(ZH) Chinese Bitcoin Mines: A Threat To US National Security

Chinese Bitcoin Mines: A Threat To US National Security

Chinese cryptocurrency mining operations have been discovered in 12 U.S. states, raising national security concerns, including Arkansas, Ohio, Oklahoma, Tennessee, Texas and most notably, as The Epoch Times' Antonio Graceffo details below, The Pentagon is overseeing surveillance of a Chinese bitcoin mining facility in Cheyenne, Wyoming.

This site is near a Microsoft data center that houses sensitive information, providing critical support to the Pentagon.

In a 2022 report submitted to the Committee on Foreign Investment in the United States (CFIUS), a federal entity responsible for monitoring foreign investments with potential national security implications, Microsoft expressed concerns regarding the Wyoming location, emphasizing the possibility of China engaging in comprehensive intelligence collection activities.

U.S. officials are apprehensive that this mining operation may be able to conduct surveillance on the Francis E. Warren Air Force Base, a mile away from the bitcoin mine. The base is home to the 90th Missile Wing, known as the “Mighty Ninety,” responsible for maintaining “Minuteman III intercontinental ballistic missiles (ICBMs) "on full alert 24 hours a day, 365 days a year."

The Wyoming-based mine uses computer hardware sourced from a company known as Bitmain, with some components originating from a location affiliated with the Chinese Communist Party (CCP). Following the 2021 ban on Bitcoin mining in China, shipments of Bitmain equipment to the United States surged fifteenfold. The New York Times identified Chinese bitcoin mining operations in a dozen states, and it is possible that additional undisclosed mining facilities are in operation.

Another Chinese bitcoin mining entity, YZY Capital Holdings, also acquired land near Warren Air Force Base. These Chinese firms are frequently affiliated with larger parent corporations, often concealed through shell companies, and tend to maintain a deceptive presence with a nominal address in the United States while being registered in the Cayman Islands. The corporate proprietor of the Wyoming Bitcoin mine was previously registered as a pork company located in Manhattan but registered in the Cayman Islands. Similarly, YZY Capital Holdings holds its registration in Manhattan and is owned by Chinese national Yuan Qian, who reportedly has ties to the CCP.

Prior to 2021, the majority of global cryptocurrency mining operations were concentrated in China. However, following Beijing’s decision to ban such activities, the industry shifted to other nations, including the United States. These mining operations often occupy extensive warehouse spaces, usually repurposed from former factories. Their choice of location is driven by the quest for affordable electricity, as cryptocurrency mining is energy-intensive and generates substantial heat. Therefore, these facilities require spacious, well-ventilated areas equipped with fans to regulate temperature.
Tourists walk on the dunes near a power plant in Xiangshawan Desert in Ordos of Inner Mongolia in this file photo. Bitcoin miners have enjoyed favorable electricity rates in places like Ordos for a long time. (Feng Li/Getty Images)

China’s decision to ban cryptocurrency mining was prompted by concerns related to excessive energy consumption and the inability to regulate the flow of currency out of the country.

Notably, one of Beijing’s primary concerns was the potential for capital flight, particularly during economic crises when Chinese citizens sought to move their wealth abroad by converting it into hard currency or investing it in foreign markets. Until 2021, bitcoin had served as a covert means for capital to exit the country. By banning private cryptocurrency, Beijing is eliminating competition for its own central bank digital currency (CBDC), over which it will have full control.

Beijing’s pursuit of cryptocurrency regulation aligns with its economic policies, whereas the U.S. government’s primary concern is rooted in national security. Bitcoin mining facilities concentrate substantial computing power within a single location, potentially opening the door to various activities, including cyberattacks. There are concerns that China may leverage these operations for the unauthorized acquisition of intellectual property, trade secrets, or financial data, posing significant economic risks to the United States.

Another concern pertains to the vulnerability of energy infrastructure. Bitcoin mining is notorious for its substantial energy consumption, potentially straining U.S. power grids. These mining operations’ capacity to intermittently consume vast amounts of energy can lead to grid disruptions, a threat identified by the state of Texas. The unearthing of undisclosed mining facilities could underscore weaknesses within the U.S. energy infrastructure, particularly when these operations are connected to the power grid without the necessary authorization.

