TheChek News Flow

Archbishop appeared as part of proceedings brought by financier found guilty of embezzlement

One of the Catholic Church’s most senior officials has made a rare and tempestuous appearance in a foreign court to defend the Vatican over a soured UK property deal on which it lost more than £100mn.

Pope Francis’ chief of staff, Archbishop Edgar Peña Parra, clashed at the High Court in London on Thursday during civil proceedings brought by Raffaele Mincione, a financier whom the Vatican state court found guilty of embezzlement and money-laundering for his role in the troubled transaction.

Having sworn on the Bible to tell the truth, the archbishop was accused at one point during a grilling by Mincione’s barrister, Charles Samek KC, of lying to the court over the details of an invoice — a suggestion Peña Parra dismissed.

The Holy See has traditionally invoked the principle of sovereign immunity to avoid participating in foreign court proceedings, including prosecutions for financial scandals in Italy in the 1980s and child sex abuse cases in various countries in more recent years.

However, Peña Parra, wearing a black cassock and clerical collar, testified in the case brought by Mincione, who wants the London court to rule he acted in “good faith” in his dealings with the Vatican.

Mincione received a five-and-a-half-year sentence from the Vatican court but has never served jail time and has been based in London.

The Vatican made a loss of more than £100mn in 2022 when it sold the former Harrods warehouse in London’s Chelsea, having spent more than €350mn to acquire it between 2014 and 2018. The episode led the Church to review how it handles its finances.

Mincione was one of seven defendants — including one of the Vatican’s most powerful former officials, Cardinal Giovanni Angelo Becciu — convicted in December by the Vatican court in the landmark case for their roles in the deal.

Peña Parra, a former Vatican diplomat, told the High Court on Thursday that he had never heard of the troubled investment until after assuming his new role replacing Becciu as the head of the Vatican’s general administration in October 2018.

He did subsequently authorise important steps in the Vatican’s attempt to extricate itself from the building. These included approving a further share purchase for the Vatican.

However, soon after the purchase, he discovered that the company that owned the Chelsea building had previously been restructured, leaving the Holy See with non-voting shares.

Meanwhile, another businessman, Gianluigi Torzi, still held voting shares that gave him effective control of the property and thus also had to be bought out, according to the archbishop’s written statement to the court.

While the Vatican eventually bought out Torzi for about £15mn, the businessman was convicted in the Vatican trial last year of extortion, fraud and money-laundering, and sentenced to six years in prison for his role in the transaction.

Samek quizzed Peña Parra, 64, about the Vatican’s dealings with Torzi, asking him why one of the payments to him was not mentioned in an “information note” prepared for Vatican authorities.

Peña Parra replied that the document was not supposed to be an all-encompassing account, adding that the Pope had been kept informed. “I see the Holy Father every Tuesday,” he said.

Mincione, who attended the hearing, received a grilling of his own earlier in proceedings over the valuation of the property. He was accused by the Vatican’s barrister, Charles Hollander KC, of distorting its value for his own benefit.

Mincione dismissed the suggestion and denies any wrongdoing. He said the property’s value was justified by independent auditors and third-party consultants.

The case continues.

SONDAGE - À trois jours du second tour, le camp présidentiel reprend des couleurs par rapport aux projections à l’issue du premier tour, selon la dernière enquête quotidienne Ifop-Fiducial pour Le Figaro, LCI et Sud Radio.

C’est la toute dernière ligne droite. Après la convocation de nouvelles élections législatives par Emmanuel Macron le 9 juin, au soir des européennes, les Français sont appelés aux urnes dimanche pour la troisième fois en moins d’un mois. Alors que le premier tour du scrutin a confirmé la tripolarisation de la vie politique (entre la droite nationaliste, en tête, la gauche, en seconde position, et le camp présidentiel), le second pourrait amplifier cette tendance. Des blocs qui, en monopolisant la campagne sur le plan médiatique, font bondir la participation, estimée jeudi à 68% (+1,3 point par rapport à celle du 30 juin). C'est ce que révèle l’avant-dernier sondage quotidien Ifop-Fiducial pour Le Figaro, LCI et Sud Radio, qui fournit des projections en sièges sans intentions de vote au niveau national.

