Executive Summary: Key Legal and Evidentiary Issues

• NEPL breached the EPC contract by failing to construct the NAT-1 plant in accordance with an Approved Design and Good Industry Practice.

• Significant construction deficiencies—cooling, exhaust, fuel gas, ventilation—rendered the plant inoperable, requiring extensive and costly remediation.

• The Court rejected NEPL’s position that Mr. Kuipers’ dual control excused non-compliance, affirming an objective contractual standard.

• BHEC was found to have relied on misrepresentations and incomplete disclosures when investing in the project.

• NEPL’s failure to respond to capital calls led to forfeiture of its partnership interest under the terms of the LP Agreement.

• Claims and counterclaims totaled over $40 million, with liability tied to contract breaches, failed obligations, and mismanagement of project funds.

Background and project development
This dispute arose from the development of a 20-megawatt natural gas-fired power plant near Ralston, Alberta, referred to as the NAT-1 or Ralston plant. Gregory Kuipers, through Natural Energy Partners Limited (NEPL), led the project. NEPL created NEP Holdings Limited Partnership and NEP Limited GP Inc. (together NEPH) to hold its interest. NEPL and NAT-1 LP executed an Engineering, Procurement and Construction (EPC) contract, with NEPL as contractor and NAT-1 as owner. ATB Financial loaned $17.5 million based on contractual assurances and an engineering report from Orbis.

BHE Canada Management Ltd. (BHEC) purchased a 50% interest in NEPH in September 2015, formalized through a Purchase and Sale Agreement (PSA), which incorporated the EPC contract. NEPH thus became co-owned by NEPL and BHEC and held the majority interest in NAT-1. Kuipers was retained as President of NEPH.

Plant deficiencies and capital calls
Soon after the PSA closed, BHEC discovered construction and safety deficiencies. The gensets were unable to operate continuously. Cummins, Gemini Engineering, and others raised concerns about the fuel gas system, the cooling and exhaust systems, and the building ventilation. NEPL had failed to install the required Emission Reduction Technology (ERT) units and had made design decisions without following engineered drawings or good practice. The plant could not satisfy the definitions of “Continuous Operation” or “Temporary Acceptance” under the EPC contract.

Remediation began in late 2015. NEPH issued capital calls in February and April 2016 to fund remediation and address costs related to gensets purchased for the NAT-3/Jenner project. NEPL failed to contribute and, under the NEPH LP Agreement, forfeited its interest. The plant was completed and became operational in November 2016.

Claims and counterclaims
NEPL and Mr. Kuipers alleged wrongful exclusion and sought damages of $12 million or reinstatement of their interest. They claimed the capital calls were improper and that NEPL was owed over $4.6 million under the EPC contract. Mr. Kuipers also claimed $101,627.45 in unpaid expenses and damages for his employment termination.

The Defendants (including BHEC and NEPH) counterclaimed for over $40 million, including:

• Breach of the EPC contract for failure to deliver a functioning plant.

• Liquidated damages of $1.8 million.

• Remediation costs estimated at $12.7 million.

• Foundation repairs valued at $5.65 million.

• Loss on resale of Cummins gensets intended for NAT-3.

• Reimbursement of payments made to unpaid subcontractors ($3.97 million).

• Personal liability of Mr. Kuipers, including misuse of NEPH funds and unauthorized payments to PRG, a company he controlled.

• Damages for misrepresentation and loss of investment value.

Policy terms and contractual interpretation
Key clauses at issue included Sections 3.1, 3.3, and 12.1 of the EPC contract, defining "Work", “Approved Design”, and “Good Industry Practice.” Section 8.1 set the standards for “Continuous Operation”. Section 15.1 governed termination. Schedule A detailed subcontractor responsibilities. The PSA (Schedule 5.2(17), Section 5.3) represented that NAT-1 would be built in accordance with the EPC contract.

NEPL argued that because Mr. Kuipers controlled both NEPL and NAT-1 during construction, compliance could be defined subjectively. The Court rejected this. It held that contractual obligations must be interpreted objectively, especially where third-party investors, engineers, and financiers relied on formal standards and industry practice.

Decision and outcome
Justice Carruthers ruled that NEPL breached the EPC contract by failing to deliver a properly engineered and operational plant. The work did not meet Good Industry Practice or follow Approved Design. The Court found that:

• There were critical deficiencies in cooling, gas, ventilation, exhaust, and emissions control systems.

• The plant was incapable of sustained or safe operation until significant remediation by Gemini.

• NEPL’s claim that it met its obligations by self-approving the design was commercially unreasonable.

• Capital calls were valid and NEPL’s interest was properly forfeited under the LP Agreement.

• The PSA did not waive NEPL’s obligations under the EPC contract.

The Defendants were entitled to damages, including remediation costs and purchase price adjustments. NEPL’s claims were dismissed. The Court affirmed that internal control of a project does not exempt parties from objective legal and engineering standards.

Conclusion
The judgment provides a clear precedent that performance obligations under construction and partnership agreements will be assessed based on objective, commercial expectations—not internal control or subjective intent. The Court enforced strict compliance with engineering standards, regulatory permits, and honest business conduct, particularly where external investors and public safety are implicated.

The total monetary outcome depends on how the final adjustments and overlapping claims are netted. Hence, no specific amount cannot be determined at this stage.