Power Plant Construction Disputes in Turkey: EPC Contractor Liability and Compensation Claims – 2026 Updated Guide

Facing a power plant construction dispute in Turkey? This 2026 guide explains EPC contractor liability, construction delays, defective works, liquidated damages, performance guarantees, termination, compensation claims, arbitration, and legal remedies for foreign energy investors.

Power plant construction disputes can expose foreign investors in Turkey to substantial financial and regulatory risk. Solar, wind, battery storage, geothermal, hydroelectric, and conventional generation projects commonly depend on complex Engineering, Procurement and Construction (EPC) contracts under which a contractor assumes extensive responsibility for delivering an operational facility within an agreed schedule, budget, and performance framework.

When construction is delayed or the completed facility fails to meet contractual requirements, the consequences extend beyond an ordinary construction dispute.

An investor may face lost electricity revenues, additional financing costs, missed regulatory milestones, delayed grid connection, loss of support-mechanism opportunities, lender defaults, and even risks concerning the project’s generation license.

Turkey’s electricity licensing framework makes construction timing particularly important. EMRA requires generation-license holders to submit periodic progress reports until the facility completion date, and the regulatory framework specifically addresses amendments relating to extensions of facility completion periods.

Accordingly, EPC contractor liability in Turkey should be assessed together with the project’s regulatory timetable, not solely under the construction contract.

What Is an EPC Contract in a Turkish Power Project?

An EPC contract typically places responsibility for engineering, procurement, construction, testing, and commissioning on a principal contractor.

The commercial objective is frequently described as delivering a “turnkey” facility.

However, the word “turnkey” does not itself resolve every question of liability.

The contract must clearly allocate responsibility for:

• engineering and design;
• equipment procurement;
• subcontractors;
• construction;
• permits;
• grid compliance;
• testing;
• commissioning;
• completion;
• performance;
• defects.

The precise contractual allocation becomes decisive when a dispute arises.

EPC Contracts Under Turkish Law

Where Turkish law governs the EPC contract, the contractual structure must be considered together with the Turkish Code of Obligations No. 6098, particularly the rules applicable to contracts for work and general contractual liability.

Turkish construction-law analysis recognizes the general principle that a contractor may be liable for contractual breach, including delay, unless the contractor establishes the legally relevant basis for avoiding liability. Turkish law also places restrictions on contractual attempts to exclude liability for serious fault.

Nevertheless, sophisticated energy EPC contracts usually regulate liability in substantially greater detail than the statutory default framework.

Therefore, the contract remains the starting point.

1. Construction Delay

Delay is one of the most common disputes in energy projects.

An EPC contractor may fail to achieve:

mechanical completion, provisional acceptance, grid synchronization, commercial operation, or final acceptance by the agreed dates.

The first question is whether the contractor is actually responsible.

The investor should identify the contractual completion date and then reconstruct the project’s critical path.

A simple comparison between the original deadline and actual completion date is rarely sufficient.

2. Contractor Delay vs. Employer Delay

Not every construction delay is attributable to the EPC contractor.

The employer may have delayed:

• site handover;
• design approvals;
• access;
• permits allocated to the employer;
• payments;
• grid coordination;
• variation approvals;
• necessary information.

Where both parties contributed to delay, the analysis becomes significantly more complicated.

Turkish law does not provide a simple automatic rule resolving every concurrent-delay scenario; the contract and specific causes of delay become particularly important.

This is why contemporaneous project records are critical.

3. Extension of Time Claims

An EPC contractor facing delay may submit an Extension of Time (EOT) claim.

Potential grounds can include employer-caused delay, force majeure, change in law, unforeseeable site conditions, variations, government action, or other contractually recognized events.

The contractor should normally comply with contractual notice requirements.

For the investor, the key questions are:

Was notice given on time? Was the alleged event actually on the critical path? How many days did it cause? Did the contractor mitigate the delay?

An EOT claim should not be accepted merely because a disruptive event occurred.

4. Delay Liquidated Damages

Many power plant EPC contracts contain liquidated damages for delay.

