Supreme Court to rule on Glendoe hydro scheme damages claim

A £100 million compensation claim against a contractor following a tunnel collapse at a new Highland hydro-electric scheme is to go to the UK Supreme Court.

Earlier this year, energy firm SSE Generation won more than £100m in compensation in a claim against contractor Hochtief who designed and built the underground passage at the Glendoe site near Fort Augustus between 2006 and 2008.

The £140m Glendoe plant was officially opened by the Queen in June 2009 but operations had to be suspended when there was a collapse of rocks inside the tunnel, which carries water to the facility from a reservoir.

Under the construction project a head race tunnel (HRT) ran more than six kilometres from a reservoir at Glen Tarff to the turbine before a shorter tunnel then discharged water into Loch Ness.

Operations did not resume until three years later.

Read: Blog: Glendoe Tunnel – the collapse of reasonable skill and care? – Rebecca Barrass from MacRoberts looks at the litigation surrounding the project

In 2016 a commercial judge at the Court of Session in Edinburgh ruled against SSE in the substantial part of its claim.

Lord Woolman said he was satisfied that Hochtief did exercise reasonable skill and care in the project and that the collapse was an “employer’s risk event” but awarded £1m to reflect the period when the scheme was out of action.

But after an appeal by Perth-based SSE to three judges they ruled in favour of the firm earlier this year by two to one in their legal challenge.

Hochtief has applied to appeal the case to the UK Supreme Court and Lord Carloway, sitting with Lord Menzies and Lord Glennie, have granted permission for the move.

Kenny Mcbrearty QC, for Hochtief, argued that the action raised matters which met the test of general public importance and that guidance was required from the Supreme Court.

Blog: Glendoe Tunnel – the collapse of reasonable skill and care?

Rebecca Barrass

Rebecca Barrass looks at the litigation surrounding the Glendoe Hydro-Electric Scheme

In January 2009, energy giant SSE started operating the Glendoe Hydro-Electric Scheme. Opened officially by the Queen later that year, the scheme was cited as one of Scotland’s biggest civil engineering projects, capable of generating power for 250,000 homes every 24 hours. However, by August 2009, the scheme was no longer producing electricity. SSE discovered that the headrace tunnel, used to transport water from the reservoir to the turbine generators had collapsed and was completely blocked rendering the scheme inoperable.

SSE, losing substantial revenue, requested that the main contractor on the project, Hochtief Solutions AG, return to site and carry out remedial works. However, the parties were unable to agree on who should pay or how the works should be done. SSE then instructed BAM to undertake the works. The scheme didn’t operate for the best part of three years, and the remedial works cost a whopping £130m.

The works were governed by an NEC2 form of contract with option M, which stated “the Contractor is not liable for Defects in the works due to his design so far as he proves that he used reasonable skill and care to ensure that it complied with the Works Information”

SSE raised an action in the Court of Session to recover £137m from Hochtief, claiming that Hochtief were in breach of the Works Information and accordingly the collapse was a defect for which Hochtief was responsible. The case was heard by Lord Woolman, who decided that option M put an “important brake on liability”, finding that Hochtief had not guaranteed works and had instead only accepted the lesser obligation of “reasonable skill and care”. In other words, there was no “fitness for purpose” obligation and Hochtief only had to show that it had exercised reasonable skill and care when formulating the design. Ultimately the court found that Hochtief had exercised reasonable skill and care and as such the tunnel collapse was an Employer’s risk event for which SSE had to bear the cost.

Naturally, SSE, not content with the decision, appealed to the Inner House of the Court of Session where the case was re-heard by a panel of three judges, with the decision being handed down last month. Lord Glennie and Lord Menzies disagreed with the decision at first instance. Lord Glennie stated in his opinion: “I consider that the collapse of the tunnel was indeed due to a defect existing at takeover. Further, I consider that that defect was not due to the contractor’s design of the works but rather to the implementation of design. In those circumstances Option M is not engaged, and the defence of having used reasonable skill and care to ensure that that design complied with the Works Information is not available to the contractor.”