Many of the Chinese mines are located in parts of the United States where there is little or no industry or places like Niagara Falls, where joblessness is high. Local governments have warmly welcomed these mining ventures in hopes of jumpstarting their local economies and job opportunities. However, this eagerness also presents opportunities for potential Chinese influence operations. The CCP has a track record of attempting to exert influence through engagement with lower-tier government employees or city and municipal officials.

The CCP might also be utilizing these mining operations to manipulate the price dynamics of bitcoin and other cryptocurrencies, seeking economic advantages. Acquiring a substantial portion of the bitcoin mining network could allow China to influence transactions or disrupt the network’s stability, potentially undermining U.S. interests. Moreover, the CCP has a history of assisting Mexican drug cartels in money laundering. Bitcoin could facilitate these illicit financial activities. Additionally, cryptocurrencies offer a solution to the challenge of transferring proceeds from drug sales in the United States back to Mexican cartels.

ThesebBitcoin mining operations represent the most recent additions to a series of Chinese businesses found in the United States that raise concerns for national security.

For example, in August, an unlicensed Chinese biolab was uncovered in California, where it was handling potentially lethal viruses and genetically altered mice.

These incidents collectively underscore the risks associated with permitting Chinese companies to invest in the United States and highlight how the CCP may exploit our democratic freedoms.

Furthermore, the government’s response to such discoveries often takes weeks or months, and when it does act, the actions are often fragmented, allowing such issues to persist.

WSJ : Patriot Games: Mideast Turmoil Prompts Shuffle of Prized Defense Systems

Patriot Games: Mideast Turmoil Prompts Shuffle of Prized Defense Systems
Threat from Iran-backed militia groups prompts Pentagon to pivot back to the region

The U.S. military was set to display one of its prized Patriot missile-defense systems at the Dubai Airshow this week, part of the American showcase at one of the world’s biggest arms fairs.

Then war broke out in the Middle East, and the $1 billion battery, mounted on three trucks, was needed to defend U.S. troops based in the region from attack by Iran-backed militia groups—and the Pentagon dropped the plans for the show.

Army leaders have warned for years they lacked enough of the systems, which fire interceptors to shoot down aircraft, missiles and drones, to meet the myriad U.S. national security challenges posed by strategic competition with China, war in Ukraine and fighting in the Middle East.

Some lawmakers have echoed the concerns. “I am concerned about our ability to provide air defense in other areas,” said Rep. Doug Lamborn (R, Colo.), chairman of the House Armed Services subcommittee that handles missile defense. Lamborn said the threats to U.S. forces in the Middle East justified the deployments, but he has been pushing for the funding of more Patriots.

The Pentagon shipped one to Ukraine last spring, to help Kyiv’s forces fend off Russian cruise missiles. Now, following a series of drone and missile attacks on U.S. forces in Syria and Iraq that the Pentagon blames on militias backed by Iran, it has doubled the number of Patriot batteries in the region to at least 12, according to people familiar with the deployment.

The shift of the U.S. Patriots over the past two weeks was a reversal from the trend in recent years in which the U.S. had been reallocating military hardware and personnel from the Middle East to the Pacific to deter any potential challenge from China. It threatens to leave other regions of the world more exposed to cruise and ballistic missiles and other threats, especially in the Pacific.

The Patriot was introduced in 1980 to defend against aircraft and then cruise missiles from the former Soviet Union. After early testing problems and cost overruns that almost saw it canceled, Patriot has evolved into a key part of defenses against a rapidly evolving global missile threat.

The Patriot’s success in defending U.S. forces in the Middle East over the past 20 years has helped fuel demand from buyers including Saudi Arabia and the United Arab Emirates. Poland, Sweden and most recently Switzerland are among European buyers drawn by perceptions of an increased threat from Russia.

RTX, formerly known as Raytheon Technologies, is estimated by analysts to generate $3.5 billion in annual sales from building the Patriot.

The biennial Dubai Airshow, which starts Monday, features displays of military aircraft and equipment and attracts big defense companies such as RTX, Lockheed Martin and Boeing, as well as government buyers from around the world.

Planes, missiles, drones and other equipment will line the tarmac and pavilions at the Al Maktoum International Airport, which features weapons made by Russia and China as well as the U.S. and its allies, and fast-growing exporters including South Korea and Turkey.