Affaiblie par la reconstitution d’un «front républicain» dans plus de 200 circonscriptions, où des candidats macronistes et de gauche arrivés en troisième position se sont désistés, l’«union des droites» (Rassemblement national et «ciottistes») voit assez nettement s’éloigner l’hypothèse d’une majorité absolue. Ce camp a beau avoir recueilli 33,21% des voix et envoyé 38 députés à la Chambre basse dès le premier tour, il ne récolterait qu’entre 210 et 240 sièges. Bien loin donc de la projection au soir du premier tour, qui lui donnait une majorité relative entre 240 et 270 élus. «On ne voit pas de regain du RN, comme s’il avait déjà fait le plein au premier tour. Il a beaucoup moins de réserves à opposer à la gauche ou au centre», souligne le directeur du pôle actualités et politique de l’Ifop François Kraus. Si ces estimations sont décevantes pour le RN, il pourrait quasiment tripler son contingent parlementaire (88 députés sortants). Signe indéniable de la puissance de l’alliance de droite, 95% de ses électeurs votant dans des circonscriptions non pourvues dimanche dernier se disent sûrs de leurs choix de vote.

Le bloc central retrouve des couleurs

Rassemblée sous la bannière commune du Nouveau Front populaire, la gauche, qui a déjà fait élire 31 députés, reste quasiment stable. Conséquence : elle disposerait de 170 à 200 sièges (-10 à 0) dans la nouvelle législature. Des données qui ne permettent pas de connaître les rapports de force entre les différences chapelles (LFI, PS, EELV, PCF), mais qui prédisent une meilleure performance que celle de la Nupes en 2022 (149 députés).

Beaucoup moins dominant mais toujours incontournable, le camp présidentiel sauve les meubles. Reléguée en troisième position, la macronie obtiendrait entre 95 et 125 députés (+35 par rapport aux estimations du 30 juin). Ce qui, dans la fourchette basse, représenterait moins de la moitié du contingent macroniste actuel. Et permettrait au bloc central d'être une force pivot en cas d’une hypothétique coalition anti-RN, qui irait des sociaux-démocrates aux LR.

Loin du podium, Les Républicains se frayent difficilement un chemin entre les trois blocs. Fracturée après la décision d’Éric Ciotti de s’allier avec le RN, la droite sauverait entre 25 et 45 députés (-5), contre 62 sortants. Des voix qui pourraient être très convoitées dans les prochaines semaines si le parti à la flamme et ses alliés recherchent à tout prix des élus pour constituer une majorité absolue.

A spinout of the medtech’s orthopaedics business would unlock value while shifting to the US could also deliver gains

Smith & Nephew’s mission is “to restore people’s bodies and their self-belief”. The underperforming medtech is in need of remedial work itself. Now that activist investor Cevian has taken a 5 per cent stake in the FTSE 100 business, it may get some.

It is no surprise the business caught Cevian’s eye. The stock has lost about two-fifths of its value over five years. Over that time, three chief executives, three finance directors and numerous different business heads have been in charge. It has endlessly reorganised, booking $1.6bn of net exceptional items over a decade. Over five years, operating profit margins fell by almost 8 percentage points to 12.3 per cent in 2023, according to S&P Capital IQ.

Sure, Smith & Nephew is trying to cut costs and improve productivity. Operating profit margins are expected to recover to more than 18 per cent this year. But Cevian reckons it can do better. Improving the businesses’ operating performance could create significant long-term value, it says. 

The main problem is the orthopaedics business. Smith & Nephew has a 10 per cent share of the market for hip and knee implants. With three much larger competitors, it struggles to resist pricing pressure and to spread the costs of innovation. 

The company probably needs more radical surgery. The orthopaedic unit is a drag on the healthier sports medicine and wound management businesses — the second largest in their sectors. Selling off orthopaedics might be tricky, not least because of antitrust concerns. But a spinout could be an option, along the lines of the GSK’s Haleon divestment.

A sum-of-the-parts calculation suggests that would unlock value. An ebitda multiple of eight times — a discount to that of Zimmer Biomet — implies a £2.9bn market capitalisation for orthopaedics, says Seb Jantet of Panmure Liberum. With the remainder valued at £8.5bn, using an ebitda multiple of 14 in line with UK peer ConvaTec, the business would be worth at least a fifth more than the current market value.

