Power Plant O&M Contract Disputes in Turkey: Performance Failures, Termination and Compensation – 2026 Updated Guide

Facing a power plant O&M contract dispute in Turkey? Learn how foreign energy investors can pursue performance claims, availability damages, lost generation compensation, termination rights and remedies against O&M contractors under the 2026 Turkish legal framework.

Operation and maintenance agreements are among the most important long-term contracts affecting the profitability of power plants in Turkey. Once construction and commissioning have been completed, the commercial value of a solar, wind, storage, hydroelectric, geothermal or conventional power plant depends heavily on reliable operation, preventive maintenance, rapid fault response and achievement of agreed availability and performance standards.

When an O&M contractor fails to perform these obligations, the consequences can be substantial. Repeated equipment downtime, inadequate preventive maintenance, slow repairs, failure to maintain spare parts, improper operation or poor technical management may reduce electricity generation and cause significant revenue losses.

For foreign energy investors, the central legal questions are whether the O&M contractor breached measurable contractual obligations, whether the contractor caused the generation loss, whether liquidated damages or additional compensation can be claimed, and whether repeated performance failures justify termination and replacement of the contractor.

These issues have increasing commercial significance in Turkey’s expanding electricity market. By the end of June 2026, Turkey’s installed electricity capacity had reached 126,113 MW, including 21.6% solar and 12.1% wind capacity. The country had 43,133 electricity generation facilities, including unlicensed plants.

What Is a Power Plant O&M Agreement?

An O&M agreement regulates the responsibilities of the contractor operating and maintaining an electricity generation facility after construction or commercial operation.

The precise scope varies substantially between projects.

Some contractors provide comprehensive operation and maintenance services, including plant operation, preventive maintenance, corrective maintenance, spare-parts management, inspections, reporting, regulatory coordination and emergency response.

Other agreements provide only limited maintenance services while the project owner retains operational responsibility.

The scope of services is therefore the starting point for every dispute.

An investor cannot successfully claim that the O&M contractor caused poor plant performance without establishing that the relevant task actually fell within the contractor’s contractual responsibilities.

Why Do O&M Contract Disputes Arise?

O&M disputes commonly arise from poor plant availability, repeated equipment failures, delayed repairs, inadequate preventive maintenance, insufficient staffing, failure to maintain spare parts, failure to follow manufacturer recommendations, improper reporting or failure to identify developing technical problems.

Disputes may also arise because the parties interpret performance guarantees differently.

For example, the owner may calculate availability based on all hours during which the plant was capable of generating electricity, while the contractor may exclude grid outages, curtailment, force majeure, manufacturer defects or owner-caused downtime.

These exclusions can materially change the calculation.

For this reason, the O&M agreement should define availability, excluded events, measurement periods and calculation methodologies precisely.

Performance Guarantees in O&M Agreements

Performance guarantees are among the strongest contractual protections available to power plant owners.

Depending on the technology and contract structure, the O&M contractor may guarantee minimum technical availability, plant availability, response times, repair times, performance ratios or other operational metrics.

For solar projects, the agreement may focus on plant availability, inverter availability and performance ratio.

Wind O&M agreements frequently emphasize turbine availability and response to turbine faults.

Storage projects may include availability, round-trip efficiency, capacity retention and operational response requirements.

The important point is that performance standards should be objective and measurable.

A general obligation to “operate the facility properly” is significantly more difficult to enforce than a precisely defined contractual KPI.

2026 Energy Market Context

Turkey’s electricity generation sector has continued expanding rapidly. Official Ministry data updated in July 2026 records 126,113 MW of installed capacity by the end of June, with solar accounting for 21.6%, wind for 12.1%, hydroelectricity for 25.6%, natural gas for 19.7% and coal for 17.5%.

This growth increases the importance of professional asset management and effective O&M arrangements, particularly for international investors purchasing operational renewable energy portfolios.

An investor acquiring an operating project should therefore examine O&M performance as carefully as the generation license, grid connection and land rights.

A poorly maintained power plant can carry substantial hidden liabilities even where its regulatory position appears secure.

What Constitutes an O&M Performance Failure?

