FT : Top sustainable fuel producer to cut spending and jobs after disastrous yea

Top sustainable fuel producer to cut spending and jobs after disastrous year
Neste chief says company still bullish despite $10bn bet on energy transition yet to pay off

The world’s largest producer of clean fuels for cars and planes has pledged to dramatically cut costs, including firing a tenth of its workforce, after a disastrous year in which its share price collapsed more than 60 per cent. 

Heikki Malinen, chief executive of Neste, the Finnish renewable diesel and sustainable aviation fuel (SAF) specialist, said the company had spent nearly $10bn transforming itself from an oil refiner into a leader in green fuels, and then found that the market had failed to grow as expected. 

“When you are building something new for the future, you just don’t know 100 per cent,” Malinen told the Financial Times. “We believe there is a valid case for decarbonisation, and that it will happen, but the journey will be volatile and non-linear”.

Malinen, who took over as Neste’s boss in October, is the latest executive to concede that the transition to cleaner energy will be slower than anticipated. This month, BMW warned of a “rollercoaster ride” in the US transition to electric vehicles and said it would keep investing in combustion engines and hybrid technology.

“Companies and governments made very bullish statements on their intention to decarbonise. What happened? We had the war in Ukraine, and the inflation spike, and the mood for decarbonisation just went away,” Malinen said. “Neste had decided to deploy a lot of capital and now here we are.”

Europe-wide mandates to force airlines to use SAF, which Neste makes from used cooking oil and results in much lower carbon emissions, were watered down and the market has stalled this year. Voluntary demand among airlines has failed to grow because SAF is two to three times more expensive than jet fuel. 

“Our markets have changed and the company’s financials are where they are,” Malinen said at a capital markets day in London last week. Neste posted €168mn of earnings before interest, taxes, depreciation and amortisation in the fourth quarter, much lower than a consensus estimate of €310mn.

The company said its margins on renewable fuels were nearly 40 per cent below expectations and warned that the market for renewable fuels would be “challenging” next year.

Neste will cut operating costs by €250mn a year, cancel its payouts to shareholders and fire 600 staff, as it faces what Malinen said was a financial position that needed “immediate and urgent action”.

But Malinen maintained that while the biofuels market was going through short-term pain, he was optimistic about the company’s prospects, even after a 63 per cent slide in the stock over the past year.

“If you look at SAF in particular, there isn’t another option,” he said. “I am not in the pessimistic camp that this is a dead end.”

Politicians in Europe could help the adoption of SAF by changing the current mandate so that it scales up linearly, rather than increasing the SAF requirement from 2 per cent of all aviation fuel to 6 per cent in 2030.

“The problem . . . is that if public policy is extremely volatile and unpredictable, it makes it difficult for producers to balance their capacity build-up. And then you have points of volatile oversupply and undersupply,” he said. “This is a new industry. Markets are fairly thin, and when you have thin markets, prices can gyrate all over the place.”

He said Neste would continue to invest in a giant plant in Rotterdam, which has been delayed by a year to 2027 and whose costs have increased by €600mn to €2.5bn. The plant will raise Neste’s renewable fuels capacity to 6.8mn tonnes a year, from about 5.5mn tonnes, cementing its market-leading position.

“I think it is wise to do,” said Malinen. “We play the cards we have. We are doing the utmost to stay on the road, and eventually there will be a tailwind.”

FT : The water industry’s big problem? Toxic levels of complexity

The water industry’s big problem? Toxic levels of complexity
Jon Cunliffe has his work cut out with review that will try to find a fix for problems decades in the making

Thames Water has secured a stay of execution in the form of a financial rescue that will allow it to limp on for a while longer. Yet the water industry’s biggest crisis since privatisation in 1989 is far from over.

In a bid to fix the failing water sector in England and Wales, Sir Jon Cunliffe, former deputy governor of the Bank of England, will shortly issue a call for evidence as part of a sweeping review.

He has his work cut out. The industry brings multiple layers of complexity. First: the regulators. There are at least three — including the Drinking Water Inspectorate, economic regulator Ofwat and the Environment Agency. That’s not including others in Wales and Scotland.

Their goals, too, are at least three-fold. Billions of pounds in investment are required to upgrade infrastructure and build reservoirs to meet climate and population changes. Several water companies need to reduce indebtedness and balance public anger over rising bills and sewage spills.

Add to that a squabbling dramatis personae. As well as investors and companies, there are environmental and consumer campaigners, some of whom blame financial backers for overloading certain water companies with debt and extracting generous dividends. The Cunliffe review will not consider renationalisation, to their disappointment.


