Fortune : This physicist is trying to sell Europe on a new generation of nuclear energy.
Joining the American on stage is Stefano Buono, the founder of two nuclear startups and coproducer of the film.
Buono is a man with a mission: to reconvert Europe to nuclear energy and increase nuclear's share of the growing electricity market to over 30%. The Italian believes that betting big on a new type of nuclear is the only way for Europe’s economy to remain competitive globally. Is he right?
It was just a few years ago that Germany, Europe’s largest economy, firmly said no. For much of the past decade, the country went all-in on renewables and Russian gas. It closed its last remaining nuclear plants this year. But the timing of that nuclear phaseout, we know now, couldn’t have been worse.
Last year, Russia's invasion of Ukraine ended Germany’s fragile energy balance. Germany turned to Norwegian gas after rejecting Russian supplies. That abrupt shift came at a substantial cost. This year, Germany is the only major Western economy to experience a recession. And while the country is scaling up its solar and wind energy sources, daily fluctuations in supply mean the country’s—and the continent’s—energy woes are far from over.
According to Buono, a new generation of nuclear energy is the answer to that problem. “The energy cost is the fundamental asset that is moving the economy,” he told me in a phone interview from Turin. And since nuclear energy can “flatten the prices,” it will be indispensable going forward, he said. “Nuclear is necessary in the energy mix because it can supply best programmable energy,” he said.
Even in a country like Germany, nuclear could supply up to 30% of energy, Buono said. The lead-cooled nuclear plants Buono advocates for are allegedly much more sustainable, too. The nuclear waste produced in them stops being radioactive in a few hundred years—as opposed to thousands of years for waste from conventional plants—and creates a lot less waste to begin with, Buono claims. And of course, they have zero CO2 emissions.
Whether the founder will be able to convince Germans with those arguments remains to be seen. But in France and Italy, the EU’s next two biggest economies, his company Newcleo is making inroads. By 2030, the first Newcleo nuclear plant should be operational in France.
That traction, together with the EU’s push to end oil and gas subsidies by 2030, may indeed herald a new era of nuclear in Europe. It may be a good thing, indeed. Europe’s companies desperately need affordable energy to remain competitive. And the continent needs an alternative to coal, oil, and gas to get to “net zero” in terms of CO2 emissions.
For Buono, there may be another silver lining. After selling his nuclear medicine startup, Advanced Accelerator Applications, a few years ago, he hopes Newcleo will be his first startup to turn into a Fortune 500 Europe company. “It will be a high multibillion euro company in the next decade,” he predicted. Given that Novartis bought his first company for $3.9 billion in 2017, we wouldn’t bet against him.
Fast fashion: Shein is no shoo-in for pricey IPO
The group’s business model invites regulatory and political scrutiny in the US
As TikTok took over the world, a low-profile Chinese company known for its cheap wedding dresses joined the land grab. Videos of people trying on cheap, trendy clothes from Chinese fast-fashion group Shein have become a genre of their own. Surging sales mean Shein’s US listing may become one of the largest in the past decade.
Shein has filed paperwork for a US initial public offering. Backers include Abu Dhabi sovereign wealth fund Mubadala and venture capital group Sequoia China. The group has reportedly targeted a valuation as high as $90bn, not far from its $100bn private valuation last year.
Shein has achieved remarkable growth. Viral videos playing to viewers’ short attention spans have tapped unprecedented demand for garments, home furnishings and pet accessories, all of which Shein provides at less than $10. The group has made heavy and effective use of social media marketing. Here, influencers receive commissions for posts featuring Shein outfits.
Fledgling Gen Z video makers cannot be caught wearing the same thing twice. Zara now has high price points relative to other fast-fashion groups. H&M is cheaper but lags behind Shein in keeping up with viral trends.
The group has benefited from modest requirements for warehouses and inventory in the US. It ships most of its products directly from China. This allows it to avoid import taxes. A provision in US tariff regulations waives import tariffs if the package’s fair retail value does not exceed $800.
Yet this strength is also a big risk. The business model invites regulatory and political scrutiny. Shein’s biggest market is reportedly the US. Lawmakers there want Shein to disclose employment practices that they allege include forced labour. There have also been claims of import violations. Shein has denied all allegations.
