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POWER SURGE Energy clients are dictating law firms’ strategic direction and hiring policies. For now at least, energy is king. LB finds out why MARK MCATEER AND MICHAEL NORTHCOTT
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On the last day of August ExxonMobil dominated the business pages, when news broke of its $3.2bn Arctic exploration deal with Russian oil giant Rosneft. The story surprised energy specialists – a similar deal between BP and Rosneft was previously scuppered by TNKBP, the partners in BP’s existing joint venture in Russia. The UK oil major suffered a double hit that day, when it was revealed that bailiffs had raided its offices in Moscow, an act linked to a case brought by TNK-BP shareholders over the failed Arctic deal with Rosneft. These events attracted significant media attention, not just for the energy companies concerned but also the law firms involved. Freshfields Bruckhaus Deringer, which advised Rosneft on its failed deal with BP, was now advising the Russian oil giant in the deal with ExxonMobil. Skadden, Arps, Slate, Meagher & Flom and Akin Gump Strauss Hauer & Feld were advising the US oil major. Deals and (more often than not) disputes between the energy giants and local incumbents have attracted significant interest in the press in recent years but it is also an inescapable fact that clients of the energy practices at some of the world’s largest law firms have dictated global growth strategies. u
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SHALE GALE As the financial woes of governments across the globe persist, energy production continues largely to side-step renewables. One of the current incarnations of that is the boom in shale gas production in the US. The surge in big-money shale gas projects in recent years has been dubbed the ‘shale gale’ and shale gas is forecast to provide up to 50% of North America’s natural gas demand by 2020. While Jones Day has been in the energy field for decades, its most recent projects stateside include advising New Birmingham Inc on the sale of its hydraulic fracturing (or ‘fracking’) sand to Dutch company Schlumberger, one of the largest shale gas services companies. At Latham & Watkins, Houston office managing partner Michael Dillard describes US shale gas as a ‘key driver behind our energy practice’, citing the thirst for energy independence as a reason for the sustainability of this corner of the energy sector for law firms. As an industry that has been burgeoning steadily over the last decade, investors are excited about the potential production of shale gas in Europe. However, its popularity in the US may be more difficult to replicate on the continent. The multitude of jurisdictions (with different regulatory frameworks) involved and the range of attitudes between governments make the prospect of a shale boom in Europe look
less likely. But despite the recent setback of a ban on fracking in France, a large number of plays are being made in a variety of countries. Poland looks to be the most significant prospect for would-be producers. According to Exploration & Production magazine, Poland currently has ten shale gas producers operating in the country, most of them with at least one operation in the Baltic Depression region. This amounts to more interested parties than any other country in the EU. The tough economic conditions and growing international fears of an energy crisis have spurred many countries into policy-making for greater energy independence. For Poland, this means trying to sever some of its energy ties to Russia. Poland imports approximately 95% of its oil and 45% of its natural gas from Russia, a reliance that could be dangerous were diplomatic relations to cool. Given the experience in the US, the enthusiasm from some law firms over this is palpable. Robert Lane, head of CMS’ European energy group, says: ‘We have an office in Warsaw, so it’s exciting because we’ll be right in the middle of shale gas development in Europe as it grows.’ Lisbon-based Raposo Bernardo opened its Warsaw office in early 2009 and global managing partner Nelson Raposo Bernardo says that energy work now accounts for
Since the dawn of the global financial crisis, the focus on, and prioritisation of, energy teams has been palpable. Offices have been opened on the back of new opportunities for existing clients, while the increase in the number of energy partners that have been laterally hired has become noticeable, as has the greater number of partners being made up in energy teams. CMS Cameron McKenna, for example, made up five partners to its energy group this year, the most this UK member of the CMS group promoted in any practice area this year. The firms interviewed for this feature all report that the proportion of global revenues attributable to energy work at their firms has grown and continues to do so. Energy is a top priority for law firms because it has dominated the corporate agenda. A glance at some of the largest deals during the first quarter of 2011 shows how energy companies
‘Any PLC of any size is now taking energy seriously. That means, in a way, that almost any client is an energy client.’
