International Power, the London and New York Stock Exchange dual-listed energy company, had a dramatic 2004. A major debt restructuring and the largest power acquisition of the year saw International effectively double in size, from a market cap of $1.1bn (£600m) to one of $2.8bn (£1.54bn). It was also a bumper year for the company’s lawyers.
International’s $2bn (£1.1bn) acquisition of the international power generation portfolio of Edison Mission Energy generated more than £8m in legal fees. Clifford Chance, which advised International, reaped the bulk, but International’s head of legal Stephen Ramsay is full of praise for the magic circle firm. “We’re now a FTSE100 company. This was a transforming transaction for us, and Clifford Chance played a big role in that,” he says.
The deal saw International acquire 10 power projects across nine different countries, effectively doubling its size. Initially, it was to be funded by way of a bond issue, with Linklaters advising the underwriters. However, just weeks before the final close, International had an approach from banks willing to provide debt finance. Shearman & Sterling was secretly brought on board to advise the banks on the debt finance package, while International continued to run the deal as though the bond issue would go ahead. It then switched to bank debt at the eleventh hour. It was, by all accounts, a strategy that did not go down too well with Linklaters, but it was nevertheless one that saved International a considerable sum.
Running parallel with the Edison Mission deal, and essential to the successful close of the acquisition, was the mammoth $1.38bn (£760m) refinancing of International’s merchant fleet. The fallout from the Enron collapse and the controversy surrounding TXU and AES had a knock-on effect on International’s share price, rendering it unable to meet its debt obligations. The debt restructuring had potential Chapter 11 implications for the power group, so it instructed Skadden Arps Slate Meagher & Flom, while Gibson Dunn & Crutcher acted for the shareholders on the deal.
But International’s creditors insisted on using one of the group’s favoured firms, Milbank Tweed Hadley & McCloy, on the restructuring – a situation that, Ramsay says, might have put some strain on the relationship between the group and the US firm. “Aggressive negotiations like these can put pressure on relations with your lawyers,” he admits.
Ramsay operates a law firm panel, although he is flexible in his approach to outsourcing legal work. Following its work on the massive Edison Mission deal, Clifford Chance is the group’s main corporate counsel, although Allen & Overy (A&O), Freshfields Bruckhaus Deringer, Linklaters, Milbank and White & Case also sit on the list of preferred advisers. Linklaters is instructed on the bulk of International’s Iberian work, while Clifford Chance and White & Case undertake the bulk of its work in the Middle East. Meanwhile, A&O was drafted in to advise on the acquisition of a 40 per cent stake in Uch Power, the owner of a gas-fired plant in Pakistan. According to Ramsay, the deal went to the firm as a reward for its work on a transaction that did not complete.
As is usual for power companies on major deals, International pays the fees both for its own lawyers and for the lenders’ advisers. As a result, Ramsay and the in-house team have powerful sway over lenders’ counsel, pushing for either Milbank or one of its other regular advisers.
Ramsay also instructs Freshfields on litigation and arbitration matters and on some Middle East projects. Regional firm Bond Pearce also gets a look-in on litigation matters, while Cadwalader Wickersham & Taft advises on trading work. Morgan Cole acts on all International’s rent review work for its London premises.
Ramsay’s external spend is currently budgeted at a relatively tight £250,000. This figure includes property advice, annual general meeting advice, general disputes and internal employment matters, all of which are outsourced, but it does not include spend on major deals nor legal spend in the US. Legal expenses for significant transactions are billed to the project, not the legal team.
The legal team is responsible for the full range of work for the group. This includes drafting shareholder agreements on M&A deals, advising on purchasing agreements for new assets and acting on energy disputes. The legal team is divided along geographical lines, with heads of legal in each of the geographical divisions where International has interests – in Europe, the US, Asia, Australasia and the Middle East.
Ramsay began his legal career in 1984 at the now defunct Herbert Oppenheimer Nathan & Vandyk. The firm dissolved in the late 1980s, scattering lawyers across the City. Ronnie Fox and Tina Williams, who went on to found Fox Williams, were both at the firm, as were Denton Wilde Sapte’s Steve Blakeley, Ed Marlow, Cindy Leslie and John Rosenheim and SJ Berwin‘s head of real estate Brian Pickup.
Stints at Slaughter and May and Bird Semple then followed, before Ramsay joined International’s legacy company National Wind Power in 1996. Four years later, he played a key role in the demerger of National Power’s UK business from its international offering. The UK operation was spun off to become Innogy Holdings, while the remainder became International. Ramsay, who led the deal from the International side, was later appointed company secretary of International. In 2004, he was appointed general counsel and company secretary.
Stephen Ramsay
Director of legal services
International Power
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| Organisation | International Power |
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| Sector | Energy |
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| Turnover | £1.27bn |
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| Legal spend | £250,000 |
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| Employees | 2,750 |
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| Legal capability | 12 |
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| Director of legal services | Stephen Ramsay |
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| Reporting to | Chief executive officer Philip Cox |
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| Main law firms | Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters, Milbank Tweed Hadley & McCloy and White & Case |
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