The testing module separated breaking from underproducing, and placed the second on the contract side. What remains is to describe that contract, because on energy and industrial projects it does not stop at acceptance: the supplier often guarantees an efficiency, an availability or a consumption for five, ten or fifteen years after commissioning. Those undertakings carry amounts comparable to a policy's, they trigger on measurements and not on events, and part of the work consists in not confusing them with insurance.
The difference in nature comes down to one sentence, and it extends the bonds module. Insurance covers a fortuity: it indemnifies damage the insured suffers. A performance guarantee covers a promise: the supplier undertook a measurable result, and owes the difference between that result and reality. There is therefore no fortuity from the debtor's point of view, only an obligation whose content it knows, and that is why its price is built into the price of the machine rather than called as a premium.
The measurement mechanism decides everything, and it is more disputed than the principle. A guaranteed efficiency is measured under reference conditions, temperature, pressure, feed quality, which reality never reproduces; measurements must therefore be corrected back to contractual conditions, and that correction rests on curves supplied by the very party owing the guarantee. A guaranteed availability is measured over a window, excluding certain outages, and the list of exclusions, planned outages, force majeure, supply failure, decides the result as much as the machine does.
These guarantees exhaust, and that is their most misunderstood feature. They are almost always capped, often as a percentage of the contract price, and the series defect module showed what such a cap is worth when the defect is common to a fleet. They are also consumed over time: an availability guarantee paying damages two years running may reach its aggregate in the third, leaving the operator with eight years of contract and no recourse at all. A performance guarantee cap is therefore an asset that is spent, whereas an insurance limit reinstates or is renegotiated each year.
The articulation with insurance produces a zone neither covers properly, and the testing module opened it: underperformance whose cause is physical damage. The supplier will argue that the repaired machine is no longer its own and refuse its guarantee; the insurer will argue that underperformance is not damage. Both have an argument, and the operator sits between them with a real loss. That is the configuration justifying the preservation of performance measurements before and after each repair, an act costing an engineer a day and being the only usable proof afterwards.
What these guarantees do to the project calendar must also be seen, because their duration exceeds that of every contract described so far. A construction policy lasts three years, a maintenance period two, a ten-year liability ten; a fifteen-year availability guarantee outlives everyone, often including the supplier itself. Counterparty risk then becomes the real subject: a fifteen-year guarantee given by a company whose balance sheet does not carry it is a promise and not a protection, and that is why some are backed by a bond or a parent company guarantee, which drops them back into the corresponding module.
The useful reading therefore comes down to three questions asked when the machine is ordered. Under what reference conditions is performance measured, and who supplies the correction curves. What is the cap, is it consumed, and over what period. And who really carries the undertaking at ten or fifteen years, the signing company or an entity guaranteeing it. Those three answers are obtainable only before the order, because afterwards they are no longer negotiable, and they decide an amount of the same order as the policies negotiated with far more attention.
An operator buys six turbines with a 96% availability guarantee over fifteen years, damages of 45,000 euros per missing availability point per turbine per year, capped in aggregate at 12% of the contract price, that is 8.6 million euros. In the first two years measured availability is 91% then 92%, and the supplier pays. In the third year a covered fire destroys a rotor; the turbine is repaired at the insurer's expense, and its availability falls to 84% the following year. The supplier refuses to apply its guarantee to that machine, on the ground that it was repaired by a third party. Where does the operator stand?
Counting must come before arguing, because the cap governs what follows. Five missing points in the first year and four in the second, across six turbines, make nine points times six, that is fifty-four points at 45,000 euros: 2.43 million already paid against an 8.6 million cap. The guarantee is therefore not exhausted, but it has been consumed by more than a quarter in two years, and that is the feature nobody sees: a performance guarantee cap is an asset that is spent, where an insurance limit reinstates each year. At that rate only five or six years of protection remain on a fifteen-year contract. Then comes the zone neither party covers. The supplier refuses its guarantee on the repaired machine, the insurer will object that underperformance is not damage, and both arguments hold. The only workable route is the causal role module applied in the other direction: establishing that the eight missing points arise from the repair and not from the original defect, or the reverse, which requires comparing that turbine's availability before and after the fire. Yet the operator has two years of measurements precisely because the guarantee obliged it to produce them. The file's non-obvious point is there: the contractual arrangement costing it most is also the one that manufactured the only proof it needs.
- 01Insurance covers a fortuity, a performance guarantee covers a promise: the supplier owes the difference between a measurable result and reality, with no fortuity from its point of view.
- 02The measurement mechanism decides more than the principle: reference conditions, correction curves supplied by the debtor itself, and the list of excluded outages.
- 03A performance guarantee cap is an asset that IS SPENT, where an insurance limit reinstates: two bad years can leave ten years of contract with no recourse.
- 04Underperformance caused by repaired damage is properly covered by nobody: the supplier refuses the repaired machine, the insurer objects that underperformance is not damage.
- 05A fifteen-year guarantee outlives every other contract and sometimes the supplier: counterparty risk becomes the real subject, hence the bonds and parent guarantees backing it.