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UK electricity company’s investment could help US economy as it faces energy supply crunch from AI demands

UK electricity group Drax is committing up to $12.5bn in the US over the next decade to build power plants to take advantage of the country’s lucrative subsidies and expectations of surging energy demand.

Drax, which operates the UK’s largest power station in the north of England, will build the plants under its Houston-based subsidiary Elimini, which launched on Tuesday.

It could help the US economy as it faces an energy supply crunch with power needs set to soar as data centres proliferate to cope with the demands of artificial intelligence.

The plants will generate electricity by burning biomass such as wood and then capture the emissions produced. The technique is known as bioenergy with carbon capture and storage or BECCS.

The process is considered “carbon negative” in some accounting metrics because in addition to capturing emissions, the biomass burnt has also absorbed carbon in its lifetime.

“We’re exporting British capability now,” Will Gardiner, Drax chief executive, told the Financial Times. “The UK is an interesting and exciting market, but we need to do more than that.”

Drax is planning to install carbon capture equipment at its power station in Yorkshire, dependent on government support.

It is evaluating more than 20 potential sites in North America under Elimini, with an aim to build up to five plants in the US over the next 10 years with a combined capacity of about 750MW of electricity — enough to provide power for more than 600,000 homes.

The company estimates that each US plant will remove about 1.5mn tonnes of carbon dioxide per year and be eligible for more than $100mn in tax breaks annually from President Joe Biden’s Inflation Reduction Act.

However, some analysts say the company’s plans could prove challenging as carbon removal technologies remain expensive and have yet to be produced at scale.

The company’s US drive comes as European investors pump billions into the US market to take advantage of the IRA’s clean energy subsidies.

The US is also facing new power demands from data centres for AI, electrification, and industrial onshoring. Consultancy ICF estimates that electricity demand could increase by an average of 9 per cent by 2028, posing a risk to reliability and affordability.

Laurie Fitzmaurice, president of Elimini, said that the US will require low carbon electricity sources such as BECCS that are available around the clock to avoid the intermittency problems of wind and solar. 

“There’s a tremendous amount of load growth happening,” Fitzmaurice said. “We need a decarbonised energy system that has that base of dispatchable renewable energy.”

Elimini also plans to sell carbon dioxide removal credits from its global portfolio of projects with an announcement on Tuesday of six offtake deals, agreements to buy credits used to offset emissions, totalling 28,000 tonnes. While the company declined to offer a price, previous contracts averaged $300 per tonne.

Brenna Casey, a carbon capture analyst at BloombergNEF, called BECCS a “compelling option” for carbon removal given its dual revenue streams. 

“You can sell power to the market and make a profit, or you can sell credits,” Casey said, cautioning that steep selling prices and limited sustainable supplies of biomass remain constraints to the sector’s ability to scale. 

Drax’s bet on BECCS has come under scrutiny from environmentalists, who raise concerns over the sustainability of burning organic matter such as forests.

The International Energy Agency estimates that carbon dioxide removal from BECCS plants will need to reach 185mn tonnes per year by 2030 to be on track for net zero by mid-century, up from the 60mn tonnes committed today.

Ankara hires banks for ‘switch tender’ deal to exchange short-debt for longer-term note

Turkey has hired banks to sell a new long-term US dollar bond and buy back debt due in the next couple of years, as Ankara seeks to reduce the scale of a looming wave of repayments and to court international investors.

The country appointed banks to sell a new benchmark 10-year dollar bond, Turkey’s finance ministry said on Tuesday.

It will also launch its first so-called switch tender transaction, which will allow investors to sell back short-dated debt and swap their holdings to the new bond. Switch deals are relatively rare, but countries including Ukraine and Greece have utilised them in the past.

Turkey has billions of dollars of foreign currency debt coming due next year, and the switch is designed to push some of that wave of redemptions further into the future, said a person familiar with the transaction.

The deal comes as Ankara pursues a broad economic turnaround programme aimed at quelling a long-running inflation crisis and luring foreign investors back to its markets.

President Recep Tayyip Erdoğan pitched to US executives at a roundtable in New York on Monday as part of a series of business-focused events coinciding with the UN General Assembly.

Erdoğan told executives that his country would provide investment support to 30 industries including chipmaking and green energy. “I invite you to benefit from these supports and grow together with a developing Turkey,” he said.

Turkey’s finance minister and central bank chief are due to address a Goldman Sachs investor conference on Tuesday, while the energy and industry ministers will hold separate meetings.

Turkey is hoping that a pivot towards more conventional economic policies, which began after Erdoğan’s re-election in May last year, will attract back foreign investors who were spooked by previous policies.

The central bank has been at the heart of the reforms, lifting its main interest rate more than 40 percentage points since last summer to 50 per cent in an attempt to slow runaway price growth.

The new programme has already shown some signs of success, with inflation falling from a peak of more than 85 per cent in 2022 to just over 50 per cent this summer.

S&P Global Ratings, Moody’s Ratings and Fitch have all raised their ratings on Turkey’s creditworthiness in recent months, although the country remains deep in junk, or non-investment grade, territory.

