. All companies will be looking closely at contracts and they know that at some point they’ll need to protect themselves. Nobody can wait indefinitely. We expect to see defaults that lead to project failures, and legal action.

Even if Covid-19 passes quickly, the delays will ramp up pressure on the supply chain. That 15GW of capacity to be built this year was already a big challenge.

Force majeure isn’t just a European or US issue. These clauses are being invoked in countries including India and South Africa too. Covid-19 is a global crisis and force majeure is one way that companies globally, including in wind, will seek to mitigate that uncertainty. This could get ugly.

How is your business being affected by force majeure notices? What questions do you have about them? Please let us know.

NEWS IN BRIEF

INNOGY PICKS SGRE FOR 342MW KASKASI...

RWE subsidiary Innogy has picked Siemens Gamesa to supply turbines for the 342MW Kaskasi offshore wind project in the German North Sea. Innogy took a financial investment decision to build the project last week. Installation is due to start in the third quarter of 2022. Read more

...AND ENTERS TAIWANESE OFFSHORE MARKET

Top of Form

Innogy has entered Taiwan's offshore wind market by teaming up with Asia Cement Corp to develop the 448MW Chu Feng project. Read more

Bottom of Form

PORTUGAL'S EDP KICKS OFF €750M NOTES ISSUE

Portuguese utility EDP has kicked off a €750m offer of 1.625% notes that are due to mature in April 2027. It plans to use the funds to finance or refinance parts or all of its renewables projects portfolio, which includes wind farms.

AVANGRID UNVEILS $750M GREEN NOTES ISSUE

US utility Avangrid has announced the pricing of a $750m notes issue to finance or refinance US renewables projects, including onshore and offshore wind farms. The 3.2% notes are due to mature in April 2025. Read more

NORWAY BACKS 88MW HYWIND TAMPEN

The Norwegian government has approved Equinor's plan to develop the 88MW floating wind project Hywind Tampen in the Norwegian North Sea. The 11-turbine scheme is intended to produce electricity for operations at the Snorre and Gullfaks offshore oil fields. Read more

VESTAS WINS 139MW OFFSHORE DEAL IN JAPAN

Vestas is set to supply 33 of its 4.2MW turbines for the 139MW Akita Noshiro project in Japan. This is due to be the first utility-scale offshore wind farm in Japan and is being developed by a consortium led by Marubeni. Read more

CTG MULLS $3.5BN IPO FOR GREEN ARM

China Three Gorges is set to raise $3.5bn with an initial public offering of its green arm Three Gorges Renewables. It is looking to use to the funds to back seven offshore wind projects, as well as for working capital. Read more

ØRSTED COMMISSIONS 338MW ONSHORE

Ørsted has commissioned its 120-turbine 338MW Sage Draw Wind onshore scheme in Texas. Ørsted is looking to reach 5GW installed onshore capacity by 2025. Read more

BAYWA GAINS TAX EQUITY AT 250MW AMADEUS

BayWa has gained tax equity from a group led by GE Energy Financial Services for its 250MW Amadeus Wind in Texas. The project also has a hedging deal with Morgan Stanley and a construction loan from Commerzbank. Read more

INFRAVIA WINS €132M DEBT FACILITY IN SWEDEN

InfraVia Capital Partners has secured a €132m senior debt facility for its 175MW Björkvattnet onshore wind project in Sweden. The project is set to be made up of GE turbines and has a corporate PPA with Google. Read more

Have you heard the phrase ‘jingle post’?

I hadn’t until the 2008 crash. Back then, I was writing for people in the commercial property industry, and learnt that 'jingle post' is the term for a landlord’s mail in a recession - due to the sound of tenants returning keys.

Every industry has terms that mainly come to prominence during a recession or downturn. One we’re hearing a lot in the wind industry right now is ‘force majeure’ notices. We expect speakers to touch on these in our webinar later today and, in truth, they could sustain a 45-minute discussion on their own.

