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McDermott Will & Emery Named 2021 Project Finance Group of the Year

We are pleased to share that our Energy & Project Finance Group was recently recognized as a 2021 Law360 Practice Group of the Year for Project Finance.

We have made impressive strides in 2021 with exponential team and matter growth globally. The group’s multifaceted experience in both renewable and conventional energy, as well as in the infrastructure sector, combined with the group’s excellent thought leadership, has led to this recognition.

From closing fast-moving energy deals to help drive a carbon-neutral economy to hosting industry experts for a bi-weekly discussion on how the Energy Transition is shaping our industry, the Energy & Project Finance Group is committed to providing comprehensive advice in any area of energy law.

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Key Takeaways | Outlook for Competitive Power in 2022

On February 2, Neil Levy and David Tewksbury, partners in McDermott’s Energy Regulatory, Markets & Reliability Practice Group, hosted Todd Snitchler, president and CEO of the Electric Power Supply Association (EPSA), for an in-depth discussion about developments affecting the competitive power sector as we move into 2022.


Below are the key takeaways from this discussion:

  • Competition has benefited consumers by shifting risk from consumers to investors, lowering prices, and reducing emissions, while improving reliability. However, competitive power markets are facing challenges due to recent state actions and FERC decisions.
  • Carbon pricing would be one way to address concerns regarding emissions within a competitive market framework.
  • The federal government and states need to work together to preserve competition and ensure that state goals do not jeopardize reliability.
  • Steps must be taken to ensure that resources required for reliability are not pushed out of the market.
  • States have been focused on emissions reductions by subsidizing certain types of resources, which can result in lower market prices. At the same time, recent FERC actions have also reduced revenues for various resources.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Key Takeaways | Finding and Structuring Development Capital for Renewable Platforms and Projects

During the latest webinar in our Energy Transition series, McDermott Partners Christopher Gladbach and Joel Hugenberger hosted Angel Fierro, managing partner of PLEXUS Solutions, and Jorge Vargas, managing partner & co-founder of Aspen Power Partners, to discuss what financing is available to fund the development of projects before they reach notice to proceed (NTP). They also covered what capital providers and developers consider when approaching development capital to fund pre-NTP expenses and general business expansion and the challenges and opportunities associated with these financing products.

Below are key takeaways from the webinar:

1. The market for pre-NTP financing is expanding and diversifying. Traditionally, pre-NTP costs were covered by a developer using the development fee they received from selling a completed project or by granting preferred equity. Today, large credit funds, Environmental, Social and Corporate Governance (ESG) funds, boutique finance groups, family offices, oil and gas companies and corporations are all providing pre-NTP financing, and development loans are becoming a more common way for developers to cover pre-NTP costs.

2. Sponsors should look for development lenders that understand the typical risks and delays associated with the project development process. Development lenders need to be flexible and ready to accommodate development delays and other unexpected issues that arise as a project is brought to market. (This includes flexibility related to amendments and consents.) Lenders should be prepared to quickly provide amendments and waivers to address changes in a project’s timeline as it progresses toward NTP.

3. Price should not be the only thing developers consider when deciding which source of development capital to use. Developers should ensure that they and the capital providers are aligned when it comes to deadlines for NTP to occur, capacity to accommodate delays in the development process and the share of income generated from the project.

4. Development capital is essentially a bet on a development team, and in evaluating a development team, development lenders assess what experience management has and their success working together to bring projects to market. Development lenders want to see that a development team has people who know how to mitigate risk across the various segments of the development process (e.g., origination, site control, permitting, power marketing, etc.).

5. Power purchase agreements (PPAs) are becoming scarcer and shorter (10-year terms are replacing 25-year terms), and lenders and investors are getting more comfortable with providing capital to merchant projects and other projects that have traditionally struggled to obtain financing.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Key Takeaways | The Growth of Early Stage Technology Company Investment and Development in Energy and Oil and Gas

How is technology affecting the energy industry? In the latest webinar in the Energy Transition series, McDermott Will & Emery Partner Parker A. Lee hosted Shawn Helms, co-head of McDermott’s Technology and Outsourcing Practice Group, Nadine Herrwerth, managing director at TWTG, and BJ Walker, managing director at Tudor, Pickering, Holt & Co for a 30-minute discussion where they opined on the current and future impact technology plays on conventional and renewable energy companies.

