WSJ : After the OceanGate Implosion, the Ultra Wealthy Still Can’t Resist the De

After the OceanGate Implosion, the Ultra Wealthy Still Can’t Resist the Deep Sea
Makers of luxury submarines braced for collapse after an expedition to the Titanic wreckage ended in disaster. But some deep-pocketed clients are still calling.

THE OCEAN FLOOR off the coast of Sebastian, Florida, is littered with untold fortunes. For three centuries now, the sea has turned the gold and silver coins of the doomed Spanish treasure fleet over and over among strands of flowing seaweed and beneath the claws of scuttling crabs.

Twenty miles inland, plunked on an unassuming industrial lot amid a swampy expanse, lie vessels capable of surfacing that sunken bounty. Triton Submarines, founded in 2008, is one of the leading makers of personal submersibles, serving a deep-pocketed clientele with aspirations of exploring the undersea realm.

Patrick Lahey, the company’s co-founder and CEO, is one of the world’s most experienced submersible operators. He has piloted a sub to the deepest point in the ocean, more than 35,000 feet below the water’s surface in the West Pacific. He speaks about his profession with passion, sometimes peppering his sentences with profanity. About a year ago, it seemed as though his work could all come screeching to a halt.

On June 18, 2023, the Titan, a submersible built by Seattle-based OceanGate, imploded during a trip to the Titanic, killing all five passengers onboard. The tragedy turned the world of personal submersibles from a luxury niche into a national fixation. For those in this tight-knit industry, the losses were personal. Lahey was particularly fond of Paul-Henri Nargeolet, a Titan passenger and deep-sea explorer whom he knew as P.H. and considered a dear friend.

The grief was enough to be paralyzing. But the industry also found itself deep in crisis mode. People who had never been inside a submersible were, understandably, swearing the vessels off for good. In a culture that attracts people who push the limits of adventure, the implosion gave even some sub enthusiasts pause.

“When I first heard about OceanGate, I texted my family and said, ‘You won’t be able to get ahold of me for a few weeks,’ ” says Craig Barnett, Triton’s director of sales.

OceanGate had been controversial in the sub industry for years. Men like Lahey, Nargeolet and Rob McCallum, founder of the ultra-high-end expedition company Eyos, had pleaded with OceanGate’s CEO Stockton Rush, who was part of the Titanic voyage, to exercise caution with Titan. In 2018, McCallum wrote to Rush in an email reported by the BBC: “You are wanting to use a prototype un-classed technology in a very hostile place. As much as I appreciate entrepreneurship and innovation, you are potentially putting an entire industry at risk.”

After the implosion, co-founder Guillermo Söhnlein told The Wall Street Journal that Rush’s goal was to build a safe sub while “breaking the rules” the industry had long followed. “Internally, we always called ourselves ‘SpaceX for the oceans,’ ” Söhnlein said.

Several authorities, including the U.S. Coast Guard, the National Transportation Safety Board and the Transportation Safety Board of Canada, opened investigations into OceanGate last summer following the disaster, in order to determine what went wrong and prevent it from happening again. Their safety reviews are ongoing.

In July, OceanGate announced on its website that it had suspended its operations. A representative for the company declined to comment.

Triton and its main competitor, Netherlands-based U-Boat Worx, suddenly had to differentiate their subs from the OceanGate vessel. Otherwise the fatal dive could grind the entire personal-sub industry to a halt.

The companies say they needed to drive home the key differences between “classed”—certified as safe and up to code—and “unclassed” subs. Both Triton and U-Boat Worx use third-party maritime-classification societies to ensure that their machines are classed, and Eyos uses only classed subs for its chartered voyages. Titan, on the other hand, was unclassed and built using experimental designs and materials such as carbon fiber that were prone to cracking after repeat dives.

After Titan’s passengers were declared dead, Lahey became a kind of industry spokesman. He was still flush with heartache when he was interviewed by the Times of London and ended up sounding too raw. In the interview he described Rush as “predatory.” Shortly thereafter, Triton’s New York City public relations firm, Shamin Abas, recommended that Lahey remain behind the scenes.

“Sometimes I wonder if I should have gotten more out in front of the story, because I was chomping at the bit,” Lahey says. “But I was very emotional. It still baffles me beyond words that P.H. was onboard.”

As Lahey and his peers see it, OceanGate’s problems weren’t broader submersible problems. They say classed subs are considered exceptionally safe modes of transportation thanks to rigorous testing of designs and materials.

“In that sense, OceanGate didn’t make the industry look bad,” says McCallum. “It made us look good.”

LAHEY RECALLS being laughed at when he began selling personal submersibles at boat shows in the early 2000s. Back then, hardly anyone had or coveted their own sub. Today, subs are common accessories for yachts exceeding 150 feet. On the floor at Triton’s headquarters lies Pagoo, a $50 million submersible formerly owned by Microsoft co-founder Paul Allen. A one of a kind, it is fitted with a $40,000 Dale Chihuly sink.

