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Mergers and acquisitions
Ring fencing
To protect utility credit ratings, it is important for utility holding companies engaged in risky activities such as energy trading or the acquisition of unregulated generating plants to shield, or “ring fence,” the parent company from the additional financial risk.
Mergers and acquisitions can raise ring fencing concerns because the merging companies may create significant new financial risks for captive ratepayers, for example, at the local distribution level.
A lack of ring fencing can also lead to competitive market abuses if unregulated subsidiaries can use a corporate parent or regulated subsidiary to off-load financial risk.
Bates White experts advise clients on appropriate ring fencing measures to protect firms’ financial integrity and prevent competitive abuses.
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