So far, one part of the strategic trilemma has trumped the others: keeping bills low. Ofwat recently rubber-stamped an average 36 per cent rise in customer bills over five years from April, yet that is the first time in 15 years it has allowed bill prices to rise in real terms.

This has allowed financial rust to set in, and not only at Thames Water. In its last review of financial resilience, Ofwat said 10 out of 16 companies either required action or were of “elevated concern”. Water company executives blame the regulator for prioritising low bills over greater infrastructure investment. This is not entirely wrong.


The energy sector seems to have done a better job. It shares some features with water oversight — including the “regulated asset base” approach to working out acceptable returns for companies. Some water executives and consultants say energy regulator Ofgem does a better job of balancing bill-setting with the improvements needed to meet climate targets.

Energy also has one thing water at present does not: someone looking at the big picture. The National Energy System Operator, a body taken back into public ownership last year, has drawn up national plans detailing the upgrades to Britain’s electricity grid it thinks necessary to meet climate targets. Something similar for water would help address the muddle.

There are no quick fixes to problems decades in the making, of course. Yet the sheer complexity — even just at Thames Water — has got in the way of thinking simply. That is one way Cunliffe can add value.

FT : KKR confronts €449mn earnings hole as flagship Italian deal sours

KKR confronts €449mn earnings hole as flagship Italian deal sours
Private equity group clashed with management over diverging forecasts for telecoms business

KKR clashed with management over a projected €449mn earnings hole that threatened to derail its plans for the Italian telecoms company it bought last year in Europe’s biggest ever private equity deal.

The US powerhouse has tightened its control over FiberCop, which houses the fixed-line networks business carved out from Telecom Italia in a €22bn deal, after the company’s management presented earnings forecasts that jeopardised billions of euros in prospective dividends.

Last month FiberCop’s chief executive quit after a row with the buyout firm, and all significant decisions by his successor now require prior written approval by one of two executives of KKR’s choosing, according to an internal memo seen by the Financial Times.

The upheaval underscores how much KKR has at stake after triumphing last July in a years-long battle over Telecom Italia with the company’s largest shareholder, Vivendi.

Luigi Ferraris, the former chief executive of Italy’s state-owned railway group, only became chief executive of FiberCop at the time the deal completed last year.

But the board “unanimously” accepted his resignation a week after an explosive board meeting that left KKR scrambling to save face with other investors in the company, including the Abu Dhabi Investment Authority (Adia), the sovereign wealth fund.

At an induction meeting for the new board on January 16, FiberCop’s chief financial officer told investors that management forecast earnings before interest, taxation, depreciation and amortisation would be €449mn lower in 2025 than KKR had estimated in an earlier business plan agreed with the company’s shareholders.

Management put the cumulative ebitda shortfall over five years at €2bn compared with KKR’s original business plan.

The figures were presented to investors — which include Canadian pension fund CPP Investments, Italian fund F2i and the Italian Treasury, alongside Adia and KKR — as part of a draft business plan seen by the FT. CPP Investments and Adia, which own 17.5 per cent of FiberCop each, also pay KKR a management fee.

FiberCop’s management told the meeting that the predicted shortfall in earnings meant that billions of euros in dividends envisaged under the shareholders’ agreement to be paid over the next five years would have to be cut, or else the company would need to raise further public debt and risk a ratings downgrade.

Investors present were incensed, according to multiple people in attendance. Adia’s head of digital infrastructure Mamoun Jamai expressed disbelief, according to others in attendance.

“I cannot believe that after only a few months from the underwriting of a solid due diligence, numbers are off by 20 per cent,” one of the people recalled Jamai having said. Adia declined to comment.

Other investors told the FT that the presentation was merely a “draft” and such discussions were a standard part of the “planning cycle”.

FiberCop is now racing to prepare an updated budget for 2025 before month-end that aligns with the original business plan agreed by the shareholders.

Plans for an expensive early retirement scheme have been put on hold, while other costs have been postponed to 2026 and beyond, according to people with knowledge of the internal discussions.

Management also now forecast that the number of lines they will shed during the year will be lower than previously estimated. Line losses were the largest driver of the shortfall between the original KKR business plan and the one presented at the meeting last month.

However, even as the company readies the 2025 budget, its wider business plan is not now expected to be ready before the summer, the people said.

The shortfall arose because of a litany of factors, according to the management presentation, including households’ slower than expected fibre uptake, a reduction in connectivity revenues, higher labour and IT costs and the cancellation of a €100mn contract with Telecom Italia.

