Ten-plus years of lessons in offshore wind project finance

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

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A Word About Wind
July 20, 2015
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Ten-plus years of lessons in offshore wind project finance

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

The appetite for financing offshore wind projects is growing, with a wide range of investors interested in accessing an attractive and cash hungry market. So what can offshore wind developers do to de-risk projects and attract this investment?

The most important factor in delivery of an offshore wind project is the quality of the developer and contractor teams. These projects are complex, with many interlinked aspects, and strong communication is vital. Owner management teams of 20-30 often communicate better than larger groups with more restricted communication.

Health and safety performance should also be paramount, with contractual penalties for poor performance and the developer having the authority to address issues with contractors and subcontractor staff. Developer-managed marine coordination centres and relevant contractual procedures can help reduce health and safety risks.

Typically, contractors are unwilling to accept ground risk, so the standard of ground investigation campaigns is crucial. Comprehensive investigations can be costly so a staged investigation campaign should be implemented to minimise expenditure prior to confirming conditions are appropriate. However, knowledge of ground conditions is insufficient to confirm offshore structures can be designed appropriately, so design and certification should be in place at or shortly after any financing decision.

We have not seen any standard on contracting strategies and, while lenders always prefer a reduced number of contracts, experienced developers often feel best placed to manage the complex job of co-ordinating offshore work. We have not detected any relationship between number of contracts and project costs and, with a strong management team armed with a comprehensive interface matrix, a multiple contract approach is manageable.

Approaches to weather risk sharing are equally varied, and it is crucial to use clear language on weather thresholds, the risks accepted and measurement procedures.

During installation the highest-risk items are vessels. Delays can cost €100,000 to €300,000 a day, so even minor issues can lead to expensive overruns. Engagement of contractors and the marine warranty surveyor in development is crucial, to confirm vessel specifications and operational criteria are appropriate and understood.

Developers should actively check vessel availability and back-up options in case issues are experienced. Cable laying is a particularly high-risk activity, and owners should carefully monitor planning and execution in this area.

Permits should be completed prior to any financing decision, with requirements collated and passed to contractors where appropriate. Stakeholder reference groups should be created early in the process to aid communication and gain understanding from relevant groups.

Operations and maintenance (O&M) should be considered from the design stage with maintainability and redundancy forming a particular focus. Electrical system downtime can affect multiple turbines and be extremely costly, so plans for major intervention and replacement of key components, particularly cables, should be carefully considered. O&M teams should be involved in the commissioning period in order to be up to speed from day one.

While these lessons have typically been learned in other industries, many have been costly in offshore wind. Thankfully, developers should not to have to learn expensive lessons themselves if they bring competent parties on board during development.

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

The appetite for financing offshore wind projects is growing, with a wide range of investors interested in accessing an attractive and cash hungry market. So what can offshore wind developers do to de-risk projects and attract this investment?

The most important factor in delivery of an offshore wind project is the quality of the developer and contractor teams. These projects are complex, with many interlinked aspects, and strong communication is vital. Owner management teams of 20-30 often communicate better than larger groups with more restricted communication.

Health and safety performance should also be paramount, with contractual penalties for poor performance and the developer having the authority to address issues with contractors and subcontractor staff. Developer-managed marine coordination centres and relevant contractual procedures can help reduce health and safety risks.

Typically, contractors are unwilling to accept ground risk, so the standard of ground investigation campaigns is crucial. Comprehensive investigations can be costly so a staged investigation campaign should be implemented to minimise expenditure prior to confirming conditions are appropriate. However, knowledge of ground conditions is insufficient to confirm offshore structures can be designed appropriately, so design and certification should be in place at or shortly after any financing decision.

We have not seen any standard on contracting strategies and, while lenders always prefer a reduced number of contracts, experienced developers often feel best placed to manage the complex job of co-ordinating offshore work. We have not detected any relationship between number of contracts and project costs and, with a strong management team armed with a comprehensive interface matrix, a multiple contract approach is manageable.

Approaches to weather risk sharing are equally varied, and it is crucial to use clear language on weather thresholds, the risks accepted and measurement procedures.

During installation the highest-risk items are vessels. Delays can cost €100,000 to €300,000 a day, so even minor issues can lead to expensive overruns. Engagement of contractors and the marine warranty surveyor in development is crucial, to confirm vessel specifications and operational criteria are appropriate and understood.

