Project delivery & counterparty resilience — Contracts, delivery and contagion

As Australia accelerates delivery of major energy infrastructure, organisations across the energy sector are increasingly exposed to financial distress within global supply chains and delivery partners. As contracting models move toward more shared risk, boards need a clear view of who is critical to delivery, what costs each party can absorb, and the choices available to them if cost, timing or funding assumptions change.

Contractual rights matter because they shape those choices. A right to pass on costs, enforce a claim or replace a contractor must be tested against the commercial outcome the company wants. Any clause involving financial terms or calculations should be properly stress tested by accounting professionals. In some cases, supporting a contractor or renegotiating terms may preserve more value than enforcing a strict contractual position that risks failure or project disruption.

"Even if we can pass costs through, do we want to? An insolvent supplier can become the far more expensive outcome compared to a solvent counterparty with a recovery pathway." – Emma Boucher, Partner, Performance

If a change to contractual terms or additional funding is requested, protections, visibility and contingency arrangements should be considered. In today’s energy market, resilience is less about predicting distress and more about being prepared when it occurs. Connection, approvals, cost escalation, cost recovery and financing can all affect when an infrastructure project begins earning revenue. Boards need to understand these dependencies early to avoid delivery, funding and regulatory misalignment.

Boards and executives should:

• identify critical counterparties

• understand each counterparty’s financial capacity and operational role

• know which costs can be passed on and test whether contract protections support the project outcome in practice

• model downside early, including delays, cost escalation, connection and financing risk

• develop playbook contingencies - agree trigger points for support, replacement, direct payment, renegotiation or action

• monitor finance, project, legal, regulatory and commercial risks

• consider a portfolio approach to reduce execution risk.

"Renewables are sold as a cheap alternative to coal and gas. They might be cheap from a generation standpoint, but actually connecting them to the grid has been quite expensive." – Chris Davey, Partner, Performance

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How we help

McGrathNicol helps energy, mining and natural resources companies improve performance, manage risk, resolve disputes, and achieve stability and growth through every phase of the commodity and capital cycle. We work with a range of corporates, financiers, investors and government organisations across the sector. Our independent experts help these businesses navigate volatile commodity prices and rising costs, production challenges, capital scarcity, increasing regulatory obligations and security risks, and the structural shift toward the nation's longer term energy transition.