Force majeure clauses are contractual clauses that alter the obligations of the parties to that contract if there is an extraordinary event or situation that is out of their control and prevents them from fulfilling one or more of their obligations. The Covid-19 pandemic, and the ensuing crisis, should qualify.

Use of force majeure

We have heard more talk from firms investing in the wind industry in the last month about an uptick in the quantity of force majeure notices.

Many developers and manufacturers started to receive them in February, when their component suppliers in key Asian markets, particularly China, wrote to warn them of delays to the production of vital parts.

These manufacturers will have received similar notices from their raw material suppliers; and most developers that received notices from manufacturers will have had to warn their customers too. You can’t build a wind farm without turbines, and the delays to project timelines will likely hit power deals too.

This means that force majeure notices will be a big part of the market this year and beyond. The Chinese government is lifting the Covid-19 lockdown in some cities, but we expect all countries with active wind markets to suffer in 2020.

Look at Spain. The ‘Financing & Investment Trends’ report from WindEurope, which was published on Tuesday, showed that 2.8GW of new wind projects in Spain secured €2.8bn of project finance in 2019. But much of the capacity where construction hasn't started is now likely to be delayed by Covid-19.

The UK’s active offshore wind market will suffer too. Bloomberg reported at the end of March that Iberdrola and Innogy were among the developers that had notified the UK government that they may need to declare force majeure to halt their contracts. The situation in the UK has worsened since then.

WindEurope has forecast that the capacity of wind farms financed in Europe in 2020 would be 25% lower than its previous forecast because of Covid-19: 13.6GW rather than 18.1GW.

It added that some of this capacity would not be financed at all in the coming years, which shows that Covid-19 will not just delay activity. It will end some projects as developers find themselves unable to cope with contractual delays.

Meeting PTC deadlines

Then there is the US, where the American Wind Energy Association has said 15GW of projects were due to complete this year, and developers also have until the end of 2020 to start building schemes so they can gain support under the federal production tax credit (PTC) regime.

The wind industry has so far been excluded from the federal support packages for Covid-19, so firms do not know if the PTC will be extended.

This can only cause further financial uncertainty for companies at a time when turbine orders and projects are being stalled, and raise the frequency of force majeure notices. Many of these notices only include scant information because none of us knows the full impact of Covid-19, when the industry will recover, and the long-term impacts on the supply chain.

Most recipients of these notices will tolerate some uncertainty, but only for so long. All companies will be looking closely at contracts and they know that at some point they’ll need to protect themselves. Nobody can wait indefinitely. We expect to see defaults that lead to project failures, and legal action.

Even if Covid-19 passes quickly, the delays will ramp up pressure on the supply chain. That 15GW of capacity to be built this year was already a big challenge.

Force majeure isn’t just a European or US issue. These clauses are being invoked in countries including India and South Africa too. Covid-19 is a global crisis and force majeure is one way that companies globally, including in wind, will seek to mitigate that uncertainty. This could get ugly.

How is your business being affected by force majeure notices? What questions do you have about them? Please let us know.

NEWS IN BRIEF

INNOGY PICKS SGRE FOR 342MW KASKASI...

RWE subsidiary Innogy has picked Siemens Gamesa to supply turbines for the 342MW Kaskasi offshore wind project in the German North Sea. Innogy took a financial investment decision to build the project last week. Installation is due to start in the third quarter of 2022. Read more

...AND ENTERS TAIWANESE OFFSHORE MARKET

Top of Form

Innogy has entered Taiwan's offshore wind market by teaming up with Asia Cement Corp to develop the 448MW Chu Feng project. Read more

Bottom of Form

PORTUGAL'S EDP KICKS OFF €750M NOTES ISSUE

Portuguese utility EDP has kicked off a €750m offer of 1.625% notes that are due to mature in April 2027. It plans to use the funds to finance or refinance parts or all of its renewables projects portfolio, which includes wind farms.

