EPC Contractor Delays a Power Plant in Turkey: Liquidated Damages and Termination Rights – 2026 Updated Guide

Is an EPC contractor delaying your power plant project in Turkey? Learn about delay liquidated damages, termination rights, performance security, extension-of-time disputes, lost revenue claims and legal remedies available to foreign energy investors in 2026.

Construction delays are among the most serious risks facing foreign investors developing power plants in Turkey. A solar, wind, storage, hydroelectric, natural gas or other generation project may have secured financing, land rights, regulatory approvals and grid capacity, yet delays caused by the engineering, procurement and construction contractor can prevent the facility from reaching mechanical completion, provisional acceptance or commercial operation on schedule.

The financial consequences can be substantial. Delayed commercial operation may result in lost electricity revenues, additional financing costs, extended project management expenses, delayed debt repayment, penalties under other project agreements and potential regulatory consequences.

For foreign energy investors, the central questions are therefore whether the EPC contractor is legally responsible for the delay, whether delay liquidated damages can be claimed, whether additional damages remain recoverable and when the delay becomes serious enough to justify termination.

These questions have particular commercial significance in 2026. Turkey’s installed electricity capacity reached 126,113 MW by the end of June 2026, including 21.6% solar and 12.1% wind capacity, while the number of electricity generation facilities reached 43,133. (Enerji Bakanlığı) Against this expanding investment environment, properly allocating construction and completion risk remains essential for international project sponsors.

Why Do Power Plant EPC Delays Occur?

Power plant construction delays can result from engineering deficiencies, late procurement, equipment manufacturing problems, insufficient personnel, subcontractor failures, logistics problems, defective works, commissioning failures or poor project management.

However, not every delay is automatically attributable to the EPC contractor.

Projects may also be delayed because of owner-requested variations, late site access, grid connection problems, administrative approvals, force majeure events, changes in law, exceptional weather conditions or circumstances expressly allocated to the employer under the EPC contract.

The first legal question is therefore not simply whether the project is late. The investor must determine who bears contractual responsibility for the event that caused the delay.

Scheduled Completion and Commercial Operation Dates

A well-drafted EPC contract should establish a clear contractual timetable.

Important milestones may include notice to proceed, engineering completion, equipment delivery, mechanical completion, energization, testing, provisional acceptance and commercial operation.

The contract should also identify the scheduled completion date and define exactly what the contractor must achieve by that date.

Ambiguous completion definitions can create major disputes. A contractor may argue that construction was substantially complete even though the plant could not pass performance tests or commence commercial operation.

Foreign investors should therefore ensure that contractual completion is linked to objective and measurable requirements.

When Does the EPC Contractor Become Liable for Delay?

Contractor liability generally depends on the terms of the EPC agreement and the applicable governing law.

Where Turkish law applies, the Turkish Code of Obligations provides the general contractual framework, while the EPC contract usually contains the detailed allocation of construction and delay risk.

The investor should establish the contractual completion date, identify the actual delay period, determine whether an extension of time was validly granted and separate contractor-caused delay from excusable delay.

If the contractor fails to achieve completion by the adjusted contractual deadline for reasons within its responsibility, delay remedies may become available.

What Are Delay Liquidated Damages?

Delay liquidated damages are predetermined amounts payable when the contractor fails to achieve a specified milestone by the contractual deadline.

Instead of requiring the employer to prove its actual financial loss for every day of delay, the EPC contract may establish a daily or weekly amount or percentage payable during the delay period.

For example, the contract might provide that the contractor must pay a specified percentage of the EPC contract price for each week of culpable delay, subject to an overall cap.

This mechanism provides greater predictability for both parties.

For the investor, it reduces the evidentiary burden associated with proving financing costs, lost revenues and other delay losses. For the contractor, it can define and limit its financial exposure.

Liquidated Damages and Penalty Clauses Under Turkish Law

The legal characterization of liquidated damages should be examined carefully where Turkish law governs the EPC agreement.