Smith & Nephew’s future as a UK-listed company could also be in doubt. Cevian is attuned to the potential gains from shifting listing venues; Smith & Nephew earns most of its revenues in the US. Chair Rupert Soames coined the phrase “Brilo”, meaning “British in listing only” when making the case for a pay rise for its US-based boss.

Relocation is not a quick fix. But, absent other progress, it could be another stage in the medtech company’s rehabilitation.

Lots of big rounds last month, including two huge ones well over a half-billion dollars. While June started slow, it ended in a flurry of massive-money deals — making this list tough to crack.

1. Cruise, $850M, autonomous cars: In for a penny, in for a pound. That clearly seems to be how General Motors feels about Cruise. The auto giant agreed to pump another $850 million into the San Francisco-based startup. Cruise’s saga has been well documented. In 2021, Cruise snagged the largest round of any venture-backed U.S. startup when it upsized a round to $2.75 billion, valuing the company at more than $30 billion. However, the tide started to turn in early 2022 when SoftBank did not release a promised $1.35 billion to Cruise as part of an agreed-upon deal when the autonomous carmaker completed a commercial deployment of vehicles. Instead, General Motors acquired SoftBank’s equity ownership stake in Cruise for $2.1 billion. Then, late last year, Cruise suspended its self-driving taxi program across the country after losing its permit to operate in San Francisco due to an incident with a pedestrian. That announcement came almost exactly a year after another autonomous vehicle startup — Ford Motor-backed Argo AI — shuttered after raising $3.6 billion in funding from investors such as Ford Motor, Volkswagen Group and Lyft. Cruise is now restarting its driving programs in Phoenix, Dallas and Houston. Clearly GM is betting — big — the autonomous driving and robotaxi market comes back.

2. AlphaSense, $650M, artificial intelligence: AI-driven market intelligence platform AlphaSense raised $650 million in funding co-led by Viking Global Investors and BDT & MSD Partners at a $4 billion valuation — a 75% increase from just nine months ago. As part of the deal, AlphaSense acquired expert research startup Tegus for $930 million. Last September, the company locked up a $150 million Series E led by Bond Capital at a $2.5 billion valuation — an increase of nearly 30% from its $100 million round at a $1.8 billion valuation in April last year. The New York-based startup’s market intelligence and search platform — powered by AI and natural language processing — helps clients form corporate and investment strategies. In total, the company has now raised $1.4 billion since its founding, per Crunchbase.

3. Sila Nanotechnologies, $375M battery: A next-generation battery materials company pulled in a huge round in June. Alameda, California-based Sila, a next-generation battery materials company, announced it raised a $375 million Series G led by existing investors Sutter Hill Ventures and funds and accounts advised by T. Rowe Price Associates. The new cash will help the company finish construction of its Moses Lake, Washington, plant — scheduled for the first quarter of next year — for the production of its Titan Silicon anode material. Founded in 2011, the company has raised $1.4 billion, per Crunchbase.

4. Formation Bio, $372M, biotech: Formation Bio, an AI-enhanced pharma company, raised a $372 million Series D led by a16z. The New York-based startup, launched in 2016 as TrialSpark, has built AI-enabled platforms and processes to accelerate drug development and clinical trials — integrating large language models, AI models and applications throughout its platform. More and more biotech startups are using AI to help with their drug processes and investors are clearly taking note. Founded in 2013, the company has raised $528 million, per Crunchbase.

5. CData Software, $350M, data integration: In a round that likely slipped under most folks’ radar was data connectivity company CData Software’s massive $350 million growth round from two big-named firms. The round was led by Warburg Pincus, with participation from Accel. The Chapel Hill, North Carolina-based company develops data products and connectivity solutions that provide access to live data from hundreds of on-premises and cloud applications. Founded in 2016, the company has raised $510 million, per Crunchbase.

