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Namibia seeks to double GDP growth from oil and gas finds

Energy minister Tom Alweendo eyes economic boon as population grows restive ahead of elections

Namibia could double its annual GDP growth to 8 per cent within a decade and reduce its dependence on diamonds because of new offshore oil and gas finds, according to the southern African country’s mining and energy minister Tom Alweendo.

Alweendo’s party Swapo, in power since independence in 1990, hopes the promise of riches from big energy discoveries in the past five years — which have lured TotalEnergies, Shell, Chevron, ExxonMobil and Galp to Namibia — will help it win the November 27 election.

But dissatisfaction with the economy among Namibia’s 3mn people has been rising, increasing the risk for Swapo that it could lose its parliamentary majority as its fellow “liberation parties” did in neighbouring South Africa and Botswana this year.

“If these oil finds are developed to their potential, Namibia could easily double its GDP [growth]. And that’s huge,” said Alweendo in an interview with the Financial Times, when asked about the growth rate.

“But the major focus for us will be on how this resource could help improve the livelihood of the average Namibian.” 

Alweendo — an influential leader of Swapo who in 1997 became the first Namibian governor of the country’s central bank — cited the cautionary tales of Angola and Nigeria, which both discovered oil decades ago, but which still suffer from high poverty rates.

“Hopefully, Namibia has learnt enough lessons from others. So, we plan to use these discoveries to create other economic opportunities, and we will insist on strong governance,” he said.

Namibia’s government has faced criticism over its inability to address unemployment of about 20 per cent and high inequality — second only to South Africa — despite its diamond wealth.

Teresia Kaukuhowa, professor at Namibia’s University of Science and Technology, said other elections in the region this year were swayed by economic frustrations. “Namibia’s leaders should heed this sentiment and direct potential oil and gas revenues towards inclusive policies, such as labour-intensive job creation.”  

Alweendo said the government had made inroads into inequality, but not fast enough for a population that has doubled in three decades. He conceded this presented a risk for Swapo.

“What we’ve seen in elections elsewhere in Africa this year, it’s all about the economy. People worry about the livelihoods and people are no longer willing to just vote [for] a party because his father did, and his grandparents before that,” he said.

He said Namibia needed to “fast-track” the oil and gas finds — with production potentially beginning as early as 2027 —  so that the resulting revenue could be passed on soon. “We all want fast-tracked oil and gas developments,” he added.

In part, that is because Namibia’s budget has taken a hit from falling prices of mined diamonds, which until now provided about half of the country’s export earnings. Their value has fallen as lab-produced diamonds became more common.

Paul Eardley-Taylor, southern Africa oil and gas expert at Standard Bank, said these discoveries were significant enough to potentially reshape Namibia’s economy.

He said energy data group Wood Mackenzie estimated they included 8.9bn barrels of oil equivalent, “which is sizeable”. “But only 11 wells have been drilled so far, so we could see that number increase sharply in the next few years,” Eardley-Taylor said.

He cited Guyana in South America, which discovered oil in 2015 — seven years before Namibia — and whose GDP grew 62 per cent in 2022 and 38 per cent last year, with 42 per cent growth expected this year. 

“Guyana represented the biggest emerging market offshore discovery in recent times, but potentially Namibia’s reserves could be even larger,” he said.

Eardley-Taylor said Alweendo’s target of fast-tracking production to 2027 was “not impossible”, but would depend on how accessible the oil is in shallower waters, and the flexibility of legislation.

Analysts say Namibia’s natural resources will play a big role in the election. 

“A lot of Namibians feel that, 34 years after independence, their lives haven’t improved that much economically, despite resources like diamonds and uranium,” said political analyst Ndumba Kamwanyah. “People are sceptical that the new discoveries of oil and gas, as well as green hydrogen, will benefit the majority.”

The signs for Swapo are ominous, he said. in the 2019 election, Swapo lost its two-thirds majority for the first time, while support for late president Hage Geingob plunged from 87 per cent to 56 per cent. It lost further ground in 2020 local elections.

This time Swapo has nominated Nandi-Ndaitwah Netumbo as president, who would be the first female head of state.

“It is possible that Swapo may still win the election, but it will not be a landslide. And if there’s no clear winner, and there is a run-off, that would be bad news for Swapo,” said Kamwanyah.

Namibia’s government also faces pressure from environmental activists. The country is rich in renewables, in the form of sun and wind.

“In the end, we all want climate justice,” said Alweendo. “But is there any justice in saying to Namibia, don’t develop this find, when other countries have benefited from this [oil and gas] for decades? If Africa were to monetise all its fossil fuels, it would still contribute less than 5 per cent of global emissions.”

Trading assets at US banks cross $1tn for first time since financial crisis

Much of the increase has been in equities but exposure to structured credit has been growing as well

The trading accounts of US banks topped $1tn in the third quarter — their highest level in more than 16 years and close to an all-time high — as the nation’s largest financial firms seek to profit from rebuilding their market-making businesses.

That growth has at the same time left the banks, particularly the largest ones, more exposed to market moves than at any time since the financial crisis as they hold ever-greater inventories of price-sensitive securities.

Their trading accounts last peaked at just over $1tn, slightly higher than today, in the first quarter of 2008, according to industry tracker BankRegData. That was just a few months before the bursting of the housing bubble that led to a credit crunch, cratered markets and sent the US into a significant recession.

“You see the cash that the banks had sitting on the sidelines flowing recently into their trading books,” said Bill Moreland, who runs BankRegData, which compiled the trading data from the bank’s regulatory filings with the Federal Deposit Insurance Corp. “It is a bet on financial assets, rather than say lending or the economy, because that’s where they see the returns.”

Trading was a key source of the bank instability that contributed to taxpayer-financed bailouts in the financial crisis, as desks took proprietary directional bets that turned against them. After the crisis, lawmakers adopted rules that prohibited banks from speculating with house money and required that trading facilitate client business.