u
Julian Boswall, Burges Salmon
25% of the office’s revenues, more than any other office. ‘Mandates in the energy sector were not the only cause for the opening of our office in Poland, but were an important factor in this decision,’ he says. Others are not sure shale gas will take off in Europe. Richard Metcalf, energy partner at Norton Rose, believes that ultimately environmental concerns will hamper any serious growth in the sector, long before a profitable approach can be reached. ‘I’m not convinced about how fast shale gas will kick off because of environmental concerns in Europe, and the fact that Europe is more densely populated than America,’ he says. Worries about the contamination of water supplies by chemicals in the fluid used to carry out fracking have resulted in a significant anti-shale lobby, even in the US. It is on this basis that the French government decided to ban the technique. Part of the issue, Metcalf explains, is the vast expanses of rarely visited and relatively inaccessible land available for exploitation in America: ‘In the US, it doesn’t matter as much if you have some areas that are left a bit of a mess by the production techniques, but in Europe, people appear to care a lot more.’ The picture may be slightly different however, if investors start to see rising profitability in the currently tapped fracking fields of Poland. The shale gale may yet blow beyond the Bay of Biscay.
are writ large on any deal roster. According to data provided by mergermarket, energy, mining and utilities was the most active sector for deals during this period, with 249 deals totalling $155.8bn. These included Duke Energy’s recently announced $13.7bn acquisition of Progress Energy, and BHP Billiton’s $14.8bn bid for Houston’s Petrohawk Energy Corporation (see table, ‘Top ten global energy M&A deals: YTD 2011’, page 56). The figures so far this year and last year point to a significant upturn in the energy sector, especially during Q1 2011. This trend is demonstrated by a handful of massive deals, International Power’s acquisition of GDF Suez Energy International being just one example. Clifford Chance acted for International Power, while Linklaters, French firm Bredin Prat and Canadian giant Stikeman Elliott advised u GDF Suez. Herbert Smith advised Morgan
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NUCLEAR FALLOUT Following the flurry of concern surrounding the events at Fukushima after the Japanese earthquake earlier this year, speculators have been quick to talk up the possibility of a global death in the nuclear generation market. The crisis has been heralded as proof of the environmental risks of the technology by the green lobby, but has been met with varying responses from governments increasingly troubled by the costs associated with meeting global energy needs solely through renewables. For law firms, the situation is a mixed bag. It looked as though a global backlash against nuclear generation might erupt, with Germany announcing that all of its reactors would be taken out of service by 2017, and the green lobby appearing to gain public support. In response to the unfolding events, the International Energy Agency (IEA) cut its projected figure for the construction of power plants by 2035 in half. Before the disaster, the agency expected 360 gigawatts of capacity to be added globally by nuclear new-builds, and now it expects half as much. This is equivalent to a reduction from around 200 new European Pressurised Reactors (Gen-III reactors which, thanks to their incorporation
of copious safety features, are emerging as the popular player in the reactor manufacturing market) to just 100. There is significantly less new-build legal work than the sector had been expecting. But Julian Boswall, partner at Burges Salmon, says there was already only a small pool of clients looking at nuclear, even before Fukushima. ‘With new-builds there are only a small number of clients anyway. There are firms who will have taken a punt on nuclear and now it will be costing them.’ Indeed, many firms that hired lawyers in anticipation of nuclear growth during the last decade could suffer if the IEA’s predictions are right. In Switzerland, for example, partner Marc Grüninger of GHR Rechtsanwälte reports that the federal government decided in May 2011 to abandon plans to build new nuclear power plants following the developments in Fukushima. The country’s five existing reactors will be allowed to continue operating, but will not be replaced at the end of their lifespan. The last will go offline in 2034. ‘As a result of the moratorium imposed by the Swiss government on the development of nuclear power plants, most projects in the nuclear energy field have come to a grinding
u Stanley, J.P. Morgan Cazenove and Nomura
Holdings as joint sponsors, while Freshfields acted for The Blackstone Group in connection with the deal. In our recent report on M&A trends in the emerging markets (‘Redrawing the map’, LB215, page 40), data supplied by Thomson Reuters showed that M&A activity in emerging markets last year was dominated by the energy sector: 33.5% of all deals involved energy and power companies, more than doubling the materials sector, which accounted for 15.5% of all deals. One of the largest Chinese M&A deals of the first quarter saw Encana Corporation, Canada’s biggest natural gas producer, sell a 50% stake in its shale gas assets to PetroChina International for C$5.4bn. ‘Energy is counter-cyclical. It is almost immune,’ says Christopher McGee-Osborne, partner and co-chair of the energy, transport and infrastructure group at SNR Denton. ‘Energy has grown when the rest of the economy has shrunk.’ He adds that it is difficult to gauge exactly how much of SNR Denton’s global revenues are attributable to energy clients since the US and UK sides of the recently
halt, although there is still some demand for expertise in this area,’ he says. Changing government attitudes throughout the world to nuclear energy, and the fact that the Generation II power stations built in the 1950s and 1960s are nearing the end of their lifespans, means that swathes of decommissioning contracts are likely to appear. ‘We don’t see Fukushima as ending nuclear,’ says Christopher McGee-Osborne, energy partner at SNR Denton. ‘It is not just about new-builds, as we’ve done a great deal of decommissioning work. There is still a lot of work in that, on the approximately 300 reactors that were built in the ‘50s.’ Ultimately, the tide may not have turned against nuclear at all. Governments are under increasing pressure to balance the books, a feat difficult to reconcile with the gargantuan expense of bridging the impending ‘energy gap’ solely with renewable source technologies. As Glen Ireland, partner at Latham & Watkins, says: ‘The reality as we see it is that, with a few exceptions, people’s nuclear plans remain unchanged. We’ve seen no reduction in the amount of work associated with it.’
