Page 352 - Fluid Power Engineering

312 Chapter Fourteen

the schedule regularly based on new data, and communicate to the
entire team.

Bidding and Contracting: Engineering Procurement and
Construction (EPC) and Other Forms of Contract
EPC or turnkey contracts are the most common form of contract be-
tween the wind project owner and the contractor. As the name implies,
the EPC contractor delivers to the project owner a completed project
at a prespecified cost, in a prespecified timeframe, and that performs
to a prespecified level of production and quality. An alternative to
EPC contract is individual contracts with numerous vendors: Design
contract, construction contract, electrical contract, erection contract,
project management contract, etc. An ideal EPC contract is one that
is fixed cost with fixed delivery date, a security deposit to guarantee
performance, liquidated damages for delay in completion and sub-
standard performance, and large cap on liability. A security deposit
or a performance bond is part of an EPC contract to protect the project
owner in case the contractor does not fulfill its obligations. Normally,
the security amount is 5–10% of the total contract price and it is held
at a bank. The advantage of EPC contract is the assignment of sin-
gle point of responsibility. The disadvantage is that the EPC contract
is more expensive because of built-in contingencies and, in a tight
market, contractors are unwilling to bid on such contracts.
In this activity all the tasks related to EPC contracting are per-
formed including (a) preparing requirements document that describes
in detail all the particulars of the project, (b) sending the requirements
documents to potential bidders, (c) receiving bids, (d) evaluating bids,
and (e) choosing a contractor.

Project Financing
Presentation to investors and investment committees begins after the
detailed wind assessment and detailed financial assessment are com-
plete. Thisisa negotiation-intensiveprocessand itisadvisabletowork
with a financing partner during detailed wind and financial assess-
ments.Thereasonisafinancingentityhasitsownchecklistandcriteria
for evaluating a project. It is, therefore, crucial to involve the financing
entity in a project as early as possible to obviate the need for rework.
Examples of rework include, longer wind data collection, higher un-
certainty factors in assessment, and, therefore, lower P84, P90, and
P99 estimates, changes to PPA, changes to construction contracts, and
others. In addition, a developer, early in the process, should ask the
financing entity to review and verify the assumptions, soundness of
the measurement approach, and subsequent technical analysis.
In any renewable energy project, a financing entity is attempting
to manage the following three types of risks; understanding of these