Ray Dalio, the multibillionaire financier and founder of the hedge-fund giant Bridgewater, was bitten hard by the sub bug some 12 years ago. A lifelong admirer of Jacques Cousteau, he owns a 285-foot research vessel named OceanXplorer that houses two subs, and which he likens to a modern-day Calypso, Cousteau’s legendary expedition vessel. “I’m not a yacht guy,” he says. “This is a sharp ship.” The list of scientific achievements made possible by Dalio’s boat and its subs is extensive, and includes capturing the first video from a manned submersible of a giant squid at depth.

With a deep appreciation for meditation, Dalio often speaks at a calm, almost zenned-out clip that he loses when discussing life below the waves. “For me it’s very exciting,” he says. “You can see all the species, the coral, the terrain, but it’s more than that. It’s otherworldly. The ocean has a huge effect on climate, a huge effect on our lives in so many ways: commerce, food, and so much of it is unexplored.”

It’s why, in 2022, Dalio teamed with another sub devotee, the filmmaker James Cameron, to buy an undisclosed stake in Triton. Dalio, who says he dives with both his children and grandchildren, seemed to express surprise when asked about the public’s newfound wariness of submarines. He says he would have gotten on a sub “five minutes later” after hearing about the implosion.

“In that situation they were experimental, they didn’t have certification, and they were not representative of what subs are,” Dalio says. “Anyone who is knowledgeable would have
no reservations.”

Still, the market has softened considerably in the wake of OceanGate. “We had contracts in place that we didn’t feel were in good taste to push too hard to get over the line, considering what happened,” says Barnett.

In the Netherlands, the horizon was even drearier. In 2022, U-Boat Worx had rolled out its Nemo model, a small vessel with a price tag of about $650,000. This was considered modest in an industry where most sub owners had a net worth in the nine-figure range—enough money to pay for the megayacht required to launch it. Nemo, meanwhile, could be launched from the beach using a $60,000 track vehicle. The plan was to put the model on a production schedule and bring personal submersibles to a wider market. These new owners would be hobbyists looking to putter around shallow reefs, not ultrawealthy die-hards spending tens of millions of dollars to go to the bottom of the Mariana Trench.

U-Boat Worx’s commercial director, Erik Hasselman, says that while no one canceled an order, the company quickly started to notice cooling demand. “There are many things that can affect a downcycle, particularly in such a small market, but I would attribute this directly to Titan,” he says. Hasselman says that the company has let go of 40 of its 85 employees since the implosion.

“This tragedy had a chilling effect on people’s interest in these vehicles,” says Triton’s Lahey. “It reignited old myths that only a crazy person would dive in one of these things.”

Barnett says Triton has delivered 18 subs in the past 15 years, and five in the past three. He also said that just before OceanGate, the builder had a pipeline of 15 different projects it was working on, each taking about one to two years to complete. One almost immediately vanished. “We had a $4 million sub we were building for a family’s yacht,” he says, “and the wife pulled the plug on it.”

But just a few days after the implosion, Lahey’s phone rang.

“We had a client, a wonderful man,” Lahey says. “He called me up and said, ‘You know, what we need to do is build a sub that can dive to [Titanic-level depths] repeatedly and safely and demonstrate to the world that you guys can do that, and that Titan was a contraption.’ ”

That man is Larry Connor, an Ohio real-estate investor who has been down to the Mariana Trench and all the way up to the International Space Station.

“I want to show people worldwide that while the ocean is extremely powerful, it can be wonderful and enjoyable and really kind of life-changing if you go about it the right way,” Connor says by phone.

He and Lahey plan to make the Titanic journey together in a two-person vessel. “Patrick has been thinking about and designing this for over a decade. But we didn’t have the materials and technology,” Connor says. “You couldn’t have built this sub five years ago.” Called the Triton 4000/2 Abyssal Explorer, it’s listed on the company’s website for $20 million. The “4000” represents the depth it can dive to in meters. Notably, Titanic rests at 3,800 meters.

Connor says he isn’t afraid of the deep. But he’s not fearless. Just the night before our call, he says he had a fright while driving home to his farm: “I almost hit a deer. I was going probably 60 miles per hour. That was scary.”

IN MANY WAYS, the deep sea remains as much an unexplored frontier as outer space. It contains multitudes of undiscovered bounties—treasure, minerals, unexamined forms of life.

The unknown is what draws most people to the world of submersibles. Nearly everyone interviewed for this story expressed an insatiable curiosity about the natural world.

Still, to have reservations about getting inside of even a classed submersible is understandable. There is a trio of phobias associated with these machines. First, claustrophobia—personal space inside a sub is comparable to an economy seat on a domestic flight, and occupants are sealed inside a bubble. Second, thalassophobia, an intense fear of large and deep bodies of water and the terrors they may conceal. And last, agoraphobia: When a vessel is submerged, light refracts so perfectly through the sub’s acrylic bulb that it seems to disappear, leaving some passengers feeling exposed, as if they might actually be swept away. Furthermore, subs that dive deep enough do so in the utter absence of sunlight.

