It would be easy to be trite about 2020 and the negative impact of COVID-19 – either an “annus horribilis” or a heavy spin on the positives. The reality though, is a spectrum of greys and complexities, challenges and opportunities.
Weathering the pandemic storm
At Gneiss Energy, we exited 2019 hugely positive about the state of our business. We had settled into our new home in Edinburgh, bolstered our business with key sector experts, and completed a major brand refresh.
A year on, and despite significant challenges facing parts of the energy industry, our active decisions to diversify our service offerings over the last few years have proved invaluable. They have provided Gneiss with a more balanced exposure to the sector’s cyclical nature and the framework to ride the gale-force tailwinds from renewables and sustainability.
Expanding the pipeline
Who would have predicted the emergence of a global pandemic and the widespread disruption it would cause to daily life, the economy and, specifically, across the energy sector? No business was immune to the extraordinary effects of negative oil prices and global lockdowns.
For us, at the tail end of 2019 and the beginning of 2020, a significant proportion of our pipeline of live projects was delayed or cancelled when extreme uncertainty, market volatility and the inevitable contraction of capital availability rendered decision-making impossible.
However, in this environment, we took a measured decision to refocus our business development to assist clients with the fresh challenges and opportunities presented to them as they quickly adjusted their business models to the new realities of the year. The active pipeline we developed over the spring and summer paid dividends in the second half of the year.
In 2020, we secured new mandates and delivered wins for our client base. In just 12 months we achieved two years’ worth of Business Development – not to mention saving a six-figure sum on business travel.
A year of greater connectivity
The high calibre of clients retained and projects delivered in 2020 enabled greater accessibility to people (underpinned by a reduction in commuting time for all participants). I firmly believe this greater accessibility was also down to a sense of togetherness and collective participation in tackling the COVID environment.
In years to come it will be impossible to mention 2020 without referring to the technology that supported our ability to communicate and execute effectively – in particular Microsoft Teams and Zoom.
We have all enjoyed shouting “You’re on mute!” at colleagues but communication has continued largely without significant disruption (unless, of course, you have several children using up bandwidth by playing on their PlayStation or making TikToks).
The effectiveness with which we at Gneiss were able to execute corporate M&A, asset transactions and financings was made possible by this technology. It was certainly a career first for me to advise on an M&A transaction where the two Board and Management teams were unable to be in the same room for the entire process, with no disadvantage to any party.
Significant transactions in a challenging period
As the light at the end of the tunnel begins to burn brighter, it is easy to forget that earlier this year equity and debt capital markets were in complete free fall, and the growing deltas between buyer and seller expectations became unbridgeable. Capital, especially in Debt Capital Markets (which rely so heavily on the “strip” price), no longer supported companies in closing deals.
Additionally, companies with relatively strong balance sheets and availability of cash were forced to focus on the requirements of their existing asset portfolios, enacting protective and preventative measures in their own businesses to ensure ongoing viability. As we leave 2020, we see an extremely uneven marketplace with low cost capital readily available to those sectors and companies seen as beneficiaries of the post-COVID business environment. Whether this vision of the new business environment will prove to become a reality is a question under fierce debate.
Against this backdrop, we successfully delivered 11 transactions and are on track to deliver a clutch of ongoing mandates that will feed into 2021. Our successful deals include six capital raises plus two M&A and three A&D transactions. We also delivered a first major risk-management project for a market-leading specialty refiner. Of a wide range of transactions, two stand out for me as typifying the developing trends of 2020, and what we expect to be major themes in the future.
(1) Bahamas Petroleum Company (BPC) plc’s £100 million merger with Columbus Energy Resources plc
The Gneiss Oil & Gas team acted as financial adviser to BPC in its all-share merger with Columbus. We were involved in the full process from origination to execution, bringing our combined industry, Takeover Code and M&A experience to the project.
The industry looks set to be in defensive mode for some time to come. In my view, public market consolidation will be a key theme in corporate strategy, becoming a critical driver of deal flow over the short to medium term.
(2) GreenPower International’s (GPI) disposal of 100% interest in the Carraig Gheal wind farm to RPMI Railpen
Gneiss advised on the divestment of GPI’s 46MW wind farm in Argyll in the west of Scotland and introduced the buyer, Railpen, the investment manager for the £30 billion railways pension funds. As part of the package, our team advised on a structured solution to minimise the cash flow impact of hedge break costs at financial close.
