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Key Takeaways: SPACs and How to Plug into the Opportunities They Present in Renewable Energy and Green Infrastructure

On April 14, McDermott Will & Emery partners Tom Conaghan and Carl Fleming and Nicole Neeman Brady, CEO and director of the renewable energy SPAC, Sustainable Development Acquisition I Corp, discussed the rise of special purpose acquisition companies (SPACs), the opportunities they present in renewable energy and in the transition to green infrastructure and the complex legal and business challenges these vehicles present.

Below are key takeaways from the webinar:

  1. There has been an increase in SPAC activities in recent years, and this presents an opportunity for sponsors, investors and private companies. Each stakeholder has distinct advantages for entering into a SPAC transaction.
  2. Sponsors are able to take advantage of the industry experience they already have, including in the capital markets sector and the specific industry sector of the target company. Investors have downside protection with the money they invest, which may be refunded at a later date. Investors are also eligible to purchase warrants in connection with SPAC initial public offerings (IPOs), offering additional protection. Private companies are offered access to capital markets without having to undergo a traditional IPO, which is a burdensome process in complying with various regulations and underwriter requirements.
  3. Various SPACs consider different factors in making investments. Sustainable Development Acquisition I Corp, for example, looks for sustainability goals that balance profit and purpose as a B Corp. and prioritizes companies that have expertise and goals that are consistent with sustainable growth.
  4. Private companies that are hoping to do a SPAC transaction should prepare in advance to make sure it is ready to comply with public company laws and regulations. These rules are complex and will require long lead times before the company is in a position to be regulated as a public company. In particular, preparation of financial statements can be challenging to prepare. As there is an 18- to 24-month deadline for SPACs, private companies would benefit from getting a head start in preparation.
  5. The US Securities and Exchange Commission (SEC) has recently been more involved with IPOs conducted through SPACs, including publishing a primer on SPAC transactions and a statement on whether warrants should be treated as equity or liability for accounting purposes. In light of such recent developments from the SEC, all stakeholders should exercise more caution in performing SPAC transactions and avoid cutting corners.

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




Department of Justice Launches an Antitrust Investigation into Pressure Pumping Services Used in Hydraulic Fracturing

by Nicole Castle

On July 24, 2013, Baker Hughes, Inc., the owner of the third-largest pressure pumping fleet in the United States, disclosed as part of its filing with the Securities and Exchange Commission that it had received a civil investigative demand (CID) from the Department of Justice (DOJ) on May 30, 2013.  The CID requests information and documents relating to U.S. pressure pumping services for the period from May 29, 2011, through May 30, 2013.  

Baker Hughes stated in its filing that it was “not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation.”

Pressure pumping services generally refers to the process of pumping water and other materials into a well to break apart rock formations and increase the well’s oil or gas production.   Pressure pumping is the main step in the hydraulic fracturing process, and has in recent years become more heavily used for extracting oil and natural gas from rock formations.

The following day, on July 25, 2013, Halliburton Co., the largest provider of pressure pumping services in the United States., confirmed that it had also received a CID from the DOJ regarding pressure pumping services.  




SEC Shines Light on Resource Extractor Payments

by Obiamaka P. Madubuko and James M. Commons

On August 22, 2012, the U.S. Securities and Exchange Commission (SEC) issued final rules on Section 1504 of the Dodd-Frank Act, which requires resource extraction issuers to publicly disclose certain payments made to the U.S. and to foreign governments that are more than $100,000 in a fiscal year.  Payments must be detailed by type and total amount and must be reported on a project-by-project basis.  Intended to bring greater transparency and accountability to the industry, these new rules are controversial and have raised concerns about the added cost of compliance and whether there are competitive disadvantages to issuers.  Companies with reporting requirements under this new rule should begin as soon as possible to determine how and whether these new rules apply.

To read the full article, click here.




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