The French have a term, l’appel du vide, meaning “call of the void.” It’s that feeling when you’re waiting for a train and the thought pops into your head: What if I jumped onto the tracks? There’s a thrill to putting personal safety aside in the name of curiosity.

Victor Vescovo is among those who’ve fallen hard for the deep sea. “When he started his journey, it was like, ‘OK, I’m going to plant the flag and be the first at all five deeps,’ ” McCallum says, referring to the oceans’ lowest points. “But he became so enamored with the project that he spent three years of his life doing it.”

A fine-featured Texan with a silver ponytail and penetrating blue eyes, Vescovo is one of the best-known submariners in the world. He holds degrees from Stanford, Harvard and MIT, and served in the U.S. Navy Reserve for 20 years as an intelligence officer. He has scaled the world’s highest mountain on every continent, skied to both the North and South Poles and been to space. He has also taken a sub to the deepest points of all five oceans, and been to the Challenger Deep—the deepest point on Earth’s surface—a record 15 times.

“I don’t do these things for bragging rights,” he says. “If all I wanted to do was break records, there are a lot of records that are a hell of a lot easier to break.”

For him, the pursuit of the ocean’s great unknowns is far more noble than that—one based on a love of science and a relentless curiosity about the world he inhabits.

“My own belief system is that I firmly believe in technology,” he says. “Most of the great ills of our world: food production, medicine, communication, they’ve been satisfied by technology, not politics or religion. So if I can advance us in my own small way, then I believe that’s a great use of my short time here on the planet.”

Vescovo is currently focusing his considerable energies on a project with a scope that includes trying to bring woolly mammoths back to life. Once that is complete, he says he could potentially return to the deep, and dreams of building a sub “that could do even more,” though what that means to a man who has already done so much is unclear. The explorer, who earned his fortune in private equity, spent some $50 million on his last submersible expedition—a substantial portion of his personal fortune. Was it worth the price?

“Oh, yes, every single penny,” he says. “It was money well spent.”

WSJ : An Oil-Patch Brawl Over a $53 Billion Megadeal Entwines the Legacies of Th

An Oil-Patch Brawl Over a $53 Billion Megadeal Entwines the Legacies of Three CEOs
The leaders of Exxon Mobil, Chevron and Hess are duking it out over a generational oil discovery in Guyana

Days after striking a $53 billion purchase of Hess HES 0.74%increase; green up pointing triangle, Chevron CVX 0.52%increase; green up pointing triangle Chief Executive Mike Wirth called his counterpart at Exxon Mobil XOM -0.08%decrease; red down pointing triangle to discuss their future partnership in a mega-oil project Chevron would inherit through the deal.

Darren Woods told Wirth he looked forward to collaboration in Guyana, where Exxon and Hess own portions of a buried treasure of 11 billion barrels of oil and gas. Chevron and Exxon have a long-established partnership in projects around the world, one they could expand off the coast of the rainforest-covered South American country, Woods indicated in the October phone call.

Weeks later, Exxon called with a starkly different message for Chevron and Hess: not so fast.

Exxon executives contended they and China’s CNOOC, a third partner in Guyana, have a contractual right to pre-emptively match Chevron’s offer for Hess’s stake in Guyana. Blindsided, Chevron and Hess disagreed. Both sides dug in, and private talks failed. Amid monthslong discussions, Exxon stunned its rivals again by filing for arbitration and ending talks in March. The proceedings could sink Chevron’s largest-ever deal.

Hinging on the interpretation of several lines in a confidential contract, their dispute has burst like a thunderclap in Houston, the capital of the U.S. oil industry, which hasn’t seen titanic oil companies battle like this since a court fight with Pennzoil forced Texaco into bankruptcy in the 1980s.

The clash between the two largest descendants of John D. Rockefeller’s Standard Oil monopoly has also subsumed some of Wall Street’s most influential advisers, including JPMorgan Chase, Morgan Stanley and Goldman Sachs.

Now, the fortunes of all three companies are intertwined, as are the legacies of Woods, Wirth and John Hess.

If Exxon wins in arbitration, Chevron’s acquisition of Hess would be rendered effectively impossible. For oilman John Hess, it would mean his eponymous company would likely be much harder to sell, and calls into question what’s next for a CEO about to top off his legacy with a momentous transaction.

For Wirth, it would be the second megadeal he has missed out on in the past five years, and increase the pressure on him to secure another big bounty of oil. Woods, on the other hand, would have the option to buy more of the precious Guyana project, if Hess was a willing seller.

Drillers have rushed recently to secure their future oil reserves. Many oil fields are depleting, and further exploration could take decades to pay off. Wall Street has grown averse to gambling billions on new fields as countries move away from fossil fuels. That has made Guyana’s prolific Stabroek block one of the most coveted in the world, and a crown jewel for Exxon and Hess.

Soon after Chevron’s deal was announced, Exxon’s lawyers, believing the company had a right of first refusal that applied to the transaction, combed through every line of the joint-operating contract for the Guyana project that was written decades ago—a document few have ever seen.