Depending on the wording and function of the clause, an agreed delay payment may interact with Turkish-law rules governing contractual penalties and damages. The contract should therefore be drafted so that the trigger, calculation methodology, maximum liability and relationship with additional damages are clear.

Investors should avoid assuming that the label used in an international EPC template automatically determines the clause’s legal treatment under Turkish law.

Particular attention should be paid to whether the agreed amount is the exclusive remedy for delay or whether the employer retains the right to pursue additional damages where legally available.

Can the Employer Claim More Than Liquidated Damages?

Potentially, but the answer depends heavily on the contract and applicable law.

Many EPC contracts state that delay liquidated damages constitute the employer’s sole and exclusive monetary remedy for ordinary delay. Other agreements preserve additional damages in defined circumstances.

The distinction becomes particularly important when actual losses substantially exceed the liquidated damages cap.

Suppose a project suffers prolonged delay and the investor loses significant electricity revenues while also paying additional financing and project management costs. If the EPC agreement limits recovery to a relatively small delay liquidated damages cap, the contractual limitation may become one of the central issues in the dispute.

Foreign investors should therefore negotiate this issue before signing the EPC contract.

Can Lost Electricity Revenue Be Claimed?

Potentially, subject to the contractual allocation of liability and applicable law.

A delayed commercial operation date can prevent the project from selling electricity during a period in which it would otherwise have been operational. However, the investor must establish whether lost generation or lost profit is recoverable under the EPC agreement.

Many international EPC contracts contain exclusions of indirect or consequential damages and may specifically address lost profits or lost revenues.

If such losses remain recoverable, proving them requires technical and financial evidence. The claimant may need to demonstrate the date on which the facility would have become operational without contractor delay, expected generation, applicable electricity prices and other relevant revenue assumptions.

Any concurrent owner-caused or grid-related delay must also be separated from contractor-caused delay.

Extension-of-Time Claims

One of the most common defenses raised by EPC contractors is entitlement to an extension of time.

The contractor may argue that completion was delayed because of force majeure, changes in law, employer variations, delayed site access, grid problems or other excusable events.

The EPC contract should define both the substantive grounds and procedural requirements for extension-of-time claims.

Notice provisions are particularly important.

A contractor may be required to notify the employer within a specified number of days after becoming aware of a delay event and subsequently provide detailed supporting information.

Where the contractor fails to comply with contractual notice requirements, the employer may argue that the claimed extension is barred or restricted, subject to the contract and applicable law.

Concurrent Delay Disputes

Power plant projects frequently involve more than one cause of delay.

For example, the EPC contractor may have delayed inverter installation while grid infrastructure was simultaneously unavailable. The contractor may then argue that even without its own breach, the plant could not have achieved commercial operation.

This creates a concurrent-delay dispute.

A detailed critical-path analysis may become necessary to determine which events actually affected project completion.

Contemporaneous schedules, progress reports, correspondence, meeting minutes, procurement records and construction records can become decisive evidence.

Foreign investors should therefore preserve project documentation continuously rather than attempting to reconstruct the delay history only after the dispute begins.

Force Majeure and EPC Delay

Force majeure provisions can significantly affect delay liability.

Depending on the contract, qualifying events may entitle the contractor to additional time and, in some cases, additional costs.

However, an event should not automatically be treated as force majeure merely because it made performance more expensive or difficult.

The contract should be examined to determine the definition of force majeure, foreseeability requirements, mitigation duties, notification obligations and consequences of prolonged force majeure.

Supply-chain problems require particular scrutiny. A contractor cannot necessarily rely on ordinary procurement difficulties where those risks were contractually allocated to the contractor.

Delay Caused by Subcontractors or Suppliers

EPC contractors frequently rely on extensive networks of subcontractors and equipment suppliers.

A turbine manufacturer may deliver late. A transformer supplier may fail to meet the production schedule. A civil subcontractor may fall behind construction milestones.

