Energy financing in 2009 – a UK snap-shot

Getting towards the end of 2009, it would be hard to argue that it hasn't been a tough year for many of the banks. 

We have seen significant numbers of banks re-trenching from long-term debt, others have substantially re-priced risk and the terms on which debt can be provided as well as certain funders stepping back from particular markets, whether in terms of a specific sector or a specific geography.

With Lloyds Banking Group and RBS still largely Government owned, there is undoubtedly political pressure to meet lending targets of £11bn and £16bn respectively by next March.  However, the banks are struggling to meet these targets and we have seen little in the way of "new" money being lent – hardly surprising given the conflicting requirements to lend more and re-capitalise at the same time.

In terms of lending policy, the banks have, in general, indicated that the energy sector is somewhere that they want to allocate their capital.  In particular, UK banks are committed to lending into UK based borrowers and UK deals. 

Strangely, while funding of renewable energy projects on a global basis has continued, very few deals have closed in the UK. The increased cost of debt, combined with currency fluctuations and the decrease in leverage have meant a number of deals have needed to be reconsidered, as sponsors bide their time in the hope the market stabilises.

Some big deals have been done in the oil & gas sector – most notably Tullow Oil's US$2bn facility – but the lower oil price has made funding assets more difficult.

To read more please click here.

If you have any questions please contact:

Gillian Frew
Senior Associate, Banking & Finance
McGrigors
Tel +44 (0)131 777 7026
Email gillian.frew@mcgrigors.com

Stephen Tobin
Partner, Banking & Finance
McGrigors
Tel +44 (0)207 054 2789
Email stephen.tobin@mcgrigors.com

Iain Macaulay
Partner, Banking & Finance
McGrigors
Tel +44 (0)131 777 7022
Email iain.macaulay@mcgrigors.com

McGrigors Energy – About Us
The McGrigors Energy Team consists of over 40 energy lawyers recognised for their market leading specialist knowledge and understanding of the commercial and legal challenges in the energy sector, both internationally and in the UK. The team works with clients across the whole energy industry including major multi-nationals, utilities, FTSE/AIM listed companies or independents, regulatory bodies and financiers and draws upon the complementary skills of colleagues in corporate, banking, competition, litigation, tax, shipping, real estate, environmental, planning, construction, infrastructure, health and safety and human rights.

The team's capabilities cover the upstream and downstream markets working with clients on projects, transactional and regulatory matters across the oil and gas value chain and all aspects of power and heat generation/supply including coal, nuclear and renewables. The McGrigors Energy Team is at the forefront of advising clients in the renewables sector with significant experience of onshore and offshore wind projects, solar, wave and tidal power generation and alternative fuels.

McGrigors LLP has offices in London, Manchester, Edinburgh, Glasgow, Aberdeen, Belfast and Port Stanley (Falkland Islands).