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Carrefour and Lidl among those seeking to buy hypermarkets from indebted group built by Jean-Charles Naouri

Daniel Křetínský has pushed Casino’s management to sell the retailer’s largest stores months before his planned bailout, said three people with knowledge of the discussions, an outcome its founder Jean-Charles Naouri had sought to avoid when striking the deal with the Czech billionaire.

When Křetínský won the battle for Casino in July as part of a court-supervised debt restructuring, rival bidders accused the energy billionaire of planning to strip the French retailer of its assets.

Naouri, who spent decades building the group, wanted to keep it intact as he sought to cut high debt. The finance ministry was also wary about the impact on jobs in the country, where Casino employs more than 50,000 people.

In an interview in July, Křetínský vowed to “preserve the maximum possible, rational perimeter” of the group.

But a person close to the tycoon admitted he had expressed concerns about the feasibility of keeping the stores to Naouri months ago. “Now it is obvious to everyone, but [Křetínský] was right about it from the beginning,” the person said.

If completed, the divestments of Casino’s hyper and supermarkets would dramatically reduce the size of the group, capping years of asset sales that Naouri undertook to pay down debt. The group’s remaining assets would mostly comprise inner-city stores such as Monoprix in Paris.

Clément Genelot, analyst at Bryan Garnier, said that while the group will find itself on firmer financial footing once the debt was cut and the cash-burning hypermarkets stripped out, its revenues will shrink to an estimated €7.5bn by 2025, from €33.6bn last year.

“They have sold everything that was worth anything . . . From now on, since they can’t finance the cash burn through asset sales they have to reduce the cash burn by de-consolidating the stores that are losing the most money,” Genelot said.

Bids are expected in the coming days, according to people close to the sale process. French food retailers Intermarché, Système U, Auchan and Carrefour are among the bidders lining up to buy the stores they each want. Germany-based discount chains Lidl and Aldi are also planning to make separate offers, the people said.

The talks are the most advanced with Lidl and Intermarché, whose parent company Groupement Les Mousquetaires already agreed to buy about 60 stores from Casino in May, said one person close to the seller.

Casino, Intermarché, Auchan, Carrefour and Lidl declined to comment. Aldi, Système U did not reply to requests to comment.

That the auction is taking place before the completion of Křetínský’s plan to lead a €1.2bn recapitalisation of Casino shows how rapidly the business has deteriorated since July.

Casino is racing to complete the bankruptcy proceeding by early next year, at which point Křetínský will assume control of the group. It issued a profit warning last week saying its French business would swing to an operating loss this year of as much as €140mn, compared with an operating profit or more than €1.3bn last year.

Křetínský’s holding company said: “These sales would in no way affect our desire to become the controlling shareholder of Casino and to invest in the development of the rest of the group, particularly in the Monoprix and Franprix brands.”

Genelot predicted Casino will also need to close its headquarters in Saint-Etienne, leading to more than 2,000 job cuts.

“Clearly all the promises made to the government and unions [on job preservation] are now untenable,” he said. “But they will be pragmatic: better to lose a few thousands jobs than to see the entire group stripped for parts.”

Wind and solar power face an end-of-life sustainability challenge

As the world switches to renewables, difficulties in dealing with spent panels and turbines are coming into focus

Cars were a novelty once; so were oil wells, plastic bottles and coal-fired power stations. Novelty wears off, though — and, as the industries concerned acquired global heft, the environmental downsides became ever clearer.

But it is not only the giants of the fossil fuel era that must confront the loss of innocence that comes with scale. The huge increase in renewable energy in recent years — a doubling of capacity since 2013, with COP28 expected to produce a push for a tripling by 2030 — means that the solar and wind power sectors will soon face their own sustainability challenges.

“With average product lifetimes of about 30 years, the young solar industry has not yet faced waste streams that have necessitated the proactive integration of circular economy requirements,” points out Jan Clyncke, a board member at the Global Solar Council, a Washington DC-based industry organisation. That does not mean it will be caught napping, however. “Solar product and component manufacturers are taking the lead and looking at ways to increase the recyclability and end-of-life management of their products,” Clyncke adds.