Below are key takeaways from the webinar:

1. Industrial Internet of Things (I-IOT). I-IOT products and services can be used to improve site safety and efficiency. I-IOT products have the capability to monitor equipment, such as valves and temperature sensors on machinery, and record data on external dashboards for analysis and alerting. Through the use of data analysis, data gathered by I-IOT products can identify trends, build models and detect future equipment failure. As a result, I-IOT products and services can increase the efficiency, reliability and safety of equipment.

Though the application of I-IOT devices is relatively new to the industry, these products are capable of being retrofitted to established and already operational sites.

2. Technology Companies and Energy. While technology companies are large consumers of energy output, they can also provide significant insights and intelligence in regard to energy use and production. Synergies between technology and energy industries are continuously evolving and providing improvements in energy investments, efficiencies and reliability. For example, drones are capable of leveraging artificial intelligence to increase efficiency and consistency of equipment monitoring and inspections, particularly equipment that is located in remote areas (such as offshore).

3. Investor Focus on the Energy Space. An important theme in the oil and gas industry is the recent focus on transforming the industry to a generator of cashflow. In attracting new investors to the energy industry, particularly as new technologies are introduced, investors should know there is typically a longer wait period to receive a return on investment than what a general investor would commonly expect. In addition to general investors, technology companies are investing in renewable energy sources for purposes of environmental responsibility and in order to power their own enterprise. It is expected that this trend will continue to grow in energy intensive areas, such as the cryptocurrency space.

4. Technology in Traditional Oil and Gas. Although not widely appreciated, the oil and gas industry has always been heavily reliant on technology and an area where revolutionary technologies are developed—and that is certainly the case today. Because oil and gas professionals are proficient with, and conversant in, the application of new technologies, look to those professionals to be industry leaders in the energy transition as new businesses and products are developed.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Key Takeaways | Legislative Update on Renewable Energy Tax Incentives

On November 17, McDermott Partners Philip Tingle and Heather Cooper were joined by Bill Parsons, COO of the American Council on Renewable Energy (ACORE), for a discussion on recent legislative activity regarding renewable energy tax incentives and how it will affect current tax credits as well as those in the center of the renewables space.

Below are key takeaways from the webinar:

1. Negotiations surrounding the Build Back Better Act and progress regarding the substance of the bill have been moving at a rapid pace. Despite some uncertainties, the hope is that something will be passed before year-end—and the tax credits component is likely to look very similar to the current proposal.

2. A shift in thinking has taken place in US Congress, specifically, the clean energy tax regime is now seen as a credible driver in achieving the Biden administration’s decarbonization and climate goals.

3. Industry participants are assessing whether the direct pay component of the Build Back Better Act will dramatically change the tax equity market. Several factors will determine how direct pay will affect said market, including the timing of payments, Internal Revenue Service (IRS) scrutiny, availability of depreciation and tax basis step-ups, permissiveness of waivers, congressional oversight and the proposed minimum book tax.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Key Takeaways | Lender Outlook on the Debt Financing of Renewables and Transactions

During the latest webinar in our Energy Transition series, McDermott Partners Robert da Silva Ashley and John Bridge hosted Paul Pace, SVP and team leader at KeyBank, and Andrew Chen, managing director at CIT, to discuss the current outlook of leading lenders in the US renewables and transactions space. More specifically, they focused on lender outlook regarding the state of debt market support for the growing range of renewable power generation and clean energy infrastructure projects.

Below are key takeaways from the webinar:

1. The financing market for renewable projects remains extremely competitive, compressing pricing for lenders and driving innovations in financing structures with credit increasingly given to shorter tenured power purchased agreements (PPAs) and earlier merchant tails.

2. Current supply chain delays and inflationary pressures are creating significant stress. Solar panels and other major equipment are stuck in ports and sharp rises in project costs (insurance, labor wages, operations and maintenance, etc.) are starting to have a noticeable effect on the viability of certain project developments.

3. Lenders have been leaning heavily on client relationships with established track records of successful project developments, strong financial footing and credibility with industry counterparties helping to navigate the current challenges.

4. Environmental, Social and Governance (ESG) remains a focus for banking institutions driven by regulatory and environmental factors.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Does the ADP in Your LNG SPA Meet Your Needs?