The court therefore found that the collapse was the result of a failure of Hochtief in their implementation of the design. Hochtief’s ability to show that they had exercised reasonable skill and care at the design stage did not protect them. The collapse amounted to a defect under the relevant terms of the contract for which Hochtief were liable.

The debate in relation to where, in design and build contracts, design obligations end and workmanship obligations begin has always been a complex one. Arguably the Court’s decision here has simply added to the ambiguity, causing more difficulties for employers, contractors and insurers alike. However, given the sums at stake – not small change, even for our energy and construction giants – it is not surprising that we will see the decision appealed in the Supreme Court. Until then? Parties need to think very carefully about the extent of the obligations they are undertaking pursuant to their contracts. It is not as simple as it might seem at first glance!

SSE wins £130m damages claim against contractor over hydroelectric scheme tunnel collapse

Court of Session

Perth-based energy giant SSE, which was seeking £130 million in damages from an engineering contractor following the collapse of a tunnel at a Fort Augustus hydro-electric scheme nearly a decade ago, has won its appeal over the affair.

By a majority of two-to-one, the Inner House of the Court of Session allowed a reclaiming motion by Scottish & Southern Energy (SSE) Generation against a Commercial Court ruling that Hochtief Solutions AG was not liable for the collapse at the Glendoe scheme in 2009, although the commercial judge at that stage had awarded £1 million to SSE to reflect the period during which the electricity generation scheme was out of operation.

The Lord President, Lord Carloway, sitting with Lord Menzies and Lord Glennie, heard that the Glendoe scheme, which was constructed between 2006 and 2008, was the biggest to be built in Scotland for many years.

It began operating in January 2009, but just seven months later it ceased to generate electricity.

SSE discovered that rock material had fallen into the tunnel over several months, leading to a complete blockage.

Having lost substantial amounts of revenue while the scheme was out of commission, SSE asked Hochtief to carry out the remedial works, but the two parties were unable to reach agreement about who should pay.

A dispute arose about whether the collapse was as a result of a defect in the design or in the construction.

In consequence, SSE instructed another engineering company, Royal BAM Group, to undertake the works, which took much longer to complete and cost far more than expected.

The scheme did not begin to generate electricity again until August 2012.

SSE sought to recover the £130m costs involved in the remedial works from Hochtief, the defenders, relying on various provisions in the contract to try to establish liability.

In its defence Hochtief contended that it had completed the works in accordance with the contract, and that SSE had assumed the risk of the collapse at takeover.

The collapse had occurred in a part of the tunnel that lay in a geological area known as the Conagleann Fault Zone (CFZ); a tear in the ground caused by an ancient earthquake and is an area in which rock conditions for tunnelling could be anticipated to be difficult.

The engineering geologists had been aware of the CFZ before construction began and had expected to find poor rock conditions there, but found none.

As a result they saw no reason to reinforce the tunnel perimeter in that section.

The collapse was caused by insufficient support.

Having heard the evidence of a number of experts in tunnelling construction, the commercial judge held that Hochtief was not liable, having been satisfied that the company exercised “reasonable skill and care”, but since the parties had agreed £1m as the ceiling figure for the lost income incurred by SSE, he awarded that sum.

SSE appealed, and Lord Menzies and Lord Glennie differed with the Lord President on the question of whether the collapse of the tunnel was due to a defect which existed at takeover, with Lord Glennie concluding that the defence of having used reasonable skill and care to ensure that the design complied with the works information was not available to the contractor.

In his Opinion, Lord Glennie wrote: “I consider that the collapse of the tunnel was indeed due to a defect existing at takeover. Further, I consider that that defect was not due to the contractor’s design of the works but rather to the implementation of that design.”

He added: “It follows from this, in my opinion, that the collapse of the tunnel was a contractor’s risk in terms of section 81.1 of the contract; and the defenders are liable to the pursuers for the costs of repairing the tunnel. On that basis I would allow the reclaiming motion.”

Lord Menzies stated that he found himself in complete agreement with Lord Glennie’s analysis and conclusion.