Valued at an industry multiple, Shein would be worth about $70bn. That would be lower than the $126bn market value of Zara owner Inditex and higher than H&M’s $27bn.
The figure is conservative, given that Shein is expected to grow faster than peers. It has a target to more than double sales over the next two years.
However, the US listings market is lacklustre and Shein bears notable political risks. It was valued at $66bn in its last private fundraising. A flotation price not far from that benchmark would make sense.
UK bans vague ‘sustainability’ fund labels in greenwashing crackdown
Financial Conduct Authority moves to outlaw ‘misleading’ marketing in $250bn sector
Asset managers in the UK will be banned from using vague references to “sustainability” to market their funds, under new anti-greenwashing rules that could lead to a significant shake-up of the $250bn sector.
The Financial Conduct Authority said its regime laid out on Tuesday, two days before the start of the global COP28 climate summit in Dubai, was intended to make sure products marketed as helping either people or the planet were “clear, fair and not misleading”.
From December next year, asset managers who market their funds as sustainable will have to choose one of four specific fund labels and demonstrate that they apply to at least 70 per cent of their assets.
Funds that use these labels or that make any sustainability-related claims in marketing will have to publish a two-page summary for retail clients of their evidence-based stewardship strategy and “theory of change”, based on an independently assessed standard such as a greenhouse gas target or alignment with the EU’s taxonomy, or dictionary, of green activities.
This approach could in future be extended to portfolio managers, overseas funds, pension products and financial advisers, the FCA said.
In addition, from May next year, all FCA-authorised companies will be subject to anti-greenwashing rules building on a requirement that the marketing of financial products and services should be correct, clear, complete and fair. A financial institution should not, for example, place an image of a rainforest at the top of its website if only some of its savings products are invested in a way that creates positive change for the planet, the FCA said.
There are currently $242bn of funds in the UK marketed as “sustainable”, according to data provider Morningstar Direct, compared with $290bn in the US and nearly $2tn in the rest of Europe. Until now, the asset management industry has largely been given a free hand to apply this label and to use green marketing terms to attract retail investors with little oversight from regulators.
The four new categories proposed by the FCA apply to funds that invest in companies that meet a “credible” environmental or social standard, have the potential to improve against this criteria, invest in tangible solutions to problems affecting people or the planet, or a mixture of these.
The new regulatory certainty will probably spur asset managers to launch new green funds in the coming year, but could also lead to “more enforcement action against funds that are probably greenwashing”, said Gavin Haran, head of policy for asset management at London-based law firm Macfarlanes.
Sacha Sadan, head of environmental, social and governance issues at the FCA, said that the regulator was the first in the world to mandate the use of regulated labels for funds claiming to be sustainable, and that it had learnt from stumbling blocks faced by its counterparts in the EU.
Europe’s top asset managers last year abruptly withdrew claims that tens of billions of dollars of funds met the most stringent sustainability requirements, after confusion surrounding the introduction of the bloc’s Sustainable Finance Disclosure Regulation.
The UK’s greater flexibility reflects an acceptance that investing in polluting clients rather than divesting from them is acceptable in sustainable strategies, as long as that approach is clearly disclosed. “It’s OK to stay,” Sadan said. “Whether it’s on climate, diversity or supply chains you can stay and show you are trying to influence and make the system better.”
Slicing and dicing historical equity returns
Past performance is not necessarily indicative of future results, but it does make for some neat charts
It’s that time of year when strategists and fund managers are bullied by their marketing colleagues into making on-the-record public forecasts about The Year Ahead. Good luck to them!
Absent any incentive to make our own predictions about future equity returns, we thought it a good time to throw a bit of light on the past. First up, here’s a chart that splits equity returns into dividends, earnings, valuations, and currency:
Sure, US stocks are a bit richer than they were five or ten years ago, But sitting behind the performance of US stocks has been some really stonking earnings growth, which is in spite of dollar strength diminishing the value of the ~40 per cent of revenue that comes from overseas.
Drilling down a level to sectors, and the story is similar. This time we’ve thrown the data onto a bubble chart and left returns in local currency. The size of each bubble is the share of the MSCI All Country World Index accounted for by the region-sector cohort — so, for example, the bubble in the right-hand corner is US Technology, which accounts for 18.8 per cent of global equities. It has had annualised growth in forward earnings to the tune of 11.6 per cent over the past decade, and returns of 20.1 per cent per annum.