Nearly all of the trading activity in the US banking industry remains concentrated at the nation’s largest banks. The biggest is JPMorgan Chase, which had $506bn, roughly half the industry total, in its trading account at the end of the third quarter, up from $329bn at the beginning of the year, according to its FDIC filings.

But all of the big lenders, including Citigroup, Bank of America and Wells Fargo, have boosted their trading assets this year, according to data logged with the FDIC.

Trading accounts at Goldman Sachs and Morgan Stanley, which generate more of their income from Wall Street activity than lending, are the highest they have been in years.

The biggest jump, for all the banks, has been in plain-vanilla equity holdings. JPMorgan’s stock market traders held $190bn in securities, more than double the $85bn they had at the beginning of the year.

But bank trading desks also have increased their holdings of asset-backed securities. These have been among Wall Street’s hottest financing markets this year, such as bonds comprised of consumer debt like credit cards and auto loans.

Despite the jump in assets, executives and industry analysts say the banks’ trading businesses are significantly less risky than they were prior to the financial crisis.

They say much of the activity that the big banks carry out is either on behalf of their clients or to facilitate client trades. The Dodd Frank Act and other post-financial crisis legislation have made it hard for banks, as they once did, to make proprietary bets or to put their depositors funds at risk.

For example, value-at-risk — or VaR — assessments, which estimate how much a bank could lose in the market in any one day, in most cases stand at levels that are half of where they were before the financial crisis.

And while trading assets are up, they still only make up 4 per cent of the banking industry’s total assets, and about half of what they were as a percentage of assets back in 2008.

“Generally the business of banks these days is to sell the securities and investment to others, not to hold it themselves,” said Christopher Whalen, a veteran bank analyst at Institutional Risk Analyst. “But activity is up and can’t sell everything you want.”

Car transporters face big costs and fines from German safety standards

Industry says new rules on how vehicles are lashed to trailers are latest example of cumbersome red tape

European car transporters face hundreds of thousands of euros in costs and potential fines after the introduction of German standards on how vehicles are lashed to trailers.

The rules are an example of the web of red tape faced by businesses in Europe and which are to blame for the bloc’s slowing economy and waning global competitiveness, critics say.

Car transport companies say they were only given one week’s notice of the new standards, which were introduced in September and require them to meet more stringent standards for the straps and wheel blocks that secure cars to their trucks, in order to travel on Germany’s roads.

The rules were set by the German engineering body VDI. But its standards are used across Europe because of Germany’s leading role in the car manufacturing supply chain and because the country is the main transit point for car transporters travelling from eastern Europe to western European ports and markets.

Technical experts at VDI have requested that Brussels make the rules a European standard. But their complexity has tapped into wider anxiety about a pile-up of red tape and compliance costs for those doing business in the EU.

In a report published in April, former Italian prime minister Enrico Letta blamed “gold-plating” of existing EU guidelines for the “fragmentation of the single market . . . increasing difficulties and multiplying obstacles to productive activity”.

Frank Schnelle, executive director of European vehicle logistics industry body ECG, said: “We do not understand why we need this extra guideline, which is an administrative burden and which costs money, when [the previous rules] worked for the past 30 years.”

Under the new VDI standard, cars must be secured to transporters with more straps and the wheel blocks and rails on which they sit must be strengthened. For the first time it also requires that trucks are certified as meeting the guidelines.

The VDI says the changes are necessary because of the increased weight of electric vehicles compared with conventional cars and the age of Europe’s transporter fleet, with many trailers approaching 20 years old.

But transporters say the concerns are unfounded. “We have been transporting Tesla [electric vehicles] for eight years or more,” Schnelle said.

A VDI spokesperson told the Financial Times the previous standard introduced in 2009 “no longer reflected the current state of the [technology], especially given innovations in the automotive market. While compliance with the new rules would require “adjustments”, it said, “they are necessary to maintain safety”.

The impact on transporters ranges from set-up costs to increased loading times that would eat into already tight deadlines for drivers, trucking companies said. Depending on the design of trailers, some may have to carry fewer cars, cutting into profits, Schnelle said.

Wolfgang Goebel, a board member at German logistics company Mosolf, estimated that the rule change could increase loading times by up to five minutes per car, adding about 40 minutes to every journey.

Goebel said the short notice meant the industry “had to do everything at one moment, which [involved] extra cost”.

The car transport sector was only just beginning to recover following a post-Covid slowdown in vehicle manufacturing as a result of semiconductor shortages, the ECG said. In response, many transporters have cut capacity and laid off drivers.

Rene Eisbrich, chief operations officer at Austrian transporter Lagermax Autologistik, said that upgrading his company’s fleet of 500 trucks would cost about €1mn. Another big challenge was the backlog of orders for new lashings that meant transporters were forced to risk fines by running non-compliant trucks.

“Technically we are not able to comply because the needed equipment is not on the market . . . We need 25 per cent more wheel blocks and 30 per cent more lashes per truck, and across the European fleet that means thousands of lashes and wheel blocks,” he said.

Two of his trucks had already been pulled over by police in Austria and faced penalties, he added.

Schnelle said the cost of certifying trailers more than 20 years old could stretch to about €30,000 for each.

Kurt Garrez, head of car securing for the Belgian federal police, said Belgian law required truck companies to comply with the VDI standard if car manufacturers requested it.

If they did not do so, drivers would face fines of up to €1,000 or be forced to pull over and put the cars on to an alternative truck.

It would be easier for the standard to be applied Europe-wide, he said. “The problem is it’s not always the same in Europe, but transport has to pass borders so it’s important for EU countries to have the same rules.”