Developers should actively check vessel availability and back-up options in case issues are experienced. Cable laying is a particularly high-risk activity, and owners should carefully monitor planning and execution in this area.

Permits should be completed prior to any financing decision, with requirements collated and passed to contractors where appropriate. Stakeholder reference groups should be created early in the process to aid communication and gain understanding from relevant groups.

Operations and maintenance (O&M) should be considered from the design stage with maintainability and redundancy forming a particular focus. Electrical system downtime can affect multiple turbines and be extremely costly, so plans for major intervention and replacement of key components, particularly cables, should be carefully considered. O&M teams should be involved in the commissioning period in order to be up to speed from day one.

While these lessons have typically been learned in other industries, many have been costly in offshore wind. Thankfully, developers should not to have to learn expensive lessons themselves if they bring competent parties on board during development.

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

The appetite for financing offshore wind projects is growing, with a wide range of investors interested in accessing an attractive and cash hungry market. So what can offshore wind developers do to de-risk projects and attract this investment?

The most important factor in delivery of an offshore wind project is the quality of the developer and contractor teams. These projects are complex, with many interlinked aspects, and strong communication is vital. Owner management teams of 20-30 often communicate better than larger groups with more restricted communication.

Health and safety performance should also be paramount, with contractual penalties for poor performance and the developer having the authority to address issues with contractors and subcontractor staff. Developer-managed marine coordination centres and relevant contractual procedures can help reduce health and safety risks.

Typically, contractors are unwilling to accept ground risk, so the standard of ground investigation campaigns is crucial. Comprehensive investigations can be costly so a staged investigation campaign should be implemented to minimise expenditure prior to confirming conditions are appropriate. However, knowledge of ground conditions is insufficient to confirm offshore structures can be designed appropriately, so design and certification should be in place at or shortly after any financing decision.

We have not seen any standard on contracting strategies and, while lenders always prefer a reduced number of contracts, experienced developers often feel best placed to manage the complex job of co-ordinating offshore work. We have not detected any relationship between number of contracts and project costs and, with a strong management team armed with a comprehensive interface matrix, a multiple contract approach is manageable.

Approaches to weather risk sharing are equally varied, and it is crucial to use clear language on weather thresholds, the risks accepted and measurement procedures.

During installation the highest-risk items are vessels. Delays can cost €100,000 to €300,000 a day, so even minor issues can lead to expensive overruns. Engagement of contractors and the marine warranty surveyor in development is crucial, to confirm vessel specifications and operational criteria are appropriate and understood.

Developers should actively check vessel availability and back-up options in case issues are experienced. Cable laying is a particularly high-risk activity, and owners should carefully monitor planning and execution in this area.

Permits should be completed prior to any financing decision, with requirements collated and passed to contractors where appropriate. Stakeholder reference groups should be created early in the process to aid communication and gain understanding from relevant groups.

Operations and maintenance (O&M) should be considered from the design stage with maintainability and redundancy forming a particular focus. Electrical system downtime can affect multiple turbines and be extremely costly, so plans for major intervention and replacement of key components, particularly cables, should be carefully considered. O&M teams should be involved in the commissioning period in order to be up to speed from day one.

While these lessons have typically been learned in other industries, many have been costly in offshore wind. Thankfully, developers should not to have to learn expensive lessons themselves if they bring competent parties on board during development.

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

The appetite for financing offshore wind projects is growing, with a wide range of investors interested in accessing an attractive and cash hungry market. So what can offshore wind developers do to de-risk projects and attract this investment?

The most important factor in delivery of an offshore wind project is the quality of the developer and contractor teams. These projects are complex, with many interlinked aspects, and strong communication is vital. Owner management teams of 20-30 often communicate better than larger groups with more restricted communication.

Health and safety performance should also be paramount, with contractual penalties for poor performance and the developer having the authority to address issues with contractors and subcontractor staff. Developer-managed marine coordination centres and relevant contractual procedures can help reduce health and safety risks.

Typically, contractors are unwilling to accept ground risk, so the standard of ground investigation campaigns is crucial. Comprehensive investigations can be costly so a staged investigation campaign should be implemented to minimise expenditure prior to confirming conditions are appropriate. However, knowledge of ground conditions is insufficient to confirm offshore structures can be designed appropriately, so design and certification should be in place at or shortly after any financing decision.

