Development of the £1.8bn ($2.5bn) Neart na Gaoithe (NNG) wind farm off Scotland has run into difficulties amid a commercial negotiation between the project’s developer EDF Renewables and main construction contractor Saipem linked to “soil” and “foundations” issues, Recharge understands.

The problems were revealed by Saipem during its fourth-quarter results call with analysts on Thursday, where it highlighted a mixed outlook on some its projects, including “slow progress on a project in the North Sea” in the offshore renewables sector, which “outweighed positive developments”.

Saipem also noted it was unable to provide earnings guidance for 2021 due to uncertainty caused by the Covid-19 pandemic, cautioning earnings before interest tax depreciation and amortisation would remain at a similar level in 2021 to 2020.

Saipem did not name the project involved but Recharge understands it is the 450MW NNG, where it was awarded its first ever turnkey offshore windfarm construction project in November.

The Italian contractor is due to carry out the engineering, procurement, construction and installation of 54 steel jackets for the project’s wind turbines, 8MW Siemens Gamesa units, plus the two for the electrical substations, as well as the transportation and installation of the relevant topsides.

These jackets are being manufactured partly at a Saipem-owned yard and partly by BiFab in Scotland, although the latter deal has been the focus of controversy over doubts the work will actually be placed at the troubled fabricator, two of whose yards have just been acquired by a new owner.

The jackets are being piled-in in water depths ranging from 40-60 metres.

Offshore installation work is being carried out by the crane vessel Saipem 7000.

EDF Renewables, which bought NNG from developer Mainstream Renewable Power in 2018, would not confirm NNG was the project in question.

A spokesperson told Recharge: “This is a matter for Saipem and we will not be commenting.”

Saipem chief executive Stefano Cao said during the analysts call that the project in question was still in its “fairly early stages”, adding the issue is related to “data provided by the client” in relation to “soil” and “foundations”.

He added Saipem is involved in an “ongoing commercial negotiation”, which prevented him from being “very specific” in his explanations, but said “the bulk of discussions” are related to information about the “soil generally” and a “discrepancy which we see between what we have been provided with at the time of tender” and what was “provided at a later stage”.

“It is a renewable project. And the issue is related to foundations,” Cao said.

“There is no other complexity. I mean, we are talking of conventional structure[s] and conventional offshore operations. So, the bulk of the discussion and the bulk of the issue is related to the soil provided information (sic).”

He added: “For accounting purposes, we have to account for all the costs incurred by the project on the basis of full life.”

A Saipem spokesperson told Recharge: "We cannot disclose the name of the project."

In a research note to clients, analysts at Jefferies also mentioned NNG.

The note said: “Saipem's EBITDA warning today referenced a North Sea "renewables project [with] issues related to foundations" and "the bulk of the issue is related to the soil provided information".

“Based on our knowledge of projects and players, we think this is the offshore Scotland ‘Neart na Gaoithe’ wind farm development in the North Sea's Firth of Forth and we have asked Saipem for confirmation.”

NNG, located 15km off the east coast of Scotland in the Firth of Forth spread over a 105 square kilometre site, is due to be operational in 2023.

The project was originally awarded a lease by seabed landlord The Crown Estate in 2011, and in 2015 won a contract for difference power deal in the first ever round of UK renewables auctions. It was then in limbo for several years as it fought a legal challenge from RSPB Scotland over feared impacts on seabirds.

Irish utility ESB joined EDF as 50% owner of the project in 2019.

Francesco Racheli, chief operating officer of the Saipem E&C division, said at the time of the award: “This EPCI contract awarded by EDF Renewables marks a key milestone in the pursuit of our strategy to become a reference player for large offshore windfarm developments and, more extensively, in the sphere of energy transition.”

Additional reporting by Andrew Lee and Darius Snieckus

Wind

'Soil and foundation issues' hit work at EDF's $2.5bn Neart na Gaoithe wind farm off Scotland