The Pentagon was to display a battery, which includes the launcher, radar truck and command station. On Oct. 25, it announced plans to send more air-defense resources to the Middle East.

In the days that followed, the U.S. Army flew six Patriot batteries from the U.S. to the region, joining six that were already in theater, according to people briefed on the transfers. Army recruitment posters for highly skilled Patriot technicians suggest the launchers are based in Bahrain, Kuwait and Saudi Arabia, where the U.S. maintains a presence at about a dozen installations.

Patriot batteries are also cycled through Europe, including deployment in Germany, and one is slated to be based in Guam and another in Hawaii, according to Pentagon plans before the latest escalation in the Middle East.

The Army declined to comment on how many were already in the region and where the new ones are located but said its “plans and commitment to the defense of the homeland have not changed.”

The U.S. has 60 Patriot batteries, while 17 other countries have bought it or placed orders. RTX doesn’t disclose production rates except to say they are being increased. The company has said it would take more than two years to deliver on new orders. Industry executives estimate the company is producing around a dozen Patriot systems a year, little changed from rates 30 years ago.

One battery remains in South Korea and several others are held for training, repair and upgrade in the U.S., according to Pentagon and industry officials. The Ukraine and expanded Middle East deployments leave under half of the U.S. inventory available to guard its forces in the rest of the world.

The Pentagon also has six batteries of the upgraded LTAMDS system, also made by RTX after it beat out competition from Lockheed Martin and Northrop Grumman to develop a new radar.

These are in testing and won’t be operational before 2025, said the company, with the biggest difference being a radar that can scan 360 degrees, versus the point-and-shoot of the current model.

“If you think back to Patriot when it was developed back in the 1980s, we knew where the threat was coming from,” said Wes Kremer, head of RTX’s defense business, at an investor day. “But now, we don’t know where the threat is coming from.”

FT : Iceland declares state of emergency as it braces for volcanic eruption

Iceland declares state of emergency as it braces for volcanic eruption
Town in south-west evacuated as thousands of earthquakes are recorded close to country’s main airport

Iceland declared a state of emergency after earthquakes raised fears that a volcanic eruption will damage residential areas in the Nordic country for the first time in 50 years.

Iceland evacuated all 4,000 residents the south-western town of Grindavík after a 15km-long underground magma tunnel was detected close to the Fagradalsfjall volcano, increasing the likelihood of an imminent eruption.

The government convened an emergency cabinet meeting on Sunday as thousands of earthquakes were recorded in the area. The activity has rocked the Reykjanes peninsula — home to Iceland’s international airport and the Blue Lagoon tourist site, which has been closed since Thursday.

The mid-Atlantic island of 390,000 people is well used to volcanic eruptions, with several occurring close to Grindavík in recent years. The eruption of Eldfell destroyed several hundred homes on the southern island of Heimaey in 1973, though there were no fatalities.

The 2010 explosion at Eyjafjallajökull closed much of European airspace for almost a week after plumes of ash clouds spread south. Volcanologists said there is a lower risk of a big ash cloud from this volcano, but that one was possible if eruptions occur at sea.

Grindavík is only 19km from Keflavik airport, Iceland’s main international entry point, but flights are carrying on largely as normal.

Huge cracks have appeared in roads around Grindavík. Authorities said on Sunday that it should be safe for residents to return to collect essentials and evacuate pets and livestock, subject to close monitoring.

“I felt the most scared for my life I have ever been,” said American basketball player Danielle Rodriguez, who lives in Grindavík, about the evacuation on social media platform X, formerly Twitter.

“The ground started shaking so much I had to grab a hold of the car and honest to god for a good 30 seconds I felt as though the ground was going to crack open and take us both [her girlfriend and her],” she added.


Experts said that an eruption could happen at any time, and that the current seismic activity made such event likely but not guaranteed in the coming days.

“The overall assessment from the status meeting was that the likelihood of a volcanic eruption is high, and that an eruption could be possible on a timescale of just days,” the Icelandic Met Office said on Saturday night.

It added that the magma intrusion was slowly moving towards the surface and was currently estimated to be 800 metres below the ground. The likelihood of an underwater eruption had also increased “so preparations must be made for the possibility of explosive activity”, it added.