Under a properly structured turnkey EPC arrangement, these problems generally do not automatically transfer construction risk to the project owner.

The EPC contractor’s responsibility for subcontractors and suppliers should be expressly regulated.

Otherwise, the investor may find itself drawn into disputes between multiple project participants while commercial operation continues to be delayed.

Delay Liquidated Damages Caps

EPC agreements commonly impose a maximum amount of delay liquidated damages.

For example, liability may be capped at a defined percentage of the EPC contract price.

Once the cap is reached, the investor must determine what happens next.

A well-drafted agreement may provide that reaching the maximum delay liquidated damages amount constitutes a termination trigger or gives the employer additional contractual rights.

Without such a provision, the contractor may reach its maximum financial exposure while the project remains unfinished.

This is why the relationship between liquidated damages and termination rights should be negotiated as one integrated risk-allocation mechanism.

When Can the Investor Terminate the EPC Contract?

Termination is one of the most serious remedies available to a project owner and should not be exercised without careful legal analysis.

The EPC agreement may allow termination where the contractor abandons the works, fails to proceed with due diligence, becomes insolvent, commits a material breach, fails to remedy a default within the contractual cure period, exceeds the maximum permitted delay or fails to achieve specified long-stop milestones.

Termination rights may also arise under applicable law depending on the circumstances.

The investor must comply precisely with contractual notice and cure procedures.

Wrongful termination can expose the project company to substantial counterclaims from the contractor.

Termination for Contractor Default

Before terminating for default, the project company should establish a detailed documentary record.

The employer should identify the contractual breach, relevant milestone, delay period, previous notices, cure opportunities and contractor responses.

Where the agreement requires a notice to cure, the investor should ensure that the notice complies with contractual form, delivery and timing requirements.

The termination notice itself should identify the contractual basis for termination clearly.

Informal correspondence expressing frustration with the contractor should not be treated as a substitute for a properly structured contractual default process.

What Happens After EPC Termination?

Termination does not solve the project automatically.

The investor must determine how construction will be completed, whether replacement contractors can access the site, whether designs and engineering documents can be used, whether equipment warranties remain valid and whether subcontractors can be transferred.

The EPC contract should regulate ownership and use of drawings, software, engineering documentation, materials, equipment and intellectual property following termination.

The employer may also need the right to take over subcontracts.

Without effective step-in and takeover provisions, termination can create an even longer project delay.

Performance Bonds and Security

Performance security becomes particularly important when an EPC contractor is seriously delayed.

The project company may hold a performance bond, advance payment guarantee, parent company guarantee or retention amount.

Before exercising termination rights, the investor should review the conditions and expiry dates of all available security.

If the performance bond is close to expiry, urgent action may be required.

A strong damages claim against an insolvent contractor may have little practical value without effective security.

Contractor Insolvency During Construction

Financial distress can transform an ordinary delay into a major project crisis.

Warning signs may include unpaid subcontractors, declining workforce levels, delayed equipment orders, requests for unusual advance payments and repeated schedule revisions.

Foreign investors should respond quickly.

The EPC contract should be reviewed for insolvency-related termination rights, security enforcement, ownership of equipment, rights over materials already paid for and takeover of subcontractors.

Waiting until formal insolvency proceedings begin may significantly reduce the investor’s options.

Regulatory Consequences of EPC Delays

Construction delays may also affect regulatory obligations.

Licensed energy projects can be subject to project-specific regulatory milestones, licensing conditions and other obligations. A delay in construction should therefore be assessed not only under the EPC contract but also under the project’s regulatory timetable.

This is particularly important given the continuing expansion of Turkey’s electricity market. By June 2026, solar represented 21.6% and wind 12.1% of national installed capacity. (Enerji Bakanlığı)

If an EPC delay threatens a regulatory deadline, the project company should examine available regulatory procedures immediately rather than waiting until the contractual dispute is resolved.