However, the Lord President considered that it could not be said that the commercial judge was “plainly wrong” in concluding that the defenders had exercised reasonable care in relation to their design of the head race part of the tunnel (HRT) and in determining, at the face, how it was to be implemented.

He said that the commercial judge had provided a chronology of events, starting with the scheme and going on to describe the contract, the construction, its collapse and the recovery project. He had provided specific sections on why the tunnel collapsed, the witnesses and burden of proof, whether (in relation to the works information or the design) there was a defect at takeover and the exercise of reasonable skill and care.

Lord Carloway added: “In each of these sections the reasoning of the commercial judge is generally clear and concise. It leaves the reader in no doubt about what his reasons for reaching a particular view were. That is not to say that the reasoning is as clear as it might have been on all the points raised, or that it might have been more expansive in certain areas, but it meets the legal test.”

Click here for the judges’ opinions.

Pick Everard helps power up offshore wind farm for SSE

Beatrice wind farmHistorical maritime buildings in the harbour of Wick in Caithness will be brought back into operation when renovated to act as the hub for one of the largest new offshore wind farms in the UK.

Work is well underway to build the £2.6 billion, 84 turbine offshore wind farm in the outer Moray Firth. Designed by world famous Scottish engineer Thomas Telford in 1807, the conservation of the onshore maritime buildings will play a key part in generating 588MW of sustainable energy from the wind farm to go into the grid.

Independent management, design and construction consultancy Pick Everard is part of the team who will be delivering the onshore aspects of the project alongside HRI/Munro Architects.

Inverness and Glasgow-based Pick Everard is delivering mechanical and engineering services for the £10 million land base which will service the windfarm commissioned by Beatrice Offshore Windfarm Ltd (BOWL). Once complete, the wind farm will power approximately 450,000 homes (around three times the number of homes in the Moray and Highland regions).

23rdJan__HRI-Architects_BOWL-Photomontage_045 low resDoug Soutar, director at Pick Everard, said: “This is such an exciting project to work on and one that is key in helping us to continue to deliver sustainable energy for the future.

“The onshore element of the project comprises the conservation, re-planning and part reconstruction of two blocks of the historic Old Pulteneytown area of Wick.

“These buildings are more than 200 years old and have a longstanding history of being used for maritime purposes. We are pleased to be helping to bring them back into service again following planning permission from the Highland Council.”

Wick has provided a safe haven for fishing, commercial, and leisure vessels for the last 150 years or so with the harbour consisting of three basins. The Inner and Outer Harbours are the main fishing and leisure berths, and the River Harbour is the commercial area.

Steve Wilson, senior project manager for SSE, said: “Renovation of the iconic Thomas Telford buildings in Wick is well underway and has been progressing well. These buildings will become our long term Operations and Maintenance base for Beatrice Windfarm.

“These Thomas Telford buildings are a symbol of Wick’s industrial and marine past so we are really pleased to be utilising them and in doing so help continue that legacy. We’ve been very pleased with the support there has been in the area.”

The Beatrice wind farm will be operational in 2019. It is one of the largest private investments ever made in Scottish infrastructure, bringing economic and community benefits to the area. Beatrice will also create opportunities with job creations across the region, skills training, investment in Scottish ports and harbours, supply chain opportunities and community benefit funding.

Agreement reached over Stronelairg legal battle costs

Court of Session

Court of Session

SSE and the John Muir Trust (JMT) have reached a settlement in relation to court expenses incurred due to a dispute over a planned wind farm in the Highlands.

In July last year, the Court of Session overturned a previous decision to halt development of the 67-turbine Stronelairg wind farm in the Monadhliath Mountains near Inverness.

As a result, the John Muir Trust ended its legal action against the project, stating the legal battle against the development had consumed a “significant amount of time and money”.

SSE then began the process of pursuing £350,000 in court costs’ settlements from the Trust.

However, the JMT has agreed to pay £50,000 in final settlement for the legal case.

The charity said: “This agreement, combined with the £75,000 agreed with the Scottish Government last month, ends our liability for the Stronelairg legal case. The Trust is extremely grateful to our legal team who supported us throughout and minimised their costs where possible.

