Cyber Risk and Digitalized Energy Assets: Key Considerations for Debt and Equity Transactions
The energy transition and digitalization are converging, with digital assets becoming as important and valuable as physical assets. With this shift, we are seeing more significant cyber vulnerabilities. The energy sector remains a prime target for nation-state actors, and attacks on industrial control systems are becoming increasingly sophisticated. Investors, sponsors, and debt financiers are responding by embedding cyber risk analysis into due diligence, with some deal teams now including dedicated cybersecurity advisors alongside the more usual types of advisors. Projects are also being restructured to carve out assets subject to cyber risk, with the deployment of alternative, in-country solutions to compensate.
This White Paper explores what clients should be considering for protection against cyber risk—a process that goes beyond a tick-the-box exercise. There now has to be a thorough understanding of what systems are in place, how they have or have not been costed, how transferable they are, and, importantly, how effective they are. Effective systems now need to protect against a whole new set of risks beyond regulatory compliance. In this paper, we set out how best to practically manage risk via diligence, insurance gap analysis, warranty and indemnity protections, project cost impact assessment, financing assumptions, and enhanced transaction management.