6. (tied) Creatio, $200M, customer relationship management: Low-code and no-code startups are not seeing the funding they did a couple of years ago, but it clearly has not dried up completely. Creatio achieved unicorn status after landing a $200 million round led by Sapphire Ventures. The new cash, a minority investment, values the startup at $1.2 billion and will be used to help the company expand globally as it continues to grow revenue 50% year to year. The Boston-based startup is a developer of a no-code platform to automate customer relationship management and enterprise workflows. Not surprisingly, the company has an AI angle — creating a new generative AI copilot to help automate different marketing and sales tasks. Founded in 2014, Creatio previously raised $68 million in 2021 in a round led by Volition Capital, per Crunchbase.

6. (tied) Foodsmart, $200M, healthcare: Foodsmart locked down a massive $200 million round led by TPG’s global impact investing platform, The Rise Fund. The San Francisco-based company has developed a telenutrition and food benefits management platform. Founded in 2010, Foodsmart helps those facing chronic disease and food insecurity by partnering with health plans and providers to give patients access to affordable healthy eating options, virtual nutrition counseling, meal plannning and ways to buy food affordably. Foodsmart has raised nearly $315 million, per Crunchbase.

8. Marea Therapeutics, $190M, biotech: This big biotech round is actually the combination of two rounds. Marea Therapeutics, a clinical-stage biotechnology company developing medicines for cardiometabolic diseases, launched with $190 million in a combined Series A and B financing. The Series A round was led by Third Rock Ventures — where the startup was incubated — and the Series B round was co-led by Forbion Capital Partners, Perceptive Advisors, Sofinnova Investments and VenBio Partners. The company didn’t split out the rounds, so we record it as one.

9. Sidecar Health, $165M, healthcare: Healthcare is a mess — nearly everyone can agree on that. Sidecar Health, a health insurance company providing major medical coverage to businesses, closed a $165 million Series D led by Koch Disruptive Technologies to try to untangle it at least a little bit. The El Segundo, California-based startup offers plans that eliminates the need for prior authorizations, referrals and networks for doctors — allowing patients to go where they want. Sidecar Health believes a free-market approach will ensure healthcare is more accessible and affordable. Founded in 2018, the company has raised 328 million, per Crunchbase.

10. Huntress, $150M, cybersecurity: Maryland-based Huntress became the newest cybersecurity unicorn after it raised a $150 million Series D at a $1.5 billion-plus valuation. The new round was led by Kleiner Perkins, Meritech Capital Partners and existing investor Sapphire Ventures. The startup focuses on security services for small business to small enterprise customers — an often overlooked sector in cyber as many companies chase Fortune 500 companies. Huntress currently is realizing more than 70% year-to-year revenue growth for the past two years as it continues to “approach $100 million in annual recurring revenue.” Founded in 2015, Huntress has raised nearly $310 million, per Crunchbase.

Also in today’s newsletter, a new report casts doubt on clean hydrogen’s role in the power sector

While the US is off celebrating independence from Britain, our colleagues across the pond are covering the general election, where Labour is set for a landslide victory. The party has put energy at the centre of its campaign, pledging to cut carbon emissions from electricity generation to net zero by 2030 and create a state-owned energy company.

In today’s Energy Source, we sit down with the chief executive of FirstEnergy. The US investor-owned utility sees no pathway to phase out coal amid growing demand for more around-the-clock power fuelled by data centres for artificial intelligence and new manufacturing. 

Our second item dives into a new report from the Clean Air Task Force that casts doubt on green hydrogen’s ability to decarbonise the power sector. Data Drill looks at how the global liquefied natural gas market is set for a glut. 

Thanks for reading,

Amanda

‘We’re just honest’: FirstEnergy CEO on coal plant retirement delays

Fast-growing power demand driven by artificial intelligence and the deterioration of the US grid are narrowing the pathway for decarbonisation, warns FirstEnergy, one of the largest US investor-owned utilities. 

“When we were looking at emissions reduction, it was based on running our coal-fired power plants less at the end of the decade,” Brian Tierney, chief executive of FirstEnergy, told Energy Source. “We don’t see a pathway for that now.”

The Ohio-based utility withdrew its 2030 target to exit coal earlier this year, keeping its two West Virginia plants running until 2035 and 2040, citing increasing power demand, reduced generation capacity and state politics.

“The things that are bumping up against each other are people’s growing demand and desire for reliability, what’s affordable for most customers, and then what’s sustainable. It’s easier to make two of those three things congruent with one another. It’s harder to get all three solved at the same time,” Tierney said.