Miss Tweed : The Estée Series – 1-How the company got scent off course

The Estée Series – 1-How the company got scent off course

What would Estée Lauder, the doyenne of the modern cosmetic industry, say? The Estée Lauder Companies, her namesake multinational, appears to be stuck in a downward spiral. The $41bn group has missed expectations nearly every quarter this year. Then last week, it again cut growth targets. America’s biggest beauty group keeps losing market share to rivals such as France’s L’Oréal and Spain’s Puig. Many of its flagship brands such as Clinique and the Estée Lauder brand are no longer as strong as they once were.

The time has come to brush off the cobwebs, industry insiders say. The Lauder family let them grow in the same way the Ferragamo family refused to touch the Italian shoemaking brand for many years before the arrival of CEO Marco Gobbetti, as Miss Tweed reported last month. It’s the “Ferragamo syndrome.” For the longest time, the descendants of the Ferragamo brand could not find the courage to alter its products and communication. For them, it felt like killing the memory of their grandfather Salvatore, founder of the brand. The same thing has happened to the Lauder family. Revamping brands such as Estée Lauder means destroying the memory and heritage of its beloved founder, who died in 2004 aged 97. The brand is sacrosanct, untouchable. And as a result, it has become irrelevant. It’s seen as for grandmothers, like Ferragamo was before its brutal (and not yet successful) makeover initiated by Gobbetti.

Karl Lagerfeld would often describe Coco Chanel as an old lady who needed to be shaken up from time to time. That way, he explained, he made sure it stayed connected to the Zeitgeist and constantly said new things. The success of a legacy brand depends on finding the right balance between heritage and relevance.

Like the Ferragamo family who control their namesake fashion house, it’s up to the Lauder family, who own about 38% of total common shares, and a whopping 86% of voting power, to drive the change.

The group warned net sales would decrease between 9 and 11 percent in the current quarter to Dec. 31 from a year earlier. The company’s CEO Fabrizio Freda has been blaming the company’s woes on in its all-important travel retail division and weak business in China. Last week, Freda said the conflict in the Middle East was also responsible for the lowered outlook. No wonder. Freda may well feel he needs to pass the blame to justify his bumper pay which reached $65.9m in compensation last year. Freda is the second-most “overpaid” CEO among those at companies on the S&P 500, according to an annual ranking by the world’s biggest shareholder advocacy group As You Sow published in March this year. The company has not replied to Miss Tweed’s requests for comment.

PROFITABILITY
Freda announced a series of measures designed to improve profitability in 2024, 2025 and 2026. That means that even less money will be invested in the image and desirability of the group’s portfolio of brands – which industry insiders underline as its main problem in recent years. Freda is obsessed with financial performance. He’s not interested in storytelling. Those who were, and excelled at building brands – many of them former executives of French group L’Oréal who clashed with the Italian executive – have left the company in the past three to four years. In 2022, Freda sacked John Demsey over an Instagram post which was described by the company as a racist meme.

Demsey was one of Estée group’s greatest assets. He had a talent for developing brands, industry experts say. For example, he helped M.A.C. position itself as the make-up artist brand fashion designers loved to partner with for their shows. Today, M.A.C. is no longer the dominant brand on the podium. Charlotte Tilbury and Pat McGrath Labs are the new go-to make-up providers for catwalks. In recent years, the company has consistently missed out on industry trends. For example, consumers now are into vegan, clean products (with no additives or preservatives) and face creams recommended by dermatologists, a market in which Estée group has not invested much.

L’Oréal with brands such as La Roche-Posay and Cerave is much more present. During lockdowns, there was a boom in demand for shampoo as hairdressers were closed, but Estée failed to seize on the opportunity and boost advertising for Aveda and Bumble and bumble while L’Oréal fired on all cylinders, actively promoting Kérastase and Garnier.

Problems at the Estée Lauder Companies run deep, industry insiders and former executives say. They point to a corporate culture problem, a kind of complacency no-one appears ready to address or acknowledge. Family executives and senior managers, paid millions if not tens of millions of dollars, are said to be socialites, living a high life and spend more time attending glamorous events than reading market intelligence or coming up with disruptive ideas.