‘Lots of the energy corporates have been better insulated from some of the economic downturn.’ Alexander Msimang, Vinson & Elkins formed transatlantic firm account differently. But he adds that on the UK side, the energy business had grown from 20% of the firm’s revenue to 30% in the last seven years. Both halves of the firm have readily admitted that an enhanced energy practice was a key factor behind the merger. ‘There has been a substantial change in the energy mix that governments are looking for,’
says McGee-Osborne. ‘What we have now is the economy recovering just as the switch is going on. In the emerging markets, we’ve got huge growth in demand for resources. All factors point towards growth of demand for legal services in energy.’ Alexander Msimang, London-based partner in Vinson & Elkins’ energy group, says that u during the economic downturn energy
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TOP TEN GLOBAL ENERGY M&A DEALS: Y/E 2010 Announcement Target date company 10 August 2010
GDF SUEZ Energy International
3 December 2010 Eni SpA (16.38% stake)
Target legal adviser
Bidder company
Bidder legal adviser
Seller company
Seller legal adviser
International Power
Clifford Chance; Herbert Smith/ Gleiss Lutz/Stibbe (advising J.P. Morgan Cazenove; Morgan Stanley; Nomura Holdings)
GDF Suez
Bredin Prat; Freshfields Bruckhaus Deringer (advising The Blackstone Group); Linklaters; Stikeman Elliott
Cassa depositi e Prestiti
6 December 2010 EnBW Energie BadenWürttemberg (54.99% stake) 21 February 2010 Smith International
19 January 2010
16 August 2010
Freshfields Land of BadenBruckhaus Württemberg Deringer Blake, Cassels & Schlumberger Graydon; O’Melveny & Myers (advising UBS Investment Bank); Wachtell, Lipton, Rosen & Katz The Williams Companies Williams Partners (certain gas pipeline and domestic midstream businesses) Cairn India S&R Associates; Vedanta Shepherd and Resources Wedderburn
7 September 2010 Enterprise GP Holdings LP
Baker & Hostetler; Enterprise Simpson Thacher Products & Bartlett (advising Partners LP Morgan Stanley); Vinson & Elkins 7 September 2010 Électricité de France Cheung Kong (UK-based Infrastructure distribution network) Holdings; Li Ka Shing (Overseas) Foundation; Li Ka Shing Foundation 1 October 2010 Repsol Brasil China Petroleum (40% stake) & Chemical Corporation 28 November 2010 Pan American Energy Bridas (60% stake) Corporation
Herbert Smith/Gleiss Lutz/Stibbe
Italian Ministry of Economy and Finance Électricité de France
Deal value ($m)
14,362
Cleary Gottlieb Steen & Hamilton
Baker Botts; Latham & Watkins; Vinson & Elkins (advising Goldman Sachs)
Baker Botts
27,278
14,076
12,198
The Williams Companies
Bracewell & Giuliani (advising Citigroup); Gibson, Dunn & Crutcher
Allen & Overy; AZB & Partners; Freshfields Bruckhaus Deringer (advising J.P. Morgan Cazenove; Morgan Stanley); Latham & Watkins Alston & Bird (advising Credit Suisse); Andrews Kurth; Morris Nichols Arsht & Tunnell; Skadden, Arps, Slate, Meagher & Flom
11,750
9,177
9,121
Allen & Overy (advising The Royal Bank of Scotland Group); DLA Piper
EDF Energy
Herbert Smith/Gleiss Lutz/Stibbe
8,870
Vinson & Elkins
Repsol YPF
Latham & Watkins
7,109
Akin Gump Strauss Hauer & Feld; Baker & McKenzie
BP
Freshfields Bruckhaus Deringer; Sullivan & Cromwell
7,059
NB: Based on announced deals, including lapsed and withdrawn bids. Based on dominant geography of either target, bidder or seller being global. Based on dominant sector of target being energy. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: mergermarket
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u became a very welcome buffer against
some of the volatility of the financial and corporate markets. He argues that one of the reasons for this is that the time horizons of energy ventures, from a client perspective, are very long, with clients looking at projects spanning up to 25 years. As such, governments and companies are not simply deciding to do a project based on today’s commodity prices or today’s economic picture. ‘Another reality is that lots of the energy corporates have themselves been better insulated from some of the economic downturn,’ he says. ‘They’re not as dependent on bank finance. Contracting debt markets have not had the same impact on them as in other sectors. At the same time on the transactional side, some of the smaller players have been squeezed or are feeling the burden of increasing regulation. That has created a lot of asset-buying opportunities.’