The situation is similar for the wind industry. The lifespan of turbines also often reaches 25 or 30 years, says Alexander Vandenberghe, sustainability manager at WindEurope, a Brussels-based lobby group, which means there is relatively little end-of-life material today. But this will likewise change as wind turbine production rises massively to meet climate targets.

Preparing for the “huge wave” of solar panels that will need to be recycled in the future is a challenge, but one that industry should be ready to face, says Nicolas Defrenne, director-general of Soren, an organisation approved by the French government to collect used solar panels in France and its overseas territories. “We need to build capacity correctly,” says Defrenne. “[But] given regulation and market trends, there is no excuse not to be ready.”

For context, the production of a 1-terawatt peak photovoltaic system, the EU’s aim by 2030, will require 56mn tonnes of steel, 12.5mn tonnes of aluminium, 42mn tonnes of glass, 29,000 tonnes of silver, 2.3mn tonnes of silicon and 7mn tonnes of copper, Soren estimates.

To ensure that circularity is at the heart of this renewable energy transition will require well defined regulation. In the EU, solar panels are covered by the Waste Electrical and Electronic Equipment Directive, which stipulates that EU countries should collect 85 per cent of all electrical and electronic waste generated. However, Defrenne rues the fact that the law does not insist that recycling results in “good quality materials”.

A focus on quantity over quality, he says, also means that “the glass, which makes up the majority of a solar panel, is recycled, but there is less pressure to recycle low-volume, high-value materials like silver or silicon.”

In the wind industry, Vandenberghe says there are “well-established recycling practices for 85-95 per cent of a turbine” — weightier materials such as steel, iron, copper and aluminium. “[But] for the remaining 5-15 per cent, those practices have not been established at a scale that is large enough to be cost competitive.” 

The permanent magnets used in modern turbines, and the rare earth minerals they contain, pose a particular technical challenge, he says — but several research projects are focused on solving the issue. “We are confident there will be a business case, as they are highly valuable”, he adds.

Defrenne wants “specific recovery targets” included in the next iteration of the WEEE directive for such minerals. “This is important for our economy, industrial sovereignty and the environment,” he says.

Indeed, environmental and human rights campaigners are concerned that the rush to expand renewable energy could bring about harms similar to those that have blighted fossil fuel operations over the decades. However, circularity policies can help reduce the need for extractive practices, reducing reliance on rare earth suppliers with poor records on the environment and human health.

“For a truly sustainable future, the green transition cannot come at the expense of the wellbeing of vulnerable communities,” says Marion Lupin, policy officer at the European Coalition for Corporate Justice, a non-profit.

She would like to see more explicit references to indigenous people’s rights in legislation, like the EU’s recently agreed Critical Raw Materials Act. “Abuses against indigenous peoples, common even within EU borders, as seen with the Sámi people, are set to remain unaddressed while policymakers prioritise geopolitical and financial interests,” says Lupin — referencing controversial plans for an iron ore mine on Sámi lands in Sweden.

Factoring the full life cycle of renewable energy facilities into tomorrow’s greener economies will not be easy. But Clyncke and Defrenne say there is a growing awareness globally of the need for action.

China, the world’s largest solar PV and wind energy market, has pledged to establish a “more or less mature full-process recycling system for wind turbines and solar panels by the end of this decade”, says Clyncke. Meanwhile, Defrenne highlights government policies on solar panel recycling in Australia, Japan and South Korea, and says that other nations, such as India and South Africa, “are starting to think about” how to develop the market.

For him, the key is securing the necessary investment to equip all countries with the right infrastructure, so that waste is not exported, and that recycled or recuperated materials can be used domestically.