Evidence Needed for an EPC Delay Claim

Strong EPC delay claims depend on contemporaneous evidence.

Important documents may include the baseline construction schedule, updated schedules, progress reports, site records, correspondence, meeting minutes, engineering submissions, procurement records, delivery documentation, variation orders, extension-of-time notices, commissioning records and expert delay analysis.

For substantial disputes, an independent delay expert may conduct critical-path analysis to determine which events actually caused completion to move beyond the contractual deadline.

The legal claim should be built around that technical chronology.

EPC Delay Due Diligence When Buying a Power Plant

Foreign investors acquiring a project under construction should investigate delay exposure before closing.

Due diligence should examine construction progress, remaining milestones, contractor notices, extension-of-time claims, liquidated damages accrued, performance security, subcontractor disputes, equipment delivery status and expected commercial operation.

The buyer should also determine who will receive accrued liquidated damages after closing and whether existing EPC claims remain enforceable.

The share purchase agreement should contain appropriate protections concerning undisclosed EPC defaults and construction delays.

Frequently Asked Questions

1. Can a foreign investor claim liquidated damages when an EPC contractor delays a power plant in Turkey?

Potentially, yes. The investor’s rights depend on the EPC contract, contractual completion date, cause of delay, valid extensions of time and governing law.

2. Must the investor prove actual losses to claim delay liquidated damages?

Not necessarily. One purpose of agreed delay damages is to establish a predetermined remedy without requiring detailed proof of every item of actual loss, although the legal treatment depends on the applicable contractual framework.

3. Can the EPC contractor request an extension of time?

Yes, where the contract provides an entitlement based on qualifying events. The contractor must generally comply with applicable notice and substantiation requirements.

4. Can lost electricity revenue be claimed in addition to delay liquidated damages?

Potentially, but the EPC agreement may restrict additional recovery or exclude lost profits. The contract and governing law must be examined carefully.

5. Can the owner terminate the EPC contract after serious delay?

Potentially. Termination rights may arise where contractual default or long-stop provisions are triggered. Required notice and cure procedures must be followed carefully.

6. What happens when the delay liquidated damages cap is reached?

The consequences depend on the EPC agreement. Well-drafted contracts may provide additional rights, including potential termination, once the maximum delay damages threshold is reached.

7. Is a subcontractor delay automatically force majeure?

No. Subcontractor or supplier problems are not automatically force majeure. Responsibility depends on the contract and circumstances causing the delay.

8. Can the investor call a performance bond because of EPC delay?

Potentially, depending on the wording and conditions of the relevant security instrument. The bond should be reviewed independently from the EPC contract before a demand is made.

9. What should a foreign investor do when EPC delay becomes serious?

The investor should preserve project records, analyze the critical path, review extension-of-time claims, issue required contractual notices, calculate accrued liquidated damages, verify performance security and assess termination and replacement-contractor options before the delay becomes irreversible.

Legal Support for EPC Delay and Power Plant Construction Disputes in Turkey

EPC delays can expose power plant investors to lost electricity revenues, increased financing costs, regulatory risks and significant completion expenses. Early legal intervention is particularly important where contractual milestones are being missed, extension-of-time claims are accumulating or the contractor’s financial position is deteriorating.

Fırat Fesih Kaya Law Office provides legal assistance to foreign energy investors, international companies, project developers, lenders and power plant owners in EPC delay disputes, liquidated damages claims, extension-of-time disputes, contractor default, performance security enforcement, termination proceedings, project acquisitions, arbitration and litigation in Turkey.

If your EPC contractor has failed to complete a solar, wind, storage, hydroelectric, thermal or other power plant within the agreed timetable, you may contact our office for a project-specific legal assessment. Experienced legal representation can help preserve contractual rights, secure evidence, evaluate delay damages and determine whether continued performance, negotiated restructuring or termination offers the strongest strategy for protecting the investment.

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