Thames Water’s £3bn loan will hit customers, warn experts

Mooted emergency loan could rack up £800mn in costs and further drain troubled utility’s resources

Thames Water could incur more than £800mn in interest and other costs on its planned £3bn emergency loan that analysts warn will hit customers by depleting cash for key infrastructure improvements.

Britain’s largest water utility, which is already struggling under a £19bn debt mountain, said on Wednesday that it had approval from a majority of its lenders to take out a new £3bn loan.

The additional debt, which will require approval in the courts, is intended to prevent the company running out of cash just after Christmas and being renationalised under the UK government’s special administration process. 

But the debt comes with a headline interest rate of 9.75 per cent and nearly £200mn in fees and other sweeteners that could take the total costs to more than £800mn in total over the 2.5-year life of the loan, according to infrastructure finance specialist Scientific Infrastructure and Assets.

Tim Whittaker, research director at SIA, said that the loan when fully drawn would add nearly £300mn of annual interest expense and have a “significant impact on its 16mn customer bills”.

“This will have a clear impact on customers as paying the higher interest on debt will hurt Thames’ ability to invest in its business and siphon resources from the company to the lenders,” he added.

The loan is piling pressure on Prime Minister Sir Keir Starmer to take control of the company, which provides water and sewerage services to 16mn customers, in London and surrounding areas.

Starmer’s Labour government, which was elected in July, has so far insisted that it will not renationalise Thames Water, instead favouring a private-sector solution to its problems.

Sarah Olney, Liberal Democrat MP, urged the government to block the “poor deal” and accept that the water company had finally reached the threshold to enter special administration, a form of renationalisation. 

“The deal on the table is a short-term fix which will further entrench Thames Water in debt — at the expense of the company, Thames Water customers and UK taxpayers,” she said.

The group of top-ranking Thames bondholders that is offering the £3bn loan includes US hedge funds such as Elliott Management as well as large asset managers such as M&G.

People close to the group argued the interest on the new loans would be funded by a portion of the debt itself rather than customer bills, a move that makes the facility bigger than it otherwise would be.

They also argued that Thames is expected to write down part of its overall debt in a future restructuring and the larger interest bill would lead to a bigger haircut for lenders, rather than hitting customers.

However, Whittaker said that “if the company has to pay a lot more interest then that reduces the ability to use the cash for other alternative uses such as investment to reduce sewage overflows or network improvements”.

The loan is intended to keep Thames going until it can raise at least £3bn in equity from fresh investors next year and further restructure its balance sheet.  

Its existing shareholders include the pension funds Omers and USS as well as the Chinese and Abu Dhabi sovereign wealth funds. They have declared the business “uninvestable” and stated their willingness to withdraw taking a potential £5bn loss.

Potential new investors are waiting on a decision from Ofwat next month over the extent to which it will allow Thames to raise customer bills before they submit final bids in January.

The company has asked Ofwat to approve a 53 per cent increase in bills by 2030. The investment bank Rothschild is running the equity raise, with final bids due to be submitted by January next year. 

Adam Leaver, professor of accounting at the University of Sheffield’s Audit Reform Lab, said Thames was operating on the “flawed logic that the answer for an over-indebted company is more debt at a higher rate of interest”.

A separate group of lower ranking bondholders have made an alternative offer of £3bn debt at a lower rate of 8 per cent with significantly lower fees and different conditions. They have appointed specialist litigation law firm Quinn Emanuel to represent their interests and could challenge the proposed loan.

Whittaker argued the new loan from the higher ranking “class A” bondholders would give them greater control over the company and put them “at the head of the queue if Thames does enter special administration”.

Mike Wheeler, a former restructuring expert at KPMG, said that “serious consideration should be given to putting Thames Water into special administration ahead of a potential renationalisation of the assets, which represent essential infrastructure”.

“If the class As are going to recover their debt and all the associated costs in full, the only people who are going to pay for this are consumers — and that’s you and me,” he added

People close to the class A creditors said they expect to take a haircut on the value of their original debt in a future restructuring of Thames. Whether they make an overall profit would depend in part on the price at which they bought the original debt.

A spokesman for the creditor group said: “This is the first stage of our restructuring plan for Thames Water which aims to prevent a special administration and save UK taxpayers and bill payers billions in increased costs.”

Simon Coop, national officer for Unite the Union, urged Labour to nationalise water companies. “Until they do we will lurch from one crisis to the next with our supplies and waterways constantly degrading,” he said.

Ofwat said that higher interest costs are not directly added to customer bills, as these are agreed with the regulator based on a “notional” cost of debt rather than “the actual rates companies borrow at”.

The Department for Environment, Food & Rural Affairs said: “We are closely monitoring the situation and the company remains stable. The government is working to make the sector more investable into the decades to come.”

Thames Water declined to comment.

Bernard Arnault’s son steps up in new chapter of LVMH succession saga

Reshuffle at wines and spirits business comes as luxury sector deals with slowing growth and possibility of US tariffs

When pop star Katy Perry performed clad in jeweller Tiffany’s signature shade of robin egg blue at the reopening of the New York flagship store last year, Alexandre Arnault was offstage — but behind the scenes he was front and centre. 

The third child of LVMH’s billionaire chief executive Bernard Arnault, Alexandre had, as second-in-command at the US company, been working on its turnaround since the luxury group bought it for $15.8bn following laborious negotiations in 2021. 

This week the group announced the 32-year-old would take on a new role as deputy chief executive of Moët Hennessy, the €293bn group’s wines and spirits business, working alongside veteran LVMH chief financial officer Jean-Jacques Guiony, who will become chief executive.

“The idea is Alexandre would be a very close second,” a person familiar with the matter said. “This would give him additional experience in managing a mini-LVMH, that is to say a portfolio of brands.” 

Guiony, a 62-year-old former Lazard M&A banker who has spent two decades piloting LVMH’s finances, is also expected to play a pivotal role in revitalising a division that is under pressure from falling sales of cognac and champagne in key markets including China and the US.