‘In Switzerland most projects in the nuclear energy field have come to a grinding halt.’ Marc Grüninger, GHR Rechtsanwälte Kristóf Ferenczi, head of energy at CEE firm Kinstellar, echoes this sentiment: ‘Investment and projects in the energy sector have continued despite the global economic
slowdown, given that the energy market requires longer term investments and offers attractive returns to investors primarily in u the long run. Our clients have, therefore,
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‘The national oil companies of countries spreading their wings and deploying their capital will create a lot of mandates.’ Douglas Glass, Akin Gump u neither suspended nor abandoned their major projects.’ As Julian Boswall, partner at Burges Salmon, says: ‘Any PLC of any size is now taking energy seriously. That means, in a funny way, that almost any client is an energy client.’ Whatever the motivation, it is clear that every firm has had its strategy dictated by the energy and natural resources sector, regardless of whether it has had a longstanding practice group in this sector or not.
DRIVING STRATEGY Nowhere can the dominance of energy client work over law firm strategy be better seen than by office openings and team hires in recent years. For example, Mark Newbery, head of the electricity group at Herbert Smith, is coy about immediate plans for new offices at the firm, saying: ‘There are a number of things under consideration.’ However, he is unequivocal about the motivation behind geographic expansion:
‘For any jurisdiction we look at the energy industry first.’ ‘The offices that we have in Abu Dhabi and Doha, which have been opened in the last three years, were driven to a large extent by the continuing development of those economies based in large part on the oil and gas business,’ says Philip Stopford, head of the London energy, infrastructure and project finance group at White & Case. ‘We continue to monitor whether we should be opening other offices in response to recent developments in the energy field.’ The most recent example of energy-centric expansion is the announcement by Squire, Sanders & Dempsey in August that it would be acquiring the Perth office of Australian giant Minter Ellison. The addition of 80 lawyers and 14 partners in the Australian city and a focus on mining, minerals and related energy work in Australia, will give Squire Sanders much needed strength in the Asia-Pacific region for its energy practice. But the most significant move from an energy perspective was Latham & Watkins’ office launch in the US oil and gas capital Houston in January last year. Latham said it would target energy acquisition work and bulked up with key lateral hires, including Michael Dillard from Akin Gump, Sean Wheeler from Baker Botts and William Finnegan from Vinson & Elkins. The tactic seems to be working, adding to Latham’s traditional strength in advising energy clients on major deals: the firm has played a role in four of the ten largest energy deals of 2011 so far. According to mergermarket data, the firm tops the legal adviser list on energy-driven deals globally so far this year: 28 deals worth $56bn. ‘We were approached by a lot of clients that were perfect for Latham but we did not have the Houston office,’ says Michael Dillard, who now heads up the office. ‘It will have grown from nothing to 50 lawyers by the end of 2011.’ ‘We have realised that there is this thirst for energy all around the world that cannot be satisfied, so we are positioning ourselves in all components of the energy sector,’ adds Glen Ireland, a London-based partner who joined Latham from White & Case in 2010. And Latham isn’t the only non-Texan firm to see the benefits of opening in Houston of late. Cadwalader, Wickersham & Taft, Simpson Thacher & Bartlett and Winston & Strawn have opened in ‘Space City’ in the past 18 months. Like Latham, Norton Rose is no young u pretender among specialist energy and
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TOP TEN GLOBAL ENERGY M&A DEALS: YTD 2011 Announcement Target date company 14 July 2011
Bidder company