US Tech really is a gigantic bubble. That’s not our opinion, it’s an aesthetic observation; a chart like this can confirm almost any biases you bring to it.
American exceptionalists can point to the transformative power of earnings growth to justify astounding historical equity returns. Fundamental analysts and investors can point to the goodness of fit between earnings growth and returns to justify their existence. Bears can point to the size of Tech on the chart, its elevation above a line of best fit, and the impact that gravity reasserting itself would have on global — and especially US — equity market returns.
But what does the chart really say? Generally, over long periods, an investor did better buying baskets of stocks that delivered higher levels of persistent earnings growth than by buying baskets of stocks that delivered lower persistent earnings growth. To see how fragile this seemingly self-evident statement is, flick the chart filter from ten years to five years and watch the correlation melt before your eyes.
Olaf Scholz sticks to Germany transition plans despite budgetary hole
Opposition criticism mounts as chancellor offers few details on how to fix Berlin’s public finances
German chancellor Olaf Scholz said he would stick to his plans to modernise the EU’s largest economy and invest in the green transition, despite a court ruling that opened up a €60bn hole in the budget.
“I stand by all these goals,” Scholz told the Bundestag on Tuesday, adding it would be a “grave, an unforgivable mistake to stop . . . modernising our country”.
But he provided few details as to how his government plans to dig itself out of its fiscal hole, prompting angry responses from the opposition. Friedrich Merz, leader of the Christian Democrats, accused Scholz of “dogmatism” in wanting to stick to his spending priorities, despite the court’s decision.
Next year’s budget is on hold as ministers and MPs work out the consequences of the court verdict, which said €60bn of unused borrowing capacity from Berlin’s pandemic budget should not have been transferred to another fund for fighting climate change.
Scholz said these consultations were “not yet over . . . due care is more important than speed”, but he acknowledged that it would be necessary to “limit spending”. Experts said his remarks suggest the 2024 budget may not be passed before the end of the year.
Germany’s constitutional court threw Berlin’s spending plans into disarray when it ruled in mid-November that Scholz’s government had broken the law in shifting €60bn of credit lines earmarked for fighting the Covid-19 pandemic into a climate and transformation fund known as the KTF. The court also ruled that the government cannot put aside emergency loans authorised in one year for use in subsequent years.
The verdict focused attention on the way Scholz has used a series of multibillion-euro off-budget funds to get round Germany’s strict curbs on new borrowing.
One such vehicle was the €200bn Economic Stabilisation Fund (WSF), which was set up during the pandemic but then used during last year’s energy crisis to subsidise gas and electricity prices.
The funds allowed Germany to circumvent a rule known as the “debt brake”, which since 2009 has limited the federal government’s structural deficit to 0.35 per cent of gross domestic product, adjusted for the economic cycle.
The court’s verdict not only calls funds like the WSF into question but also left a big hole in the 2023 and 2024 budgets.
Ministers responded to the court judgment by retroactively declaring 2023 a national emergency, paving the way for them to temporarily suspend the debt brake for a fourth year running and put the budget on a sounder legal footing.
Merz said Scholz had resorted to an accounting trick to please the three parties in his fractious coalition — the liberals who wanted to stick with the debt brake, the Greens who wanted massive subsidies for climate projects and the Social Democrats who wanted to expand the welfare budget.
“You tried to square the circle and on November 15, 2023 this house of cards collapsed,” he said. He also claimed that Scholz himself, as finance minister from 2018-21, was the “originator” of the “unconstitutional construction” struck down by the Karlsruhe court.
But Scholz said it had been right to create special investment vehicles, which helped to finance programmes such as the reconstruction of the Ahr valley, a region in West Germany devastated by floods in 2021, and to help consumers with high energy prices.
Gas was still “twice as expensive” as it was before Moscow’s full-scale invasion of Ukraine led to a steep drop in Russian gas exports to Europe, he said, adding: “The energy price crisis is definitely not over yet”.
He also insisted it was right to boost spending to help companies suffering during the pandemic, provide Ukraine with military aid and absorb about 1mn Ukrainian refugees.
Scholz said the government had responded to the ruling by blocking payments from the KTF, freezing new payment commitments from the 2023 budget and making retroactive changes to the 2023 spending plan to bring it into compliance with the constitution.