But the plan is for him eventually to hand leadership to Alexandre, according to people familiar with the matter.

“The impression is that it is a transition, in which Guiony will accompany Alexandre” before handing over, said Jean Danjou, luxury analyst at Oddo BHF. 

The reshuffle at the top of LVMH has shone a spotlight on Alexandre’s trajectory at the world’s biggest luxury group.

All five Arnault children have moved into increasingly prominent operational roles while an older generation of executives close to their 75-year-old father is taking a step back — fuelling speculation in boardrooms and cocktail parties across Paris over succession. 

The shift comes at a testing time for the industry, which was already dealing with slowing growth and now faces the possibility of tariffs under the incoming Trump administration.

Delphine Arnault, 49, is a member of the executive committee and chief executive of Dior, the group’s biggest brand after Louis Vuitton, and Antoine, 47, is chief executive of holding company Christian Dior SE through which the family controls LVMH as well as being in charge of image and sustainability across the group.

Frédéric, 30, was promoted to run LVMH’s watchmaking division at the start of the year and joined the board alongside Alexandre in April. Jean, the youngest at 26 and the only Arnault child yet to join the board, leads Louis Vuitton’s watch business. 

With a sharp eye for marketing and an enviable Rolodex of celebrity contacts, Alexandre oversaw the multimillion-dollar refurbishment of Tiffany’s flagship store, which is now the group’s top-selling outlet.

He was also behind campaigns featuring music royalty Beyoncé and Jay-Z, and another featuring the slogan “Not your mother’s Tiffany”, as part of efforts to elevate and modernise its image.

Four years at luggage maker Rimowa also gave him experience in the fashion and leather goods division, the group’s biggest, helping transform it from a serviceable German brand to a fashion set must-have. 

LVMH does not disclose Tiffany’s sales figures. However, analysts at HSBC estimate that the brand’s sales have grown from just under $4.4bn in 2019, before the deal, to €5.4bn ($5.8bn) in 2023.

Watch and jewellery revenues group-wide fell 3 per cent on an organic basis in the first nine months of this to €7.5bn amid persistent market weakness, particularly in China and, for Tiffany, among US aspirational shoppers. Tiffany is now the fourth-biggest contributor to earnings among the group’s roughly 100 brands, according to HSBC.

The younger Arnault leaves the jeweller partway as it continues to transform itself from a purveyor of silver and mid-market engagement rings to a high-end jeweller that aims to compete with the likes of Richemont’s Cartier — a process that will be a 10-year project, according to Danjou at Oddo, and that financiers close to the group have said will require billions in investment.

Guiony had been expected to take a step back in his next role after he named his successor, deputy Cécile Cabanis, in June. However this is not the first time Arnault has relied on one of his trusted executives to take on a new challenge.

Sidney Toledano, 73, has been running LVMH’s fashion group — which includes brands such as Céline, Loewe and Givenchy — behind the scenes, despite having formally handed the reins to former Louis Vuitton chief Michael Burke in February.

However, when Burke had to pull back for personal reasons, Toledano was drafted back in, according to people with knowledge of the situation.

For Guiony, the change makes sense: beside his long experience in the group, he is a wine connoisseur and has quietly chaired LVMH’s Vins d’Exception alongside his CFO duties, which owns the group’s most exclusive producers including Château Cheval Blanc and Clos des Lambrays.

Alexandre was also involved in this aspect of the business and worked closely on it with Guiony, taking a personal interest and building relationships in key winemaking regions such as Burgundy, the people said. 

Moët Hennessy is far from being the group’s biggest division but it houses key brands ranging from Hennessy cognac to Veuve Clicquot champagne and has more recently been under pressure following several years of strong growth.

Sales fell 8 per cent on an organic basis in the first nine months of the year, the sharpest decline in the group, due to falling demand for cognac and champagne after a pandemic-era boom.

The re-election of President Donald Trump in the US could present an additional challenge to recovery if he follows through on threats to levy tariffs on European exports and even steeper ones on China. 

Alexandre may have some cachet with the president-elect that could benefit the group. He “is a young man on the move, the son of one of the great businessmen and leaders in Europe, and in the world,” Trump wrote on X after a dinner with Alexandre and his wife at Mar-a-Lago last year.

Outgoing Moët Hennessy chief executive Philippe Schaus is viewed as having managed the division well through the market downturn — launching new products and doing deals such as its 2022 acquisition of Napa Valley winemaker Joseph Phelps Vineyards — but now “there is a subject of renewal and recovery that Alexandre and Jean-Jaques will take on”, said one of the people close to the group.

“There is a fundamental reflection that will need to be had on the Chinese market, especially for cognac,” said Oddo’s Danjou, although he believes the downturn is spirits is “largely cyclical”.

He added: “Many investors think Alexandre wanted the opportunity to lead something bigger within the group, and this is a transition so that he can do that in time.”

American luxury deal’s collapse leaves Michael Kors in limbo

Fashion brand’s $8.5bn merger with Coach was scrapped after a months-long fight with antitrust regulators

Hours after the $8.5bn deal between the parent company of his fashion brand and the owner of Coach collapsed on Thursday, Michael Kors chief executive John Idol pulled together a last-minute call.

Idol tried to reassure investors that the iconic American label, which had suffered lagging sales, could go it alone.

“We know that we are not performing at the level” the company should be, he said, in his first call with analysts in more than 15 months. While the company waited to be acquired, it had made a series of “mis-steps”. It had not focused on long-term planning and raised prices too quickly. 

The cancellation of the deal following pushback from antitrust regulators tosses Michael Kors into uncertain territory at a bleak time for luxury brands globally. Consumers are spending less and certain regions are experiencing crushing economic slowdowns.

