How did we get here?
Commentators attribute the development of the energy crisis to various factors, with the most commonly cited considerations focusing on the economic stagnation during the COVID-19 pandemic, and the Russian invasion of Ukraine.
As the grip of the pandemic softened, and countries began to recover, demand for gas started to increase again. However, this could not be met due to a shortage in supply, causing gas prices to increase in 2021. This increase in gas prices forced some energy suppliers in Great Britain out of business, with a total of 28 energy companies declaring bankruptcy by the end of December last year, including bigger companies like Bulb, affecting over two million customers1. The 80% jump in the consumer price cap of Q4 in 2022 further demonstrates the impact of the pandemic, with new predictions showing a spike of over 235% from the current levels for 20232.
The invasion of Ukraine, the sanctions imposed by the international community in condemnation of the conflict, and Russia’s subsequent retaliation to these sanctions, have further exacerbated this international quagmire which has stunted the supply of gas throughout Europe. Thus, commentators have been rallying to provide solutions to this situation. Amongst them is John Zadkovich, a partner at Penningtons Manches Cooper, who suggests that governments should encourage foreign investment in the sector through incentives, while “abandoning disincentives such as windfall taxes and nationalising infrastructure”. The energy market has long lead times, says Zadkovich. For example, “the time between discovering a specific ore and/or fossil fuel to producing it is often just shy of ten years”. Equally, most renewable projects also have long lead times, often “five to ten years before they are commercially viable”3.
It is also worth noting that while the eyes of the world look to the looming effects of the pandemic and the war in Ukraine, many commentators have been vocal and critical about the surging profits of energy suppliers such as BP, where its profits hit $8.45 billion (£6.9bn), more than triple the amount it made in the same period last year4.
Impact on the Legal Sector
The impact of the energy crisis has also been prevalent in the legal market, as law firms are placing particular emphasis on developing and expanding their energy capabilities encompassing renewable energy, project finance, and infrastructure. The expansion in these areas is exemplified by several significant departures from the Magic Circle, which amongst others include Marton Eorsi joining Addleshaw Goddard as Partner from Allen & Overy, and Infrastructure M&A Lawyer Sara Pickersgill, who also departs from Allen & Overy, and joins the ranks of Kirkland & Ellis.
Spearheading the energy expansion efforts on the U.S side are Akin Gump, Latham & Watkins, Orrick, Shearman & Sterling, Simpson Thacher Bartlett, and White & Case. Akin Gump have made particularly significant strides in securing top talent with the likes of Matt Hardwick joining the firm after spending 13 years at Norton Rose Fulbright. Another significant hire is Alex Harrison, the power, renewables and energy transition head at Hogan Lovells, whose tenure at the firm spanned 18 years. Kirkland & Ellis is another notable figure in the energy space with the development of its ESG Impact Team aimed at combating energy related crises.
UK headquartered firms such as Pinsent Masons are also emphasising their energy capabilities and their focus on this sector, with a significant round of promotions setting stage for an exciting future for the firm. What is interesting here, is that of the 23 promotions, 10 of these were in the energy space.
Our Response and Approach
At Halkin, a significant section of our work focuses on staying up to date with the developments in the market. We place significant emphasis on this, in order to provide informed, relevant, and strategic advice to the firms we work with. This is particularly important in times such as these, where the needs of our clients are rapidly changing given the instability of the geopolitical climate. Thus, our market intelligence, competitor analysis, and our entrenched relationships with senior partners in practice, in house, and across multiple jurisdictions, means that we are uniquely positioned to benefit from extensive information, insight, and wisdom. Subsequently, our market analysis is rigorous, accurate, and comprehensive. The sector specialist approach we take also affords our consultants a wealth of expertise which we can relay to our clients, and the present expansion of our team means that we are able to develop our already formidable capabilities.
1 Why are energy bills going up? https://energysavingtrust.org.uk/why-are-energy-bills-going-up/.
2 UK Energy Crisis Response – Key Proposals Emerge as Winter Of Discontent Looms, https://www.herbertsmithfreehills.com/insight/uk-energy-crisis-response-%E2%80%93-key-proposals-emerge-as-winter-of-discontent-looms.
3 Energy: Companies and governments consider legal remedies as crisis set to deepen, Energy: Companies and governments consider legal remedies as crisis set to deepen | International Bar Association (ibanet.org)
4 Underlying profits of the energy giant hit $8.45 billion – the second highest figure in the company’s history, https://www.energylivenews.com/2022/08/02/bps-profits-skyrocket-as-energy-crisis-deepens