Joint-operating agreements are indispensable in the oil industry, where companies often partner in megaprojects to share risks and investment. The contracts usually contain a right of first refusal for existing partners when one company wants to sell out. Exxon believes that right is triggered by the corporate takeover. Chevron believes the right applies only to an asset sale.

In months of discussions, Exxon laid out a number of concerns that Chevron believed it could address. Both sides seemed to be working toward a resolution, though it’s unclear what it would have entailed, according to people familiar with the discussions. The talks ended suddenly in March when Neil Chapman, a senior vice president at Exxon, told the audience at an investor conference his company had filed for arbitration in the International Chamber of Commerce in Paris. Chevron had learned of the move only a few hours prior, these people said.

If Exxon’s argument prevails, Hess’s Guyana holdings—worth $40 billion or more, by some estimates—would turn into a sort of poison pill. It wouldn’t only blow up the merger with Chevron, per the terms of its agreement with Hess, but would likely scare off any future suitors—except for Exxon itself.

Woods and Chapman maintain their interest is in preserving the sanctity of contracts and their goal is to understand how Chevron valued Guyana—and then to decide which options to explore. Woods has said he isn’t interested in buying Hess outright, but hasn’t ruled out buying Hess’s chunk of the project or other options.

“We’ve got a very attractive resource that, frankly, we put a lot of effort into developing,” Woods said in an interview. “We have an option to understand what a potential transaction for us would look like and evaluate that for our shareholders.”

The dispute over Guyana is a body blow for John Hess, who runs the last major U.S. oil company controlled by a single family. The tycoon has been frustrated with what he views as a highly unusual situation, and is perplexed about what Exxon wants, according to people familiar with his thinking.

Hess and Wirth personally led the negotiations, after they first discussed the idea of a Chevron-Hess deal over dinner in summer 2021. The two disagreed on price then, but started talks in earnest last year. The deal was seen as a coup for Chevron, giving it a piece of its rival Exxon’s most important asset.

For years, Exxon and Chevron have been both friend and foe. They are partners on multibillion-dollar projects in places like Kazakhstan and Australia. But the oil giants have also competed fiercely for a shrinking pool of investors willing to park their cash in fossil-fuel companies.

Despite the competition, Woods and Wirth have enjoyed cordial relations—occasionally dining together—since their tenures began in 2017 and 2018, respectively, say people familiar with the matter.

In the eyes of many investors, Exxon has long held the role of big brother to Chevron, with larger oil production and superior profits. But the rivalry shifted in the mid-2010s when Chevron’s shareholder returns in some years began outpacing those of the industry, including Exxon’s.

Wall Street credited Wirth’s cost-conscious approach, which aligned with investors’ push for austerity and a focus on cutting carbon emissions. Investors favored Wirth’s move to walk away from a bid for shale giant Anadarko Petroleum in 2019 after Occidental Petroleum outbid Chevron with a successful offer of $38 billion. Chevron pocketed a $1 billion breakup fee.

“Chevron, under Mike’s leadership, has navigated some pretty tempestuous waters quite well, and it’s undeniable the company is better today than it was in 2018,” said Dan Pickering, chief investment officer at Pickering Energy Partners.

As Chevron ascended, Exxon suffered setbacks. Woods’ plan to spend heavily to grow production turned off investors. In 2020, Chevron overtook Exxon as the largest U.S. oil company by market value. In 2021, Exxon lost a proxy challenge to a little-known activist investor who placed three directors on Exxon’s board as it pushed the company to better navigate the energy transition and cut spending.

But in the past few years, Exxon’s fortunes have risen. It collected record profits in 2022 and paid out record shareholder distributions last year. Woods’ countercyclical investments, unpopular with some investors at the time, paid off when energy prices came roaring back after the pandemic. He won the full backing of his board for this year’s $60 billion purchase of West Texas fracker Pioneer Natural Resources, a deal well-liked on Wall Street.

Woods has used the momentum to aggressively pursue Exxon’s interests, according to people familiar with the matter. While Exxon, which employs an army of lawyers, is famous for its willingness to fight, the challenge to the Hess deal has turned heads in Houston.

Though the dispute risks some reputational blowback for Exxon, the fate of the deal is more consequential for Wirth than Woods, investors and analysts say.

Wall Street sees the deal for Hess as critical to securing Chevron’s long-term oil reserves and profits. Investors and analysts said if the Hess deal falls through, and Chevron doesn’t acquire another large company or asset, they are concerned the company’s oil-production portfolio could grow thinner in coming years. At the same time, many of the biggest and most attractive companies have been scooped up in a flurry of deals over the past year.

Chevron executives have tried to reassure investors it has plenty of other prospects, including promising frontier exploration in Namibia, the potential of liquefied natural gas in the Eastern Mediterranean, its megaproject in Kazakhstan and its operations in the Gulf of Mexico and the Permian Basin in West Texas and New Mexico.