Estée group is often cited as the cosmetics player that took a long time to realize consumers no longer bought beauty products at department stores but at specialized boutiques and online. It also started massively investing in Asia more than a decade after its main rivals. The corporate culture is very top-down, people who worked at the company say. “You have to kiss the hand,” said one former Estée manager. “It was not like that when Leonard was in charge.”

Leonard Lauder, 90, the oldest son of Estée and Joseph Lauder who founded the company in 1946, started packaging products. He encouraged anyone to come forth with a good idea or warn about a problem. “That’s no longer the case. You cannot question management’s strategy, you risk losing your job if you do,” the former company manager said. Former staff say there is also a lot of duplication of responsibilities, which means that there are often several people working on the same project who roughly have the same responsibilities and do not take any initiative.

LEONARD LAUDER
Leonard Lauder remains chairman emeritus but is no longer involved in day-to-day operations. He had infused the company with a passion for developing brands and products. That drive has been fading since he retired few years ago, managers say. “It’s complicated now at Estée Lauder since Leonard left,” the founder of one of the company’s brands told Miss Tweed on condition of anonymity. “And it’s not clear who will replace him.” “Leonard was an amazing force who has no voice today because of his age,” said another former Estée manager. Under Leonard’s leadership, the company launched many brands, including Aramis, Clinique, Lab Series and Origins.

Beginning in the mid-1990s,itbegan expanding through acquisitions, including Aveda, Bobbi Brown Cosmetics, Jo Malone London, La Mer and M·A·C. Born Josephine Esther “Esty” Mentzer, Estée was raised in New York’s Queens by her mother Rose and father Max, who immigrated to the United States from Hungary. Her last name was originally Lauter and was changed to Lauder to sound more aristocratic. Her middle name Estée was also changed to tap into the lure of Parisian chic.

One of her first successes was Youth-Dew, a bath oil that doubled as a perfume she released in 1953. Estée Lauder’s Youth-Dew products still exists today. In 1995, Estée’s son Leonard, took over and helped build the company into a global business. His much younger brother Ronald, 79, was less involved with the company. He pursued a career in politics and led many important Jewish associations such as the World Jewish Congress and Jewish National Fund. He worked in defense under President Ronald Regan and in diplomacy afterwards as ambassador. In 1989, he was a contender for Mayor of New York City.

None of the children of Ronald or Leonard appear to be of the corporate stature to take over. None of them has built a strong enough track record at the company and appear ready to meet the challenge of the extensive revamp the flagship beauty brands need if they want to regain traction. Clinique and the other Estée Lauder brands haven’t made a major product breakthrough in recent years. They continue to surf on their best-sellers from decades ago.

Clinique has remained stuck in its “three-step” products and failed to evolve under the leadership of Jane Lauder, daughter of Ronald and billionaire heiress of the Lauder family name. Her poor management of Clinique discredited her as a potential successor to CEO Freda, investors tell Miss Tweed. She is today the company’s executive vice president and chief data officer. She is the only one who stands up to Freda and helps somewhat preserve the Lauder family spirit, industry sources say.

Meanwhile, the Estée Lauder brand has remained focused on its bestselling Double Wear foundation and anti-age serum Advanced Night Repair. The latter was a huge hit in China. But it’s partly because of that success that senior management grew complacent, industry analysts say. “Business was going so well, they did not have to think about tomorrow. It took them time to realize they had to invest in that market. And by the time they really did, the pandemic hit,” one former company senior manager said.

It wasn’t always so complacent. In 2015, Estée Lauder was the first beauty group to invest in niche perfume brands, buying Editions de parfums Frederic Malle and two years later Le Labo and Kilian. L’Oréal, LVMH and Puig would soon follow suit. Many of Estée group’s niche fragrance and make-up brands have been stifled by heavy corporate processes, senior sources tell Miss Tweed. That’s particularly the case with Frederic Malle. It has not grown as much as the company hoped, and in recent years, it appears to have stopped investing in it.

The brand’s concept is publishing the work of “noses”. It allows them to tell their story via a fragrance. The creator of a perfume is usually never advertised. Malle’s idea is great, but it has proven too intellectual to succeed at the company. “Frederic Malle himself invested more money in the brand than Estée group itself,” one person close to the U.S. cosmetics maker said. “Now he’s miserable and exploring options.”

