The benefits of international best practice when partnered with local contracting know-how
By Alex Daniels, Director and Country Manager – New Zealand
The Te Mihi Geothermal Power Station project in New Zealand, which was constructed between 2011 to 2013, has been an important influence on my approach to the commercial management of construction projects.
New Zealand is a world leader in the generation of electricity from geothermal sources, which currently account for almost 20% of its total electricity production. In the 1950’s the Wairakei Geothermal Power Station was commissioned on the banks of the Waikato River, in Taupo, New Zealand. At the time it was only the second commercial geothermal power station in the world. In the early 2000’s it become clear that the original power station would eventually be decommissioned and replaced by a modern facility.
In 2011 I was appointed as the Commercial Manager for a Joint Venture comprised of SNC Lavalin (Canada) McConnell Dowell (New Zealand) and Parsons Brinkerhoff (at the time a subsidiary of Balfour Beatty). This Joint Venture had been awarded an EPC Contract to design, construct and commission a new 166 mega-watt power station, to partially replace the existing Wairakei station.
The project presented a great opportunity to return home from the US, where I had been involved in another power station project in the State of Maryland.
The Te Mihi Project, which was part of a broader steam field development in the area, represented a huge capital investment for Contact Energy, its Owner.
Whilst all contractors and engineers become invested (emotionally and financially) in the delivery of their projects, at the end of the day its most satisfying to be able to hand over an asset that the owner or operator can be proud of, and which will reliably perform its job over its lifespan.
This includes getting everything right from the “big ticket” items, such as the installation of the steam turbine generators, and transformers, all the way through to the minor details in the control room. And when things don’t go according to plan, the builder needs to work with the owner to get things right.
I learnt an enormous amount working on the Te Mihi Project, which encountered a number of significant technical and commercial challenges.
I developed a strong appreciation of the synergies that occur when international best practice is partnered with local contracting know-how.
I came to understand firsthand the positive impacts that large capital projects have on the regional economies around them. Wherever possible the Project engaged with the local supply chain and workforce, providing opportunities for employment and upskilling of trades.
I also learnt a lot about the complexity of international supply chains. The supplier of the steam turbine generator was a Japanese company, which had its assembly lines temporarily taken over by the Japanese government after the 2011 Fukushima earthquake, which put our slot on the production line at risk. We also had to deal with multiple force majeure events caused by the sinking of a container ship outside the Port of Tauranga, the threat of a volcanic ash eruption nearby, and the logistics of transporting precisely calibrated engineered items along rough forestry tracks.
One challenge of delivering a larger project, with multiple packages, is providing accurate detailed financial reporting, and having effective cost controls.
On a fixed sum job, every dollar counts.
I learnt that there is no substitute for the day to day grind involved in methodically administering a construction contract, including attending to the unglamourous and often undervalued tasks such as maintaining project registers, sending out notices on time, right though to matching purchase orders with delivery dockets irrespective of the value of the item. If the delivery team doesn’t stay on top of these things, they will always catch up with you. This is the same for any job, regardless of whatever risk management software, management accounting and forecasting tools, and contract model is in place.
It was great to see Contact Energy’s recent announcement that it is proceeding with the next stage of its geothermal development with the construction of the 155 MW Tauhara Geothermal Power Station. This project will again bring together a great combination of international best practice and local civil contractors. It’s a significant project for the Taupo region, and the country as a whole.