TOGETHER WITH

Table of Contents

• TOGETHER WITH

• EDITOR’S RAMBLE 🗣

• FEATURED REPORT 📰

• IN OTHER NEWS 🗞

• AROUND THE WEB 🌐

• STUFF THAT MIGHT HELP YOU 👌

EDITOR’S RAMBLE 🗣

I’ve always wanted LittleLaw to work with more law firms.

Why? From my time as a lawyer, I saw how intimately close great lawyers become with the matters they’re working on.

They learn everything about their clients — their goals, their concerns, even the working habits of their people.

Basically, there’s a tonne of interesting information that you’d never be able to get from just ‘reading the news’ or ‘reading the deal announcement on a firm’s website’.

That’s why I’m really excited that today’s newsletter is in collaboration with Gowling WLG. 

Gowling WLG was the first law firm to partner with LittleLaw — they really want to help make commercial awareness easier to build.

So, two of their lawyers Siân Dewing (Principal Associate) and Gareth Baker (Partner) shared their insights on today’s story — they actually worked on the deal.

Today’s report gets quite technical at points, but I think it’s one of the most valuable pieces we’ve ever published.

Let me know what you think using this poll.

- Idin 

P.S. I’m running a commercial awareness session with Gowling WLG next week (it’s completely free). If you’re interested, sign up here.

FEATURED REPORT 📰

🌱 How law firms are supporting green hydrogen

What's going on here?

Gowling WLG’s energy transition team advised HydrogenOne Capital Growth (HydrogenOne), a green energy investment fund, on the consolidation of its portfolio company HH2E AG (HH2E).

Before we break it down, you can read about the deal on the firm’s site if you want.

What does HydrogenOne do?

HydrogenOne invests in projects that produce hydrogen without carbon emissions (as well as investing in other hydrogen-focused assets).

Currently, 95% of hydrogen is generated using CO2-emitting fossil fuels. HydrogenOne's portfolio company, HH2E, focuses on projects that use electrolysis. This process uses renewable energy (like wind or solar) to split water into hydrogen and oxygen, making it a really clean energy source.

What was HH2E’s structure before the consolidation?

Consolidation means combining the ownership and control of different companies.

Before the consolidation, HH2E was a holding company. It co-owned six project-specific Special Purpose Vehicles (SPVs) and managed their operations. These included a hydrogen centre near Germany's northeast coast (called HH2E-Werk Lubmin) and a green hydrogen plant in central Germany (called HH2E-Werk Thierbach). HydrogenOne and another fund, Foresight, held shares directly in these SPVs.

What is a Special Purpose Vehicle?

A special purpose vehicle (SPV) is a company created by a parent company to buy and finance assets. In this case, each SPV was created to hold a separate clean hydrogen project and was a subsidiary of the parent company, HH2E.

What are the benefits of using SPVs?

One advantage of an SPV is that its assets, debts, and equity are separate from the parent company's. This means if an SPV project faces financial trouble, HH2E’s finances stay safe, so HH2E can take on riskier projects.

As SPVs clearly distinguish each project operated by HH2E from the others, it also makes it easier for HH2E to attract financing for the projects. Siân Dewing, Principal Associate at Gowling WLG, explains that “investors or lenders might be willing to fund one project, but may not have the means or appetite to fund multiple”. The SPV structure lets investors put money into the specific projects they’re interested in and limits their risk to just that one.

How did consolidation change HH2E’s structure?

Before this, HydrogenOne and Foresight owned shares in some of the SPVs (shown with the orange lines).

But HH2E wanted to own 100% of the SPVs itself. 

To make this change, HydrogenOne and Foresight had to transfer their shares in the SPVs to HH2E and receive shares in HH2E in return (essentially swapping shares in the SPV for shares in the parent company).

Since the consolidation, HH2E owns all the shares in the SPVs itself. Foresight is the majority shareholder in HH2E, while HydrogenOne owns an 11% stake in HH2E.

Why was the arrangement changed at all?

Investors like HydrogenOne like co-investing in SPVs when projects are in their earliest stages — that’s when they’re most risky, and many things can go wrong before they’re complete, but co-investment also affords a greater potential return on investment. As HH2E’s projects got closer to completion, the risks decreased, so investors worried less about needing the protection co-owned SPVs offered through reducing HH2E's overall risk profile (so were happy to only hold shares directly in the parent company, HH2E).

Over time, HH2E’s portfolio of SPVs grew, making it harder to manage. Since HH2E plans to raise more money, it’s seen that many investors prefer a simpler structure without the hassle of dealing with multiple SPVs with varying shareholders – they’d rather invest directly in HH2E, the parent company, and have greater transparency on HH2E's future revenue streams knowing the SPVs were wholly owned.

What’s the role of a law firm in this?

Gowling WLG’s work for HydrogenOne on this transaction demonstrates how law firms can participate in and lead the energy transition (moving away from fossil fuels towards cleaner sources of energy).

Here, Gowling used its corporate expertise in mergers and acquisitions, private equity, and project development to work with HH2E's and Foresight's legal advisers to consolidate the green energy company. This made the company more attractive to investors, increasing the likelihood of accessing the financing needed to complete green hydrogen developments.

Gareth Baker, Partner and Energy Sector Co-Lead at Gowling WLG said law firms facilitate the transition towards green energy by being “active on every section of the value chain” of renewable energy projects, including “permitting, planning, land rights, grid connection, construction contracts, financing, off take agreements, and mergers and acquisitions”. Gowling WLG often works on a project “through the stages of development", planning for and anticipating the project’s later stages while working on its initial steps.

IN OTHER NEWS 🗞

• 🔒 More than 1 million passwords from UK law firms have leaked onto the dark web. Almost three-quarters of firms have had their employee login details exposed. The report also found that only 46.2% of firms use DMARC (a security measure to stop email fraud. Without this, criminals can send fake emails that look like they're from the firm. Last year, A&O was faced with a major cyber-attack, and was threatened with data exposure. This shows that law firms are major targets for hackers.

• 📜 The Government Legal Department is offering 10-month student placements. Law students from lower socio-economic backgrounds can now work with the government's main legal adviser for 10 months. Students will gain hands-on experience in various areas, like employment law, litigation, and working on negligence claims. They'll also visit prisons, build client relationships, create bundles, source counsel, and draft instructions for barristers.

• 💰 The SRA has been allowed to significantly raise the fees solicitors and firms pay into its compensation fund. The total will jump to £31.6 million in 2024/25, up from £10 million. This means individual contributions will go from £30 to £90, and firms will pay £2,220 instead of £660. The increase is mainly due to the high costs of investigations (especially related to the Axiom Ince scandal). The Law Society called these hikes "deeply concerning" and urged the SRA to prevent future large claims.

• 📺 Netflix has failed to get a £132 million Baby Reindeer defamation lawsuit dismissed. The case was brought by Fiona Harvey, who inspired the stalker character in the hit TV show Baby Reindeer. The show starts with a claim that it’s a "true story," but a judge found that some key events, like Harvey's supposed stalking conviction, didn’t actually happen.

AROUND THE WEB 🌐

• 🍽️ Fun: Pop as many bubbles as you want

• 🐼 Diplomacy: Finland has returned two pandas to China because they cost too much (apparently more than £1 million a year)

• 💪 Fitness: This body map with 2,000 exercises helps simplify your workouts

Credit: r/internetisbeautiful

STUFF THAT MIGHT HELP YOU 👌

• 📹️ Free application help: If you're applying to commercial law firms, check out my YouTube channel for actionable tips and an insight into the lifestyle of a commercial lawyer in London.