About

In what ways do you see the in-house legal role evolving over the next few years?

Firstly, in-house teams are expanding, and this is not merely an effort to reduce external legal spending, but rather that it is more and more appreciated that the key value of an in-house team is that they have a deep understanding of the commercial offerings of their company. It understands and is willing to take a view on which risk one is willing to accept in return of the potential margin the opportunity will create. That, combined with the fact that certain industries, like M&A, financing, construction and operations, it is virtually impossible to fully outsource the legal works streams and hence, the requirements of the individual member of the in-house team increases, but also makes the in-house team an important success factor for the company as a whole. Secondly, the importance of compliance, both in terms of ethical compliance and in terms of ESG will emerge as being a key area for the in-house team to take control over. The consequence, both financially and in reputation for not having sufficient control and focus on these important subjects are detrimental. Having ethical compliance and ESG under control, provides a competitive advantage unlocking further investors and debt providers and will provide a competitive edge where the legal in-house teams will be adamant.

Do you have any effective techniques for getting the most out of external counsel, in terms of how to instruct them?

This highly differs, but we do seek to try to ensure that we, and the various counterparties use counsels that we together (or they alone) have worked with on prior similar deals as to established a base line quickly and not spend time negotiation items that have been solved in previous deals. Further, we spend significant time in the RFP process on the setting the scope for the work to be provided and firm caps on fees.

What makes the Norwegian market a good place to locate for a global renewable energy business?

There are four key traits I would like to highlight. Firstly, access to experienced professionals. Norway, with its long renewable energy history with hydropower being the dominant power technology, combined with a developed oil and gas segment, provides for a significant pool of highly experienced professionals within the energy sector. As a global frontrunner in renewable energy, Scatec Solar has been able to leverage on past experience in the field of developing, financing, constructing, owning and operating energy assets. Secondly, the experience from the financial and investor sector within energy is significant. This ensures an effective access to capital to grow. As the renewable segment is capital instance and competitiveness is large driven by your cost of capital, having an efficient financial structure is imperative. Thirdly, support and focus. There has been a tremendous shift the past 10 years towards focussing on renewables in Norway and a push for Norway to take a leading role. This is also evident by the tremendous investment made by government institutions such as GIEK and Norfund into renewables globally. Fourthly, good intentions. When entering new markets within infrastructure, and especially within energy supply, which is vital to the national security of a country, it is an advantage that you represent a country which do not pose any treats to national matters.

How have you adapted and overcome the challenge of covering the company’s global remit?

Several markets have strict foreign exchange regulations and it is vital that the early structuring phase clarify the exact requirements, and adopt the funding structure thereafter. We have made several adoptions over the years and we focus on place holding entities in countries with strong bilateral trade agreements with the market we are entering into. Thereafter, we split most construction contracts in offshore and onshore parts, and adopt offshore and onshore accounting structures allowing funds to flow without necessarily entering the market.

FOCUS ON:

Funding in emerging markets

In the past 10 years, Scatec Solar has transformed from a start up to a global frontrunner in renewables. A significant success factor has been the company’s ability to attract project finance for its power plants – which it develops, finances, constructs, owns and operates – particularly in emerging markets where access to financing is a significant competitive advantage. The company has raised more than NOK20bn in project finance, on five continents, with various finance institutions, with structures ranging from syndicated facilitates with commercial banks, DFIs, export credit agencies, climate funds, concessional finance to Sharia compliant bond structures. Although each of these financings have been tailored to fit the requirement of the applicable market, they all have certain specific common traits which has ensured their success. The structuring is designed to ensure flow of funds to safeguard payment of interest, instalments and dividends. Repatriation of funds, tax and waterfalls are carefully catered for in the structuring phase. All agreements are further drafted in a form and content to be acceptable to lenders, and any material agreements caters for lenders taking security over it. Offshore-onshore contracts are utilised to safeguard enforcement, as well as standardised documents satisfactory to lenders under their preferred jurisdiction. Essentially, any project the company undertakes is measured on the basis of its ability to attract financing. 

During the credit crunch I experienced first-hand that lenders with a strong position allowed the borrower to focus on their operations even if financial covenants were not met. Clients with complex structures with competing interests were not focused on this, as each of their lenders were uncertain of their position and hence chose to enforce quickly. This taught me that it is imperative to understand (and value) that lenders take the majority of the risk without any potential upside, they do not get higher margin if the plant produces more yield. The package presented to the lenders must thus reflect this fully. An infrastructure project designed with this in mind not only allows you access to financing where others do not, but also allow you to focus more on the items that increases your return, such as leverage, reduced DSCR, and reduced costs. Additionally, the interest of the lenders and yourself as investor is heavily aligned. Relentlessly focus on risk improves your own investment significantly.