But Hess’s Guyana stake represents Chevron’s best option to grow in the eyes of many. The Guyana consortium is expected to produce 1.2 million barrels a day by 2027 and continue pumping large amounts of oil for years, having approved more than $50 billion in project spending thus far.

“If they lose it, then I think it will be a substantial blow to his reputation,” said Paul Cheng, an analyst at Scotiabank.

Chevron and Hess’s advisers spotted the right of first refusal during deal due diligence, but believed it didn’t apply to the transaction and thought it was unlikely Exxon would pursue it, said people familiar with the matter. Chevron’s financial advisers included Morgan Stanley and Evercore, while Paul, Weiss, Rifkind, Wharton & Garrison served as its legal adviser. Hess’s financial advisers were Goldman Sachs and JPMorgan Chase.

Hess shareholders are due to decide whether to approve the deal or not on Tuesday. Several investors have said they would abstain from voting due to the feud with Exxon.

The sale to Chevron was supposed to be a regal send-off for the 70-year-old John Hess, allowing him to merge the firm he took over from his famously gruff father, Leon Hess, with the second-largest Western oil company. The merger agreement provides for John Hess to join Chevron’s board, a role that would give him a say in the future of the combined entity.

Legendary Wall Street lawyer Martin Lipton, a founding partner of law firm Wachtell, Lipton, Rosen & Katz advised Hess on the deal. Shortly after it was announced, he said in an interview that John Hess had concluded Chevron was the best possible buyer for his family company.

“This wasn’t digging up a deal or being forced into a deal,” Lipton said.

John Hess and his family own a roughly 9% stake in Hess worth around $4.3 billion, and the CEO stands to net about $50 million in cash and stock from the change in control alone, according to company filings.

With the transaction in limbo, uncertainty has trickled down to the workforce, with Hess staffers concerned about what lies ahead, according to several employees.

An Exxon win in the arbitration would essentially give that company veto power over who Hess gets sold to—or even if it gets sold at all. It means that Hess might have to go on operating as an independent company, which raises the question of whether John Hess would remain at the helm—and if not, who would succeed him. Before the deal with Chevron, he hadn’t anointed a successor and was prepared to remain in the CEO seat for years.

Compounding John Hess’s irritation with Exxon is his view that Hess was pivotal in helping turn the fortunes of the Guyana project around.

His company bought Shell’s stake there in 2014 after Exxon and Shell logged dozens of dry wells bereft of oil. Exxon executives have told John Hess his company was essential to the venture’s success, according to people familiar with the matter. The CEO feels that his geologists played an important role in the exploration efforts that led to a prodigious find. Woods has publicly praised Hess’s work in Guyana.

Hess’s stock price soared in recent years as oil came pouring from the South American discovery. Some large Hess investors are hopeful Hess will end up being acquired by either Chevron or Exxon.

“If John Hess wants to sell, somebody’s gonna buy it,” said John Levin, founder of asset manager Levin Capital Strategies and a long-term Hess shareholder.

FNG/ LN Rights issue - One pager and Valuation post



From: LCHEKROUN@makor-cm.com At: 05/27/24 07:44:02 UTC+2:00
To: Laurent Chekroun (MAKOR CAPITAL MARKET )
Subject: NG/ LN Rights issue - One pager and Valuation post

 

NG/ LN Rights issue - One pager and Valuation post

Find below the preliminary one-pager on NG/ LN Rights issue.

The Prospectus was supposedly published yesterday but we can't find it yet. 

 

1/ Rights issue one pager

 

 

2/ Implied NG valuation post Rights issue

 

We believe NG/ LN would start being attractive if it trades at 860p or below post Rights issue (13.5x PE 25E).

This price post implies a price today of around 955p.

 

 

 

 

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FT : Chinese industrial profits return to growth

Chinese industrial profits return to growth
April rise underlines authorities’ efforts to boost manufacturing

Profits at China’s industrial companies returned to growth in April, highlighting Beijing’s efforts to boost manufacturing as other areas of the world’s second-largest economy struggle to regain momentum.

Industrial profits at businesses with more than Rmb20mn ($2.8mn) in turnover increased 4 per cent year on year in April after a decline of 3.5 per cent in March, according to the National Bureau of Statistics. So far this year, their profits are up 4.3 per cent, unchanged compared with the rate in the first quarter after a large jump at the start of the year.

The improved April data follows a rise in Chinese exports in the same month after a push from Xi Jinping’s government to boost “high-quality development” in manufacturing, which prompted complaints from western leaders over perceived overcapacity.

The EU is carrying out a probe into state support for Chinese electric vehicle production, while US President Joe Biden this month introduced 100 per cent tariffs on EV imports from China, where intense domestic competition has spurred a price war.

Recent economic data in China is being closely watched for further evidence of the government’s strategy as it grapples with a historic property sector slowdown and weak consumption. Exports in April grew 1.5 per cent year on year in dollar terms, while industrial production jumped 6.7 per cent.

Analysts at Goldman Sachs noted strong increases in profits across equipment manufacturing in the first four months, with profits in electronics and transportation equipment growing by 76 per cent and 41 per cent, respectively.

