After almost three years of uncertainty and non-stop legal wrangling, during which time British Energy battled the threat of insolvency proceedings, general counsel and company secretary Robert Armour can finally catch his breath.
Armour and his team have been on the hop constantly since 2002, assisting on what has proved to be one of the most complex financial restructuring programmes in the UK’s history. His team assisted with a range of specialist legal issues, including obtaining the group’s first government rescue facility in September 2002 and handling the Financial Services Authority’s investigation of the company. It was also crucial to the disposal of British Energy’s Canadian subsidiary Bruce Power for C$700m (£325.7m) and agreements with creditors and the Government to restructure British Energy’s £15bn nuclear liabilities and £1.2bn of debt.
But now that British Energy’s financial situation has stabilised and the group has relisted on the London Stock Exchange, Armour claims that life for the legal team is returning to normal.
The focus is now on day-to-day operational and regulatory issues, such as the planning of nuclear sites, although the company has agreed not to build or acquire new generation assets for 10 years as part of the Government’s rescue package.
Armour says that any perceived lull in work is unlikely to last, as the company is facing a myriad of changes tipped for the energy sector. For instance, earlier this month German utility giant Eon announced that it was considering bidding for Scottish Power. The Government is also rumoured to be considering energy policy reform.
Armour is in two minds about these developments. While he is conscious of providing the legal team with new challenges, he is also keen to offer the work-life balance that they have sorely missed in recent years. “It’s always a concern that now that the restructuring is completed the team may feel the work will become less interesting, but I’ve worked in the energy sector long enough to know that it usually has something new and interesting around the corner.”
One significant task the legal team is facing is a review of its legal panel. The review, which will be led by head of legal services Jean MacDonald, will be launched later this year in order to pare down the company’s panel to a maximum of six firms and bring more work in-house. Submissions will be requested later in the year, although all of the company’s existing advisers, including Clifford Chance, Hammonds, MacRoberts and Morgan Cole, have been given a forewarning of the review.
Armour is clear that the majority of British Energy’s operational and regulatory legal matters should be dealt with in-house, primarily because the company operates in the niche nuclear regulatory sector. He claims few firms have good knowledge of the nuclear sector so the panel will instead focus on more general advice.
Clifford Chance and MacRoberts are expected to retain a place on the panel for corporate matters due to the knowledge they have gained through advising on the restructuring. But Clifford Chance is unlikely to see a repeat of the £25.7m it billed in the last three years. “We’ve been heavily involved with Clifford Chance on the restructuring. But now the company is moving back towards normal business, that is likely to lessen,” says Armour.
Indeed, MacDonald claims that advisers pitching for work should not hope to receive fees even remotely close to the sum billed by Clifford Chance, as British Energy’s average allocated annual legal spend for day-to-day matters is less than £1m. While she admits that this figure does not include exceptional items, MacDonald is confident that the group’s legal spend will not reach the headline-grabbing £50m figure it paid during restructuring again.
British Energy’s withdrawal from the Canadian market has resulted in the end of its relationship with US firms such as Morgan Lewis & Bockius and Simpson Thacher & Bartlett, although the company is still receiving advice from Canadian firm Lenczner Slaght Royce Smith Griffin in relation to an ongoing legacy arbitration relating to the company’s sale of Bruce Power.
Any further work looks unlikely, as during British Energy’s annual general meeting last week (15 September), the group asked shareholders to approve plans to cancel British Energy’s registration with the Securities and Exchange Commission (SEC).
Armour claims this will significantly reduce the workload on British Energy’s regulatory team, which he also oversees, and free up the legal team to focus on UK and European regulations. “We’ve looked at the value added to the governance process by US reporting and SEC registration and the feedback is that few people read these accounts and it is tying up huge amounts of management and time.”
Instead, Armour sees the regulatory and legal teams’ time better spent interfacing with the local UK and European regulators such as Ofgem and the Nuclear Decommissioning Authority. And with so many regulators governing British Energy’s operations in one form or another, there is little doubt that the legal and regulatory teams will remain busy.
General counsel and company secretary
British Energy Group
|Organisation||British Energy Group|
|Annual legal spend||£1m before exceptional items (£50m for restructuring)|
|Legal capability||Ten divided between Gloucester and Livingston|
|General counsel and company secretary||Robert Armour|
|Reporting to||Chairman Adrian Montague and chief executive Bill Coley|
|Main law firms||Clifford Chance, Hammonds (litigation, environment), MacRoberts (corporate), Morgan Cole (company and commercial)|