AVANGRID UNVEILS $750M GREEN NOTES ISSUE

US utility Avangrid has announced the pricing of a $750m notes issue to finance or refinance US renewables projects, including onshore and offshore wind farms. The 3.2% notes are due to mature in April 2025. Read more

NORWAY BACKS 88MW HYWIND TAMPEN

The Norwegian government has approved Equinor's plan to develop the 88MW floating wind project Hywind Tampen in the Norwegian North Sea. The 11-turbine scheme is intended to produce electricity for operations at the Snorre and Gullfaks offshore oil fields. Read more

VESTAS WINS 139MW OFFSHORE DEAL IN JAPAN

Vestas is set to supply 33 of its 4.2MW turbines for the 139MW Akita Noshiro project in Japan. This is due to be the first utility-scale offshore wind farm in Japan and is being developed by a consortium led by Marubeni. Read more

CTG MULLS $3.5BN IPO FOR GREEN ARM

China Three Gorges is set to raise $3.5bn with an initial public offering of its green arm Three Gorges Renewables. It is looking to use to the funds to back seven offshore wind projects, as well as for working capital. Read more

ØRSTED COMMISSIONS 338MW ONSHORE

Ørsted has commissioned its 120-turbine 338MW Sage Draw Wind onshore scheme in Texas. Ørsted is looking to reach 5GW installed onshore capacity by 2025. Read more

BAYWA GAINS TAX EQUITY AT 250MW AMADEUS

BayWa has gained tax equity from a group led by GE Energy Financial Services for its 250MW Amadeus Wind in Texas. The project also has a hedging deal with Morgan Stanley and a construction loan from Commerzbank. Read more

INFRAVIA WINS €132M DEBT FACILITY IN SWEDEN

InfraVia Capital Partners has secured a €132m senior debt facility for its 175MW Björkvattnet onshore wind project in Sweden. The project is set to be made up of GE turbines and has a corporate PPA with Google. Read more

Have you heard the phrase ‘jingle post’?

I hadn’t until the 2008 crash. Back then, I was writing for people in the commercial property industry, and learnt that 'jingle post' is the term for a landlord’s mail in a recession - due to the sound of tenants returning keys.

Every industry has terms that mainly come to prominence during a recession or downturn. One we’re hearing a lot in the wind industry right now is ‘force majeure’ notices. We expect speakers to touch on these in our webinar later today and, in truth, they could sustain a 45-minute discussion on their own.

Force majeure clauses are contractual clauses that alter the obligations of the parties to that contract if there is an extraordinary event or situation that is out of their control and prevents them from fulfilling one or more of their obligations. The Covid-19 pandemic, and the ensuing crisis, should qualify.

Use of force majeure

We have heard more talk from firms investing in the wind industry in the last month about an uptick in the quantity of force majeure notices.

Many developers and manufacturers started to receive them in February, when their component suppliers in key Asian markets, particularly China, wrote to warn them of delays to the production of vital parts.

These manufacturers will have received similar notices from their raw material suppliers; and most developers that received notices from manufacturers will have had to warn their customers too. You can’t build a wind farm without turbines, and the delays to project timelines will likely hit power deals too.

This means that force majeure notices will be a big part of the market this year and beyond. The Chinese government is lifting the Covid-19 lockdown in some cities, but we expect all countries with active wind markets to suffer in 2020.

Look at Spain. The ‘Financing & Investment Trends’ report from WindEurope, which was published on Tuesday, showed that 2.8GW of new wind projects in Spain secured €2.8bn of project finance in 2019. But much of the capacity where construction hasn't started is now likely to be delayed by Covid-19.

The UK’s active offshore wind market will suffer too. Bloomberg reported at the end of March that Iberdrola and Innogy were among the developers that had notified the UK government that they may need to declare force majeure to halt their contracts. The situation in the UK has worsened since then.

WindEurope has forecast that the capacity of wind farms financed in Europe in 2020 would be 25% lower than its previous forecast because of Covid-19: 13.6GW rather than 18.1GW.

It added that some of this capacity would not be financed at all in the coming years, which shows that Covid-19 will not just delay activity. It will end some projects as developers find themselves unable to cope with contractual delays.