Not every reduction in electricity generation constitutes an O&M breach.

A solar plant may produce less electricity because irradiation was lower than forecast. A wind farm may experience unusually weak wind conditions. A generation facility may also be curtailed because of grid constraints.

The correct legal question is whether the O&M contractor failed to perform an obligation within its contractual control.

Examples may include failure to conduct scheduled preventive maintenance, failure to respond to alarms, unreasonable repair delays, failure to replace defective components, insufficient technical staffing or failure to follow manufacturer maintenance procedures.

The investor must therefore establish both breach and causation.

Preventive Maintenance Failures

Preventive maintenance disputes can be particularly serious because the financial consequences may emerge gradually.

The contractor may fail to perform scheduled inspections, lubrication, cleaning, testing, torque checks, thermal imaging, oil analysis, blade inspections or other preventive procedures.

Initially, the plant may continue operating normally.

Months later, a major component may fail.

The investor may then argue that proper preventive maintenance would have identified or prevented the failure.

Maintenance logs, manufacturer manuals, inspection schedules, SCADA records and contractor reports can become decisive evidence in determining responsibility.

Corrective Maintenance and Repair Delays

O&M agreements commonly impose response and repair obligations when equipment fails.

The contractor may be required to respond to alarms within a defined period, attend the site within a specified time and use commercially reasonable efforts to restore operation.

Where the agreement contains guaranteed response or restoration periods, failure to meet them may trigger contractual remedies.

The financial impact can be significant.

If an inverter, turbine or transformer remains unavailable for several weeks because the contractor failed to organize repairs promptly, the project owner may suffer substantial generation losses even though the original equipment defect was not caused by the O&M contractor.

The legal claim may therefore focus on excessive downtime rather than the initial equipment failure.

Spare Parts Management

Spare-parts obligations frequently become a major source of O&M disputes.

The contractor may be responsible for maintaining minimum inventories of critical spare parts or ensuring rapid procurement.

If a low-cost component failure keeps a multimillion-dollar generation asset offline for weeks because the required spare part was never stocked, the owner may argue that the contractor failed to satisfy its inventory-management obligations.

The agreement should identify which party bears responsibility for critical spares, consumables and major replacement components.

It should also establish minimum inventory requirements where appropriate.

Can the Investor Claim Lost Generation?

Potentially.

Lost generation can become one of the largest components of an O&M dispute because prolonged downtime directly affects electricity revenues.

However, the investor must prove what the plant would reasonably have generated without the contractor’s breach.

For solar facilities, relevant evidence may include irradiation data, historical generation, comparable inverter output, SCADA information and plant availability.

For wind projects, wind measurements, turbine power curves, neighboring turbine output and historical production may be important.

The calculation must exclude generation that would have been lost regardless of the contractor’s breach.

Grid curtailment, grid outages, force majeure events and insufficient renewable resources may therefore need to be separated from contractor-caused losses.

Availability Liquidated Damages

Many sophisticated O&M agreements use liquidated damages to address availability failures.

For example, the contractor may guarantee annual technical availability of a specified percentage. If actual availability falls below that level for reasons attributable to the contractor, a contractual formula may determine the compensation payable to the project company.

This can significantly simplify claims.

Instead of proving every element of actual lost revenue, the owner can rely on the agreed contractual mechanism, subject to the wording and enforceability of the provision.

Investors should nevertheless examine whether availability liquidated damages constitute the exclusive remedy.

If the agreement states that they are the owner’s sole monetary remedy for availability failure, recovery of additional lost-generation damages may become significantly more difficult.

Compensation Under Turkish Contract Law

Where Turkish law governs the O&M agreement, general principles of the Turkish Code of Obligations become relevant alongside the negotiated contract.

The Turkish Code of Obligations provides contractual remedies where obligations are not properly performed and also contains rules relevant to contracts involving works and contractor performance.

For example, Article 473 permits an owner, under specified circumstances, to take action where it becomes clear during performance that the work will be defective or contrary to the agreement because of the contractor’s fault. Articles 474 and 475 regulate inspection, notification and remedies for defective work, including repair, price reduction and, in appropriate cases, withdrawal, while preserving compensation rights under general principles.

