On March 27, 2008, the Federal Reserve Board issued an order authorizing the Royal Bank of Scotland Group plc (RBS) to expand its commodities trading businesses in connection with the formation of a joint venture with Sempra Energy involving its commodities trading businesses. The Federal Reserve’s groundbreaking order, secured by Simpson Thacher on behalf of RBS, for the first time permits a financial holding company to enter into energy tolling arrangements, and expands RBS’ authority to engage in physical energy trading activities and to enter into energy management services agreements.
The order highlights the Federal Reserve’s recognition that energy trading markets have developed into very sophisticated financial markets and the increasingly important role that banking organizations and other financial institutions are playing in the trading of energy commodities.
As a result of the Federal Reserve’s ruling, on April 1, 2008, RBS and Sempra Energy completed the formation of their joint venture, named RBS Sempra Commodities, LLP. This joint venture uniquely combines RBS, one of the world’s largest banking groups, with Sempra Energy’s commodities subsidiaries, one of the world’s leading power, natural gas, petroleum and metals trading operations.
Attached please find our most recent Firm memo which describes the highlights of the Federal Reserve’s order. This memo will be sent to individuals on the Firm’s mailing list who are designated to receive general corporate, banking regulation, commodities, and energy-related memos.
To view the Order from the Federal Reserve Board, click here.