Advantages of Fixed-Price Turnkey EPC Contracts
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Single Point of Accountability:
- The contractor is responsible for all aspects of the project, from engineering to commissioning, ensuring clarity in accountability and reducing the risk of miscommunication and disputes.
- This model provides the client with a single point of contact, simplifying project management.
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Risk Mitigation:
- The contractor assumes most of the construction risks, including delays, cost overruns, and technical issues, which are otherwise borne by the client in other contract models.
- This allows the client to focus on their core business operations while the contractor manages project risks.
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Cost Certainty:
- The fixed-price nature of these contracts provides clients with cost certainty, helping them manage budgets and financial planning more effectively.
- It minimizes the likelihood of unexpected cost increases unless explicitly agreed upon in the contract.
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Streamlined Project Delivery:
- The integrated approach of EPC contracts, where engineering, procurement, and construction are handled by a single entity, leads to faster project completion times and improved efficiency.
- This is particularly beneficial in energy storage projects where timely deployment is critical to meet growing energy demands.
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Lender Preferences:
- Lenders often prefer fixed-price turnkey EPC contracts as they shift significant construction risks to the contractor, making it easier for lenders to assess project viability and provide financing.
- It ensures that the lender’s exposure to project risks is minimized, which can lead to more favorable financing terms.
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Performance Certainty:
- Turnkey projects are delivered as fully operational facilities, ensuring that the client receives a project that meets specific performance criteria from the outset.
- This guarantees that the energy storage project operates at its intended capacity from the beginning, supporting a stable cash flow scenario for energy delivery or storage services.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-advantages-of-using-a-fixed-price-turnkey-epc-contract-for-energy-storage-projects/