Our Renewables & Cleantech team is seeing a larger number of asset transactions for scalable projects being pursued by some of the largest pension funds in the UK and Europe. These funds are typically looking at investments which both satisfy requirements for long-term yield and meet the ever more stringent ESG credentials, with such criteria both increasingly being met by projects of this type.
Building the Gneiss team
The 2020 COVID environment has not stopped Gneiss expanding our core geographical footprints of London and Edinburgh and taking the step of bringing on board our first team member domiciled outside the UK.
Victor Bessudo joined Gneiss in Bogota, Colombia in October, focusing on the Latin America market. We have previously completed deals as a team in this area, but were always conscious that the pools of capital for regional projects are better serviced with a local presence. Victor is a highly experienced corporate financier and brings a wealth of experience in this market.
Closer to home, we also bolstered our capabilities in Emerging Markets with Michael Salun, a career investment banker. Michael is an experienced energy M&A and private equity professional with 17 years’ experience in the sector. Prior to joining Gneiss as Senior Adviser, Michael spent the last seven years as Principal at L1 Energy, including the last two years as Executive Director of its portfolio company, Wintershall Dea. Previously, he served as Head of M&A at AAR and Deputy Head of Downstream Business Development at Gazprom Neft.
Regrettably, we also say goodbye to Rosemary Johnson-Sabine, who retires at the start of 2021. Rosemary has been at the core of our business from the beginning, leading our technical advisory services. Rosemary and I had worked together on several projects historically and when I founded Gneiss, I could think of no stronger technical hand to turn to, and I was delighted when she accepted the role as Technical Director. Rosemary’s expertise gained from her career leading teams at majors, mid-size, and smaller independent companies was hugely beneficial for our technical capability. Thank you to Rosemary for all she has done for Gneiss. We wish her all the best for her retirement.
New norms for energy and business
COVID is also fuelling the already rapidly evolving debate around energy transition, and the development of new technologies alongside the decline of the old.
We have been perennial contributors to that debate, looking to harness some of the excitable optimism along with a pragmatic assessment of the scale of the challenges, and a realisation that we drive for a premature demise of our legacy energy sources at our peril.
Alongside regular pieces in the industry press, we contributed papers to a book by the University of Dundee, reviewing the impact of the pandemic, as well as making keynote presentations in industry webinars and conferences throughout the year.
As for the ‘new normal’ of working remotely, only time will tell if this approach suits all businesses. From our point of view, Gneiss has always promoted and supported remote working due to the volume of travel historically undertaken by our principals. As remote working becomes even more prevalent, I’m confident we are well prepared to deliver.
Looking forward to 2021
Personally, I hope 2021 brings back more personal interactions. They are still important, not just for executing business, but for the lasting friendships I’ve established over the last 25 years in the city and beyond.
For me, the culture we try to instil at Gneiss is summed up perfectly by a quote from US entrepreneur Mark Cuban: “Business happens over years and years. Value is measured in the total upside of a business relationship, not by how much you squeezed out in any one deal.”
2020 was a year of adaptability, flexibility, and achievement, and we have grown and learned valuable lessons as individuals and as a business. Throughout the period we have continued to make major investments in our technical, commercial and operational toolkits that allow us to achieve the best results for our clients.
I am particularly excited about the opportunities that 2021 will bring us in a diverse and growing energy market. We enter the year with a significant number of advanced mandates that span traditional energy sectors through energy transition to renewable power. We are assisting a diverse range of clients across the full spectrum of financial services from M&A to capital raising.
I’m proud of, and thankful to, my colleagues and partners who neither shrank from the challenges nor rested on our reputation or past successes. I’m also grateful to our clients, both old and new, who we worked with so closely throughout the year and who provided us with the opportunities to showcase our strengths.
We close out 2020 with an increased headcount, a larger geographical footprint and a stronger top-line and bottom-line performance. It was another record year in terms of our revenue performance, which has grown year-on-year every year since I founded the company in 2016, and is testament to the quality of the work the team has generated for our clients and the level of incoming inquiry we now receive as a business.
Already we are planning major announcements about the business early in the new year and we are excited about the forthcoming opening of our new flagship office in London as soon as COVID restrictions allow. Overall, I am optimistic our specialist skills across the whole energy space will be even more relevant in 2021 and far into the future.
Jon Fitzpatrick, Managing Director