Energy trading
“Norton Rose gains significant recognition for its dedicated structured trade and commodity finance practice. The firm has an excellent track record in advising financial institutions involved in core emerging markets, particularly in Africa and Eastern Europe. Transactions involving Islamic finance issues are also an area of expertise” .
Chambers UK 2010 - Commodities: Trade Finance
Energy trading has been a major part of our energy practice since the early 1990s. As both international and national energy policies have begun to focus increasingly on sustainability and environmental integrity energy utilities are having to devise more sophisticated trading strategies to cover the wider variety of commodities that they trade or will need to trade in future.
In the European Union this is best illustrated by the implementation by EU Member States of a host of EU Directives relating to the liberalisation of energy markets, the promotion of renewable energy and establishing the European Union Emissions Trading Scheme. In transposing some of these directives using market based mechanisms EU Member States such as the UK have effectively established new energy related products and markets - Renewable Obligation Certificates under the Renewables Obligation and Levy Exemption Certificates under the Climate Change Levy.
These changes now mean that a wider variety of fuels are being used (with biomass and increasing wind capacity starting to be added to the UK’s gas, coal and nuclear capacity.) Furthermore, energy utilities are trading a whole range of energy related commodities in addition to electricity including: Renewable Obligation Certificates, Levy Exemption Certificates, Renewable Energy Guarantees of Origin, CO² emission allowances and sulphur dioxide allowances. In addition they may seek to hedge their positions with options and other derivative products including weather derivatives.
Our commercial approach is attributable to our team members' involvement within the sector - working in-house or on secondment with energy trading companies and continually assessing the legal and commercial implications of the latest regulatory changes and policy reforms in a range of energy markets.
We have extensive experience in advising on long-term gas and coal supply agreements, power purchase agreements, and tolling agreements for power projects across the globe in the context of new developments, M&A, restructurings and refinancings. We also have extensive experience in advising in relation to the drafting of biomass supply agreements and structured deals (such as dark green spreads, which involve the purchase of gas or coal together with CO² emission allowances and the sale of electricity). We advised many project companies, offtakers and developers on changes, disputes and expert determinations arising from the introduction of NETA in the UK and continue to advise on new trading arrangements introduced in other countries. We also advise a number of major players on standard form energy trading documentation for physical and derivative trading and we have developed standard election sheets and amending schedules for (among others) EFET General Agreements, (including the Annex for transactions under the Dutch Title Transfer Facility), Grid Trade Master Agreements, ROC Trade Master Agreements and LEC Master Agreements, ISDA Master Agreements and weather derivatives.
Since the collapse of Enron and TXU Europe there has been increased focus on close-out netting and credit support issues and we regularly advise on bespoke and industry standard master netting agreements, (such as the Bond Market Association’s Cross-Product Master Agreement) margining schedules and other credit support issues including cross-product and cross-affiliate netting.
Emissions trading
We follow the development of emissions trading schemes (in particular the European Union Emissions Trading Scheme and the market for trading emission credits created by Clean Development Mechanism Projects under the Kyoto Protocol). We have advised project companies and banks in respect of lobbying activities and other potential remedies in relation to national allocation plans for EU emission allowances as well as on appropriate amendments to financing documentation to permit project companies to trade these allowances along with a wider variety of energy associated products. We advise a variety of energy utilities in relation to the development of standard trading terms for EU emission allowances using the International Emissions Trading Association’s Emissions Trading Master Agreements, or the relevant Schedules to the ISDA or EFET master agreements. We also advise on lobbying activities and other potential remedies in relation to national allocation plans, and we drafted and negotiated one of the first sale and purchase agreements for the transfer of sulphur dioxide emission allowances in Great Britain.
Our team of specialist energy trading and emissions trading lawyers is led by John Wood. Our financial services team, led by Jonathan Herbst, has in-depth knowledge of relevant regulatory and authorisation requirements including the EMP regime.
We are regularly highly commended by Trade Finance Magazine in the category of “Best Trade Finance Law Firm” and in 2009, we won 6 “Deals of the Year” from Trade Finance Magazine
We have been voted “Best Trade Finance Law Firm” in Asia by the readers of Trade Finance Magazine for the last two years