These provisions can be particularly valuable because proving the precise amount of daily financial loss caused by construction delay can otherwise become complex.

A typical clause establishes an agreed amount or percentage payable for each day or week of culpable delay, usually subject to a contractual cap.

However, enforceability should be assessed under the governing law and specific contract structure.

The wording should clearly identify the milestone triggering delay damages and how the amount is calculated.

5. Can the Employer Claim More Than Liquidated Damages?

This depends heavily on the contract and applicable law.

An EPC agreement may state that delay liquidated damages constitute the employer’s exclusive monetary remedy for specified delay.

Other contracts preserve rights relating to different categories of loss, termination, indemnities, or separate contractual breaches.

The investor should therefore avoid assuming that a liquidated-damages clause automatically determines the full amount recoverable.

The entire limitation-of-liability regime must be analyzed.

6. Defective Construction

Delay is not the only source of EPC liability.

A facility can be completed on time but contain serious defects.

Examples include:

• defective foundations;
• inadequate cabling;
• transformer defects;
• faulty substations;
• defective turbine installation;
• inverter problems;
• battery integration failures;
• inadequate drainage;
• structural defects;
• control-system problems.

The employer should document defects immediately and comply with contractual inspection and notification procedures.

7. Design Liability

EPC contractors commonly assume substantial design responsibility.

A design defect can be particularly expensive because it may affect multiple systems throughout the plant.

For example, inadequate electrical design may prevent the facility from satisfying grid requirements even though each individual component operates correctly.

The contractor should not automatically escape liability merely because the employer reviewed or approved drawings.

The contract should determine the legal effect of employer approval.

8. Equipment Procurement Liability

Power projects depend on specialized equipment.

Depending on project type, this may include:

solar modules, wind turbines, inverters, transformers, generators, batteries, control systems, switchgear, cables, and substations.

The EPC contractor may argue that a failure was caused by the manufacturer rather than its own work.

From the employer’s perspective, this defense may be limited where the EPC contractor expressly assumed procurement and overall performance responsibility.

The investor should examine whether manufacturer warranties were transferred and whether direct warranty rights are available.

9. Subcontractor Failures

Large EPC projects frequently involve multiple subcontractors.

A principal EPC contractor may subcontract civil works, electrical works, installation, testing, or specialized engineering.

The employer should generally avoid being forced to pursue dozens of subcontractors separately where the EPC structure places overall responsibility on the main contractor.

The contract should clearly provide that subcontracting does not release the EPC contractor from its obligations.

10. Performance Shortfalls

A power plant can achieve construction completion while failing commercially.

Performance tests may reveal that the facility does not meet guaranteed:

• output;
• efficiency;
• availability;
• capacity;
• heat rate;
• performance ratio;
• battery efficiency;
• storage capacity.

This can produce performance liquidated damages separately from delay damages.

For renewable projects, even a relatively small long-term performance shortfall can materially affect project valuation.

11. Solar EPC Performance Disputes

Solar projects frequently involve disputes concerning performance ratio, module degradation, inverter availability, construction defects, tracker systems, and actual output.

The EPC contract should define testing methodology precisely.

A dispute can otherwise arise over whether underperformance results from construction, irradiation assumptions, grid curtailment, equipment degradation, or operational conditions.

Technical expert evidence is often essential.

12. Wind EPC Disputes

Wind projects can involve disputes concerning turbine foundations, installation, cables, substations, blades, towers, commissioning, and grid compliance.

Performance disputes may also concern turbine availability and power curves.

Foreign investors should preserve turbine data and SCADA records.

Where a dispute develops years after commissioning, contemporaneous operational data can become decisive evidence.

13. Battery Storage Construction Disputes

Battery energy storage adds another layer of complexity.

Disputes may concern usable capacity, degradation, round-trip efficiency, availability, fire-safety systems, battery management software, commissioning, and grid compliance.

This is especially important in 2026 because Turkish technical requirements for storage projects have continued to develop.

An EPC contractor’s obligation should therefore be defined by reference to the regulatory and technical standards applicable to the project, rather than an outdated technical specification.

