Joint Venture Portfolio Governance: Highlights from the London Roundtable

By Sylvia Staneva | Tuesday, December 11, 2018

WATER STREET PARTNERS recently hosted its tenth annual Roundtable on JV Portfolio Governance for natural resource companies. Twenty industry executives, representing the oil and gas, mining, and chemicals sectors and collectively accountable for governing more than 700 non-operated ventures, gathered in Brown’s Hotel in London for this year’s installment to discuss what an approach to portfolio governance looks like today/ 

Four main topics were on the agenda:

1) Non-Operated Portfolio Governance Excellence: How much progress have natural resource companies made in recent years in putting in place the core practices to govern their portfolio of non-operated ventures? 

2) New Deal and Industry Trends, and Impact on Governance: What types of new ventures and forces are natural resource companies seeing, and how are these impacting the requirements of governing non-operated portfolios? 

3) Stock Market Announcement Effects: What types of venture announcements materially impact the share price of large natural resource companies, and what might companies do to better shape the narrative to investors? 

4) Corporate Social Responsibility Pressures on Non-Operated JVs: What impact are various external groups, from the Environmental Defense Fund to Transparency International, having?

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Joint Venture Dealmaker Outlook: Trends in Oil and Gas

By Sylvia Staneva | Tuesday, November 27, 2018
WATER STREET PARTNERS periodically convenes joint venture dealmakers from an array of industries and geographies to speak to the latest JV trends, challenges, and best practices from their vantage points. Most recently, Mike Henson, Manager of Infrastructure Development at Chevron, shared his perspectives on partnership trends in the oil and gas world.

Mike Henson has been with Chevron for 40 years, spending the last ten years in the downstream business development space. He is responsible for leading Chevron’s enterprise-wide effort to achieve the desired corporate infrastructure. Mike’s focus includes strategic planning and execution, building relationships with third-party infrastructure companies and trading partners, and identifying acquisition, divestiture, capital construction, or partnering of infrastructure assets.

Oil and gas and the energy industry more broadly has been a heavy utilizer of joint ventures for decades, though in recent years new dynamics and to some extent innovative deal terms and structures have emerged in response to global commodity prices, evolving geopolitical relations, and the advent of new technologies. Mike spoke to these and shared learnings from his decades working with joint ventures.

An edited transcript of his comments follows.

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Who's My Boss Secondee Reporting and Loyalty

By Tracy Branding | Thursday, November 15, 2018
SECONDEES PLAY a key role in many joint ventures: some 80% of joint ventures have secondees in top management roles (e.g., COO, CFO) and 55% have a seconded CEO ( Exhibit 1). Parent companies use secondees for various reasons – for instance, to provide critical skills and capabilities, to accelerate initial staffing in experienced roles, or to secure added transparency, assurance, and influence over venture activities.

But companies often fail to adequately define and align on how secondees will be managed once in the joint venture. This can lead to secondees unable to answer a seemingly simple question: Who’s my boss? 

It doesn’t have to be this way.

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Joint Venture Director Selection: Shouldn’t the Board Have a Say?

By Shishir Bhargava | Thursday, October 25, 2018

VIRTUALLY ALL joint venture legal agreements provide owner companies with the unilateral right to nominate anyone they deem fit to serve as their representatives on the JV Board or equivalent body. In practice, owner companies often make these choices based on internal needs and dynamics, and often in a rush – for instance, appointing their CFO to maintain optics after the partner does the same, or using the role as a development opportunity or carrot for a younger executive.

But owner companies almost never consult with the constituency best positioned to provide advice: the JV Board itself. This leads to JV Boards that lack the mix of skills and personal attributes necessary for success – and that miss out on an opportunity for self-reflection that fosters a common culture and collective sense of self.

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Making JV Governance Sing: How to Use a Shareholders' Committee

By James Bamford | Tuesday, October 16, 2018

ONE OF THE ENDURING tenets of good joint venture governance is the central importance of getting true decision makers from each shareholder in the same room, talking directly to each other. In many JVs, however, the actual decision makers are too senior, too busy, or otherwise unwilling to serve on the JV Board or equivalent body. As one European aerospace executive put it: “I don’t have the time – or the interest – to fly halfway around the world once per quarter to attend a day-long Board meeting spent reviewing budgets, plans, and operational performance.” 

It’s a fair point.

But when the true decisions makers operate outside the governance structure, bad things can happen. Decisions are delayed. Misalignments fester. Issues are not raised, and management is surprised. And Board members feel disempowered and not accountable for outcomes. One JV Director summed up his governance context this way: “We operate
in an Oz-like environment, where our business unit president is the Wizard, making all our decisions from behind a curtain.”

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Alternative Energy: Forces and Consequences

By Lois D'Costa | Tuesday, October 9, 2018

ONE OF THESE DAYS we are not going to need fossil fuels.” Not a routine utterance by an environmental analyst concerned about climate change, but the stunning public admission by Ali al-Naimi that alternative forms of energy are finally going mainstream.  Why does Ali al-Naimi’s prognosis of the future matter? He is the Petroleum Minister of Saudi Arabia – a nation whose wealth, power, and size are predicated on its vast reserves of oil, and also a nation that recently announced a more than $100 BN commitment to alternative energy1.  

Saudi Arabia is but a recent contributor to the global surge in alternative energy investments, which have increased by nearly 500% over the past decade2  and are expected to maintain an upward trajectory. Motivated by the multiple sources of value possible through partnerships, we estimate that companies will fulfill at least 40-60% of these investments through joint ventures and other strategic alliances3.  Consider a set of recent ventures across wind, bioenergy, solar, geothermal and other alternative energy sub-sectors (Exhibit 1).

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