Frederic Malle, the founder of the brand, declined to comment. The company’s other later Californian acquisitions, on which it spent billions, such as make-up brands Too-Faced and Smashbox and the face mask specialist Glamglow have not performed as strongly as expected and have had to lay off staff. Two years ago, the company shut down Australia’s Becca Cosmetics, bought in 2016, and some industry insiders expect it will eventually have to shut down Glamglow.

Another important character in the Lauder drama unfolding is William Lauder, 63, son of Leonard and Evelyn Lauder and executive chairman of the company. He keeps publicly renewing his confidence in the abilities of Fabrizio Freda to lead the company. William does not want to admit that the company, arguably, has lost its way. But the time has come to think about who will replace 66-year-old Freda, who has been in the post since 2009 and accumulated wealth estimated at several hundreds of millions of dollars.

Freda prolonged his term and obtained very lucrative incentives to stay through at least until June 30, 2024, when he will be awarded stock payouts. A year ago, he said he was “completely committed to continue leading this company for the foreseeable future” but the Lauder family needs to think about who will replace him. They need to decide what kind of leader they want and what the company’s strategy is.

FT : US offshore wind goals will be missed, say parts manufacturers

US offshore wind goals will be missed, say parts manufacturers
Sector must be fundamentally reset to become economically viable, executives warn

The Biden administration’s plan to increase offshore wind generation capacity by 2030 will not be met, executives at the world’s biggest turbine manufacturers have said, warning that the sector needed a reset to become economically viable.

The White House has set a goal of installing 30 gigawatts of offshore wind capacity by 2030 — enough to power 10mn homes — and has made the target central to its plans to slash carbon pollution.

But recent project cancellations, including Danish developer Ørsted’s decision to pull two offshore projects in New Jersey, and soaring costs had thrown the entire strategy into peril, said executives.

The 2030 target was “widely and regretfully acknowledged” to be unrealistic, said Josh Irwin, senior vice-president of offshore wind at Vestas, the world’s largest offshore wind manufacturer.

“These cancellations and delays go beyond growing pains,” Irwin told the Financial Times, adding that Vestas lacked the certainty needed to move forward with plans to build a US factory.

“The US industry is in the middle of a fundamental reset to restore economic viability.”

Richard Voorberg, chief executive of Siemens Energy North America, made similar comments this week, saying the administration’s 2030 offshore wind target was now a “tall order”.

“The market’s got a problem. You look at Siemens Energy, you look at GE, you look at Vestas, the big players, we’re all losing money . . . That’s not a sustainable model,” Voorberg told the FT’s Investing in America summit on Tuesday.

The warnings from the largest wind manufacturers came as developers move to cancel or renegotiate contracts after suffering steep losses. Aside from Ørsted, Avangrid and Shell have cancelled projects, and BP and Equinor reported $840mn in impairments last quarter from their two New York projects after the state rejected their requests to renegotiate contracts.

Just one offshore wind project is in full operation in the US, generating 30 megawatts of electricity per year off the coast of the state of Rhode Island.

The delays pose a risk to the US’s plans to halve its emissions by 2030 as well as President Joe Biden’s ambition to create a domestic offshore wind manufacturing sector — an effort to create jobs while also breaking dependence on foreign supply chains.

The administration’s landmark Inflation Reduction Act, which passed Congress last year, included about $370bn worth of sweeteners to stimulate domestic cleantech manufacturing. At least 10 offshore wind ports and five projects to build vessels and structures for offshore wind have been announced since the IRA passed.

But rising project costs and expectations that interest rates will remain higher for longer are hurting the sector’s prospects, analysts have said.


Vestas has agreed to supply offshore wind projects in New Jersey and New York and plans to build a nacelle factory. But the facility — for which the planned capital expenditure has not been announced — could be shelved if the Atlantic Shores, a project planned by Shell and EDF Renewables offshore New Jersey, does not go ahead.

The developers have called on the state for “immediate action”, warning that “tens of thousands of real, well-paid and unionised jobs are at risk”.

“We’re taking a wait-and-see approach because we need to gain confidence in a multiyear, multi-project pipeline of demand,” Irwin said. 