“Michael Kors was in decent shape when Tapestry announced they would buy it,” said David Swartz, an analyst at Morningstar. “But its results have dropped off dramatically in the past year . . . The fact that the luxury market is now weak is not helping — it’s making it harder.”

So-called “aspirational shoppers”, or customers who stretch their wallets to buy expensive products, have started to spend less. China, a market that fashion houses had ploughed into over the past decade, has been a particular sore spot.

The deal between Tapestry — the owner of Coach, Kate Spade and Stuart Weitzman — and Capri — the owner of Michael Kors, Versace and Jimmy Choo — fell apart this week after the companies spent months battling antitrust regulators in court.

The Federal Trade Commission argued that yoking the brands together would lead to higher prices and lower quality handbags.

Its cancellation comes three weeks after a federal judge froze the deal ahead of further proceedings before the FTC, which first sued to block it in April. The proposed union had ambitions to create an American rival to European luxury juggernauts like LVMH and Kering. 

Until recently, there was still a sliver of hope. The companies were granted an expedited appeals process, and there was already a schedule in place in the coming weeks to fight the court’s decision. But the brands decided to walk away anyway. 

“I just don’t understand why they didn’t go the distance here,” said one hedge fund manager, who had bet the deal would close.

Hours after the deal was frozen last month, the stock price of Capri halved, dropping to around $21 per share as investors conceded that the original all-cash offer of $57 per share was doomed. Capri will not receive a break-up fee, but will be reimbursed $45mn for legal costs.

Tapestry is largely considered the stronger business, and Capri has struggled to keep up. Revenue at Michael Kors, Capri’s biggest brand, plunged 16 per cent this year. It lost share in all markets, driven by a 43 per cent drop in China.

Michael Kors himself, the chief creative officer of his eponymous brand, testified during the trial in New York that the company had suffered “brand fatigue” recently. The company’s attempts to re-energise consumers had hit “stasis at this point”, he added.

As Capri charts its path as a standalone business, Idol was candid on the investor call that its current strategy was not working. To right its financial trajectory over the next two years, the company will shut around 75 Michael Kors stores and will renovate 150 others.  

Idol also addressed what he considers the largest hurdle in the coming months. “Our biggest concern is China,” he said. “We don’t know how or when the economic situation will stabilise there.” While the company had in the past invested heavily in the country, it will shift focus to North America.

Meanwhile, investors and analysts are already speculating on whether Capri is mulling other transactions or spin-offs as a way to boost its stock. And they all seem to agree that while not imminent, some type of major deal will eventually take place.

“The most shareholder-friendly outcome would be a break-up and sale of the two luxury brands, Versace and Jimmy Choo, which would maximise company EV,” analysts from Bernstein wrote. Splitting the group up would also make more sense for Michael Kors, which would then be a “single-brand stock”.

Since the main concern with the deal between Tapestry and Capri centred on the companies’ respective dominance in handbags, analysts said other types of buyers would escape the same level of antitrust scrutiny. Donald Trump’s incoming administration, which is expected to be softer on business regulation, could also help through a future deal.

Morningstar’s Swartz believes Capri will “eventually be sold as a whole or in parts”, potentially to a private equity group. But first, the company needs to improve its financial situation.

Idol did not dispel those theories on the call with investors. 

“We have always been open to conversations with any company that has an interest in any of our assets, as we would always do and always have done,” he said. 

Tech investor Xavier Niel urges Europe’s AI start ups not to cash out

French billionaire warns that if region misses AI boom it will be ‘a very small continent abandoned for a few generations’

Xavier Niel, one of Europe’s top technology investors, believes the region can succeed in creating leading artificial intelligence companies even without the billions in capital raised by US competitors — as long as founders are not tempted to cash out too early.

“I think we can create big things with a few hundred million euros,” the French billionaire who made his fortune in telecoms with operator Iliad and now invests broadly in start-ups. This includes backing Paris-based AI group Mistral which has soared to a €6bn valuation within a year of being founded.

“Europe can create competitive AI models today,” he said in an interview with the Financial Times. “But over the next two or three years, [success] depends on the number of initiatives and the ability of those who are the real geniuses — those building the best companies — not to be swallowed up or to sell too quickly.”

Such optimism about European tech is notable given that the continent lost to US and Chinese giants during previous waves of disruption from the internet to social networks, leading the region to distinguish itself more on regulation than innovation.

Niel’s view carries weight as a prolific tech investor with deep contacts in Silicon Valley who also sits on the boards of private equity group KKR and TikTok owner ByteDance.

Europe has few players to compete against the likes of OpenAI and Google that are building the so-called large language models that underpin AI applications. Some hopefuls such as Germany’s Aleph Alpha have thrown in the towel.

Despite his optimism, Niel warned that if AI innovation failed to take root, the region would be “demoted” in the global economy. It would depend on US and Chinese tools built without its “values”, such as privacy and transparency. “If Europe doesn’t do this right, it will become a very small continent abandoned for a few generations,” he said.

France is home to one of the remaining hopefuls in AI models: Mistral, founded last year by a trio of scientists from Google and Meta. Flush with over $1bn in funding, Mistral has developed a large language model that it says is leaner and more capital efficient than better-funded competitors.

Although Niel insisted his message not to sell out too early was addressed broadly to European founders, it rings particularly true for Mistral. “Founders need to realise that if a bigger company is offering to buy them at X value then it is probably worth 2 or 3 times that.”

Niel has supported the AI ecosystem in France with investment of about €500mn so far, and said he could eventually deploy billions.

A non-profit research lab called Kyutai aims to create open-source AI models — a project joined by ex-Google CEO Eric Schmidt. Niel’s cloud infrastructure company Scaleway runs one of the biggest supercomputers in the European private sector.

Niel makes early-stage investments of €15mn annually through his Kima Ventures fund, and also backed the New Wave fund where he recently intervened to end a power struggle between founders.

