Development work on the £1.8 billion ($2.5 billion) Neart na Gaoithe (NNG) wind farm off Scotland has run into difficulties amid a commercial negotiation between project developer EDF Renewables and main construction contractor Saipem linked to soil and foundations.

The Italian contractor revealed during its fourth-quarter results call with analysts on Thursday that it is facing “slow progress on a project in the North Sea” in the offshore renewables sector, which “outweighed positive developments”.

Saipem did not name the project involved but Upstream understands it is the 450-megawatt NNG, where the contractor was awarded its first ever turnkey offshore wind farm construction project in November.

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

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Saipem 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.

The jackets are being installed using piles in water depths ranging from 40 to 60 metres.

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

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

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

'Discrepancy'

Saipem chief executive Stefano Cao said during the analyst 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 Upstream: "We cannot disclose the name of the project."

In a research note to clients, 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.”

Neart na Gaoithe

NNG, located 15 kilometres off the east coast of Scotland in the Firth of Forth and spread over a 105 square kilometres 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.

Francesco Racheli, chief operating officer of the Saipem engineering and construction 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 wind farm developments and, more extensively, in the sphere of energy transition.”