Latham & Watkins BHP Billiton (advising Goldman Sachs); Simpson Thacher & Bartlett 13 January 2011 Marathon Petroleum Marathon Oil Corporation Corporation (Shareholders) 28 April 2011 Constellation Hogan Lovells; Exelon Energy Group Kirkland & Ellis; Corporation Sullivan & Cromwell (advising Goldman Sachs) 16 June 2011 Southern Union Cleary Gottlieb Energy Transfer Company Steen & Hamilton Equity (advising Goldman Sachs); Locke Lord Bissell & Liddell; Sullivan & Cromwell Baker Botts; ENSCO 7 February 2011 Pride International Shearman & Sterling; International Sullivan & Cromwell (advising Goldman Sachs); Wachtell, Lipton, Rosen & Katz 14 January 2011 OJSC Rosneft Oil Freshfields BP Company (9.5% stake) Bruckhaus Deringer 16 February 2011 Compañia Española Latham & Watkins International de Petróleos Petroleum (52.94% stake) Investment Company BP 21 February 2011 Reliance Industries (23 oil and gas production sharing contracts) (30% stake) 1 March 2011 Central Networks Western Power Ltd Distribution 19 April 2011
Petrohawk Energy Corporation
Target legal adviser
Bidder legal adviser
Seller company
Seller legal adviser
Morgan, Lewis & Bockius; Sullivan & Cromwell
Deal value ($m) 14,760
Marathon Oil Baker Botts Corporation Latham & Watkins (advising J.P. Morgan); Simpson Thacher & Bartlett (advising Barclays Capital); Skadden, Arps, Slate, Meagher & Flom; Weil, Gotshal & Manges (advising Evercore Partners) Alston & Bird (advising Credit Suisse); Bingham McCutchen; Latham & Watkins; Vinson & Elkins
14,667
10,410
9,037
Baker & McKenzie; Fried, Frank, Harris, Shriver & Jacobson (advising Deutsche Bank)
8,735
Linklaters
7,910
Linklaters
Total
Freshfields Bruckhaus Deringer
7,645
Linklaters; Talwar Thakore & Associates
Reliance Industries
Allen & Overy; AZB & Partners; Vinson & Elkins
7,200
E.ON UK
Linklaters
6,506
Allen & Overy; Ashurst; Dewey & LeBoeuf (advising Credit Suisse); Simpson Thacher & Bartlett Frac Tech Services LLC Thompson & Knight Temasek Holdings Commercial Law Group; Jones Pte Ltd; Chesapeake Day; Wachtell, Lipton, Rosen Energy Corporation; & Katz Public Sector Pension Investment Board; SBI Global Investment Co Ltd; RRJ Capital
5,000
NB: Based on announced deals, including lapsed and withdrawn bids. Lapsed deal marked in red. Based on dominant geography of either target, bidder or seller being global. Based on dominant sector of target being energy. Year to date (YTD) 2011 is from 1 January 2011 to 31 August 2011. Data correct as of 2 September 2011. Activities excluded from the table include property transactions and restructurings where the ultimate shareholders’ interests are not changed. Source: mergermarket
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u natural resources fi rms. Its dedication to
the sector has been underlined by three significant and natural resources-driven mergers in recent years. The first move was a merger with Deacons in Australia, and then tie-ups with Canada’s Ogilvy Renault and Deneys Reitz in South Africa. While the deals are a significant part of Norton Rose’s increasing global footprint, energy team partners Nicholas Pincott and Richard Metcalf are clear that energy is a critical driver of the expansion. ‘Energy is a catalyst for growth in the firm,’ confirms Metcalf. ‘Energy has always been a key plank of what we do,’ agrees Pincott. ‘Our growth goes hand in hand with the locations where things are picking up.’ Norton Rose is coy about the proportion of global revenues that the group contributes but claims to have 250 specialist energy and utility lawyers worldwide and points out that six partner promotions since 2009 have come in the energy group. There have also been seven recent lateral hires to the group, including John Conlin, who joined the energy team as a corporate partner from Freshfields in July, where he was of counsel. The firm also hired Ashley Wright from Ashurst in Singapore at the end of 2010 to lead its Asia oil and gas team. While M&A deals involving energy companies are not necessarily the firm’s forte, it consistently features on major energy projects. Pincott suggests one piece of work that underlines what Norton Rose is all about is advising longstanding client The Crown Estate on the Round 3 offshore windfarms, for which the firm was chosen as the Energy and Natural Resources Team of the Year at the 2011 Legal Business Awards. It was billed as the world’s biggest renewable energy deal, requiring top-level legal advice in the context of social and government policy. However, despite recent strategic moves and award-winning mandates, the firm itself admits that a US merger is crucial to fulfi lling its true energy ambitions, providing a Houston base in particular. The firm has suggested that a US tie-up is a key strategic priority in the next two to five years, although sources suggest that this could happen sooner than many thought, and Fulbright & Jaworski could be one firm to make the US dream happen for Norton Rose (see news story, page 13).
