Engaging EPCs for Climate Projects, Part 1: When (and How) to Get It Right

Lessons from Enduring Planet & Friends' June 2026 Financing Series

Get your first commercial project's EPC relationship right and you accelerate by years. Get it wrong and you burn capital, time, and potentially your offtaker's trust.

At our latest Enduring Planet & Friends Financing Series, "Engaging EPCs for Climate Projects, Part 1: When (and How) to Get It Right," Hannah Friedman (Lupine Finance) led a conversation with Sunil Vyas (Fluor), Tom Bence (Antora Energy), and Court Horne (The New Industrial Corporation) on how founders should actually engage Engineering, Procurement, and Construction (EPC) partners.

The takeaway: the EPC relationship is not a vendor purchase you make once your technology works. It is a financing and risk-transfer decision that starts years before you break ground, and it takes two-way partnership to successfully reach financial close on schedule.

We structured the conversation around four themes: what’s an EPC and when to engage → what they need from you in partnership → the money, negotiation, and risk of the contract.

1. What’s an EPC and When to Engage 

The "E" is the small part, but with big responsibility. An EPC covers Engineering (conceptual through detailed design), Procurement of equipment and materials, and Construction. Roughly 80% of an EPC's revenue comes from procurement and construction, and only about 20% from engineering. 

While founders can work with smaller or regional design engineering firms or owners’ engineers, they may not be able to provide the warranties or guarantees that contractors in procurement and construction will need, simply because they themselves do not have the balance sheet to do so.

It’s worth confirming your engineering firm can be novated (transferring the contract after design & engineering to an EPC) so you are not locked into a partner who cannot carry the build. 

Project finance runs on engineering maturity, and it’s well codified. Engineering moves through phases: FEL-1 (feasibility, Class 5 cost estimates), FEL-2 (pre-FEED, Class 4), and FEL-3 (FEED, site-specific quantities). 

Development capital investors like to be in the room roughly 18 months before financial close to structure financing and align contractors. True project finance-only investors generally want to see a project at FEL-3 with a committed contractor before financial close, because that is the point where engineering risk is retired enough to finance.

2. What an EPC Needs From You In Partnership

Engage the contractor earlier than feels comfortable. Bringing an EPC in early can help avoid expensive rework. Typically, “Tier 1” EPCs will still be willing to do early feasibility studies with new technologies, even if they often don’t want to do small dollar-amount projects. 

Run phase gates, not ad-hoc decisions. Build a project execution plan and a project charter from the earliest stages. You’ll need defined KPIs, a risk register, and to set clear decision gates (internal estimates, economic models, stakeholder interest) so you are not improvising at each milestone. If this language is not being consistently used by your team internally, or no one on your team has run these processes before, you risk letting project management become an enemy of progress. Hire or find partners for this expertise. 

Ensure your own ducks are in a row. Secure your Board’s approval early so momentum does not stall mid-process. Remember: EPCs are made up of teams of staff, and unnecessary delays may mean that the original team gets staffed to another project, losing valuable institutional knowledge about your project. 

Lock interfaces, even if you keep iterating on the product. For working with partners like EPCs, some of the biggest challenges are moving targets & scope creep, like allowing too many technology changes up until the last minute. EPCs and contractors typically need a startup to lock the interface points of the technology with all other processes (think electrical), resisting the perfectionism that delays development and inflates cost. 

Be clear about what’s still undesigned or technically unproven. As with any long-term partner, transparent, two-way communication about risk is what turns a one-project transaction into a partner who scales with you across the second, third, and tenth project.

3. The Money, Negotiation, and Risk of the Contract

How much does an EPC cost? Founders should expect to spend 2.5% to 5% of total project capex on pre-FID (“financial investment decision”) development. Founders should be budgeting and educating their Board about the work that happens before you have the next tranche of money ready to then go and build the project.

Right-size the partner to the project. Large EPCs become cost-effective above roughly $50M to $100M of total project costs, where they can carry both engineering and procurement + construction. 

There are five terms worth understanding in depth. Be prepared to understand and negotiate specifically for: 

• process and technology risk
• schedule risk
• design integration
• security packages, and 
• supervening-event change order language. 

Contract structure is a risk trade, not a price quote. Reimbursable contracts let the contractor or EPC bill for corrections; lump-sum contracts force EPCs to absorb overruns, but they price that risk in upfront. Risk profiles shift with scope, cost, location, and structure, and for first-of-a-kind technology, change orders and liquidated damages (usually tied to missed operational milestones) need careful negotiation.

Good EPC negotiations and overall project structure involve assigning the appropriate risk to the willing receiving party, including insurance providers and other third parties. Mapping and managing the inter-relationships of these stakeholders needs adequate resourcing (again, hire or work with partners who have expertise here). 

Tactical Takeaways

If you take nothing else into your next EPC conversation, remember:

• Budget 2.5% to 5% of total capex for pre-FID development, and get board sign-off early.
• Confirm your engineering firm can be novated so a design handoff never forces a costly restart.
• Stand up a project execution plan and charter early, with KPIs, a risk register, and real phase gates.
• Negotiate the five risk areas by name: process and technology, schedule, design integration, security packages, and change orders.
• Treat FEL-3 (FEED) with a committed contractor as the practical gate for project finance: Lenders want engineering risk retired before close.

The founders who move most efficiently to build commercial projects are not the ones with the coolest or most innovative technology. They are the ones who treat the design engineering + contractor or EPC relationship as an opportunity to evaluate the appropriate risks and transfers. They manage their EPC relationships as a partnership built to outlast the first project.

Part II will flip the lens: when the traditional EPC model is not the right path, what emerging tech can enable in the E/PC process, and what it really takes to go your own way.

Thank you to Wilson Sonsini Goodrich & Rosati for sponsoring this series. Follow our Luma calendar to register for upcoming Enduring Planet & Friends Financing Series: luma.com/enduringplanet.