14. Failure to Achieve Grid Compliance

A power plant is not commercially complete merely because physical construction has finished.

It must be capable of satisfying the requirements necessary for grid connection and operation.

Where the EPC contractor assumes grid-compliance responsibility, failure to pass required tests can constitute a major contractual breach.

The employer should determine whether the problem results from design, equipment, construction, software, grid conditions, or an external network issue.

That distinction determines liability.

15. Commissioning Disputes

Commissioning is one of the highest-risk stages of a power project.

The parties may disagree over whether the plant has satisfied the contractual conditions for provisional acceptance or commercial operation.

The contractor may seek to trigger completion so that delay damages stop accruing.

The employer may argue that essential tests remain outstanding.

The contract should define completion objectively and identify which minor outstanding works may remain without preventing acceptance.

16. Regulatory Completion Deadlines

Construction disputes can become regulatory disputes if delay threatens the project’s licensed completion date.

EMRA’s electricity licensing framework specifically recognizes facility completion periods and procedures concerning amendments to completion timing.

Generation-license holders also have ongoing reporting obligations concerning construction progress until completion.

An employer facing serious EPC delay should therefore assess the EMRA consequences immediately.

The contractor’s eventual payment of damages may not adequately compensate for loss of a fundamental regulatory right.

17. Variation and Change Order Disputes

Variations are another major source of conflict.

The employer may request additional works, while the contractor later claims additional time and money.

Conversely, a contractor may characterize necessary completion work as a variation even though it was already included within the original turnkey scope.

Every variation should therefore clearly establish:

scope, price, schedule impact, regulatory impact, and reservation of rights.

Informal instructions should be avoided where possible.

18. Change in Law Claims

Energy projects are exposed to regulatory change during construction.

An EPC contract should define whether and when a change in legislation entitles the contractor to additional time or payment.

Not every regulatory clarification should automatically constitute a compensable change in law.

The investor should examine whether the requirement existed at the contract’s base date and whether the contractor was already obligated to comply with applicable law.

19. Force Majeure

Natural disasters, extraordinary governmental measures, supply-chain disruptions, war-related events, or other exceptional circumstances may generate force-majeure claims depending on the contract and applicable law.

The contractor should demonstrate that the event falls within the contractual definition and actually prevented or delayed performance.

Causation matters.

A contractor already six months behind schedule cannot necessarily attribute the entire delay to a later force-majeure event.

20. Price Escalation

Power projects can experience substantial increases in steel, copper, equipment, transportation, labor, or foreign-exchange costs.

Whether the contractor can claim additional compensation depends largely on the agreed pricing structure and contractual risk allocation.

A genuine lump-sum turnkey contract may place significant price risk on the contractor.

However, escalation, change-in-law, employer variation, or exceptional-event clauses may alter that allocation.

21. Employer Payment Defaults

Contractors can also have legitimate claims.

An employer that fails to make certified payments may expose itself to interest, suspension, extension-of-time, or termination claims.

The investor should therefore maintain contractual payment procedures even during a technical dispute.

Wrongfully withholding all payments because of a limited defect can create a second dispute.

22. Suspension of Works

Suspension may become necessary where construction is unsafe, seriously defective, unauthorized, or affected by another major event.

The EPC contract should specify who may order suspension and its financial consequences.

A wrongful employer suspension can generate contractor compensation claims.

Conversely, unauthorized contractor suspension may constitute serious breach.

23. Termination for Contractor Default

Severe delay, abandonment, insolvency, repeated defective work, failure to provide security, or inability to achieve completion may justify termination where contractual and legal requirements are satisfied.

Termination should not be undertaken casually.

A defective termination can expose the employer to significant counterclaims.

Before issuing a termination notice, counsel should review cure periods, notice requirements, contractual thresholds, evidence, and the consequences for subcontractors and equipment.

24. Completion by a Replacement Contractor

After termination, the employer may need another contractor to complete the facility.

The additional completion cost can be substantial.

The investor should preserve evidence comparing:

the original EPC price, unpaid contract balance, replacement contractor price, remediation costs, and additional project expenses.