There is still time to mint AI winners in Europe, Niel said, given the quality of its maths and engineering institutes and how tech giants have yet to establish dominance. Plus, the scale of the opportunity in AI means that “it will not be one company that wins, but dozens or even hundreds,” he said.

“Sure, the world moves faster now, the resources are greater. But there will always be two clever kids somewhere in the world, working out of a garage, with a technological vision or a new idea.”

Niel was once one such a kid, as the 57-year-old iconoclastic entrepreneur recently related in a memoir-like book of interviews titled Une Sacrée Envie de Foutre le Bordel (“An intense urge to stir up trouble”).

He dabbled in hacking as a teenager and briefly became an asset for the French domestic spy agency as it was building its first cyber unit. They had him hack then French president François Mitterrand’s phone so the agency could get a bigger budget, according to the book.

Niel’s first lucrative business was running adults-only sex chat services on Minitel, a rudimentary French network that preceded the internet.

But the real breakthrough came in telecoms when he founded Iliad in 1990 as a low-cost challenger when France opened the market to competition. It went public in 2004.

Only months after the IPO, Niel was arrested on suspicion of misusing assets and pimping, which was related to investments in sex shops he made with a partner from his Minitel days.

He spent a month in jail and was later convicted on the lesser charge. Niel wrote that the judge gave him advice he has never forgotten: you can skim the line between right and wrong but never cross it.

Flush from Iliad’s success, Niel invested in technology, real estate, and media such as Le Monde newspaper. Now private, Iliad has expanded to around 20 countries, most recently Ukraine. In Paris, Niel built the world’s biggest start-up incubator called Station F and opened a free coding school.

As his projects multiplied, Niel took on an ambassador-like role for European tech. When Pavel Durov, the billionaire creator of the Telegram messaging app, was arrested and questioned in France over alleged complicity in criminal activity, his first phone call was to Niel.

“When I went to prison everyone disappeared on me. So when a friend runs into a problem in France, I’m not the kind of person who doesn’t pick up the phone.”

In September, Niel joined the board of ByteDance, the Chinese parent of TikTok, that has been scrutinised in the US and Europe over data privacy, misinformation and security.

US President Joe Biden signed a law to ban the platform over national security concerns if its Chinese parent does not divest by 2025. President-elect Donald Trump has said he could reverse the decision — an eventuality that Niel personally supports.

“I think it would be positive for TikTok to continue to exist, with its skilled workforce, in the US. Positive for competition, for citizens, for the improvement of products,” he said.

“What worries me is that if TikTok comes under pressure, then all the other social networks, including the Americans ones, will also,” he said.

Niel said he had been a “small investor for a long time” and thought being the sole European on the board would help ByteDance’s plans to expand in the region.

“We are capable of welcoming them in Europe and helping them to invest . . . and to understand who we are as we are, [our] way of operating,” he said. For them, “it creates value, and for us, it creates future-oriented investment in Europe.”

Restart of Three Mile Island tests US appetite for nuclear revival

Legal threats, skills shortages and regulatory challenges complicate reopening of plant at site of nuclear accident

A group of veteran community activists is planning legal action to block the reopening of Three Mile Island nuclear plant in a test of whether the American public will back an atomic energy boom financed by Big Tech and US taxpayers.

Three Mile Island Alert, a group founded almost half a century ago to lobby for the closure of the plant in Middletown, Pennsylvania — site of the worst nuclear accident in US history — said it would challenge government licences required by operator Constellation Energy, which is targeting a restart in 2028.

The legal threat is one of several obstacles facing the utility as it races to meet the terms of a 20-year power supply deal struck with Microsoft. The $1.6bn project could become a potent symbol of the revival of nuclear energy in the US.

Constellation must obtain numerous regulatory approvals, train hundreds of staff and upgrade equipment at a time when nuclear supply chains are stretched. It must also persuade the local community — and the incoming administration of Donald Trump — that the benefits of restarting the plant outweigh the risks.

“The restart is not going to happen by 2028: that is pure fantasy,” Eric Epstein, a 64-year old former history professor and chair of TMI Alert, told the Financial Times.

“We haven’t even cleaned up Three Mile Island unit two, the site of the accident is still highly radioactive . . . and now we’re going to generate more nuclear waste. It’s disappointing and it’s manifestly unfair.”

TMI’s second reactor was closed in 1979 after a partial meltdown caused a radiation leak, prompting a chaotic response from then operator Metropolitan Edison Company and public authorities that dented public trust. The plant’s first reactor was shuttered in 2019 for economic reasons when the US shale revolution produced so much cheap gas that nuclear energy could not compete.

But a surge in power demand from data centres, reshoring of manufacturing and electrification of transport, which is forecast to double electricity demand growth over the next decade, is fuelling a nuclear investment boom.

Big Tech and the Biden administration are backing atomic energy to deliver the type of reliable 24-7, emissions-free power they insist is needed to ensure America maintains its lead in artificial intelligence technologies.

In September, Holtec International secured a $1.5bn federal loan to help fund the restart in 2025 of the Palisades nuclear power plant in Michigan, which was mothballed in 2022. Last month, Google and Amazon signed deals with companies building small modular reactors, a new generation of nuclear technology seen as less risky to build than large scale reactors.

The US Department of Energy is reviewing $65bn in loan requests from companies seeking to build new reactors. Constellation is considering seeking a $1.6bn federal loan guarantee to help it finance TMI’s restart.

NextEra, another US utility, is considering restarting a nuclear plant in Iowa, which shut in 2020.

But it is the high prices for emissions-free electricity that Big Tech are willing to pay to meet climate goals that analysts say could sustain the revival of a sector, which appeared to be in terminal decline following the 2011 Fukushima disaster in Japan.