Yu Weining, statistician for the National Bureau of Statistics, also emphasised the contribution of equipment manufacturing and said market demand picked up in April, citing the impact of “macroeconomic policies”.

But Yu added that domestic demand remained “insufficient” and that the development of new productive forces — a widely used term in China for its recent focus on manufacturing — still needed to be “accelerated”.

State-owned companies’ profits dropped 2.8 per cent year on year in the first four months of 2024, the data showed, while profits at private groups rose 6.4 per cent and those at foreign businesses grew 16.7 per cent.

FT : Thames Water pumped 14bn litres of sewage into Thames in central London in

Thames Water pumped 14bn litres of sewage into Thames in central London in 2023
Figures obtained via freedom of information laws come as effluent pollution climbs political agenda

Thames Water pumped 14.2bn litres of sewage into the river Thames in central London last year, according to data that highlights the quantity of effluent flowing from the pipes of the UK’s largest water company.

The figures, obtained under freedom of information laws, reveal for the first time the volume of sewage outflows into the section of the river covered by the £4.5bn Tideway Tunnel, which is due to open next year.

They also come days after Sir Chris Whitty, England’s chief medical officer, warned that sewage pollution in UK waters had become a “public health priority” that needed to “be taken seriously”.

Water companies are facing a growing backlash against sewage pollution, which has risen up the political agenda in marginal seats in the south of England that the Conservatives are seeking to retain in the election on July 4.

Thames Water, the UK’s biggest water provider by number of customers, says the Tideway Tunnel project, which began eight years ago, will significantly cut the amount of sewage leaked from its network.

While private water companies are obliged to monitor and report on the number of sewage overflow incidents, Thames Water has electronic devices that also measure the quantity of effluent flowing into the part of the Thames that falls within the Tideway Tunnel area of central London.

These devices recorded at least 85.9bn litres of sewage being pumped into that part of the river between 2020 and 2023, according to freedom of information requests obtained by the Liberal Democrats over successive years.

The latest, released this month, showed that 14.2bn litres of sewage entered the Thames at these sites last year.

Sarah Olney, Treasury spokesperson for the Lib Dems, said the outflows last year were “disgusting” and called for every combined sewage overflow pipe to be installed with monitors measuring volume and frequency. 

The worst incident took place in October at Mogden in south-west London, where 558mn litres of sewage were discharged.

The second-worst incident occurred at Crossness in Bexley, where 430mn litres of effluent were released in one day in November. Both Mogden and Crossness are home to sewage treatment works.

The increased focus on sewage overflows has also increased public and political scrutiny of water companies’ finances.

The 16 water and sewage companies in England and Wales paid out £78bn in dividends and accrued £62bn in net debt between privatisation in 1991 and March 2023, according to research by the Financial Times.

Ofwat was due to rule in June on how much water companies would be allowed to increase bills in England and Wales until 2030, but the sector regulator has delayed its decision until July 11 because of the election.

The decision will have a bearing on the financial health of Thames Water, which is struggling under the weight of its £18bn debt mountain and needs a £750mn cash injection from shareholders this year to keep running and deliver infrastructure improvements.

Ministers have already drawn up contingency plans to put the business in special administration, a form of temporary nationalisation.

The Lib Dems are calling for special administration measures to be enacted. Labour, the main opposition party, is urging a regulatory shake-up.

Thames Water said retrofitting the entire network with volume monitors would be “prohibitively expensive”. It said it had published plans to upgrade 250 sewage treatment works and sewers including a £100mn upgrade of the Mogden sewage treatment works and a £145mn upgrade of the Beckton sewage works.

“We regard all discharges as unacceptable and taking action to improve the health of rivers is a key focus for us,” the company said, adding that the Tideway Tunnel would capture 95 per cent of the volume of untreated sewage entering the tidal section of the river in a typical year once operational. 

FT : Abu Dhabi conglomerate embarks on flurry of mining deals

Abu Dhabi conglomerate embarks on flurry of mining deals
Business owned by $240bn IHC broke into market last year with acquisition of a major Zambian copper mine

The mining business owned by $240bn Abu Dhabi conglomerate IHC has embarked on a flurry of deals in Africa, after breaking into the market last year with its acquisition of a major Zambian copper mine.

IHC chief executive Syed Basar Shueb, told the Financial Times that its IRH subsidiary had signed joint venture agreements for iron ore mining in two places in Angola — Kassala Kitungo and Munenga — and that it was in advanced talks to mine nickel in Burundi as well as various metals in Tanzania and Kenya.

IHC expected to make about $1bn of mining acquisitions this year, Shueb told the FT.

The Abu Dhabi group’s foray into the mining industry comes as BHP’s £34bn approach for rival Anglo American highlights the race to secure access to minerals such as copper, iron ore and lithium that are critical to the transition to cleaner energy.

Asked who IRH was bidding against for mining assets, Shueb said the “majority of the time you’re competing with Chinese. There’s no other countries.”