Several people noted that a business carve-out introduced complexities and the highly regulated telecoms industry faced a series of risks that were difficult to anticipate.

For example, many Italians are switching their copper lines to internet infrastructure other than fibre, or opting for other fibre network providers. Because of the country’s geography, it is highly complex to install fibre cables in remote areas.

One person close to the company suggested the highly regulated telecoms industry required specific expertise that Ferraris “realised he lacked”.

The chief executive role has since been handed to FiberCop’s chair, Massimo Sarmi, who was appointed to the board last year by the Italian Treasury.

But an internal memo dated February 17 states that all “operative decisions” must first be approved in writing by one of two executives backed by KKR, including one who currently works for the private equity firm in London and is set to join FiberCop this month.

KKR, CPP Investments and F2i declined to comment. Ferraris did not respond to requests for comment.

>>> US After Hours Summary: ANDE +13.6% and COMP +7.8% soaring on earnings; BMBL

After Hours Summary: ANDE +13.6% and COMP +7.8% soaring on earnings; BMBL -19.1%, CE -13.7% pulling back on earnings; HHH -5.1% down following Pershing Square's revised proposal

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ANDE +13.6%, COMP +7.8%, RBA +6.7%, LBTYA +6.7% (also announces buyback program), PEN +6.6%, CVI +5.7%, UIS +2.4%, EQT +1.6%, HQY +1.4%, HALO +0.9%, DVN +0.6%, VTMX +0.4%, JHX +0.2%, LZB +0.1%, NGVT +0.1%

Companies trading higher in after hours in reaction to news: CMCO +1.9% (CEO about $223K of stock), HQY +1.4% (year-end sales statistics), VIST +1.3% (reports reserves), LGO +1.3% (appoints Co-COOs), MRAM +1.2% (collaborates with LSCC), CDTX +0.8% (appoints new CFO), TEVA +0.8% (hosting call on data for Duvakitug), UNM +0.5% (up to $1 bln repurchase plan), CL +0.4% (to acquire Care TopCo Pty Ltd), VAL +0.4% (fleet rationalization and status report), WOOF +0.3% (appoints new CFO), MRK +0.3% (vaccine case tied to RFK Jr delayed, according to Reuters), MSTR +0.2% ($2.0 bln convertible note offering), STZ +0.2% (Chief Growth Officer to depart), FND +0.2% (confirms start date for President), ARES +0.1% (upsizes Tempus debt facilities to $560 mln), OTLY +0.1% (confirms change to ratio of ADRs)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: BMBL -19.1%, CE -13.7%, FOUR -10.4% (also to acquire Global Blue), MBC -9.8%, TX -8.6%, TRUE -8%, RNW -7.1%, FLS -6.5%, CYH -5.7%, WTTR -5.4%, CSGP -5.2%, IFF -5.1%, TOL -5%, UAN -5%, ANET -4.5%, CDNS -4.5%, CRK -3.6%, SON -3.6%, PRDO -2.8%, IOSP -2.6%, GNW -1.8%, OXY -1.8% (also achieves debt repayment target), SPNT -1.5%, MGY -0.7% (also increases buyback), XP -0.7%, HCKT -0.7%, SSRM -0.6%, MTDR -0.1%

Companies trading lower in after hours in reaction to news: SUPN -19.5% (released data on Phase 2b study of SPN-820), SBLK -9.9% (reported Q4 net income), HHH -5.1% (Pershing Square revises proposal to acquire 10,000,000 newly issued shares of HHH for $90/share), WAY -3.5% (stock offering), HPQ -1.4% (to acquire Humane assets for $116 mln, according to Bloomberg), FDUS -1.1% (declares dividend and supplemental dividend), SKE -1% (stock offering), SLDB -1% (enters into underwriting agreement), FFIE -0.6% (begins hiring for key positions to support AI), HTLD -0.6% (files $150 mln mixed shelf), WES -0.5% (CCO to retire), BP -0.3% (mulls sale of lubricants business, according to Bloomberg), FLR -0.3% (files mixed shelf), KMI -0.2% (subsidiary closes on acquisition of natural gas system), RDW -0.2% (releases transcript from interviews with CEO), UPS -0.1% (files $10 bln mixed shelf)

WSJ : Trump Floats 25% Tariffs on Autos, Chips, Pharmaceuticals

Trump Floats 25% Tariffs on Autos, Chips, Pharmaceuticals
President provides further details about his expected tariff moves

WASHINGTON—President Trump on Tuesday said he was considering tariffs of 25% or more on automobiles, semiconductors and pharmaceutical products.