Overall, Vandenberghe suggests it is mainly “administrative and legal barriers” that are preventing circular economy concepts from being scaled up. He cites EU waste classification rules that are ill-suited to products made from composite materials, such as turbine blades, and make it harder and costlier to export them for recycling.

Engineering knowhow is not the problem. “The technology is ready and will further improve once there is scale,” he says.

Don’t bet on the UK ending the power of gas to set energy bills

The electricity price is set by the most expensive generating asset, but uncoupling the two would be very complicated

In the dark days of 2022, it became clear that despite the growth of cheap, clean, renewable power generation, the UK electricity system was still, ultimately, controlled by gas.

The wholesale price of electricity is set by the most expensive generating asset. As gas prices soared after Russia’s invasion of Ukraine, average household energy bills more than quadrupled to more than £4,000 and the government stepped in with billions to cap those bills, the peculiarities of the market structure were clear.

This is most obviously the case for wind and solar power supplied under old-style renewables obligations contracts, which cost the equivalent of sky-high gas prices for electricity with much lower production costs. More recent contracts for difference offer a fixed price for renewable generation instead.

One result was that the government decided to impose a revenue cap on low carbon generation, an odd move given the urgent need to attract vast investment in order to decarbonise the UK grid.

Another was what the government called “the biggest electricity market reform in a generation”, the snappily named review of electricity market arrangements or Rema. This explicitly set out to try to decouple different parts of the market, stopping volatile fossil fuels setting prices for renewable production.

Don’t bet on it happening, though. An interim report, scheduled for this autumn, is expected to rule out or delay this type of decoupling, after officials concluded it would be too challenging. Gas could hold sway in the UK power market for years or decades to come.

This sounds perverse. But there is a case to be made that splitting the market into gas-generated versus renewable power, a fiendishly difficult task, doesn’t bring sufficient benefits to be worthwhile, except when there is an international gas shortage and prices are soaring. It would be a solution, one without international precedent, to 2022’s specific problem. 

The realities of having two separate markets, which would need to interact in real time to balance supply and demand and bring on capacity when required, are fraught. One proposal, from UCL’s Michael Grubb, proposed the government in effect act as a single buyer for all green power, creating a “green power pool”. 

When the report is published, expect some fudge, though, given that the idea of freeing consumers from the effects of volatile gas prices was central to reform efforts. The government could dust off last year’s failed attempts to negotiate with generators on renewable obligations contracts to switch to CFDs, uncoupling another chunk of generation from fossil fuel prices. 

Another option would be to play up the virtues of what is going to happen anyway: the gradual dilution of the influence of gas in the system as more and more renewables come online. Those renewables, especially if they are located in places that can generate electricity at varying times, combined with more storage in the form of batteries should start to reduce the role of gas in setting the market price.

To achieve decoupling over time, the government must avoid the mistakes of its annual renewables auctions in September, which failed to attract any interest from offshore wind developers because the price for electricity generation was set too low.

Another reason not to bog the entire process down in a formal market split, is the need for other crucial reforms under consideration as part of Rema.

Renewable obligation contracts start to wind down from 2027 and those assets could be modernised under new fixed-price contracts. New types of fixed-price contracts are needed to incentivise renewables to be built in different places. Enabling low carbon generation to help balance the grid requires reform of the capacity market — the mechanism for ensuring there is always enough power available. Meanwhile, there is a furious debate going on within the sector about whether contracts should be priced according to location, to incentivise the investment needed to reach net zero.

The awkward truth is that these changes would still leave gas with a central role in a decarbonising power system. Even by 2050, argues Dan Monzani at Aurora, gas production offset using carbon capture could be fulfilling just a tenth of UK power needs but setting the price more than half the time throughout the year. In this vision of the market, even with vastly more renewables, the wholesale electricity price could routinely swing from near zero to the gas price.

All very well, until the next gas crisis.

London-listed Energean had to supply 60% of the Jewish state’s demand in early stages of war against Hamas

About 75km off the coast of northern Israel sits a vessel once targeted by Hizbollah, and now guarded by two Israeli warships, tasked with ensuring the lights stay on in Israel during the war against Hamas in Gaza.