“That’s why we had to withdraw our interim goal. Some people think we were bad people for doing that. I think . . . we’re just honest,” he added.

The comments from FirstEnergy come amid a series of retirement delays for coal plants as the scramble to meet soaring power demand from data centres for AI puts decarbonisation plans on the backburner. On Monday, Google reported its emissions jumped nearly 50 per cent over the past five years due to data centre expansion, putting its 2030 net zero target in doubt.

FirstEnergy serves five states in the mid-Atlantic and is part of the PJM Interconnection, a power market that includes northern Virginia, the world’s largest data centre hub. Electricity demand in the PJM region is one of the fastest-growing in the country, with the operator this year more than tripling its growth forecast for the next decade. 

Natural gas made up 43 per cent of US power generation last year, while wind and solar contributed 14 per cent, according to the Energy Information Administration. Coal-fired generation, which makes up 16 per cent of the electricity mix, has declined rapidly over the past decade as plants were retired and gas became the more competitive option.

The Biden administration has set a target of creating a carbon-free power sector by 2035. The 2040 retirement date from FirstEnergy runs against new rules from the US Environmental Protection Agency, which require coal plants to be retired by 2039 or install expensive carbon capture systems. The rule has been challenged by multiple Republican attorneys-general, utilities and trade groups who argue the technology to capture emissions is premature and will raise prices for consumers.

Report casts doubt on clean hydrogen’s role in power sector

Clean hydrogen faces “limited prospects” in its ability to decarbonise the grid and could exacerbate the struggle to meet growing power demand, warns the Clean Air Task Force in a new report shared exclusively with Energy Source.

The environmental non-profit found that while burning clean hydrogen in power plants is technically feasible, it is highly inefficient and is double the cost of other low-carbon alternatives for around-the-clock power.

The report’s authors looked at the cost of production for blue hydrogen, produced using gas and capturing its emissions, and green hydrogen, which splits water using electricity. CATF estimates that green hydrogen burns three times more power than it returns to the grid, draining the already limited pool of low-carbon sources needed by everyday consumers of energy. Blue hydrogen, meanwhile, has a highly variable emissions profile.

“[Green hydrogen] generally increases overall electricity demand and cannibalises clean electricity that could be used for another application,” said Kasparas Spokas, who co-authored the report with Ghassan Wakim. “People need to be cautious about this strategy to decarbonise the power sector.”

The report comes as the hype surrounding clean hydrogen simmers down as projects struggle to secure financing due to languishing demand and uncertain regulations. BloombergNEF, for example, estimates only 6 per cent of US clean hydrogen projects have secured binding supply agreements.

Data Drill

The global liquefied natural gas market is heading towards oversupply, says BloombergNEF in a new outlook released on Tuesday.

The research firm expects global demand for the chilled fuel to reach 560mn tonnes by 2030. That is about 11 per cent lower than expected supply, according to BNEF, which cautioned that project delays and further Russian sanctions could tighten the market.

The outlook comes as a wave of new LNG terminals are expected to come online before the end of the decade, with the US and Qatar leading capacity additions. On Monday, a Donald Trump-appointed Louisiana district court judge struck down President Joe Biden’s pause on LNG project approvals, putting the permitting freeze up in the air.

New import fees will begin Friday and last at least four months, the EU Commission said

The European Union confirmed plans to impose additional tariffs on electric cars made in China, dashing hopes of a solution sought by several carmakers whose executives fear reprisal from an escalating trade war.

New import fees will begin Friday and last at least four months, the EU Commission said. Thursday’s confirmation comes after negotiations with the Chinese government and lobbying from the German car industry and others failed to halt the tariffs.

The EU Commission last month said the Chinese government unfairly subsidizes EV companies—including European carmakers who import EVs to Europe—at a level that undercuts competition. Subsidies let carmakers in China sell EVs for less than European-made vehicles, prompting the tariffs to protect the industry.

European carmakers including Volkswagen, BMW, Mercedes-Benz, and Stellantis face pricing and market-share pressure in China from homegrown manufacturers like BYD and Geely, which also have growth plans in Europe.

But German car giant Volkswagen and others have come out against the fees for fear of an escalating trade war, saying the tariffs could hurt Europe’s industry long-term.

