Energy and resources is one of the most rapidly developing sectors of the economy – both in Australia and around the world. Seismic shifts in the energy industry, particularly the rise of renewables, are generating a lot of exciting new work for lawyers in this space.
Year 2017 was something of a turning point in energy and resources. While renewables projects ramped up early in the year, policy uncertainty began to plague the market as energy became increasingly politicised.
With a new year upon us, Lawyers Weekly asks expert energy and resources lawyers what it’s like to be at the cutting edge in the all-important power market.
Staying plugged in
In such a fast-paced industry, it is vital that lawyers stay up to date with technological and political developments.
Craig Rogers, Australian head of projects, infrastructure, energy and resources at King & Wood Mallesons, tells Lawyers Weekly this is a key focus area for his team.
“We have two primary purposes,” he says.
“One is to ensure that we're seamless around the country, which we are known for and so it's really in terms of our client delivery strategy in that sector, and [the second is] ensuring that our lawyers are at the cutting edge of what's happening in the market, both from a technical legal perspective and from a commercial and energy perspective.
“We spend a lot of time not just focusing on the law here but looking at trends, looking at what's happening in the industry, looking at what's happening overseas and looking at what's happening in markets, and that, combined with the legal skills, is really the focus: bringing that together and then delivering that seamlessly to clients.”
However, energy and resources lawyers don’t do it all on their own. Their work often entails significant crossover and collaboration with lawyers in other practice areas, according to Andrew Mansour, Allens’ head of power and utilities in Australia.
“There's quite an interplay between our sector and other important sectors … [such as] M&A, project finance – technology is actually an increasing area as well that we've been involved with,” he says.
Mr Rogers adds that many lawyers who specialise in areas such as M&A or planning and environment also do energy and resources work as an adjunct part of their practice.
The renewables boom
The biggest talking point in the energy and resources sector in recent years has undoubtedly been renewable energy. The role renewables will play in the future of energy production has been the subject of heated debate in Australia and globally, and it’s an area that Herbert Smith Freehills senior associate Rupert Baker is right in the thick of.
As a project finance lawyer, Mr Baker has developed a specialty in renewable energy. He says renewables projects have taken a sharp upturn recently, and he devoted a lot of his time to this work over 2017.
“[2017 was] an exciting year for renewables in Australia, with many innovative and ‘first-of-kind’ projects entering construction,” he said.
“The activity has been driven, among other things, by market prices together with the availability of PPAs [power purchase agreements] in the market in 2016 and early 2017.
“The large-scale solar funding programs undertaken by ARENA and the CEFC bolstered this activity, although they certainly weren’t a prerequisite, with many projects proceeding outside these programs.”
While the pace of growth in the renewables sector will inevitably slow down, Mr Baker says this will just mean work of a slightly different nature for lawyers.
“We will eventually see a slowdown in the pace we have seen throughout 2017 but at the same time I think we will continue to see a greater variety of projects being developed and greater difference in the relative sizes of these projects,” he says.
“The next boom we are likely to see is in the storage space, which will be key to ensuring renewable energy generation can provide a reliable and readily dispatchable source of baseload power.”
Mr Rogers notes that 2017 was also a big year in terms of transactional work in the mining and resources sector.
“We've certainly seen more transactional interest in the mining and resources sector,” he says.
“There's a number of major divestments that are in progress or that have taken place on the east coast.
“Certainly in the resources sector we've seen a lot of M&A interest, a bit of project development interest and there have been some plans from miners to start putting their foot down as we see a bit more stability in the pricing.
“We're also starting to see a different class of investor coming in, so you're seeing more private equity-type interest in the resources sector, wanting to be exposed to that commodity risk rather than the same interests that you've had from the majors here. So you've got a lot more smaller players and private equity-backed players getting into the sector.”
Uncertainty and opportunity
While in some ways 2017 was a bumper year in the energy sector, projects slowed down a little towards the end of the year as the South Australian power failure was followed by political uncertainty over the future of Australia’s energy regime.
“We went through a state of flux [in late 2017],” Mr Rogers said.
“We're obviously looking at what's going to happen past 2030, when the renewable energy target ends. The Finkel review called for a clean energy target and then the government announced its energy plan, which is the National Energy Guarantee, which has both an emissions component and a reliability component.
“Until that is formalised and passed and we've got some long-term certainty that that will be the mechanism, I think in the renewables space we've certainly seen a slowdown in the number of new projects while we're waiting for a bit more regulatory certainty.”
However, Mr Mansour offers reassurance that there is still plenty of work for lawyers in the energy and resources sector.
“I think there are a lot of opportunities,” he says.
“The good thing is that it's not just necessarily doing projects work in the area. We work a lot with our finance colleagues on project finance. I also do a lot with my M&A colleagues on acquisitions.
“Increasingly we're dealing with other parts of the firm. I mentioned technology as one that's growing, so I think that's opened up your non-traditional way of being involved in the energy sector.”
In such a turbulent area, keeping abreast of changes is key. Mr Baker says the best way for lawyers and firms to secure work is to show clients that they are true experts in the field.
“There is a lot of competition for deals and clients in this space, particularly with the volume of deals in the market,” he says.
“I think the firms who really differentiate themselves are the ones who consistently demonstrate the ever-evolving sector-specific knowledge required to keep pace with the rapidly changing market, and who are able to apply that knowledge in a well thought through and commercial manner to each new transaction.
“The ability of a firm to bring this sector-specific knowledge together across a broad range of practice areas to provide a team with a full-service offering covering the lifecycle of a project is something that is highly valued by clients.”