Here’s what we know:

What Trump said:
The tariffs on those industries may increase over time, Trump told reporters gathered at his Mar-a-Lago club in Florida, though he added that companies may be given a phase-in period to move production back to the U.S.

Tariffs will be “in the neighborhood of 25 %,” Trump said, adding that they would “go very substantially higher over the course of the year.” Trump suggested a phase-in period, saying that he wanted to give companies time to come back to the United States. He said he would allow “a little bit of a chance” to re-shore production, without providing details.

The context:
The administration had previously said it would place tariffs on those industries and others it considers critical to national security, but previously, Trump hadn’t indicated how high the levies might be. Trump last week announced he would impose 25% tariffs on imported steel and aluminum, and before that he increased tariffs on Chinese goods by 10%.

Those tariffs could come on top of the “reciprocal” tariff action that the Trump administration says will equalize U.S. tariffs with the duties and non-trade barriers charged by other countries.

What comes next:
The administration has said that action is likely after the completion of its trade policy review on April 1. More short term, European Union trade commissioner Maroš Šefčovič is visiting Washington this week for talks on the tariffs and other trade disputes.

Trump indicated that countries may be able to negotiate for lower tariffs, reiterating his claim that the European Union had agreed to reduce auto tariffs in response to his recent threats—an assertion the EU denies. Even so, Trump said he was open to the bloc or other nations reducing tariffs, saying it would put nations “on the same playing field.”

It wasn’t immediately clear if new automotive tariffs would apply to all cars, or exempt those that comply with the U.S.-Mexico-Canada Agreement, the updated Nafta pact that Trump signed in 2020. The administration previously told U.S. automakers it would consider exemptions for those vehicles when Trump had threatened tariffs on Canada and Mexico earlier this month.

>>> US Close Dow +0.02% S&P +0.24% Nasdaq +0.07% Russell +0.45%

Closing Stock Market Summary
It was a mostly lackluster day until the final 10 minutes of trading. The S&P 500 flirted with its prior close until a surge of buying interest propelled the index to a fresh record high (6,129) in the late afternoon. The Dow Jones Industrial Average, which also closed at its best level of the day, logged a fractional gain and the Nasdaq Composite closed 0.1% higher.

There was a positive bias under the index surface even as major indices traded lower, which acted as an upside catalyst and invited more buying in the final moments of the day.

The tepid price action through most of the session followed a long weekend that didn't present much market-moving news and a limited economic calendar today. The February Empire State Manufacturing survey, which jumped to 5.7 from -12.6, and the February NAHB Housing Market Index, which dropped to 42 from 47, garnered muted responses from the equity market.

Losses in some mega cap stocks were another limiting factor through the session. Apple (AAPL 244.47, -0.13, -0.1%), Meta Platforms (META 716.37, -20.30, -2.6%), Amazon (AMZN 226.65, -2.03, -0.9%), Tesla (TSLA 354.11, -1.73, -0.5%), and Alphabet (GOOG 185.80, -1.07, -0.6%) were influential laggards in that respect.

Some of the aforementioned names weighed down their respective S&P 500 sectors. The communication services (-1.3%) and consumer discretionary (-0.5%) sectors closed at the bottom of the pack.

On the flip side, the energy sector registered the biggest gain, responding to rising oil prices ($71.81/bbl, +1.13, +1.6%).
  • Dow Jones Industrial Average: +4.7% YTD
  • S&P 500: +4.2% YTD
  • Nasdaq Composite: +3.8%
  • S&P Midcap 400: +3.4% YTD
  • Russell 2000: +2.7% YTD

Reviewing today's economic data:
  • February Empire State Manufacturing 5.7 (consensus -2.0); Prior -12.6
  • February NAHB Housing Market Index 42 (consensus 47); Prior 47

Looking ahead to Wednesday, market participants receive the following economic data:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 2.3%)
  • 8:30 ET: January Housing Starts (consensus 1.400 mln; prior 1.499 mln) and Building Permits (consensus 1.450 mln; prior 1.483 mln)

>>> US Close Dow +0.02% S&P +0.24% Nasdaq +0.07% Russell +0.45%

Closing Stock Market Summary
It was a mostly lackluster day until the final 10 minutes of trading. The S&P 500 flirted with its prior close until a surge of buying interest propelled the index to a fresh record high (6,129) in the late afternoon. The Dow Jones Industrial Average, which also closed at its best level of the day, logged a fractional gain and the Nasdaq Composite closed 0.1% higher.

There was a positive bias under the index surface even as major indices traded lower, which acted as an upside catalyst and invited more buying in the final moments of the day.

