Energy transition is also a restructuring story

The energy transition is often presented as a growth story.

It involves new infrastructure, new capital, new technologies and new businesses across generation, storage, carbon capture, hydrogen, electrification and grid resilience. But from a restructuring perspective, transition also creates a more complex set of challenges. That is why, over the last few years, I have worked across many of these sub-sectors.

Transition changes asset values. It affects refinancing risk. It shortens, or at least complicates, the economic life of certain infrastructure. It can create stranded costs and ask management teams to invest in new business models before legacy cash flows have necessarily disappeared.

In other words, transition is not only about building the future. It is also about managing the decline, repurposing or restructuring of parts of the existing energy system.

The North Sea is a good example. As I have noted previously, there remain notable reserves in the North Sea. It remains a significant source of infrastructure, skills, supply chain capability and economic value. However, against a backdrop of evolving government policy, it is increasingly exposed to declining production, a challenging fiscal environment, significant decommissioning obligations and uncertainty around future investment.

These issues are not limited to upstream oil and gas. A refinery may be strategically important but commercially challenged. A gas storage asset may be critical to national resilience yet difficult to finance on purely commercial terms. A supply chain business may remain heavily exposed to legacy energy markets, while not yet positioned to benefit from transition investment.

Such situations are rarely solved by slogans. They require practical analysis of cash flow, asset value, stakeholder support, liabilities and a realistic pathway to long-term viability.

In the North Sea, operators have understandably sought to extend economic field life for as long as possible before decommissioning becomes unavoidable. Even though there are tax incentives when doing so, it remains a costly exercise. These costs still need to be funded, but will lenders remain supportive when there is no more road?

There are also broader questions around how the workforce and supply chains can move with the market. The Government suggests that many people will be employed in the renewable sector, but questions remain as to how many people are needed and whether supply chains can simply switch.

Restructuring professionals often talk about runways and optionality. The less runway you have, the fewer options there are. The oil and gas sector frequently faces this challenge, as lead times are long and changing these businesses is often like steering the metaphorical oil tanker.

In practice, that might mean reviewing cash flow, mapping stakeholder interests, understanding asset retirement obligations, preparing for lender negotiations or testing whether a transition plan is genuinely fundable.

The uncomfortable reality is that energy transition is unlikely to be orderly. There will be  funding gaps, policy gaps, timing mismatches and operational gaps. Some businesses will adapt. Some will need restructuring support. Some will fail. Others may remain viable, but only if stakeholders engage early enough and with a realistic view of value.

That is why restructuring is an integral part of the changing nature of our energy infrastructure. As parts of the existing energy system mature and new sectors emerge, the ability to manage change, preserve value and navigate financial complexity will become increasingly important.

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