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LEGAL EAGLES


BUILDING ON FIRM FOUNDATIONS


Offshore construction projects, whether for renewable energy development or otherwise, are complex projects requiring the contractual arrangement and risk sharing associated with the design and construction of the project, together with operation following construction, to be carefully considered.


RECENT CASE STUDY The need for certainty in such contracts was highlighted in the recent case of MT Hoggard A/S v E.ON Climate Renewables UK; Robin Rigg East Limited (1); E.ON Climate and Renewables UK Robin Rigg West Limited (2).


MAJOR UNDERTAKING As the Court said in its judgment the construction of offshore wind farms requires the use of substantial contractors plant and equipment and is a major undertaking. The claimant in this case (MTH) contracted with the defendants (E.ON) in December 2006 to design, manufacture, deliver, install and commission the foundations for 60 wind turbine generators (WTGs) and two substations for the Robin Rigg Wind Farm in the Solway Firth with a contract value in excess of €100,000,000.


Both parties to the contract (and the litigation) were major and sophisticated commercial concerns.


CONTRACT SPECIFICS


The foundation contract was the early contract, or one of them, dependent upon which there would be follow on contracts for the placing of the wind turbines.


Under the contract MTH was to provide a jack up barge, the use of which was to be integral to the installation of the monopiles and transition pieces that together would form the foundations of the WTGs. The jack up barge selected was not self propelling and required ancillary equipment to assist it in its operations and therefore other vessels and equipment would be required at not insignificant costs.


After the execution of the contract and while the works were in progress the jack up barge proved to be inadequate for the task which it was meant to carry out. It failed to install the foundations required and the engineer under the contract issued three variation orders which required the substitution of a different vessel to do the installation work which, under the terms of the contract, was previously to be done by the jack up barge.


PRELIMINARY ISSUES AND ARRANGEMENT CHANGES


In order to deal effectively with the litigation the parties agreed a number of preliminary issues which it required the Court to determine prior to a full hearing.


A central feature of the changed arrangements was that whereas originally MTH had been responsible for hiring the jack up barge and providing it for the contract at its cost the new vessel was hired directly by E.ON which then provided it on a free issue basis to MTH to manage the installation process.


The contract between the parties made provision for the valuation of variation orders but the parties were unable to agree the financial consequences of the changes in arrangements, which gave rise to the proceedings and the preliminary issues. MTH was of the view that what should be omitted was a component of the original contract price included in the price of the jack up barge making due allowance for the fact that it carried out two of the sixty two foundation installations.


However, E.ON’s position was that the deduction should be the product of applying a rate or alternatively a cost of the amount of time which E.ON alleged the jack up would have taken to carry out the contract works if it had in fact been permitted to do so.


The contract entered into by the parties was bespoke and adopted a carefully developed contractual structure in several parts with an agreed hierarchy of contractual documents. Within that structure it provided a detailed series of provisions that set out the financial consequences to the parties of performance and contractual default.


EARLY REVISIONS


Very soon after the jack up barge was mobilised to site it became apparent that it would be unable to keep up with the contractual timeframe and a number of early revisions of the contract programme were discussed leading to contract management improvement notices being issued under the terms of the contract.


MTH investigated the possibility of bringing a second installation spread to the site but no suitable vessels were available until a substantial period after the commencement of the contract. Discussions took place between the parties to try and find a solution but none was identified.


When the jack up barge commenced operations there were a number of issues arising as a consequence of the performance of the jack up.


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www.windenergynetwork.co.uk


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