Natural Gas-Fired Power Plant

Situated in Pasir Gudang in southern Malaysia, the Track 4A natural combined-cycle gas-fired power plant is a significant new addition to the energy infrastructure of a power-hungry region. Developed by Southern Power Generation (SPG) for the single buyer (multinational Malaysian electricity utility company TNB), the 1.44GW plant is equipped with advanced power technologies, including the world’s first GE 9HA.02 gas turbines, specifically for their high efficiency and low carbon emissions. The US$1.1 billion power plant commenced commercial operations in January 2021.

Brief

SPG retained HKA in March 2018, early in the life cycle of this complex project, to provide advisory expertise on the management of the EPC (engineering procurement and construction) contract, which was executed by a Taiwanese and French consortium. HKA’s brief was to facilitate the avoidance of claims and disputes through risk monitoring and real-time progress reviews to mitigate delays and costs. The services mirrored a previous engagement on the construction of the first power and water desalination plant in Saudi Arabia, where we worked with the same project team, achieving multiple project objectives.

What we did

HKA’s team provided extensive contract management support in respect of both contract tiers (Power Purchase Agreement and the EPC), reviewing the contractor’s updates on the programme, identifying any misreporting, analysing possible delay events, assessing variation claims for accuracy and robustness, and generally defending the owner’s position.

In the early stages of the project, HKA’s in-house engineering experts were also consulted, where necessary, to investigate technical elements of the works that gave rise to contractual issues.

The focus of our work changed in March 2020 when the first significant delays to the programme were reported, following the COVID-19 outbreak and introduction of movement control orders by the Malaysian government. We then began investigating a series of force majeure claims for costs as well as extension of time.

Our analysis demonstrated how claims presented for delays and loss and expense were not entirely substantiated as a direct consequence of the force majeure event.

Several claims – linked to commissioning defects, unreadiness for integration with grid, and significant loss of productivity not linked to COVID-19 management – were rebutted with HKA’s assistance.

HKA delay and cost specialists’ analysis of the contractor’s claim was developed for a more robust submission by SPG to the single buyer in July 2020. The interim submission was considered successful as the single buyer recognised that the original scheduled commercial operation date under the Power Purchase Agreement was no longer feasible to be maintained. We were again asked to assist with follow-on claims in 2021. These were finalised in April 2021, and await the outcome of assessment.

Outcomes

HKA’s contract management expertise was instrumental in identifying problems early, and devising mitigation measures. Our experts vetted claims as they emerged, challenging or substantiating extensions of time, cost claims, variations and other losses. Where appropriate, we advised SPG on plausible counterclaims and areas of commercial strength and weakness to facilitate stakeholder discussions. HKA’s reports and advice provided a sound basis for resolution and avoidance of full-blown disputes.

The power plant project was proceeding to schedule before the pandemic-related controls were imposed, restricting site access, delaying procurement lead times, and preventing technical specialists’ travel to Malaysia. As a result, disruption and reduced productivity impacted the programme by almost eight months.

Over the course of the project, we played an increasing role in supporting SPG in its negotiations with the contractor’s management team.

We delivered our services in conjunction with SPG’s planning, commercial and technical team to ensure transfer of knowledge for sustainability and added value.

SPG has consistently relied on HKA’s expertise for over 40 months, following an extension to our engagement in late 2020, reaffirming our strong service partnership.