IHC is chaired by Abu Dhabi royal Sheikh Tahnoon bin Zayed Al Nahyan, who is also the United Arab Emirates’ national security adviser and a key business figure. 

IRH appeared to have come from nowhere when it launched a $1.1bn bid for 51 per cent of the Mopani copper mine in Zambia last year. But Shueb said the group had been formed from different mining interests belonging to IHC and Royal Group, an investment group also chaired by Sheikh Tahnoon that preceded IHC. 

“Whether it’s a mining or a refinery business of the gold, or the trading side of the business, we have consolidated everything under IRH,” Shueb said.

He said IRH’s strategy was to buy mining concessions, as opposed to providing investment to other operators in return for future supply of raw materials, and that it wanted to make its mining projects “green” by using renewable energy sources, such as solar power.

IRH did previously have some involvement in a gold trading scheme in the Democratic Republic of Congo (DRC). The company said it had facilitated an arrangement between Auric Hub Gold Refinery, an Abu Dhabi gold and silver refinery, and gold trading business Primera Gold DRC, which last year won a 25-year monopoly for hand dug gold in the DRC. 

However, Shueb said this trading operation was now being handed over to the DRC government.

He also said IRH was discussing taking over Konkola Copper Mines with the Zambian government. Vedanta, the Indian metals and energy group, currently operates the mine and wants to sell a minority stake.

“Next to Mopani is KCM . . . we are talking to the government because it makes a lot of sense that one party manages Mopani and KCM,” he said.

“We had a few meetings with Vedanta and the government, but of course, Vedanta is a large player, they are much more experienced than us.” 

IRH employed about 60 mining specialists, Shueb said, and was owned by an IHC holding group called TwoPointZero that had other technology, financial sector, and metals assets.

FT : ECB is ready to start cutting interest rates, says chief economist

ECB is ready to start cutting interest rates, says chief economist
Philip Lane brushes off fears that loosening Eurozone monetary policy before US Fed could backfire

The European Central Bank has sent a clear signal that it will cut interest rates from their historic highs next week, as its chief economist brushed off fears that doing so before the US Federal Reserve could backfire.

The ECB now looks almost certain to be one of the first major central banks to cut rates, having been criticised for being one of the last to raise them after the biggest inflation surge for a generation three years ago.

Philip Lane told the Financial Times in an interview ahead of the bank’s landmark June 6 meeting: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”

Investors are betting heavily that the ECB will lower its benchmark deposit rate by a quarter percentage point from its record high of 4 per cent at next week’s meeting after Eurozone inflation fell close to the bank’s 2 per cent target.

The Swiss, Swedish, Czech and Hungarian central banks have already reduced the cost of borrowing this year in response to falling inflation. But among the world’s major economies, the Fed and Bank of England are not expected to cut rates before the summer and the Bank of Japan is considered more likely to continue raising them.

Asked if he was proud that the ECB was in a position to cut rates earlier than others, Lane said: “Central bankers aspire to be as boring and I would hope central bankers aspire to have as little ego as possible.”


He added that a key reason why inflation had fallen faster in the Eurozone than the US was because the region had been hit harder by the energy shock triggered by Russia’s invasion of Ukraine. “Dealing with the war and the energy problem has been costly for Europe,” he said.

“But in terms of that first step [in starting to cut rates] that is a sign that monetary policy has been delivering in making sure that inflation comes down in a timely manner. In that sense, I think we have been successful.”

Lane said ECB policymakers needed to keep rates in restrictive territory this year to ensure that inflation kept easing and did not get stuck above the bank’s target, which he warned “would be very problematic and probably quite painful to eliminate”.

However, he said the pace at which the central bank lowered Eurozone borrowing costs this year would be decided by assessing data to decide “is it proportional, is it safe, within the restrictive zone, to move down”.

“Things will be bumpy and things will be gradual,” said Lane, who is responsible for drafting and presenting the proposed rate decision before it is decided by the 26 members of the governing council next week. 

“The best way to frame the debate this year is that we still need to be restrictive all year long,” he added. “But within the zone of restrictiveness we can move down somewhat.”

Despite recent data showing Eurozone wage growth picked up to a near-record pace at the start of this year, Lane said “the overall direction of wages still points to deceleration, which is essential”, adding that this was backed up by the ECB’s own wage tracker.

Some analysts have warned that if the ECB diverges from the Fed by cutting rates more aggressively it could cause the euro to depreciate and push up inflation by raising the price of imports into the bloc. 

Lane said the ECB would take any “significant” exchange rate move into account, but pointed out “there has been very little movement” in this direction. The euro has rebounded by a fifth against the US dollar from a six-month low in April and it remains up over the past year. 

Instead, he said delays in the expected timing of Fed rate cuts had pushed up US bond yields and this had lifted long-term yields of European bonds. 

“That mechanism means that for any interest rate we set, you get extra tightening from the US conditions,” he said, indicating the ECB might have to offset this with extra cuts to its short-term deposit rate. “All else being equal, if the long end tightens more, then how you think about the short end changes.”