It’s that time of year again when the sellers and buyers of many of the world’s long-term liquefied natural gas (LNG) sales and purchase agreements (SPAs) must agree on the Annual Delivery Programme (ADP). In past years, this has typically been a mildly contentious process where both parties’ operations teams discuss, haggle and settle on an LNG delivery programme that roughly meets both parties’ needs. The discussions are framed by the terms of the applicable SPA but guided by cooperation and the goodwill generally found in long-term buyer-seller LNG relationships. Lawyers tend not to be involved. However, this is not the case this year.

With a global gas/LNG shortage and spot prices reaching record highs, there is a huge discrepancy between long-term LNG and spot LNG prices. At the time of drafting this article, Platts JKM is quoted at US$ 33.85 / MMBtu and Title Transfer Facility (TTF) is quoted at US$ 32.15/ MMBtu for January 2022 delivery. However, a long-term LNG SPA at a relatively good LNG price of 13.5% Brent would be at US$11.34/MMBtu with Brent at US$ 84/ bbl. An approximate US$ 20 / MMBtu difference or, for a mid-range LNG cargo size of 3,800,000 MMBtu, a US$76 million difference per cargo.

With this level of price difference, every cargo is vital. For sellers, any cargo that can be delivered spot rather than under a term SPA can provide significantly greater profits, and the converse is true for buyers. Many LNG buyers have recently adopted a strategy of buying a significant proportion of their LNG demand on a term basis but with spot purchases covering demand growth and swing. For these buyers, ensuring as many of their (currently lower priced) term cargoes arrive during the high demand, high cost winter months with lower price summer spot purchases making up any annual demand shortfall can significantly reduce their weighted average LNG purchase price.

The early long-term SPAs were developed for a point-to-point trade, often with a fleet of ships sailing continuously between a loading terminal and one or two particular receiving terminals serving a single SPA. Discussions on an ADP were relatively simple with both parties strongly incentivised to align delivery windows to reduce shipping and demurrage costs and ensure sufficient LNG supplies. But if the parties could not agree on a delivery programme, typically the seller had the final say.

However, the LNG industry has changed significantly since those early days, particularly with the advent of portfolio traders, diversion clauses (with or without profit sharing elements), upward and downward quantity tolerance and, most importantly, the spot market: all driving a more flexible, efficient and commercial LNG market. As the LNG market has developed, so has the drafting of the ADP provisions, with buyers increasingly wanting to set firmer delivery windows and have stronger rights for Upward Quantity Tolerance (UQT), Make-up and Make-Good cargoes.

So how does the gulf between spot and term prices and the development of LNG SPAs impact the ongoing ADP discussions? Instead of coordinated [...]

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Key Takeaways | Conventional Energy Companies Pivot to Renewables

How will traditional energy companies compete as the world transitions to renewable energy? In the latest webinar in our Energy Transition series, McDermott Will & Emery Partner Jack Langlois hosted Philip Tingle, global co-head of McDermott’s Energy and Project Finance Practice Group, and Michael Hanson, managing director of energy transition at Truist Securities, to answer exactly that. During the 30-minute discussion, they assessed the future for conventional energy companies, including key issues surrounding decarbonization and current tax credit frameworks.

Below are key takeaways from the webinar:

1. Timeline and Decision-Making. There is a broad divergence of views in how quickly the transition to renewable energy will happen, but changes in law and policy could accelerate that timeline. Conventional energy companies are taking small steps to get acclimated to new renewable opportunities because there are multiple factors they need to consider before deciding whether to enter into the renewable energy space: Strategic fit, materiality, profitability and risk. Many conventional energy companies that have successfully pivoted to renewable opportunities have done so by reutilizing their existing assets.

2. Carbon Capture. Carbon capture is often a strategic fit for oil and gas companies. However, companies, investors and banks are still struggling with the profitability of carbon capture because without government incentive, carbon capture is not profitable. The current incentive structures do not compel a sufficient amount of activity because they only compensate capture equipment owners, leaving out all the necessary downstream affiliates. Until this business model is corrected, banks especially will struggle with how to finance carbon capture.

