The volatility in the financial markets has been a wake up call for the energy sector. According to Jeffrey Delaney, Partner and coleader of the Global Energy Industry team at Pillsbury Winthrop Shaw Pittman LLP, “treasury and finance folks need to take a critical look at their liquidity strategy, their capital structure and financing plans and try to think outside the box.”
In this exclusive interview with LegalMindsTV, Delaney discusses the impact of the Lehman bankruptcy, financial and industry trends and capital markets strategies which energy companies need to focus on in the coming year.
One key is to reduce their “towers of debt,” advises Delaney. This includes a return to back-to-basics secured financing, being more proactive around their financing plans instead of waiting for debts to mature and the renewal of their revolving credit facilities.
In this “cash is king” environment, another strategy energy companies should explore is the “monetization of assets” as an alternative to the more traditional capital markets, which is perhaps more novel in the energy sector. “These companies need to look at ways in which to squeeze more value, liquidity and cash out of assets which are typically inert, such as their transmission system,” says Delaney.
In addition to the changes in the financial and capital markets, Delaney also discusses the impact of shifts in the regulatory landscape, as well as the growing interest in alternative energies, particularly in the venture capital market.
Delaney sums up the advice he gives his clients by saying “Be prepared.” Adds Delaney, “we’re in volatile markets, we’re in uncertain times – you can’t be stuck in a particular strategy or timetable.”
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