These records may form part of a compensation claim against the defaulting contractor.

25. Performance Bonds and Bank Guarantees

EPC contracts commonly require performance security.

This may include:

• advance payment guarantees;
• performance bonds;
• retention guarantees;
• warranty guarantees.

When a serious dispute occurs, these instruments can become strategically important.

Before making a call, the employer should review the guarantee wording, governing law, expiry date, demand conditions, and injunction risk.

An incorrectly prepared demand may create avoidable litigation.

26. Parent Company Guarantees

Where the EPC contractor is a special-purpose subsidiary, a parent company guarantee may provide important additional protection.

Foreign investors should verify whether the guarantee covers:

• delay damages;
• defects;
• completion costs;
• indemnities;
• termination liabilities.

The guarantee should also remain effective for a sufficient period.

A strong EPC claim against an insolvent contractor may otherwise have limited commercial value.

27. Limitation of Liability

Most sophisticated EPC contracts contain an overall liability cap.

However, the agreement may exclude particular liabilities from the cap, such as fraud, intentional misconduct, gross negligence, confidentiality breaches, intellectual property claims, or certain indemnities.

Turkish-law restrictions on exclusion or limitation of liability must also be considered. Construction-law analysis notes that Turkish law restricts attempts to exclude liability for gross fault and imposes additional limitations in certain professional contexts.

The cap should therefore be analyzed together with mandatory law.

28. Compensation Claims

Depending on the contract and circumstances, an employer may seek compensation for losses associated with:

• delay;
• defective works;
• replacement contractor costs;
• repair;
• additional engineering;
• financing;
• extended site management;
• lost generation;
• third-party claims.

Recoverability depends on the contractual remedies, liability limitations, causation, foreseeability, evidence, and applicable law.

A financial model alone is not sufficient proof of damages.

29. Lost Electricity Revenue

Lost electricity revenue can be one of the largest claims in a delayed power project.

The investor may argue that, but for the contractor’s breach, the plant would have begun commercial operation earlier.

To support such a claim, the investor may need evidence concerning expected commissioning, historical or forecast resource conditions, electricity prices, market arrangements, support mechanisms, curtailment, and operating costs.

The contractor may challenge each assumption.

Expert evidence is therefore commonly necessary.

30. Financing Costs

Construction delay can also increase project-finance costs.

Potential losses may include additional interest, commitment fees, hedging expenses, lender amendment fees, extended guarantees, and refinancing costs.

The employer should preserve lender correspondence demonstrating why these expenses arose.

The closer the financing cost can be linked to contractor delay, the stronger the evidentiary position.

31. Expert Determination and Technical Evidence

Many EPC disputes cannot be resolved purely through legal interpretation.

Technical experts may be needed to determine:

• critical-path delay;
• construction defects;
• performance shortfalls;
• remediation cost;
• commissioning failure;
• causation.

The investor should avoid modifying or repairing defective works before adequately documenting their condition.

Photographs, inspection records, test results, correspondence, and expert reports should be preserved.

32. Arbitration in International EPC Contracts

International energy EPC contracts frequently contain arbitration clauses.

The agreement may provide for institutional or ad hoc arbitration and specify the seat, governing law, language, number of arbitrators, and procedural rules.

For foreign investors, arbitration can be particularly useful where the EPC contractor, equipment suppliers, guarantors, and project participants are located in different jurisdictions.

The dispute-resolution clause should be reviewed before proceedings begin to ensure that notices, negotiation periods, dispute boards, or other pre-arbitration requirements are satisfied.

33. FIDIC-Based EPC Contracts

Many international construction contracts draw on FIDIC structures.

However, parties frequently modify standard wording through particular conditions.

Accordingly, referring to a contract as “FIDIC” does not establish the final allocation of risk.

Foreign investors should examine the actual executed contract, including amendments, schedules, employer requirements, contractor proposals, and particular conditions.

Notice provisions can be especially important.

34. Settlement and Project Preservation

Not every EPC dispute should immediately result in termination or full-scale arbitration.

