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ANNUAL REVIEW

Energy & Utilities 2014

August 2014  |  SECTOR ANALYSIS

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Today’s energy market is in flux, buffeted by rapidly developing international events and global trends. The shale gas boom continues to influence energy policy, particularly in the US. Although markets further afield are embracing the technology, it has faced resistance in some countries, including the UK.

 

UNITED STATES

Clinton A. Vince

Dentons US LLP

“The shale boom (gas and oil), now old news in the US, remains the most important development influencing the US energy sector, though significant challenges related to infrastructure, regulations, environmental issues and popular response remain. Market economics dominate developments and are more influential at present than tighter environmental requirements. In terms of power generation and use, cheap and abundant domestic gas has done more to displace coal and reduce emissions than stringent environmental rules. Distributed generation, particularly rooftop solar, is gaining traction and has the potential to revolutionise the utility landscape.”

 

MEXICO

Raúl Fernando Romero Fernández

Rodriguez Davalos Abogados

“The major trend is that Mexico is ready and open for domestic and foreign investment in the energy sector. A landmark, game changing Energy Reform was issued on December 2013, setting forth a new legal framework that introduces, among other significant changes, the possibility for private participation in oil and gas upstream and midstream activities, E&P flexible contractual arrangements, and open bidding processes to win contracts. Other major legislative changes include the conversion of the oil national company, Petróleos Mexicanos, and the power national company, Comisión Federal de Electricidad, into productive state-owned companies, as well as the gradual opening of the retail fuel sector, the strengthening of the existent regulatory entities and the creation of new ones, such as the National Center for Natural Gas Control. Anti corruption and transparency principles are key issues that the Energy Reform provides for.”

 

UNITED KINGDOM

Douglas E. Nordlinger

Skadden, Arps, Slate, Meagher & Flom

“Perhaps the principal trend in the UK utility sector has been market and regulatory uncertainty, which may have created a disincentive limiting the construction of new generating plants at the same time when older thermal generating capacity is being taken off-line. Imports of inexpensive coal has squeezed the economics of gas fired electric generation and, while gas prices have reduced recently, there is the possibility of future gas price shocks resulting from the situation in the Ukraine. On the other hand, there has been the upsurge in the renewable energy market. According to Renewables UK, the amount of power generated by offshore wind farms increased by 52 percent last year as 279 turbines were installed at sea.”

 

SPAIN

Juan Carlos Hernanz

Cuatrecasas, Gonçalves Pereira

“We are seeing a number of trends having an impact in Spain. One of those is the new remuneration systems applying to the electricity and gas sectors based on the principle of economic and financial sustainability. A rearrangement of the sector may also attract international investors. There is also a new policy focused on energy efficiency as opposed to the special remuneration of renewable energy sources applied over the last decade. We are seeing opportunities for alternative business models, such as self-consumption. The debate on the extension of the operation of nuclear power plants has reopened. Finally, we have a New Act on Environmental Assessment, aimed at homogenising the relevant law and providing legal certainty to project promoters.”

 

BELGIUM

David Haverbeke

Fieldfisher LLP

“The Central Western European (CWE) region which includes Belgium, Luxembourg, the Netherlands, France and Germany, has been marked by various trends over the last 18 months. A number of nuclear and gas-fired plants have been phased out for regulatory reasons, or due to negative spark-spread for gas-fired electricity production. Capacity mechanisms have been implemented for electricity security of supply and strategic reserves. Also, Regulation on Energy Markets Information and Transparency (REMIT) has been implemented with various CWE borders interconnection facilities – mainly for electricity – having increased. Specifically for Belgium, mechanisms for the support of renewable energy production have been reduced and reforms have taken place towards adaptable yield-based support.”

 

UKRAINE

Andriy Moskalyk

Clifford Chance LLC Ukraine

“The Ukrainian energy and utilities sector is experiencing the most dramatic and turbulent times since the country’s independence. Despite a slowdown in the market caused by the Ukraine-Russia crisis, the national government has taken significant and promising steps to recharge the industry. In response to the gas pricing conflict with Russia that led to gas supplies being cut off, the government has been showing its determination to eliminate the dependence of Ukrainian industry and households on gas supplies from Russia, and accelerate the integration of the energy system with the EU. The government has signed the Ukraine–EU Association Agreement setting out a steady process of approximating the Ukrainian legal framework to EU rules and standards.”

 

ROMANIA

Ciprian Glodeanu

Wolf Theiss

“The renewable energy sector has remained very dynamic in the last 12-18 months. In the PV sector for example, Romania has experienced a fast pace of development. If, at the end of 2012, only 49MWs of PV energy were installed, in December 2013 we were counting more than 1100MWs of PV energy. Due to legislative changes, things have slowed down in the renewable energy industry, though there is still some development. We are expecting, in the near future, the European Commission (EC) to approve a new FIT scheme for projects under 500KWs. This may boost the construction of smaller renewable energy projects.”

 

SAUDI ARABIA

Ziad El-Khoury

Squire Sanders

“There is a growing trend to develop sustainable energy projects in the Middle East. Benefiting from some of the world’s highest solar irradiation levels, the GCC countries have rightly determined that solar energy can help preserve oil export revenues, play an important role in reducing carbon emissions, act as an incubator for technological development, and, ultimately, allow the Gulf region to play a key role in the future in helping to meet its and the world’s increasing demand for electricity. While solar programs have been announced or are under development in all GCC countries – and totalling over 100 across MENA at the most recent count – Saudi Arabia and the UAE have to date announced the most ambitious programs.”

 

NEW ZEALAND

Dave Trueman

Simpson Grierson

“Electricity demand has remained relatively flat in recent years, with some spare generation capacity. There has been a growing public focus on retail prices, a push for increased transparency of the reasoning for price increases, and a willingness of consumers to swap suppliers. The last 24 months has seen the government sell down its interest in the generation sector, with the divestment of up to 49 percent of its interest in three of the major generator-retailers. Transpower, the government-owned transmission system owner and operator, has continued implementation of major grid upgrade projects. Although New Zealand’s upstream petroleum sector is relatively small by global standards, the 2013-2014 drilling season has seen exploration and development drilling at near record levels and the introduction of significant new participants in the exploration sector, for example Statoil and Woodside.”


CONTRIBUTORS

Clifford Chance LLC Ukraine

Cuatrecasas, Gonçalves Pereira

Dentons US LLP

Fieldfisher LLP

Rodriguez Davalos Abogados

Simpson Grierson

Skadden, Arps, Slate, Meagher & Flom

Squire Sanders

Wolf Theiss


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