The giant floating production facility is the primary asset of London-listed Energean, which started producing natural gas from the Karish field last year.

Although a relative minnow in the oil and gas industry, Energean “has been providing at times up to 60 per cent of all of Israel’s gas demand” from Karish since the October 7 massacre of about 1,200 Israelis by Hamas, the company’s founder and chief executive Mathios Rigas said.

“We had to produce to keep the lights on in Israel . . . ‘just keep the gas flowing’ was the message, so we went to maximum capacity,” Rigas told the Financial Times.

The responsibility was thrust upon Energean after the Israeli government ordered a temporary shutdown of the Chevron-operated Tamar gasfield, which normally meets about 70 per cent of the country’s energy needs.

Tamar’s production platform, visible from the north of the Gaza strip, sits only 25km off the coast of southern Israel — well within range of Hamas’s rockets, although production was restored after a month.

For Rigas, the dangers for natural gas producers off Israel are not new. In July last year Israel shot down three Hizbollah reconnaissance drones that the Lebanese militant group claimed were heading for the Energean Power floating production vessel as it arrived at Karish amid a territorial dispute between the Jewish state and Beirut over control of the gasfield.

Gas production only began at the site in October 2022 after the US brokered a landmark maritime border deal between the two countries, leaving Karish on the Israeli side of the line.

The war with Hamas has reignited fears that Hizbollah could try to target Energean again, leading to a 20 per cent drop in the company’s shares as the conflict started. But having stabilised in recent weeks they are down only 6 per cent from pre-conflict levels, valuing Energean at £1.7bn, helped in part by Rigas and other senior figures stepping in to buy.

Alex Smith, an analyst at Investec, said: “Despite the fact the company has a number of operations across multiple countries, it is largely exposed to the Karish asset and there is arguably single-asset risk.”

“As it ramps up production, it is the key driver to current and future cash flows,” he added.

Rigas said he was confident the vessel is well protected, with the two Israeli warships carrying the maritime version of Israel’s “Iron Dome” anti-rocket shield.

The floating facility had one brief shutdown in October because of a faulty meter reading but has otherwise produced flat-out throughout the war. A skeleton crew is keeping production going, while non-essential staff have relocated to Greece and Cyprus. Rigas said crew members were being flown to the vessel from Cyprus.

Another major short-term challenge the chief executive faces is managing a diverse group of staff at a time when tensions are running high in the region. Energean has offices in Egypt where it is drilling for gas with Italy’s Eni as part of its Eastern Mediterranean-focused strategy.

“We have people in the Israeli office that have their children at war, who have to go to bomb shelters multiple times a day, who are living with the horror of October 7,” Rigas said. “But their view is they have a job to do, and they get the job done.”

“But we also have the Muslim people who feel very strongly about the situation in Gaza,” he added. “Working in this region you have to be able to manage these tensions.”

Rigas, a petroleum engineer and former energy banker, founded Energean in 2007. Having started off with a small oilfield in his homeland of Greece, the company acquired the Karish field in 2016 as Israel looked to diversify the groups operating in the country.

Israel historically relied on imports of fossil fuels to meet its energy needs. But after major gasfield discoveries since 2009 and the start of production from Tamar and the larger Leviathan field, the country has been able to become a natural gas exporter.

Rigas contrasts the speed at which Israel has developed its gas discoveries with other countries such as Cyprus, where development of similar finds has barely begun. He also criticises the failure of many smaller oil and gas operators that have overpromised to investors.

“We have shown you can actually build a substantial oil and gas business and return money to shareholders because our sector has been horrible at delivering results,” Rigas said.

He argued that Energean’s focus on the Eastern Mediterranean had paid off as he “knows the rocks and we know the above-surface issues too”.

“So we understand how to produce gas, which has been proven from our operational success,” he said. “And we understand how to deal with geopolitics as we’re proving today.”