The new 10-year bond will be “benchmark” size, according to an announcement sent to investors and seen by the Financial Times, typically meaning the country is seeking to raise at least $500mn.

Turkey has raised $6.9bn on international capital markets so far in 2024. Debt maturing in 2024, 2025 and 2026 are eligible for the switch transaction.

Turkey has $14.4bn of principal payments due in 2025 on its external central government debt, according to projections by the finance ministry.

Still, most analysts say that Turkey runs a tight fiscal ship relative to many of its emerging market peers. Fitch earlier this month forecast Turkey’s general government debt to be about 27 per cent of GDP this year, far lower than the 55 per cent median for countries that are also in the double B rating category.

BBVA, Bank of America, Citigroup and JPMorgan are acting as joint bookrunners on the bond deal, and JPMorgan and BBVA are managing the switch.

Row is latest stand-off in French media landscape dominated by billionaire owners

LVMH chief executive Bernard Arnault has faced criticism from French media organisations — including some he controls — over a memo to staff at the luxury conglomerate barring contact with reporters from certain outlets. 

In an open letter published in national newspaper Le Monde on Tuesday, journalists’ unions at the media groups expressed their solidarity with the targeted publications. They reminded Arnault that the “mission of the press” was not to “relay the official communication of companies and institutions” but to inform.

“This constitutes one of the pillars of democracy,” they wrote.

The letter was signed by journalists’ unions from more than a dozen major publications in France, including Le Monde, Le Figaro and AFP, as well as news broadcasters France Télévision, BFM-TV and France 24. Staff from Les Echos and Le Parisien, which are owned by LVMH, also signed the letter. 

Arnault, whose group owns luxury brands Louis Vuitton and Dior, has had an at times fraught relationship with the media, including with employees at some of his own publications. He had an extended stand-off last year with the staff of Les Echos after journalists alleged the billionaire had their editor-in-chief removed in breach of their editorial independence.

Arnault wrote the memo to senior executives across the €309bn market value group in January — but its existence was reported only earlier this month by La Lettre.

The document told the managers he was issuing “an absolute ban” on speaking to journalists at seven publications: La Lettre, Puck, Miss Tweed, L’Informé, Médiapart, Le Canard Enchaîné and Glitz.paris.

“I formally condemn any behaviour consistent with maintaining relationships with unscrupulous journalists and giving them information or comments on the life of the group,” Arnault wrote. “Any breach (and this will inevitably be known) will be considered a serious infraction, with the corresponding consequences attached to it.”

LVMH did not respond to a request for comment. 

In their retort, the journalists’ groups asserted that employees were entitled to freedom of expression and association.

“The obligation of loyalty to which they are bound cannot allow their employer to deprive them of their fundamental rights by prohibiting them from any contact with people of their choice,” they wrote.

The ban was also an unlawful attempt to subvert protections for whistleblowers, they added.

The incident is the latest of several clashes between owners and staff in French journalism. The country’s media landscape is dominated by billionaire owners, who use these assets to project their status and influence.

Journalists at La Provence, owned by shipping magnate Rodolphe Saadé, went on strike in March when their editor was suspended over a front page criticising president Emmanuel Macron’s visit to Marseille to highlight the fight against drug trafficking. The editor was reinstated after unrest spread to La Tribune and BFM, which Saadé also owns.

In addition to the two newspapers, Arnault also owns Radio Classique and is in the process of buying celebrity gossip magazine Paris Match from billionaire industrialist Vincent Bolloré, who controls rightwing TV news channel CNews. Telecom billionaire Xavier Niel is Le Monde’s main shareholder.

A theoretical physicist believes he has made a breakthrough in photonics research that will enable us to have faster and better processors — a major need in artificial intelligence, quantum computing, and other tech with heavy workloads. Now, his startup has received early backing from NATO, the European government, and other key investors to produce those chips.

Ephos has raised $8.5 million in seed funding that it will use to build out and operate a new R&D and manufacturing facility near Milan focused on glass-based quantum photonics.

There are others like Ephos with bight ideas about photonics, including Xanadu (valued at $1 billion), Photonic (backed by Microsoft), Oxford spinout Orca (backed by the U.S. DoD) and more. But Ephos, with its focus on chips, says that its facility will be the “world’s first dedicated to producing glass-based quantum photonic circuits.”

Andrea Rocchetto, the Italian theoretical physicist who is the CEO of Ephos (pictured here) said he came up with the idea for building Ephos and establishing it in Italy at the peak of Covid-19.

After studies in Rome, London, and Oxford, he was working on postdoctoral research at the University of Texas at Austin when the pandemic struck.

“I flew back to Italy and reconnected with the community here and realized that there was this immense talent pool that was completely outside of the big trends in technology,” he said. “There were no startups building quantum technologies.” He linked up with with three other highlydecorated quantum and computer science researchers — Francesco Ceccarelli, Giacomo Corrielli and Roberto Osellame — in 2022 and started Ephos to fill that void.

As Rocchetto sees it, that void is not just a geographic but a technological one.