The tepid price action through most of the session followed a long weekend that didn't present much market-moving news and a limited economic calendar today. The February Empire State Manufacturing survey, which jumped to 5.7 from -12.6, and the February NAHB Housing Market Index, which dropped to 42 from 47, garnered muted responses from the equity market.

Losses in some mega cap stocks were another limiting factor through the session. Apple (AAPL 244.47, -0.13, -0.1%), Meta Platforms (META 716.37, -20.30, -2.6%), Amazon (AMZN 226.65, -2.03, -0.9%), Tesla (TSLA 354.11, -1.73, -0.5%), and Alphabet (GOOG 185.80, -1.07, -0.6%) were influential laggards in that respect.

Some of the aforementioned names weighed down their respective S&P 500 sectors. The communication services (-1.3%) and consumer discretionary (-0.5%) sectors closed at the bottom of the pack.

On the flip side, the energy sector registered the biggest gain, responding to rising oil prices ($71.81/bbl, +1.13, +1.6%).
  • Dow Jones Industrial Average: +4.7% YTD
  • S&P 500: +4.2% YTD
  • Nasdaq Composite: +3.8%
  • S&P Midcap 400: +3.4% YTD
  • Russell 2000: +2.7% YTD

Reviewing today's economic data:
  • February Empire State Manufacturing 5.7 (consensus -2.0); Prior -12.6
  • February NAHB Housing Market Index 42 (consensus 47); Prior 47

Looking ahead to Wednesday, market participants receive the following economic data:
  • 7:00 ET: Weekly MBA Mortgage Index (prior 2.3%)
  • 8:30 ET: January Housing Starts (consensus 1.400 mln; prior 1.499 mln) and Building Permits (consensus 1.450 mln; prior 1.483 mln)

>>> US Notable earnings/guidance movers: COMP +9.7%, ANDE +6.7%, PEN +5.2% on u

Notable earnings/guidance movers: COMP +9.7%, ANDE +6.7%, PEN +5.2% on upside; MBC -15.6%, BMBL -14.6%, CE -13.4%, TRUE -11.7% on downside
  • Earnings/guidance gainers: COMP +9.7%, ANDE +6.7%, PEN +5.2%, RBA +3.6%, CRK +1.9%, PRDO +1.5%, HALO +1.2%, DVN +1.1%
  • Earnings/guidance losers: MBC -15.6%, BMBL -14.6%, CE -13.4%, TRUE -11.7%, FOUR -10.1%, CSGP -7.4%, FLS -6.4%, CDNS -4.8%, TX -4.6%, RNW -4.1%, CYH -3.6%, LZB -2%, GNW -1.7%

FT : Former OpenAI technology chief Mira Murati launches rival start-up

Former OpenAI technology chief Mira Murati launches rival start-up
Thinking Machines Lab to focus on making artificial intelligence ‘more widely understood’

Mira Murati, OpenAI’s former chief technology officer, has launched a rival artificial intelligence start-up focused on making the technology widely accessible.

Murati, 36, on Tuesday unveiled Thinking Machines Lab, a product and research organisation, which aims to make “AI systems more widely understood, customisable and generally capable”.

A blog post on its website said “knowledge of how these systems are trained is concentrated within the top research labs, limiting both the public discourse on AI and people’s abilities to use AI effectively”.

The San-Francisco based company has also poached senior former OpenAI employees, including co-founder John Schulman, Jonathan Lachman, former head of special projects, and Barret Zoph, former vice-president.

Murati, who temporarily served as chief executive of OpenAI during the failed coup against founder Sam Altman, has also hired researchers and engineers with experience at other competitors such as Google, Meta, Mistral and Character AI who will build models focused on science and programming.

“Scientific progress is a collective effort,” Thinking Machines Lab said. “We believe that we’ll most effectively advance humanity’s understanding of AI by collaborating with the wider community of researchers and builders.”

It added that it planned to publish technical blog posts, papers and code because it believed “sharing our work will not only benefit the public but also improve our own research culture”.

Murati had worked at OpenAI for more than six years, leading the company’s efforts to build ChatGPT as a standalone product and working on technical breakthroughs from the company’s large language models.

In November 2023, OpenAI’s directors appointed Murati as interim chief executive after removing Altman under claims he was not “sufficiently candid” with the board. Altman returned days later after protests from employees and investors.

Ilya Sutskever, an OpenAI cofounder and chief scientist who was also involved in the coup attempt, has since left the company to launch a start-up called Safe Superintelligence. It raised $1bn in September to focus on developing safe AI systems that have human level or superior intelligence.