12 Oct Turnkey Agreement Checklist
The new publication will be provided in a package containing general terms and conditions of sale, a model contract, a checklist and a CD-ROM. The parties can easily adapt their contract to the individual situation. By completing the checklist, they can clearly assign responsibility for any type of assistance to the contractor or buyer, while the contractor remains firmly responsible and controlled for the technical functions of the work. This offers both great flexibility and clarity. Why this new standard contract? Firstly, because the scope of Orgalime`s general terms and conditions of sale and standard contract forms had to be supplemented by a turnkey contract for the supply of complete industrial installations or installations. These are often complex installations and works; Contracts must therefore be both flexible and comprehensive. Mechanical engineering buyers and contractors who have used existing models have generally not found them suitable for their needs: they are often less designed for industrial work than for civil engineering work and very complex and sometimes very one-sided. A «bankable» EPC contract is an agreement between the EPC contractor and the developer, which establishes a risk allocation profile for the construction of a project that meets the requirements of the lender or lender. As explained below, the main objective of lenders and equity investors is whether or not the EPC contractor can claim additional costs or delays under the EPC contract. They also relate to the EPC contractor`s ability to fulfil its obligations under the EPC contract and the security offered by the EPC contractor or its parent company to ensure its performance.
These elements should be at the forefront for every developer, as the further the terms of the EPC contract are from the requirements of lenders or investors, the more equity support the developer must provide to their project. Large-scale solar development is a big deal, and solar EPCs are a big deal by association. In the second quarter of 2017, the U.S. solar market installed 2,387 MWdc, up 8% from the previous year and the biggest second quarter ever. PV for distribution companies accounted for 58% of these facilities, which was the seventh consecutive quarter in which the supply area added more than 1 GWdcii. In today`s solar market, there is considerable competition between project promoters looking for debt and equity investment partners. This means that, to gain a competitive advantage, developers must prepare a solar project with the highest guaranteed revenue in order to increase the likelihood of selling the project to such potential debt and equity companies. Since the bulk of a solar project`s investments are the EPC cost (about 70%-90%)iii, the cornerstone of a bank-eligible solar project is a duly negotiated EPC contract.
Therefore, developers need to offer lenders and investment partners bank EPC contracts that centralize the responsibility of addressing many of the challenges faced in a large solar project and make the risk profile of the entire solar project more attractive to those potential partners. . . .