The Netherlands enjoys an unrivalled position as the leading player in the European energy market. The country is not only a major natural gas producer and the source of advanced gas technology, but it is also Europe’s most powerful gas broker. Fifty years of experience in organising public-private partnerships to manage the gas business have turned the country into a European gas hub. Renowned institutes such as the Groningen Energy Delta Institute train people from all across the globe in the energy sector.
In addition, the Netherlands is establishing itself as a leader in green gas. The Dutch have cutting-edge expertise in offshore wind energy, with many kilometres of coastline for wind power. Leveraging its location in the heart of Europe and the logistical, petrochemical and industrial centre around the Port of Rotterdam, the Netherlands aims to become Europe’s bio-fuel hub.
No wonder then that the Netherlands is considered the European gateway for energy clients seeking to expand their operational and investment activities. At IQ-EQ we have been seeing this throughout the energy industry, from traditional oil and gas to the renewable solar/wind/water energy markets.
Oil and gas: trading rules
In our energy market practice, we’ve noticed several interesting developments. The traditional oil and gas market has witnessed exponential growth in volumes and transactions. Besides the increase in volume in straightforward oil barrel trading, the setting up of new oil wells, oil platforms, and off- and onshore oil drilling platforms in foreign countries are also on the rise. In the latter group, we find an overwhelming number of newly developed wells and platforms – or, in more exceptional cases, re-used. On the other hand, we also observe that older oil refineries and platforms are being decommissioned or put on hold awaiting decommissioning due to the substantial costs involved in re-usage, far outstripping future profits.
Traditionally, the Netherlands was used in these cases as a hub for foreign investments, but is nowadays increasingly being used as a location for operational companies that engage in the trading of oil and gas through the Netherlands.
Renewable energy: powering investments
In the renewable energy sphere, we’ve witnessed a substantial increase in foreign investments in solar, wind and water energy plants. We note a specific increase in investments in Africa, particularly northern Africa, where most of the generated energy is used within the region. There is increasing demand for energy throughout these areas, for instance due to the fact that the electric vehicle market is emerging in such regions. In these cases, the Netherlands is used primarily as an investment hub location for foreign investments in the energy plants.
Investment structuring options
The Netherlands is consolidating its position as a strong gateway for investments. The major incentive is that the jurisdiction provides a stable, innovative and reliable legal system. And besides the straightforward holding company regime for investments, financing and operational companies, we’re also seeing interest in other structuring options. For financing purposes (guarantees), for example, there is the possibility to segregate assets or companies in a Dutch foundation; a so-called orphan structure.
In this scenario, the assets are held by an independent third party that has no legal relationship with the main parties engaging in the transactions.
The initial reason for using an orphan structure was for securitisation purposes, i.e. to enable the securitisation transaction to be separated for consolidation at a group level. However, these days, we increasingly note that the driver for using such a structure is to comply with banks’ requests to have a separate legal structure (besides the group itself) so that the assets are easily traceable and bankruptcy remote.
At the same time, by using an orphan structure, it is clear to third parties that all of the deposited assets in the orphan structure are not linked to the initial depositor(s). This is sometimes a requirement by banks or a consortium of lenders when providing financing, especially when several borrowers are involved (to keep a traceable overview of the assets pledged by each lender).
Energising future growth
At IQ-EQ Netherlands, we are committed to fully assisting and servicing our energy clients in all energy-related sectors. We have vast experience in setting up and maintaining all of the aforementioned structures and have established a dedicated desk for energy clients, staffed by experienced colleagues who already have expertise in this field, to ensure we deliver the best possible solutions while keeping pace with relevant industry and regulatory developments.
To discuss your requirements, please don’t hesitate to get in touch:
T: +31 20 522 25 26