Where the project can still be completed, a structured settlement may preserve substantially more value.

Possible solutions include:

• revised completion dates;
• acceleration plans;
• additional security;
• revised liquidated damages;
• contractor replacement of key subcontractors;
• enhanced reporting;
• partial settlement of existing claims.

Any settlement should clearly preserve unresolved rights.

35. 2026 Compliance Considerations

Foreign investors should ensure that EPC documentation reflects the regulatory framework applicable when the project is actually being constructed.

EMRA’s current licensing materials expressly warn that electricity-market legislation can change as market conditions evolve and recommend reviewing the current rules.

For 2026, EMRA also published the applicable preliminary-license and license fees through Board Decision No. 14051 of December 18, 2025.

Where EPC delay requires an amendment to a licensed facility’s completion period, the regulatory and financial consequences should therefore be evaluated using the rules applicable at that time.

Frequently Asked Questions

1. Is an EPC contractor liable for construction delay in Turkey?

Potentially, yes. Liability depends on the governing law, contract, cause of delay, contractor fault, employer conduct, extensions of time, force majeure, and other relevant circumstances.

2. Can an investor claim delay liquidated damages?

Where the EPC contract contains an enforceable delay-liquidated-damages mechanism and the contractual requirements are satisfied, the employer may potentially claim the agreed amount, subject to applicable law and contractual defenses.

3. Can the contractor avoid liability by blaming a subcontractor?

Not necessarily. Where the EPC contractor has assumed overall responsibility, subcontracting will not ordinarily eliminate its contractual obligations to the employer merely because the immediate failure originated with a subcontractor.

4. Can an investor claim lost electricity revenue?

Potentially, subject to the EPC contract and applicable law. Causation and quantum must be proven, and contractual liability caps or exclusive-remedy provisions may affect recovery.

5. What happens if EPC delay threatens the generation license?

The investor should immediately assess the EMRA implications. Turkey’s licensing framework regulates facility completion periods, amendments, and construction progress reporting.

6. Can the employer terminate the EPC contract for serious delay?

Potentially, if the contractual and legal requirements for termination are satisfied. Notice provisions, cure periods, default thresholds, evidence, and consequences should be reviewed carefully before termination.

7. Can a contractor claim additional payment because construction costs increased?

It depends on the pricing and risk-allocation provisions. A lump-sum arrangement may allocate substantial escalation risk to the contractor, but specific contractual or legal mechanisms may alter the outcome.

8. Are power plant EPC disputes suitable for arbitration?

Yes. International energy projects frequently use arbitration because disputes can involve complex technical evidence, international contractors, substantial claims, and cross-border enforcement considerations.

9. What evidence is most important in an EPC construction dispute?

The EPC contract, baseline and updated schedules, daily reports, correspondence, notices, meeting minutes, payment records, technical reports, testing results, photographs, variation orders, grid documents, and regulatory correspondence can all be critical.

10. When should an investor involve a lawyer in an EPC dispute?

Ideally when the first material delay, defect, disputed variation, failed test, or contractual notice occurs. Waiting until termination or arbitration can result in missed notice periods and weaker evidence.

Legal Support for Power Plant EPC and Construction Disputes in Turkey

Power plant construction disputes require coordinated analysis of construction law, energy regulation, engineering evidence, project finance, damages, and dispute resolution. A delay that appears contractual at first can ultimately threaten grid connection, financing, commercial operation, or the project’s regulatory timetable.

Fırat Fesih Kaya provides legal assistance to foreign energy companies, renewable-energy developers, infrastructure funds, project sponsors, lenders, employers, and international contractors concerning power plant EPC disputes, construction delays, defective works, liquidated damages, performance claims, termination, bank guarantees, compensation claims, energy arbitration, and EMRA-related construction risks in Turkey.

Early legal intervention can help preserve contractual notices, technical evidence, performance-security rights, compensation claims, and regulatory options before the dispute threatens the entire investment.

For a case-specific legal assessment concerning an EPC contractor dispute, delayed power plant, defective construction, compensation claim, or energy project in Turkey, you may contact our office.

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