Computational infrastructure, as we know by the huge revenues reaped by companies like Nvidia and the large bills that big foundational AI companies rack up for training and running models, is under stress. But it’s not just AI. New innovations like quantum computing are also putting pressure on the hardware we have today. In the U.S. alone, Rocchetto said, about 9% of the energy generated in the U.S. will be used for running data centers, so the demand is to get them to be faster and more efficient. “Photonics and quantum computing can both answer those needs,” he said.

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Ephos wants to shatter the market for AI and quantum chips with a new design based on glass

Ingrid Lunden

11:12 AM PDT • September 23, 2024

Comment

A theoretical physicist believes he has made a breakthrough in photonics research that will enable us to have faster and better processors — a major need in artificial intelligence, quantum computing, and other tech with heavy workloads. Now, his startup has received early backing from NATO, the European government, and other key investors to produce those chips.

Ephos has raised $8.5 million in seed funding that it will use to build out and operate a new R&D and manufacturing facility near Milan focused on glass-based quantum photonics.

There are others like Ephos with bight ideas about photonics, including Xanadu (valued at $1 billion), Photonic (backed by Microsoft), Oxford spinout Orca (backed by the U.S. DoD) and more. But Ephos, with its focus on chips, says that its facility will be the “world’s first dedicated to producing glass-based quantum photonic circuits.”

Andrea Rocchetto, the Italian theoretical physicist who is the CEO of Ephos (pictured here) said he came up with the idea for building Ephos and establishing it in Italy at the peak of Covid-19.

After studies in Rome, London, and Oxford, he was working on postdoctoral research at the University of Texas at Austin when the pandemic struck.

“I flew back to Italy and reconnected with the community here and realized that there was this immense talent pool that was completely outside of the big trends in technology,” he said. “There were no startups building quantum technologies.” He linked up with with three other highlydecorated quantum and computer science researchers — Francesco Ceccarelli, Giacomo Corrielli and Roberto Osellame — in 2022 and started Ephos to fill that void.

As Rocchetto sees it, that void is not just a geographic but a technological one.

Computational infrastructure, as we know by the huge revenues reaped by companies like Nvidia and the large bills that big foundational AI companies rack up for training and running models, is under stress. But it’s not just AI. New innovations like quantum computing are also putting pressure on the hardware we have today. In the U.S. alone, Rocchetto said, about 9% of the energy generated in the U.S. will be used for running data centers, so the demand is to get them to be faster and more efficient. “Photonics and quantum computing can both answer those needs,” he said.

Using chips that process light — photons, specifically — is one very efficient way to transfer data, and Ephos’s bet is that building photonics chips using (glass) fiber optics will be the best base for these and the least likely to result in photon loss. “Glass helps a lot for that,” he said. “The chips of our competitors are silicon-made, but light hates to move from one material into another. By building the entire infrastructure on glass, we can dramatically reduce those coupling losses between fibers and chips.”

Ephos has one leg in the world of deep tech, and one in the world of commercialized opportunity. Its quantum facility is already open — some of the funding was actually raised earlier in the year — but the first chips have yet to be made. These should come out in the next weeks, however, “and we expect the fab to be fully operational by the end of the year,” Rocchetto said.

Early interest has been from quantum computing startups, but he added that the startup is also seeing interest from so-called “hyperscalers,” big tech companies that build their own data centers, and the data center builders who work with them. The list of those investing are an interesting clue as to who some of those hyperscalers might be.

Starlight Ventures out of the U.S. is leading the round with Collaborative Fund, Exor Ventures, 2100 Ventures, and Unruly Capital also participating. Angels in the round include Simone Severini (Amazon Web Services’ GM overseeing quantum technologies), Diego Piacentini (formerly a senior VP at Amazon), and Joe Zadeh (former VP of Airbnb). Ephos is also getting backing from the European Innovation Council (EIC) and NATO’s Defence Innovation Accelerator (also known as DIANA).

The fact that Ephos is in Europe is not a small detail. There has been a big push across the world for regions to double down on more of their own infrastructure across a range of verticals amid geopolitcal and macroeconomic instability — collectively referred to as “resilience”. In this case, Ephos is also getting backing from the European Innovation Council (EIC) and NATO’s Defence Innovation Accelerator (also known as DIANA).

While Ephos sees its primary opportunity as one of addressing a need in computing, “As a company, we are very much interested in building transatlantic ties,” said Rocchetto. “We very much believe defense is a critical area for the growth of our company, because historically, the defense sector has been one of the first buyers of new computational technology. So we keep a close eye on the space.”

BERLIN, Sept 24 (Reuters) - UniCredit's (CRDI.MI), opens new tab behaviour towards Commerzbank (CBKG.DE), opens new tab has spurred uncertainty among shareholders, German Finance Minister Christian Lindner said on Tuesday.

"The style of UniCredit's behaviour has unsettled many shareholders in Germany, which is why the German government has decided not to sell any more shares," Lindner said.

On the question of how a UniCredit takeover of Commerzbank could be prevented, the finance minister said: "This is a matter for the board of managing directors and the supervisory board of Commerzbank."

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