“This is a positive outcome, and we are grateful to the many supporters of our Stronelairg campaign, who have enabled us to meet all of the legal costs from our existing campaign funds.”

SSE said it would pass on the full settlement to Visit Inverness Loch Ness, a not for profit organisation in the Great Glen. The funds will be used to contribute towards the South Loch Ness Trail, which is a project to complete a walking and cycling trail round the whole of Loch Ness.

Paul Cooley, SSE director of generation development, said: “We are pleased to reach a reasonable conclusion with the John Muir Trust on the issue of expenses for the Judicial Review process. We are also happy to be able to gift those funds to the excellent South Loch Ness Trail project which will allow many members of the local community and tourists alike to enjoy all the Loch has to offer for years to come.”

SSE added construction work on the Stronelairg wind farm is progressing well and the project is expected to be complete by October 2018.

Robertson’s Specialist Division eyes expansion following breakthrough deal

Craig Robertson

Craig Robertson

Robertson Group has secured work for energy giant SSE worth around £560,000 – marking the first time its Specialist Division will serve as a main contractor.

In January, Craig Robertson joined as managing director of Robertson Specialist Division with the remit of doubling turnover within two years.

The contract win marks a major step towards that goal, with the firm set to install external wall insulation at homes in the Dundee area on behalf of SSE.

Craig Robertson said: “This business has ambitious targets for growth and if we want to meet those goals then securing larger contracts is essential.

“In the past we have served as a sub-contractor, both for other businesses within Robertson Group and for external companies. This represents the first contract where we will be the main contractor and illustrates the positive progress we are making.

“And while much of our focus previously has been on providing joinery services, we’re now looking to add even more strings to our bow, with the work we will deliver for SSE an example of what we can offer clients.”

As a further sign of the firm’s expansion, it has recruited a new commercial manager who will work closely with Craig to identify and secure larger contracts across Scotland for Robertson Specialist Division.

Jason Paynter joined the firm earlier this month from Tilecraft, where he served in a similar role. A trained quantity surveyor and supply chain manager, he previously worked for Morris and Spottiswood.

Craig added: “When I joined in January I said if we wanted to achieve our goals we’d need to nurture some of the best young talent in the industry. Jason fits that bill, although he also brings plenty of experience which he has gained over the last decade.”

Hochtief cleared in SSE £130m damages claim over Glendoe tunnel collapse

Glendoe SSEEnergy firm SSE has lost a court battle over a £130 million damages claim following the collapse of a tunnel at its Glendoe hydro scheme.

It took legal action against engineering contractor Hochtief which carried out tunnelling work at the site near Fort Augustus.

A rock fall in the tunnel carrying water from the scheme reservoir to the power station in August 2009 caused the hydro scheme to close just months after it had opened. Operations did not resume at the scheme until almost three years later.

A judge at the Court of Session in Edinburgh ruled that the main part of the SSE claim has failed.

Lord Woolman said: “I am satisfied that Hochtief did exercise reasonable skill and care.

“I reject SSE’s case as it depends on the accumulation and interpretation of all the data that has been obtained since the collapse. Put short, it is founded on hindsight.

“The collapse was not due to a defect that existed at take over. Accordingly, it was an employer’s risk event.”

But the judge also held that the contractor did breach obligations by not returning to repair the tunnel and said he was minded to award SSE £1m “low availability damages” – the capped limit for compensation if the hydro plant failed to achieve certain targets in the two years after completion.

An SSE spokeswoman said: “SSE is disappointed with the ruling by the Court of Session on the compensation claim relating to repair work at our Glendoe Hydro Scheme near Fort Augustus in the Highlands. We will review the decision in more detail and assess our options.”

Financial uncertainty stalls £800m Highland hydro power plant

SSEPlans to build an £800 million hydro power station in the Highlands have stalled over uncertainty over the financial viability of pumped hydro projects.

Energy firm SSE won approval for the Coire Glas plant at Loch Lochy, north of Fort William, in 2013.

The project could have more than doubled the capacity of pumped hydro in the UK, producing up to 600MW of electricity.