GEOGRAPHIC POWER While the US, and Houston in particular, will always be a critical focus for energy work,
‘Energy is a key plank of what we do. Our growth goes hand in hand with the locations where things are picking up.’ Nicholas Pincott, Norton Rose particularly with US energy assets being sold to suitors from the Middle East and Asia as the so-called ‘shale gale’ gathers pace (see box, ‘Shale gale’, page 48), progressive and dedicated energy teams are keeping an eye on the key fighting grounds where law firms are jostling to pick up the biggest mandates. One significant area, unsurprisingly, is Asia. Douglas Glass, London-based partner and energy specialist for Akin Gump, reports that in the US right now, ‘the Chinese, the Indians and the Koreans are buying up shale gas assets at astronomical prices. The national oil companies of countries spreading their wings and deploying their capital will create a lot of mandates’. ‘In the last 12 months, Asia has probably been the key driver behind the development of our energy practice,’ says Tim Pick, London-based head of Shearman & Sterling’s project development and finance group. He adds that around 15% of the firm’s global revenues derive from energy-related work. ‘The energy business in Asia has crept out of the economic
crisis more quickly. It has been a wave. Asia seemed to jump out of the crisis and into deal mode on the energy side.’ ‘Lots of Asia-based clients have been very active around the world,’ says Vinson & Elkins’ Msimang. ‘We have relationships with all of the state-owned oil companies. They are actively making acquisitions around the world.’ One clear example of Asian clients buying up global energy assets was Chinese company Sinochem buying a 40% stake in the Peregrino oilfield in Brazil for $3.1bn from Norway’s Statoil last summer. Vinson & Elkins advised Statoil on this deal, while Baker Botts, Brazilian firm Demarest e Almeida and Dutch firm NautaDutilh all combined to advise Sinochem. Half of Vinson & Elkins’ fee-earners call themselves energy lawyers and its commitment to the practice area is reflected by roles such as advising China Petroleum & Chemical Corporation (better known as Sinopec) on its purchase of a 40% stake in Spanish oil and gas company Repsol for $7.1bn. Latham & Watkins advised the seller. But while Asian energy companies are buying up assets all over the world, the continent on every global energy lawyer’s lips is Africa. Huge natural resources and mining operations need power to work effectively, but often the infrastructure is poor, meaning power projects and the mining of natural resources go hand in hand. ‘African work has continued to go up and up, that’s north and sub-Saharan,’ says Msimang. ‘There was a hesitation in the North African work, but interestingly that has started to come back quite quickly, even after the problems there.’ Again, despite intense political and social turmoil in North Africa in the past year, there has been no lessening of the demand for energy infrastructure. And the world’s law firms have already started building up the firepower to grasp at work in the region. Jones Day recently hired an Africa energy team into its Paris office, a city where other firms, notably Herbert Smith, have had considerable joy in developing a practice. Jones Day Paris partner Laurent Vandomme, who took his team from Herbert Smith to the US firm, argues that in covering energy work across the African continent, you have to cover different types of legal system. ‘Africa may be very crudely divided between two legal systems – the French, Spanish, u Portuguese civil law system and then
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u English law,’ he says. ‘So when you advise an
international company investing in Africa you have to align skills in civil law and common law systems.’ Pick says that Shearman & Sterling has also been looking at heavily investing in Africa. The firm hired Simmons & Simmons’ Parisbased head of energy and Africa Christophe Asselineau in the spring. Pick says: ‘As the Middle East gets commoditised, Africa has become the new testing ground in terms of high-quality practices putting together complicated deals.’ Shearman certainly has a strong track record in Africa, most recently in Egypt. The firm was shortlisted for Energy and Natural Resources Team of the Year in the 2011 Legal Business Awards for its work advising both project sponsor Citadel Capital and the Egyptian Refining Company on the development and financing of the $3.5bn hydrocracking refinery near Cairo. The deal, one of the largest project financings in Africa, will be the first plant in Egypt to produce IATA-grade jet fuel and European Union-grade diesel.