But he insisted that Germany must continue to invest heavily in future technologies to keep up with countries such as the US, China and France. “We have to ensure that we achieve the transformation of our economy and remain competitive as a strong industrial nation,” he said.
He acknowledged the court verdict had created a “new reality for all current and future governments on a federal and state level — a reality that makes it harder to achieve important and widely shared goals”.
Atos in talks to change terms of Křetínský deal for IT services unit
News of move by indebted French group in negotiations with Czech billionaire follows S&P credit rating downgrade
Atos is renegotiating the terms of a deal with Czech billionaire Daniel Křetínský to buy the French group’s lossmaking IT services business Tech Foundations as it seeks to raise funds to service its debt.
The company said on Tuesday it had relaunched talks over the agreement and would consider additional asset sales and tapping debt and equity markets to address its capital raising plans and debts of €2.25bn maturing in 2025.
News of the talks comes after rating agency Standard & Poor’s downgraded Atos’s credit rating on Monday due to increased liquidity risks.
Shares in Atos, which said S&P’s move would have a “negligible” impact on its interest expenses at roughly €6mn a year, fell more than 6 per cent on Tuesday morning.
Atos is also in negotiations with its bankers including JPMorgan and BNP Paribas to refinance its debts, according to people with knowledge of the situation, with a deal expected to be announced in the coming weeks. The company’s market value has slumped by more than 90 per cent in the past three years to €651mn.
The new round of exclusive negotiations with Křetínský is aimed at recalibrating a summer deal under which the Czech tycoon would take over Tech Foundations and anchor a €900mn capital raise in Atos’s prized cyber security and supercomputing business Eviden that would give him a 7.5 per cent stake.
Investors, defence officials and politicians balked at the arrangement, notably for national security reasons. Eviden houses supercomputers that run models for France’s nuclear arsenal, and French politicians and officials objected to having a foreign investor in the share capital. Křetínský had also agreed to invest based on a €20-a-share valuation for Eviden, far above the €5.80 level at which they are currently trading.
People close to Křetínský have said negotiations will focus on getting him out of the Eviden leg of the deal.
“This is a discussion we are happy to have and all the players are all more or less aligned on that,” said a person close to the Czech businessman.
The negotiations are “principally around the price for Tech Foundations”, the person said, the idea being that some portion of the €215mn originally destined for the capital raise in Eviden would be reallocated to the purchase price for the legacy business. Investors in Atos, including recently arrived lead shareholder OnePoint, have said the agreed price was too low.
Under the terms of the August deal with Křetínský, Eviden would receive €100mn in net cash while Tech Foundations would be recapitalised by the Czech businessman to the tune of €800mn. It would also get €800mn in working capital from its former parent.
Other parties, including defence contractors Airbus and Thales, have previously expressed interest in purchasing parts of Atos’s cyber security and supercomputing businesses. Dassault Aviation has also been monitoring the situation.
Negotiations for Airbus to take a minority stake in Eviden foundered under pressure from the aerospace group’s shareholders this year. Thales has stated that it is no longer interested in Atos’s assets.
France's Mediawan weighs takeover of KKR-backed Leonine –sources
LONDON/PARIS, Nov 28 (Reuters) - Shareholders of French TV production group Mediawan are weighing a takeover of Germany's KKR-backed Leonine Studios, three people familiar with the matter told Reuters, in a deal that could value the combined entity at up to 3 billion euros ($3.3 billion).
The tie-up is among strategic options being discussed by Mediawan's advisers and shareholders as the Paris-based company, known for the TV series "Call my Agent!", assesses its next phase of expansion, the people said.
A tie-up with Leonine would help Mediawan keep pace with bigger rival Banijay, Europe's biggest independent TV production group.
Banijay's listed parent company, FL Entertainment (FLE.AS), is valued at 3.68 billion euros.
The merger would come amid renewed deal activity in the media sector.
France's Federation Studios is in talks with possible advisers to help it explore strategic options, Reuters reported earlier this month, while Britain's All3Media is in the process of finding a buyer.
A sale process for Spanish broadcasting and sports rights group Mediapro is also underway, according to Reuters.
Led by Fred Kogel, Munich-based Leonine was formed in 2019 through the merger of several German media production and distribution companies, such as Tele München Group, Universum Film, i&u TV and Wiedemann & Berg Film.