We have not seen any standard on contracting strategies and, while lenders always prefer a reduced number of contracts, experienced developers often feel best placed to manage the complex job of co-ordinating offshore work. We have not detected any relationship between number of contracts and project costs and, with a strong management team armed with a comprehensive interface matrix, a multiple contract approach is manageable.

Approaches to weather risk sharing are equally varied, and it is crucial to use clear language on weather thresholds, the risks accepted and measurement procedures.

During installation the highest-risk items are vessels. Delays can cost €100,000 to €300,000 a day, so even minor issues can lead to expensive overruns. Engagement of contractors and the marine warranty surveyor in development is crucial, to confirm vessel specifications and operational criteria are appropriate and understood.

Developers should actively check vessel availability and back-up options in case issues are experienced. Cable laying is a particularly high-risk activity, and owners should carefully monitor planning and execution in this area.

Permits should be completed prior to any financing decision, with requirements collated and passed to contractors where appropriate. Stakeholder reference groups should be created early in the process to aid communication and gain understanding from relevant groups.

Operations and maintenance (O&M) should be considered from the design stage with maintainability and redundancy forming a particular focus. Electrical system downtime can affect multiple turbines and be extremely costly, so plans for major intervention and replacement of key components, particularly cables, should be carefully considered. O&M teams should be involved in the commissioning period in order to be up to speed from day one.

While these lessons have typically been learned in other industries, many have been costly in offshore wind. Thankfully, developers should not to have to learn expensive lessons themselves if they bring competent parties on board during development.

Guest post by Ked Shayer, an offshore wind energy advisor for Mott MacDonald who has worked on high-profile offshore wind projects such as Walney, Cape Wind and Gemini.

The appetite for financing offshore wind projects is growing, with a wide range of investors interested in accessing an attractive and cash hungry market. So what can offshore wind developers do to de-risk projects and attract this investment?

The most important factor in delivery of an offshore wind project is the quality of the developer and contractor teams. These projects are complex, with many interlinked aspects, and strong communication is vital. Owner management teams of 20-30 often communicate better than larger groups with more restricted communication.

Health and safety performance should also be paramount, with contractual penalties for poor performance and the developer having the authority to address issues with contractors and subcontractor staff. Developer-managed marine coordination centres and relevant contractual procedures can help reduce health and safety risks.

Typically, contractors are unwilling to accept ground risk, so the standard of ground investigation campaigns is crucial. Comprehensive investigations can be costly so a staged investigation campaign should be implemented to minimise expenditure prior to confirming conditions are appropriate. However, knowledge of ground conditions is insufficient to confirm offshore structures can be designed appropriately, so design and certification should be in place at or shortly after any financing decision.

We have not seen any standard on contracting strategies and, while lenders always prefer a reduced number of contracts, experienced developers often feel best placed to manage the complex job of co-ordinating offshore work. We have not detected any relationship between number of contracts and project costs and, with a strong management team armed with a comprehensive interface matrix, a multiple contract approach is manageable.

Approaches to weather risk sharing are equally varied, and it is crucial to use clear language on weather thresholds, the risks accepted and measurement procedures.

During installation the highest-risk items are vessels. Delays can cost €100,000 to €300,000 a day, so even minor issues can lead to expensive overruns. Engagement of contractors and the marine warranty surveyor in development is crucial, to confirm vessel specifications and operational criteria are appropriate and understood.

Developers should actively check vessel availability and back-up options in case issues are experienced. Cable laying is a particularly high-risk activity, and owners should carefully monitor planning and execution in this area.

Permits should be completed prior to any financing decision, with requirements collated and passed to contractors where appropriate. Stakeholder reference groups should be created early in the process to aid communication and gain understanding from relevant groups.

Operations and maintenance (O&M) should be considered from the design stage with maintainability and redundancy forming a particular focus. Electrical system downtime can affect multiple turbines and be extremely costly, so plans for major intervention and replacement of key components, particularly cables, should be carefully considered. O&M teams should be involved in the commissioning period in order to be up to speed from day one.

While these lessons have typically been learned in other industries, many have been costly in offshore wind. Thankfully, developers should not to have to learn expensive lessons themselves if they bring competent parties on board during development.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.