‘Force majeure’: Delays impact Ameresco’s 2.1GWh California BESS project for utility SCE

When the deal was announced, Energy-Storage.news noted that the timelines for completion handed to Ameresco and then by the company to FlexGen, the company it contracted to provide software and integration services (including inverters, but not batteries), were aggressive: work on all three of the four-hour duration systems needs to be substantially completed by 1 August 2022. 

SCE wanted the systems in place as quickly as possible to help mitigate the expected strain on the California grid of summer peak demands for electricity, which are challenging the state’s energy reliability. 

The developer said yesterday (10 April) that the COVID-19 lockdowns in several regions in China have had an “adverse impact” on the supply of the BESS equipment. Compounded by new Chinese policies on safe transport of lithium-ion batteries, which could cause further delays, Ameresco may not be able to complete the project in time.

Ameresco said it had reason to believe the delays amount to force majeure events, the legal term often heard during the first year of the COVID-19 pandemic in 2020 as it wreaked havoc on project timelines across energy storage and many other industries.       

According to the terms of the turnkey engineering, procurement, construction and maintenance agreement (EPCM Agreement) Ameresco signed with SCE, the force majeure clause would allow for the deadline to be extended without damages being owed for breach of contract, due to the delays being beyond the reasonable control of the contractor. 

Ameresco reaffirms 2022 guidance

SCE has been informed and negotiations are ongoing. Ameresco said various project milestones have been achieved despite challenging market dynamics, such as procurement of power electronics and construction activities ahead of the BESS equipment’s arrival are underway. 

The company is also trying to expedite shipping and handling, including through discussion with California’s Port of Long Beach.

In announcing its Q4 and full-year 2021 financial results in February, Ameresco said the SCE contract — the largest deal in the clean energy company’s history — drove a 36% uplift in quarterly revenues from its project activities. Shortly after that announcement, the company secured a US$262 million increase in its credit facility from lenders including Bank Of America to support work on the project for SCE, as well as fuel the company’s expansion.

Ameresco said yesterday that based on what it has observed of the situation in China, it does not expect the latest blow to impact previously offered revenue guidance for 2022 of US$1.83 billion to US$1.87 billion and adjusted EBITDA of between US$200 million to US$210 million.  

The battery storage industry has been hit by severe supply chain challenges based largely on the rapidly rising cost of lithium, which in simple terms have been caused by rapidly rising demand, particularly from the EV sector. 

These have been magnified greatly by the pandemic, which is affecting shipping and supply chains more generally. However, while Ameresco executives did refer to supply chain shortages in a conference call with analysts to explain its full-year and Q4 2021 financial results, this latest development appears to be more directly related to the current lockdown situation in China, based on what the company said yesterday.    

This story has been amended from its original form to more accurately reflect FlexGen’s involvement in the project.