3. Reconciliation Bill. Carbon capture incentives may be around for a while longer. In the reconciliation bill, there is a provision that would extend the Section 45Q carbon capture tax credit through the year 2032. However, the bill would also modify the tax credit to provide for wage and apprenticeship requirements. Companies will need to find ways to assure financing parties that they have met these additional requirements. If they can accomplish this, the extension period will allow greater opportunities for conventional energy companies to enter the space.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




An Update on Wind Farm Development along the US Coastline

On October 13, 2021, during a speech at American Clean Power’s Offshore WINDPOWER Conference & Exhibition, US Department of the Interior Secretary Deb Haaland announced a path forward for future offshore wind leasing along the US coastline. This announcement supports the Biden administration’s goal to install 30 gigawatts of offshore wind energy by 2030 and comes approximately five months after the Biden administration approved the 800 megawatt Vineyard Wind Project.

“The Interior Department is laying out an ambitious roadmap as we advance the Administration’s plans to confront climate change, create good-paying jobs, and accelerate the nation’s transition to a cleaner energy future,” Secretary Haaland said. As part of this roadmap, Secretary Haaland also announced plans for the Bureau of Ocean Energy Management (BOEM) to potentially offer up to seven new offshore lease sales by 2025 in the Gulf of Maine, New York Bight, Central Atlantic, Gulf of Mexico and offshore the Carolinas, California and Oregon.

Secretary Haaland shared that the Interior Department’s “timetable provides two crucial ingredients for success: increased certainty and transparency. Together, we will meet our clean energy goals while addressing the needs of other ocean users and potentially impacted communities. We have big goals to achieve a clean energy economy and [the Department of] Interior is meeting the moment.”

BOEM Director Amanda Lefton advised, “[w]e are working to facilitate a pipeline of projects that will establish confidence for the offshore wind industry…At the same time, we want to reduce potential conflicts as much as we can while meeting the Administration’s goal to deploy 30 gigawatts of offshore wind by 2030. This means we will engage early and often with all stakeholders prior to identifying new Wind Energy Areas.”

As we move closer to 2030, industry investors and developers should expect to see a steady increase of offshore wind activity due to the recent announcements and the Investment Tax Credit for projects that will start construction before 2026.




Key Takeaways | The Latest Merger Control Developments under the Biden Administration

The Biden administration has placed an emphasis on antitrust enforcement that will create meaningful implications for future transactions, as well as those already consummated. In this webinar, hosted by McDermott Will & Emery partners Kevin Brophy and Lesli Esposito and associate Matt Evola, learn who the new leaders at the Federal Trade Commission (FTC) and US Department of Justice (DOJ) Antitrust Division are and how their approach to antitrust enforcement is already changing merger review process.

Below are key takeaways from the webinar: 1. Antitrust Agency Personnel Changes. The FTC and the DOJ Antitrust Division have recently seen leadership changes. At the FTC, US President Joe Biden appointed Lina Khan to chair, and she’s already making headlines for her efforts to “modernize” merger assessments. Chairwoman Khan has indicated that she wants the FTC to focus on addressing the “rampant consolidation” that has resulted in dominant firms across markets. She has also advocated for a holistic approach to identifying harms, a focus on power asymmetries and a need for the agency to be forward-looking. The changes she has implemented have significantly impacted merger review. At the DOJ, President Biden appointed Jonathan Kanter, who has not yet taken office but is also expected to take an aggressive approach to enforcement, to lead the Antitrust Division. 2. President Biden’s Executive Order on Antitrust. In a July executive order, President Biden indicated that antitrust enforcement would be a top priority for his administration. The order calls for a whole-of-government approach, encompassing 72 initiatives directed at more than 12 separate agencies. The order directed the FTC and the DOJ to vigorously enforce the antitrust laws by toughening the review of future mergers and revisiting anticompetitive mergers that went unchallenged. 3. Policy Changes with Practical Implications. The FTC has been especially active in announcing new policies and procedures that will likely extend the merger review timeline and open previously consummated transactions to further scrutiny. Among these changes are:

  • The suspension of early termination for the 30-day Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) waiting period: Early termination has always been discretionary, but the FTC’s Premerger Notification Office has suspended early termination in 2021 with no resumption in sight.
  • Warning letters sent at the conclusion of the HSR Act waiting period: These “close at your own risk” letters indicate that while the waiting period has concluded, the agencies may challenge the transaction post-closing.
  • Increased requests for “pull-and-refiles”: This process restarts the HSR Act waiting period, granting agencies an additional 30 days to review a transaction, and are being requested at an increasing rate.
  • Procedural and timing changes aligning the FTC with the DOJ: Changes made at the FTC are bringing the agencies into alignment on certain procedures for second requests, and these changes are likely to extend the timeline required for responding to second requests.

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