The duties range between 17.4% and 37.6%—on top of a pre-existing 10% tariff—depending on imports, subsidies, and cooperation with the investigation. BYD, Geely, and SAIC will be subject to new tariffs of 17.4%, 19.9%, and 37.6%, respectively.

Several carmakers will be subject to new tariffs of 20.8%, the weighted average. Tesla, which said it might raise prices because of the fees, could receive a customized rate. The decision will be made if and when the tariffs become definitive in November, the EU said, after which point they would be in effect for five years.

Overall, tariff rates will be slightly lower than previously announced for some carmakers, the EU Commission said. The executive branch revised the duties after affected companies provided more information to the EU Commission following its investigation.

Political chaos dents France’s image and raises security issues at world’s most watched sporting event

Emmanuel Macron’s move to call snap elections has cast a shadow over the Paris Olympic Games, raising the possibility of political unrest and a far-right government in charge of the world’s biggest sporting event.

The far-right Rassemblement National (RN) is projected to become the biggest parliamentary party after the run-off vote on Sunday. While a hung parliament appears the most likely outcome, if the RN were to win a majority, its 28-year-old party chief Jordan Bardella could be prime minister when the Games open on July 26, with his team greeting top athletes and dignitaries from across the world.

The timing of Macron’s decision to dissolve parliament was “catastrophic for the Games”, said Pascal Boniface, head of Paris-based think-tank Iris and an expert on the politics of sport. “We are in the thickest of fog over the future.”

Pierre Rabadan, a senior official responsible for Olympics planning in the Paris mayoralty of Socialist Anne Hidalgo, told the Financial Times he was “stupefied” by Macron’s “irresponsible” decision.

While he said the main strategic decisions had already been made, the move had raised “pragmatic and operational questions”, including deploying mayoral staff and city police for both the elections and the Games.

“We had thought about all the possible scenarios, except for the dissolution of the Assembly,” added Rabadan, a former professional rugby player with Stade Français.

Security experts had already warned of big policing challenges for the opening ceremony, in which thousands of athletes will sail down the River Seine watched by around 300,000 spectators along the quays. Pressure on security services would further be aggravated if anti-RN protesters were to take to the streets, they said.

Rabadan said his main concern now was the image of France that a far-right government, with an anti-immigration and nativist policy platform, would present.

“The Games are about welcoming the entire world and showing that we are an open country,” Rabadan said. “That clearly goes completely against what the Rassemblement National wants.”

Hidalgo told France 2 on Tuesday that “the party would not be spoiled” by an RN government.

But dozens of athletes have voiced concerns about the elections. Prior to the first round, French football star and captain of the national team Kylian Mbappé called on the electorate to vote “against the extremists”, while almost 300 sportspeople, including Rabadan, signed a column in French sports publication L’Equipe opposing the RN.

“In my memory, I have never seen athletes engage to this extent in the political field,” said Boniface.

Macron’s sports minister Amélie Oudéa-Castera told journalists ahead of the first round that despite the extensive preparations for the Olympics, an RN majority would mean far-right politicians with no experience in national government would still have to make important decisions “in a geopolitical context that is difficult, delicate and tense”.

Bardella has said he would not change the officials running the Games.

Guy Drut, a former 110m hurdles Olympic champion and sports minister under President Jacques Chirac, and one of the few athletes to publicly back the RN campaign, told Le Monde: “There is no reason the Games would go badly under an RN government.”

Scattered protests were held against the RN after the first-round vote. Paris police commissioner Laurent Nuñez told France Inter that the authorities were ready for further unrest but that this would not interrupt the Games.

“We’re preparing for this type of protest and we will have an extremely large [presence] in the Greater Paris region of 45,000 officers to manage [disorder],” he said.

In a further potential risk to smooth running, four unions representing airport management staff have threatened to strike in pursuit of “a uniform and fair bonus” for working during the event. Police, air traffic controllers, rubbish collectors and train and bus staff have already been promised bonuses.

Despite his confidence that policing and organisation were well in hand, Rabadan lamented the impact of the elections on the build-up. “There is very, very strong enthusiasm and popular support,” he said. “But the president’s decision . . . has put a stop to that rise in excitement we were hoping for, so that’s really quite disappointing.”