The exact legal classification of an O&M agreement depends on its structure and services. Long-term O&M agreements may contain elements of several contractual types rather than fitting perfectly within a single statutory category.

For this reason, the negotiated contract remains particularly important.

Liability Caps and Excluded Losses

O&M contractors frequently seek to limit their financial exposure.

The agreement may contain an overall annual liability cap, a separate cap for availability liquidated damages and exclusions concerning indirect damages, consequential losses or lost profits.

Foreign investors should examine these provisions before calculating the economic value of a claim.

A project may have suffered millions in lost electricity revenue while the contractor’s maximum contractual liability is substantially lower.

The relationship between liquidated damages, general damages, indemnities and liability caps should therefore be analyzed carefully.

Can Repeated Performance Failures Justify Termination?

Potentially.

O&M agreements commonly contain termination rights for persistent performance failures, repeated failure to achieve guaranteed availability, material breach, abandonment, insolvency or failure to remedy a default within an agreed cure period.

Termination should nevertheless be approached carefully.

The project owner must establish that the contractual termination threshold has actually been satisfied and comply with notice and cure procedures.

A premature or procedurally defective termination can expose the investor to counterclaims.

The owner should therefore build a clear record of performance failures, notices, cure periods and contractor responses before exercising termination rights.

Cure Notices Before Termination

A properly drafted cure notice can become one of the most important documents in an O&M dispute.

The notice should identify the contractual obligation breached, relevant performance data, previous correspondence and corrective action required.

It should also specify the applicable cure period where required.

General complaints that the contractor’s performance is “unsatisfactory” may provide insufficient protection.

Objective data is far stronger.

Availability percentages, response-time records, maintenance schedules, downtime data and repeated failures should be documented precisely.

Replacing the O&M Contractor

Termination is only useful if the project can continue operating safely.

Before terminating an O&M agreement, the investor should develop a transition strategy.

The replacement contractor may require access to technical records, SCADA systems, maintenance history, passwords, spare-parts inventories, manufacturer correspondence and operating manuals.

The existing agreement should therefore contain effective handover obligations.

The owner should also determine whether manufacturer warranties or long-term service arrangements depend on maintenance being performed by authorized personnel.

Replacing the contractor without addressing these issues can create new warranty disputes.

Equipment Damage Caused by Poor Maintenance

O&M failures may result not merely in temporary downtime but permanent equipment damage.

For example, inadequate lubrication may contribute to gearbox damage, failure to respond to overheating alarms may damage an inverter, or inadequate inspection may allow a developing mechanical problem to become catastrophic.

In such cases, the owner may seek repair or replacement costs in addition to lost-generation damages, subject to the agreement and applicable law.

Causation will usually be heavily disputed.

Independent technical experts should therefore inspect damaged equipment before major repairs destroy evidence.

O&M Contractor and Manufacturer Disputes

The O&M contractor may argue that the underlying problem is a manufacturer defect.

The manufacturer may respond that inadequate maintenance caused or aggravated the failure.

This three-party dispute is common in operational energy projects.

The project company should preserve claims against both parties until the technical cause has been established.

Warranty notices should also be issued within applicable deadlines.

Allowing the O&M contractor and manufacturer to blame each other for months can result in expired contractual rights.

Insurance and O&M Failures

Insurance policies should also be reviewed after major operational failures.

Machinery breakdown, operational all-risk or business interruption coverage may respond to certain events depending on the policy terms.

However, insurance does not automatically eliminate the contractor’s liability.

Where an insurer compensates the project company, subrogation issues may arise against the responsible contractor.

Contractual claims and insurance claims should therefore be coordinated carefully.

O&M Disputes During Power Plant Acquisitions

Foreign investors acquiring an operational power plant should conduct detailed O&M due diligence.

The buyer should examine historical availability, generation data, maintenance reports, recurring faults, outstanding work orders, spare-parts inventories, contractor disputes, warranty claims and termination rights.

The investor should also determine whether performance liquidated damages have accrued but remain unpaid.