Microsoft is paying between $110 and $115 per MWh for electricity under the 20-year power supply deal agreed with Constellation, according to Jefferies. The investment bank said this was roughly double the price of standard power deals in the region.

“The demand for carbon-free electricity is growing and there are people who recognise the warming climate is a real challenge and they are willing to pay to bring projects like this back to life to help reduce their own carbon footprint,” said Bryan Hanson, Constellation’s chief generation officer, who is managing TMI’s restart.

During a tour of TMI, Hanson, a 37-year industry veteran, insisted the company could avoid the delays and cost overruns that have blighted recent nuclear projects in western countries.

The gigantic cooling towers that once played a critical role in TMI’s nuclear operations are now overgrown with grass and in need of refurbishment.

The control room that operators once used to run reactor number 1, which generates enough electricity to power 800,000 homes, is a throwback to the 1970s with hundreds of levers and dials and barely a sign of the digital technologies common in modern power plants.

But Hanson said most of the upgrades required for a restart are routine maintenance apart from the replacement of the main power transformer at the plant, which has already been ordered at a cost of $100mn.

“Not an ounce of concrete needs to be poured, not one piece of rebar needs to be tied and not one cable needs to be pulled: the infrastructure is here,” said Hanson.  

Safety will be paramount when regulators make a final determination on the restart, particularly given the partial meltdown that occurred at reactor number two due to technical malfunctions and human error in 1979.

The site, which is located 300 metres away from reactor one, is now owned by a separate company, Energy Solutions, which plans to clean up and decommission the reactor by 2052.

“The 1979 accident taught us that our standards weren’t right at the time,” says Hanson, adding that safety standards are now recognised as the best in the world.

Constellation’s assurances mean little to Patricia Longenecker, an 81-year old anti-nuclear activist who lives about 3 miles from TMI and has protested against the plant ever since the accident in 1979.

“It was like a punch in the gut,” said Longenecker when asked how she felt when Constellation announced in September its plans to reopen TMI. “I felt betrayed that officials and our government representatives would even encourage this when there are other options.”

Longenecker was one of more than 140,000 people who evacuated their homes in the aftermath of the accident. She believes the industry continues to prioritise profit over safety and notes that the US still does not have a permanent nuclear waste disposal site. This means dozens of barrels of highly radioactive spent fuel continue to be stored on site at TMI, she said.

Constellation cites a survey it commissioned showing 57 per cent of Pennsylvania voters backed reopening TM1. The plant would create more than 600 permanent jobs and contribute $3.6bn a year in taxes, according to the company.

Trade unions and local businesses support the reopening. “We are super excited about getting those middle class jobs,” said Joe Gusler of the Pennsylvania State Building Trades, whose father helped build TMI.

“Sure, there was an incident, but everybody needs to remember that incident was in unit two, and that unit never ran again.”

But numerous regulatory hurdles remain before TMI can restart — a point highlighted when federal regulators last week surprisingly rejected a grid interconnection request for an Amazon Web Services data centre at the site of Talen Energy Corp’s Susquehanna nuclear power plant.

The regulator was concerned that diverting large amounts of power from the regional grid to service the data centre could undermine the stability of supply and increase power bills for consumers.

Constellation insists the Talen-Amazon decision has no impact on TMI’s deal with Microsoft, as the TMI reactor restart brings extra power on to the grid. The company also has powerful allies, including Josh Shapiro, Pennsylvania’s governor, who in September asked regulators to fast track TMI’s interconnection to the grid.

Constellation’s Hanson is confident the company can meet Microsoft’s tight timetable for getting access to power for its growing data centre fleet.

“2028 is doable,” he said. “The challenge of delays, you know, I just don’t see it. I don’t.”

US founder of private equity firm Baring Vostok says ordeal ‘could happen to anybody’

Michael Calvey was one of the west’s biggest champions of investing in Russia — even after security services threw him in a cell in “Kremlin Central”, a VIP wing of a notorious Moscow prison.

Now, the founder of private equity firm Baring Vostok is glad to be out.

The Oklahoman, 57, has emerged from a five-year ordeal, after his company, which was Russia’s biggest western investor, withdrew from the country in April and his probation on a 2021 suspended sentence for fraud expired.

The surreal experience of being convicted forced Calvey to fight for his innocence while believing the Kremlin had already decided the outcome. At his trial, state prosecutors argued the documents Calvey’s team produced to indicate his innocence just proved how successfully he had covered up the supposed crime. “It was straight out of Kafka,” Calvey recalls.

He admits he thought his years championing Russia would protect him from the dark turn the country had begun to take under President Vladimir Putin — one that ultimately led to the full-scale invasion of Ukraine in 2022.

“I never really saw the brutal face of Russia’s security services until I was arrested,” he tells the Financial Times at its London office in the first interview since his probation expired this summer. “If someone like me who had done so many good things for Russia . . . and had convinced many investors to share my belief in the country — if something like that could happen to me, then it literally could happen to anybody.”

Baring Vostok is one of nearly 1,800 western companies to have left Russia since the war began, after selling its assets to local partners in April. Calvey says he wishes he could have condemned the war earlier but feared the Kremlin could punish his investors and former Russian colleagues.

“I feel like I needed to speak out at some point,” Calvey says. “I don’t feel I can safely go back to Russia . . . And if you are planning to wait out the war and the aftermath, it would be impossible to do that without making some benign statements about the war sooner or later. I wouldn’t feel morally comfortable with that.”

Calvey started investing in Russia almost by chance. Growing up in Oklahoma, he originally planned to go into politics, with ambitions to become his home state’s governor. Instead, he spent a couple years after university on Wall Street, working as an analyst at Salomon Brothers in the late 1980s — a period immortalised in Michael Lewis’ book Liar’s Poker — before taking a job doing energy project finance in the Soviet Union at the European Bank for Reconstruction and Development. A week before he was meant to start, he set off to climb the Matterhorn mountain in the Alps just as a clique of hardliners launched a coup against Mikhail Gorbachev. When he descended three days later, he saw a picture of Boris Yeltsin, Russia’s first president, defying the plotters from atop a tank.