ENVIRONMENTALLY FRIENDLY In the UK, renewables work is dominating the agenda, as can be seen from Norton Rose’s role in advising The Crown Estate on the Round 3 offshore windfarms. In Ireland, head of projects and energy at Arthur Cox Alex McLean says: ‘The impact of a variety of EU Directives and Regulations is leading to significant activity in areas such as renewables, market reform, energy efficiency and carbon trading.’ However, the economic viability of renewable projects in Europe will always be a sticking point. As Mark Elsey, global head of energy at Ashurst, points out: ‘In Europe, the focus has been on renewables recently. The focus has been on wind, nuclear and solar photovoltaic power in the UK, as well as biomass projects. Whether it makes good economic sense is another matter. But the appetite among investors is now more attracted to sustainability.’ ‘In the renewable energy sector, wind and solar markets should continue to see strong activity over the next 12 months in both developed and emerging markets,’ says Charez Golvala, a partner in Chadbourne & Parke’s London office. ‘This is driven by the desire for independence from finite and high-priced fossil fuels and concerns over global warming. However, the US is likely to see a slow down in renewables work due to the expiration of
say that they do not actually practise energy law,’ says Warne. ‘Law firms have woken up to the fact that this is a good area to be in. But our commitment is clear: this year we made up five partners in energy and the practice accounts for around 25% of our revenues.’ Burges Salmon’s Boswall echoes Warne’s sentiment: ‘There is a big difference between lawyers doing some energy work and those that have crossed the line to being “energy lawyers”.’
JUMPING ON BOARD
‘Investment and projects in the energy sector have continued despite the global economic slowdown.’ Kristóf Ferenczi, Kinstellar various incentives provided by the federal stimulus program.’ CMS Cameron McKenna, which has one of the most established oil, gas and power practices of any UK-based international firm, frequently advises on significant global projects. These include teaming up with Sullivan & Cromwell last year to advise BP on the sale of $7bn of oil and gas assets to Houston-based Apache Corporation. However, for Penelope Warne, head of the firm’s energy practice, running a full-service, successful energy practice is not all about handling global M&A deals or projects where energy is the main asset. She cites her recent work as particularly fulfilling and indicative of a true energy practice. This involved advising industry association Oil & Gas UK over the development of a capping device for undersea oil wells – which could be a landmark development in solving a global problem that became evident during last year’s Gulf of Mexico oil spill. ‘Every firm seems to have a cosmetic energy practice but if some were honest, they would
However firms spin it (and there does seem to be a wave of jumping aboard the energy bandwagon in recent years), it is clear that investing in an energy practice is a good horse to back right now. But it isn’t as straightforward as grabbing a slice of the action – it may be too late for many firms, with the hierarchy of international law firm advisers now well established for many years. Norton Rose’s Metcalf actually believes the real threat to established legal players in the energy field will come from increasingly sophisticated law firms in Brazil, Russia, India and China, where the investment into energy assets is coming from. Other established players argue that the temporary, faddy approach to energy will soon dissipate if the global economy revives sufficiently and energy is no longer seen as just a safety net. ‘Trends come and go but I don’t think it really changes the sector focus permanently,’ says Andrew Hart, London-based energy partner for Fulbright & Jaworski. ‘I think it’s fair to say that in the transaction arena, in terms of financial returns, energy work is not seen as a premium area of work. So some firms have come and gone in terms of their focus on the sector. That point isn’t really relevant for us as energy is so central to us.’ But for the time being at least, there seems to be no lack of appetite among any firm for energy mandates, nor is there any reticence in expanding personnel or geographies to keep those clients happy. As Ashurst energy partner Peter Roberts points out: ‘Firms will not come unstuck if half of their business is in energy.’ LB mark.mcateer@legalease.co.uk michael.northcott@legalease.co.uk
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