Eurozone inflation has fallen from above 10 per cent at its peak in 2022 to a near three-year low of 2.4 per cent in April, but it is expected to tick up to 2.5 per cent when data for May comes out this week.

Lane said that the “still significant amount of cost pressure” coming from rapid wage growth pushing up services prices meant that the ECB would have to keep policy restrictive until 2025.

“Next year, with inflation visibly approaching the target, then making sure the interest rate comes down to a level consistent with that target − that will be a different debate,” he said.

How far the ECB cuts rates overall will hinge on its assessment of the so-called neutral rate, the point at which savings and investment are balanced at desired levels, where output is at an economy’s potential and inflation is at target.

Estimates of the neutral rate vary but Lane said it was likely to imply a policy rate at or just above 2 per cent, although this could be higher if “a vigorous green transition” to renewable energy or vast gains from generative artificial intelligence prompted a surge in investment.

FT : Copper price to rocket to $40,000 a tonne, says top trader Andurand

Copper price to rocket to $40,000 a tonne, says top trader Andurand

When mining company BHP made a bid for rival Anglo American last month, it was seen as a play on the future of copper. The shiny red metal is a crucial component in electric vehicles, solar panels and wind farms, and a deal would give BHP control over Anglo’s lucrative copper mines in Chile and Peru. 

Now, one of the world’s best known commodities hedge fund managers tells my colleague Costas Mourselas that the price of copper could almost quadruple to $40,000 a tonne in the next four years.

“We are moving towards a doubling of demand growth for copper due to the electrification of the world,” says Pierre Andurand, chief investment officer of Andurand Capital Management, arguing that supply will struggle to keep up with the voracious demand that comes with a global transition away from fossil fuels. 

“I think we could end up to $40,000 per tonne over the next four years or so. I’m not saying it will stay there then; eventually we will get a supply response, but that supply response will take more than five years.”

The mining industry estimates that it typically takes around 15 years to develop a new mine, and Andurand doesn’t think that digging deeper and faster in existing mines will be enough. 

Andurand climbed the ranks at Goldman Sachs and then at oil trader Vitol before launching his own fund at the age of 30. His volatile performance has earned him a reputation as something of a comeback kid. And indeed he hasn’t been right on all of his big calls. Last year, his Commodities Discretionary Enhanced fund suffered a 55 per cent loss as bullish oil wagers backfired. 

“I think we all lost a lot of money, expecting supply disruption that did not happen,” he said. “You remember that pain.”

But he has since recovered most of those losses. His best-known fund, which runs $1.3bn, is up 83 per cent this year, according to investors. One of the bullish bets that got him there was on soaring copper prices, which are up more than 20 per cent.

FT : Why Belgium’s far right is set to win the election — but not independence

Why Belgium’s far right is set to win the election — but not independence

Scheming for secession
In Belgium’s upcoming elections, a party that wants to split up the country is expected to become the biggest winner. But the road to Flemish independence is still a long way off, writes Laura Dubois.

Context: On June 9, Belgians elect their federal and regional governments. As the country is divided into Dutch-speaking Flanders and French-speaking Wallonia, plus the bilingual capital Brussels, citizens cast votes for regional parties, who then have to form a federal coalition. Often, chaos and delays ensue.

For the first time, the Flemish far-right Vlaams Belang is expected to become the largest party with 26 of 150 seats in the federal parliament, and is polling first at around 26 per cent in Flanders.

“If we have a democratic majority, we will strive for independence,” VB party leader Tom Van Grieken told the FT.

Van Grieken explains that “we do not feel represented in the Belgian country,” complaining that the wealthy Flanders has to foot the bill for less affluent Wallonia.

His aim is to negotiate with Wallonia after the elections and, if they refuse, simply go it alone: “We will have a declaration of independence.”

But to push ahead with this plan, Vlaams Belang will need the support of nationalist N-VA, which governs the region and is projected to become the second-largest force in Flanders — and they don’t seem inclined.

“We are trying to offer a realistic path towards a better model of political representation for the Flemish people,” N-VA chief Bart De Wever said, explaining that this would entail more autonomous governance for both regions. All-out secession would be “a chaotic strategy which would ultimately weaken the voice for more Flemish autonomy”, De Wever said.

Other parties also believe that Vlaams Belang’s strategy won’t work. This is because it remains unclear what will happen to Brussels, which Vlaams Belang sees as the capital of its future country, or to membership of the EU — a crucial question for the city that hosts its institutions.

“I don’t think it will happen because they have no solution,” says Peter Mertens, general secretary of the far-left Workers’ party. “They want to create a political standstill after the elections, to have no government after the elections.”

Researchers also believe that few people, including Vlaams Belang voters, support independence. “Only a very, very small minority of Belgians, also on the Flemish side, are in favour of splitting up the country,” says Didier Caluwaerts of the Free University Brussels (VUB).

“It’s going to be difficult making policies,” Caluwaerts predicts of the period after the elections. “But the country splitting up, that’s not immediately going to happen.”