Practices | Energy Law

Plant Start-Up Crisis Management

The Energy Law Practice Group (“EPG”) have represented various power plant owners with regard to plant start-up, testing, and commissioning. Drawing upon its extensive experience in power plant development and construction, power purchase agreements, and insurance, the EPG has helped to manage acceptance issues at plants that suffered mechanical or other problems during start-up or shortly thereafter.

In one recent example, the EPG represented an internationally prominent energy company on a large-scale project in South Asia. Group members lived at the site for two months, helping to guide the owner to acceptance on a project that encountered a range of problems with key pieces of equipment (including General Electric Frame 9FA turbines) during commissioning. By combining its knowledge of plant engineering and its familiarity with EPC contracts, the EPG positioned the owner to maximize its leverage with the EPC contractor, and ensured contractual protections.

In another matter, the EPG represented a partnership that developed a 185 MW barge-mounted combined cycle oil-fired combustion and steam turbine project in the Caribbean. Because of its experience in dispute resolution against the general contractor, the EPG was hired when, just after start up, tube corrosion problems revealed themselves in the plant’s power boilers and heat recovery steam generator, and chloride corrosion damaged the steam turbine. Problems were also discovered relating to hot gas path corrosion in the General Electric Frame 7EA combustion turbine. Numerous other issues were involved including water intake clogging, raw water supply, fuel handling, and boiler back-pressure due to slagging.

The EPG led the crisis management team, which was able to get the plant repaired by the general contractor and then restarted so that it met the required performance test for insurers, lenders, and the purchasing utility. A settlement was negotiated which gave the plant the prospect of a “made whole” outcome. The EPG later led a team seeking reimbursement from insurers for both physical damage and business interruption claims. This effort culminated with negotiations in London with underwriters who ultimately provided a substantial payment of the client’s damages. The EPG, in conjunction with Bernstein Shur’s Litigation Department, then managed litigation pending in state and federal courts in Texas relating to business interruption insurance claims, eventually securing a multi-million dollar settlement from the remaining underwriters. The experience it had gained from numerous other high stakes disputes involving power projects enabled the EPG to deal successfully with the hundreds of interrelated issues that arose in such a crisis.

A number of years ago, two of the EPG’s attorneys flew to Indonesia to assist the owners of a coal-fired plant to press claims against a major equipment manufacturer for steam turbine failures. After working with plant engineers and technical experts to establish the likely cause of the failures, EPG members then played key roles in the negotiations that eventually led to the redesign of suspect turbine components, as well as the manufacturing of those components and the reimbursement of the owners’ costs by the manufacturer.

The EPG has provided advice on projects in Canada, England, Pakistan, Turkey, Sardinia, India, Indonesia, Nepal, Brazil, Puerto Rico, the Dominican Republic, Guatemala, Nicaragua and Panama, as well as numerous plants in the United States.