That fateful moment spurred the USSR’s collapse and kick-started Calvey’s career. “It was fun and adventurous in the way the Wild West probably was,” he remembers. He moved to Moscow in 1994 and set up Baring Vostok, which raised western institutional funds and hired a local team to invest in Russian businesses.

It was not for the faint of heart. Successful investments attracted hostile attention from rapacious oligarchs. Russia defaulted on its debt in 1998, prompting many western investors to pull out; Calvey remembers a bank calling to check Baring Vostok wanted to send funds into the country, rather than withdraw. By then, Calvey had married a Russian woman and built an inseparable team with his Russian partners. They discovered early-stage start-ups, such as search pioneer Yandex and online bank Tinkoff, which earned Baring Vostok enormous returns when they went public.

As Putin consolidated his power and lashed out against the west, Calvey knew there was a dark side to Russia. The 2014 annexation of Crimea from Ukraine made that clear. “You could see there was this kind of fertile ground for nationalism, pent-up frustration and anger. There was a very ugly face of Russia to see up close. It was disturbing. I probably should have viewed that as more of a fundamental risk,” he says.

But Calvey thought Russia’s investment case was still too strong — and flew around the world to reassure his investors.

In the run-up to the full-scale invasion, however, those two Russias began to converge. Baring Vostok agreed a bank merger with an up-and-coming businessman who had secured Putin’s sign-off on the deal and was close to Andrei Belousov, appointed Russia’s defence minister this year. Soon after, Baring Vostok and the central bank discovered Calvey’s new partners had made a flurry of transactions after the deal’s due diligence cut-off that quickly went sour.

The dispute escalated. Calvey’s apartment mysteriously caught fire two hours before a difficult negotiation over dinner with his business partners. Then, early one morning in February 2019, security services arrested him on charges that, as Calvey later learnt, Putin had personally backed.

Convinced of his innocence, Calvey was sure the Kremlin would realise its error. “My arrest would cost Russia billions of dollars of lost investment. And I figured there were enough rational people at high levels of decision making in Russia that would quickly understand that.” Instead, he found himself sharing a jail cell with a deputy culture minister, a Russian army general, a computer hacker, a drug dealer, and three construction magnates.

Calvey was among the first prominent western executives arrested in Russia, which made him something of a celebrity — as well as a target for abuse from the guards. When he asked for a second mattress to help alleviate back pain from sleeping on a concrete slab, he says one warden replied: “Nobody gets a second mattress in Guantánamo!”

Eventually, as Calvey later learnt, a series of influential Kremlin-connected figures lobbied Putin to roll back the case, as did the US and French governments. But although Calvey and his co-defendants were released to house arrest, the security services refused to dismiss the charges.

“This system is like a car with six gears going forward and none in reverse. Their core organisational principle is never admit a mistake,” he says. A Russian court gave them suspended sentences, prompting messages of condolence from his western friends — and congratulations from Russians who knew that the best anyone could do was avoid more jail time.

Calvey left Russia for Switzerland, where his family live, in January 2022 with every intention of going back. “I was deeply bitter about the people who control the system, [but] I still believed in the Russian people, especially [those] who really stuck their necks out to help me,” he says. The years of his ordeal had been the most profitable in Baring Vostok’s history, even though Calvey had grown deeply disillusioned about Russia’s investment case. He still had to show up for parole to protect his Russian colleagues. And even as tanks amassed on the border with Ukraine, he did not think Putin would go through with the invasion.

“I overestimated Putin’s rationality. I didn’t think he would make a decision that is so obviously catastrophic for Russia itself. Of course, it’s first and foremost a tragedy for Ukraine, but it’s also a strategic and human catastrophe for Russia,” he says.

Speaking again since the US election, Calvey acknowledges Trump’s win “hopefully means a faster end to the war” but believes that is “a disaster for everyone, especially Ukraine”. “But I also hope Trump’s team will aim not just for a ceasefire, but a larger agreement that results in a permanent end to war between two independent countries. This will require complex negotiations and won’t be easy.”

Calvey thinks western sanctions have had unintended consequences. “If the goal was to impose a cost, it’s done that. But it’s pushed some people who would have preferred to live outside of Russia to move back there and to invest all of their money back in Russia, because they have no place to go.”

He thinks western countries should have been quicker to embrace people such as the founders of two of Baring Vostok’s most successful investments, Tinkoff’s Oleg Tinkov and Yandex’s Arkady Volozh. They left the country and spoke out against the war — but laboured under sanctions for more than a year. “The Russian regime used [that] as a way to threaten other people from doing the same thing,” Calvey says.

Calvey is now focusing on his main non-Russian asset, Kazakh fintech Kaspi, as well as start-ups run by exiled Russians such as Plata, an online bank in Mexico set up by former Tinkoff staff. He is open to potential investments in Ukraine should the fighting die down. But he thinks western countries should be doing more to encourage exiled Russian entrepreneurial talent. “Any rational country that understands modern economics would get on their knees to recruit these priceless people. And yet instead they get the cold shoulder. That’s a big own goal by the west.”

Baring Vostok’s exit from Russia triggered billions of dollars in losses on its assets there. “In hindsight, we should have stopped investing a decade earlier,” Calvey admits. But he hopes the companies he helped build could help Russia change for the better.

“I’m still optimistic about Russians — I’m just very pessimistic about Russia itself,” he adds. “Sometime in the future, there’ll be another opportunity for re-engagement with Russia. Might be 10, 15, 20 years . . . I feel like the work we did, you know, made Russia a better place.”