The acquisition agreement should regulate whether these claims remain with the project company and whether the seller has disclosed all material O&M defaults.

Historical maintenance deficiencies can create substantial post-closing liabilities.

Evidence Required for an O&M Compensation Claim

Successful O&M claims are usually evidence-intensive.

Important evidence may include SCADA data, maintenance logs, alarm histories, work orders, contractor reports, spare-parts records, manufacturer manuals, inspection reports, photographs, electricity generation records and correspondence.

Independent experts may need to determine whether proper maintenance would have prevented the failure and how much additional electricity the plant would have generated.

The investor should preserve this evidence before terminating the contractor or allowing major repairs to proceed.

Arbitration and Litigation

International O&M agreements frequently contain arbitration clauses, although some contracts provide for proceedings before Turkish courts.

The dispute-resolution clause should be reviewed before formal action begins.

The agreement may require negotiation, expert determination or another preliminary dispute procedure.

Technical expert evidence will often be central to disputes involving availability calculations, equipment damage and lost generation.

Fırat Fesih Kaya advises foreign investors on the contractual and regulatory dimensions of energy project disputes, including O&M performance claims, contractor termination, compensation, project acquisitions and related dispute-resolution proceedings.

Frequently Asked Questions

1. Can an O&M contractor be liable when a power plant generates less electricity than expected?

Potentially. The investor must establish that the reduced generation resulted from a breach within the O&M contractor’s contractual responsibility rather than weather, grid curtailment, equipment defects outside its responsibility or another excluded event.

2. Can a foreign investor claim lost electricity revenue from an O&M contractor?

Potentially. The contract must permit the relevant recovery, and the investor must establish breach, causation and compensable loss. Liability caps and lost-profit exclusions should also be reviewed.

3. What are availability liquidated damages?

They are predetermined contractual payments that may become payable when the plant or equipment fails to achieve a guaranteed availability level for reasons attributable to the O&M contractor.

4. Can repeated maintenance failures justify termination?

Potentially. Persistent performance failure, material breach or failure to remedy defaults may trigger contractual termination rights. Notice and cure requirements must be followed carefully.

5. Who is responsible if poor maintenance damages expensive equipment?

The O&M contractor may potentially be responsible where the investor can prove that inadequate maintenance caused the damage and the relevant activity fell within the contractor’s contractual obligations.

6. Can the O&M contractor blame the equipment manufacturer?

Yes, and this is common. An independent root-cause investigation may be required to distinguish manufacturing defects from inadequate maintenance or operation.

7. What happens to manufacturer warranties after the O&M contractor is replaced?

This depends on the warranty terms. Investors should determine whether authorized maintenance requirements or other conditions could be affected before replacing the contractor.

8. What evidence is needed for an O&M performance claim?

SCADA records, maintenance logs, alarm histories, work orders, generation data, technical inspections, correspondence and independent expert analysis can all be important.

9. What should a foreign investor do before terminating an O&M agreement?

The investor should document the breaches, review termination thresholds, issue required notices, preserve technical evidence, calculate compensation claims and prepare a transition plan for a replacement contractor.

Legal Support for Power Plant O&M Disputes in Turkey

O&M contractor failures can materially reduce electricity generation, damage valuable equipment and undermine the long-term profitability of an energy investment. Early legal and technical intervention is particularly important where performance failures are recurring or the investor is considering termination.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, international energy companies, renewable energy developers, lenders and power plant owners in O&M performance disputes, availability claims, lost generation compensation, equipment damage claims, contractor termination, replacement arrangements, power plant acquisitions, arbitration and litigation in Turkey.

If your solar, wind, storage, hydroelectric or other power plant is suffering from inadequate maintenance, excessive downtime, repeated operational failures or poor O&M contractor performance, you may contact our office for a project-specific legal assessment. Working with experienced legal counsel and independent technical experts can help preserve contractual rights, establish responsibility, quantify losses and determine whether remediation, compensation or termination provides the strongest solution.

Phone: +90 312 434 22 22
Mobile Phone: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No: 221, Yildirim Tower No: 148, 06520 Balgat, Cankaya, Ankara, Turkey