Best Practice in Contracting for Offshore Wind – Expert Interview with Nick Carlin of Pinsent Masons

Nick Carlin is a Pinsent Masons Partner with more than 10 years of experience working on construction and supply chain contracts in the energy sector.   He has advised at various stages of some of the largest onshore and offshore projects, helping to formulate procurement strategies, driving implementation of these strategies and drafting and negotiating the required contractor documents.

Nick spent a significant portion of that time on secondment to a major renewable energy developer within the UK.  He has a keen understanding of the challenges faced in developing renewable energy projects and how the key issues within the construction and supply chain contracts impact on the wider project.

The UK has accumulated a lot of expertise in legal and financial structures, including IP, environmental assessment, which are essential if complex, multi-national projects such as renewable energy schemes are to progress efficiently. Pinsent Masons have experience in projects in the UK, Europe, the Middle East, Africa, China and the Asia-Pacific region generally, and their skillset is applicable globally.  Nick has worked on one project in the US and is looking forward to the expansion of this market.

Nick’s career has progressed into advising developers on their contracting strategy. For example, how to ensure that the different packages created by the developer, such as turbines, substructures or cables are coherent and complimentary, assisting them with negotiations and then finalising the contracts. His “aftercare service” includes interpreting the contracts if issues arise, or there are administrative problems, which helps to limit exposure, keep costs down, and minimise risk.

 

The Three Ps:  Price, Programme and Performance

He looks at three main areas in supply chain contracts: price, programme and performance. He says,  “All the issues that you might see and deal with on a UK project, are very similar to the ones that by and large will be to dealt with in Taiwan or North America. Everything in a supply chain contract can usually be brought back to one of the "Three Ps". Those are the same the world over and all of the issues that affect those “Three Ps” on a UK offshore windfarm are the same as those in the US or APAC.”

 

Standards and Standardisation

The issue of standardisation is one he has thought about. Although in many areas technical standards are to be encouraged, he feels that as each project is unique it would be very difficult to have a standard contract for offshore wind projects. “We haven’t got standard contracts for offshore wind, in contrast to, say, property development - office development projects for example in the UK, a lot of the time they will use particular standard form contracts as a starting point.  We don’t have that in offshore wind, so different developers tend to start from a slightly different place and tend to put the emphasis on different things. But by the end of the negotiations, you should be able to finalise contracts that are sensible, and everyone can sign off on them.” A standard contract that might work in one region might not work in another, owing to the interests of stakeholders in that region. Many developers prefer to recycle their own contracts as well, as they will have used them successfully in the past.

He sees the UK OW industry having reached a stage of industrialisation, where all the extra costs have been minimised and this process can be rolled out smoothly in new markets. He says, “We should be able to industrialise the contracting process now too – getting more benefit from the work the everyone has done to date.”

Developers in the US are learning from the experiences of other markets. He hope that US developers will avoid going through the same time- and money-intensive learning curve that other regions have been through.

 

A Fourth P: Process

Nick sees process as another issue that can help avoid friction in contracting: sometimes areas are not codified down and both sides assume that they would have a discussion and come to an agreement in “good faith”. Nick, in his lawyerly way, prefers that these areas should be written down – for example, “Here’s the risk around seabed conditions, now are we just going to broadly say it’s a developer risk, or it’s a contractor risk, or are we actually going to go into a bit more detail and say here’s how we manage that risk? What contingency will we need and at what stage do we determine if it’s a problem?”

He sees more awareness of this and more closely-written contracts as a result. He also compares the permitting and licencing process in the UK, and the way it has been revised and streamlined as experience has built, with the discussions that are going on in the US between the regulators and the industry – he thinks that these processes will be improved and that will help delivery of projects in the future.

 

Domestic US Content or Foreign EPC?

Nick continues, “In the European projects, but also in Taiwanese standards at the moment it is that there are maybe five or six large contracts that most developers enter into.  In the US though there will be a push to use US expertise, I would expect, and to use US contractors, US capabilities, and boost the domestic industry, but I wonder if that might mean if there is more of a market for EPC contractors: a contractor to come in who is willing to deliver everything in one go, and take the risk for that, maybe some of the large American contractors might be interested in doing that.  It might be a way of driving up the US content of these developments. There are pros and cons, it’s a big risk but there are large construction companies in the US that have that capability.”

Nick concludes, “The US projects can benefit from the experience that we’ve had in the UK, and wider in Europe. A lot of lessons learned here that can be brought forward and can help the new US industry to reach its potential quite swiftly.”

 
About Nick Carlin

Nick provides specialist advice on procurement and supply chain aspects of major energy projects.He has advised at various stages of a number of the UK’s largest offshore wind projects, including helping to formulate procurement strategies, driving implementation of these strategies and drafting and negotiating the required contractual documentation.  He has recently started to advice on floating offshore projects as those have started to come to the fore.

Nick has been involved in construction aspects of numerous onshore and offshore wind power projects, biomass projects, marine energy projects and conventional power plants. He has also advised on large oil and gas sector contracts including work on platform fabrication, drilling rigs and foundation pieces as well vessel retrofit and manufacturing contracts.

 

About Pinsent Masons

Pinsent Masons is widely regarded as one of the leading law firms to the offshore wind sector.  Lawyers from Pinsent Masons were involved in the earliest projects in the UK and are now advising on development of some of the largest offshore projects in the world.  Clients get a team that is steeped in offshore wind advisory work.  They have unique full life cycle experience of advising from initial regulatory advice and the consenting process, through strategic M&A, financing and into procurement, construction, the operational phase, disputes that may arise along the way and, finally, decommissioning.  This "big picture" commercial understanding of the commercial issues associated with offshore wind underpins the advice that they offer.

https://www.pinsentmasons.com/

by Julian Jackson

All this and more will be discuss at the 4th Annual US Offshore Wind Conference, June 10-11, 2019 in Boston. Find out more here.


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