SSE said “a number of commercial and regulatory challenges” will have to be overcome before a final decision is made, which is unlikely to be this year.

The firm previously raised concerns about a lack of clarity over government policy regarding pumped hydro and said the market “needs a minimum level of confidence to invest”.

SNP energy spokesman Callum McCaig said pumped storage schemes like Coire Glas had “an important role to play in the energy mix, particularly with the increasing deployment of renewable technologies”.

He added: “In the four months since the European Union referendum we have not heard anything from the UK Government as to how they will address energy policy; it is clear the inaction from Westminster is putting investment decisions like SSE’s under question.

“The best solution for security of supply, cost to the consumer, and carbon reduction would be for the UK to stay part of the EU’s energy union, but with Theresa May’s government being deathly silent on the issue, it’s impossible to tell if this is even a priority for them.”

Pumped hydro storage schemes involve two linked reservoirs at different heights.

When demand for power is low, water is pumped from the lower loch to the upper loch and stored.

Later, the water is released and allowed to flow back downhill, turning turbines and generating power when demand is high.

Report outlines ‘key benefits’ of pumped storage hydro investment

The ScottishPower Cruachan Hydroelectric Power Station on Loch Awe, near Dalmally

The ScottishPower Cruachan Hydroelectric Power Station on Loch Awe, near Dalmally

Investing in pumped-storage hydroelectricity can have “key benefits” for the UK’s energy system, according to a new report.

The Benefits of Pumped Storage Hydro to the UK study sets out 20 key perks of expanding the technology in the UK.

Funded by the Scottish Government, SSE, and ScottishPower, the DNV GL study reveals 24GWh of pumped storage capacity currently contributes to the UK’s electricity system, split across four sites largely in Scotland. Planning permission is also in place for another 50GWh worth of projects.

Key benefits include alleviating network congestion costs by storing excess generation in constrained zones for later use, as well as avoiding waste of low carbon electricity during periods of low demand. In addition, pumped storage hydro is the most economical storage technology for the long discharge periods required to contribute to security of supply.

Mike Seaton, SSE’s director of development, said it is clear that pumped storage plays a “significant role” in making the UK’s electricity system more efficient, reliable and secure.

“At a stroke, SSE’s consented 30GWh Coire Glas project would more than double the total amount of current pumped storage capacity in the UK,” he said.

Hannah Smith, policy officer for Scottish Renewables, added: “It is important that government creates the right policy environment to encourage investment.

“We would like to see a more level playing field for pumped storage hydro which reflects the value it can bring to the electricity system.”

Energy minister Paul Wheelhouse has now called on the UK government to work towards removing investment barriers that prevent new pumped storage hydro projects from being built.

“This report outlines the huge opportunity around pumped storage hydro. This tried and tested technology can support peak demand and effectively store greater levels of electricity at times when renewable energy output is high but demand is low,” he said.

“This part of the hydropower industry needs a supportive policy and market framework – such as a ‘cap and floor’ mechanism, as is used for interconnectors – and I call upon the UK government to heed calls from the sector and work with the industry and Scottish Government to remove investment barriers that prevent new pumped storage hydro projects being built.”

Image courtesy of ScottishPower

Interserve signs £7.5m deal with SSE and SGN

Domestic-energy-use--fuel povertyInterserve has secured a £7.5 million contract to provide cleaning services for energy company SSE and gas distribution firm SGN.

The three-year account will see Interserve provide daily cleaning, window cleaning and periodic cleaning services to all of SSE and SGN’s 70 corporate offices located across the UK.

The facilities management group already provides asbestos removal services to around 90 industrial sites for both companies.

Under the contract, Interserve said it would roll out new management and timekeeping systems that will “deliver significant efficiencies and synergies” for both SSE and SGN. The firm will also transfer around 200 people to their team under the terms of the contract.

Jeff Flanagan, managing director of commercial at Interserve, said: “We look forward to starting a new partnership with SSE and SGN. Our experience of delivering consistent, cost-effective cleaning services for customers with large and diverse corporate estates makes us the perfect choice for this account, and we look forward to building on this relationship in the years to come.”