Meeting PTC deadlines

Then there is the US, where the American Wind Energy Association has said 15GW of projects were due to complete this year, and developers also have until the end of 2020 to start building schemes so they can gain support under the federal production tax credit (PTC) regime.

The wind industry has so far been excluded from the federal support packages for Covid-19, so firms do not know if the PTC will be extended.

This can only cause further financial uncertainty for companies at a time when turbine orders and projects are being stalled, and raise the frequency of force majeure notices. Many of these notices only include scant information because none of us knows the full impact of Covid-19, when the industry will recover, and the long-term impacts on the supply chain.

Most recipients of these notices will tolerate some uncertainty, but only for so long. All companies will be looking closely at contracts and they know that at some point they’ll need to protect themselves. Nobody can wait indefinitely. We expect to see defaults that lead to project failures, and legal action.

Even if Covid-19 passes quickly, the delays will ramp up pressure on the supply chain. That 15GW of capacity to be built this year was already a big challenge.

Force majeure isn’t just a European or US issue. These clauses are being invoked in countries including India and South Africa too. Covid-19 is a global crisis and force majeure is one way that companies globally, including in wind, will seek to mitigate that uncertainty. This could get ugly.

How is your business being affected by force majeure notices? What questions do you have about them? Please let us know.

NEWS IN BRIEF

INNOGY PICKS SGRE FOR 342MW KASKASI...

RWE subsidiary Innogy has picked Siemens Gamesa to supply turbines for the 342MW Kaskasi offshore wind project in the German North Sea. Innogy took a financial investment decision to build the project last week. Installation is due to start in the third quarter of 2022. Read more

...AND ENTERS TAIWANESE OFFSHORE MARKET

Top of Form

Innogy has entered Taiwan's offshore wind market by teaming up with Asia Cement Corp to develop the 448MW Chu Feng project. Read more

Bottom of Form

PORTUGAL'S EDP KICKS OFF €750M NOTES ISSUE

Portuguese utility EDP has kicked off a €750m offer of 1.625% notes that are due to mature in April 2027. It plans to use the funds to finance or refinance parts or all of its renewables projects portfolio, which includes wind farms.

AVANGRID UNVEILS $750M GREEN NOTES ISSUE

US utility Avangrid has announced the pricing of a $750m notes issue to finance or refinance US renewables projects, including onshore and offshore wind farms. The 3.2% notes are due to mature in April 2025. Read more

NORWAY BACKS 88MW HYWIND TAMPEN

The Norwegian government has approved Equinor's plan to develop the 88MW floating wind project Hywind Tampen in the Norwegian North Sea. The 11-turbine scheme is intended to produce electricity for operations at the Snorre and Gullfaks offshore oil fields. Read more

VESTAS WINS 139MW OFFSHORE DEAL IN JAPAN

Vestas is set to supply 33 of its 4.2MW turbines for the 139MW Akita Noshiro project in Japan. This is due to be the first utility-scale offshore wind farm in Japan and is being developed by a consortium led by Marubeni. Read more

CTG MULLS $3.5BN IPO FOR GREEN ARM

China Three Gorges is set to raise $3.5bn with an initial public offering of its green arm Three Gorges Renewables. It is looking to use to the funds to back seven offshore wind projects, as well as for working capital. Read more

ØRSTED COMMISSIONS 338MW ONSHORE

Ørsted has commissioned its 120-turbine 338MW Sage Draw Wind onshore scheme in Texas. Ørsted is looking to reach 5GW installed onshore capacity by 2025. Read more

BAYWA GAINS TAX EQUITY AT 250MW AMADEUS

BayWa has gained tax equity from a group led by GE Energy Financial Services for its 250MW Amadeus Wind in Texas. The project also has a hedging deal with Morgan Stanley and a construction loan from Commerzbank. Read more

INFRAVIA WINS €132M DEBT FACILITY IN SWEDEN

InfraVia Capital Partners has secured a €132m senior debt facility for its 175MW Björkvattnet onshore wind project in Sweden. The project is set to be made up of GE turbines and has a corporate PPA with Google. Read more

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