In the last 18 months SWL have completed 7 due diligences of UK offshore wind projects covering environment and consents, including Development Consent Orders (DCO’s) and Marine Licences and Section 36 Electricity Act consents. Four of these were for the Green Investment Bank. Six of the due diligences were investor due diligence with the seventh being a Vendor’s Due Diligence. What is clear from the 2015 due diligence activity, is that the standards expected of the Green Investment Bank are very rigorous, as one might expect of a bank with such well-developed green criteria and objectives.
Developers seeking investment should expect to understand the effects of late or incomplete surveys on CAPEX delay scenario modelling. Recently the Marine Management Organisation (MMO) are focussing on Annex 1 habitat survey methodologies and English Heritage are sharpening their pencil on expectations around Archaeological Exclusion Zones, and A2 targets of potential archaeological significance. Both of these have clear ramifications for cable route planning, and array construction vessel positioning. The message is clear, do not let your pre-commencement surveys drift to the right in the program as it takes time to secure approval before construction can commence.
Wind Due Diligence
The transfer of consents and compliance risk to contractors is also key to investor appetite. Supply and install contracts must include contract schedules such as Employers Environmental and Consent Requirements which clearly and unambiguously place responsibility on contractors to not only adhere to consent restrictions (such as Archaeological Exclusion Zones), but also deliver pre-commencement documentation such as Construction Method Statements, Cable Lay Plans, Scour Protection Plans to a standard expected by the MMO. The power of approval by the competent authorities such as the MMO must feature in contracts to minimise the risk of late pre-commencement delivery which in turn creates the risk of construction delays.
What is also clear is that the ‘one consent fits all’ approach of the DCO process does not work as well as originally envisaged. Projects will still need to secure additional consents for ‘supporting activities’ such as cable pre-lay grapnel runs, cable burial trials, UXO clearance, O&M pontoons, dredging etc. A thorough due diligence will include supporting consents which are essential to project delivery. At DCO application stage it is not possible to identify the detailed requirements of these supporting activities, and a ‘Rochdale Envelope’ approach deployed too early may result in worst case overestimates of requirements, leading to worse case identification of environmental impacts, which may not actually materialise. The period 6-9mo pre-construction commencement is critical to delivery, and consents, often perceived as a ‘blocker’, not an enabler of projects can easily be side-lined due to engineering priorities. An integrated approach between design engineers and consents managers is crucial to the successful delivery of projects.
As a last word, if you are tempted to think that environmental due diligence is a peripheral add-on to due diligence, think again. A true and thorough approach to due diligence means that someone is reviewing your supply contract schedules, program, CAPEX and OPEX and examining your design bases, and all your consent documentation for the main consents and supporting consents and the original EIA.