More than half of US offshore wind contracts have been cancelled this year or are at risk of cancellation, according to consultancy BloombergNEF, which says the US 2030 offshore wind targets are “impossible” at this time. 

The three largest wind turbine manufacturers, Siemens Energy, General Electric and Vestas, have all reported consecutive quarterly losses in their wind segments in the past year.

“We know the industry is ready for a reset . . . We think we can make a much better business with offshore wind, but we’re staring at some challenges that we need to address here in the fourth quarter and in 24,” GE chief executive Larry Culp told analysts last month.

The uncertainty among builders leaves the future of towns betting on an industrial revival from the sector up in the air. The US Department of Energy estimates that the country’s offshore wind industry could need up to 58,000 jobs per year from 2024-2030 if the local supply grows as planned.

“It’s heartbreaking . . . Everyone’s like, ‘What do we do now?’” said Stephen Sweeney, a former New Jersey state senator and union leader, after Ørsted’s decision to pull two projects in the state.

Sweeney resides in the third district, where the state is building a $400mn offshore wind port. Ørsted would have been its first tenant.

FT : German homebuilding collapse threatens wider economic damage

Wolfgang Schubert-Raab recalls when the boom times were so good that his firm could not build homes quickly enough.

“Back in 2021, before we’d even poured the first cubic metre of concrete, we’d already had offers on more than half the complex,” said the managing director of the Raab construction company. Two years on, the market for single-family dwellings is in what Schubert-Raab describes as a state of “completely collapse”.

Across Germany, homebuilders are facing such a sharp reversal in their fortunes that the downturn in residential construction is threatening to have broader repercussions across Europe’s largest economy.

Many have declared themselves insolvent, dampening Chancellor Olaf Scholz’s target of building 400,000 new homes a year to tackle a housing affordability crisis in several of the country’s largest cities.

This week, the federal government combined with state legislatures to intervene, unveiling a package of measures aimed at speeding up housebuilding by cutting red tape. Industry representatives view the response as a step in the right direction, but are concerned the measures are not strong enough and the rollout will be far too slow.

Tim-Oliver Müller, managing director of the German Construction Federation (HDB), said: “Based on past experience, we don’t believe that it will be implemented quickly. The federal structures are far too complex for that.”

After a decade-long boom fuelled by strong demand, cheap credit and low costs for raw materials, German builders are now facing what Gereon Frauenrath, managing director of construction company Frauenrath Group, describes as a “perfect storm”.


Raw materials are now more than 40 per cent more expensive than before the pandemic — the biggest surge in Europe. The credit-intensive sector must also grapple with 10 straight interest rate rises by the European Central Bank. While the country still has a shortfall of suitable homes, especially in the major cities, the higher cost of borrowing is pricing many prospective buyers out.

The result has been a devastating loss of confidence that has led to the country’s residential property market being among the worst performers in Europe.

House prices were down 10 per cent year on year in the second quarter, while the number of building permits issued has sunk far more quickly here than in the region as a whole. In October, 22.2 per cent of companies reported cancelled projects — the most since the Ifo think-tank began recording the figure in 1991.

“It’s getting worse all the time,” said Klaus Wohlrabe, head of surveys at Ifo. “In residential construction, new business remains very low and companies’ order backlogs are diminishing.” 


Construction output rose by more than 16 per cent between the first quarter of 2015 and the start of 2022. As demand soared on the back of low rates and relatively lax lending standards, house prices rose by 66 per cent, according to the EU’s statistics office Eurostat.

Now the troubles of the sector, which made up more than 5 per cent of GDP in 2021, is contributing to an outlook that has seen Germany fall to the bottom of the IMF’s rankings of leading economies.

Susannah Streeter, senior investment analyst at asset manager Hargreaves Lansdown, said: “Given that the real estate sector is a driver for growth in Germany, [the sector’s issues] don’t bode well.”

Firms whose fortunes are tied to residential construction are also feeling the strain.

Sabine Brockschnieder, managing director of the Baumann Group, which has built Germans’ bathrooms and kitchens for more than a century, says times have rarely been tougher.


“Smaller companies will face serious difficulties with the drop in sales and increased costs,” Brockschnieder said, adding that orders have fallen 15 per cent from a year ago.

Rising costs and weakened demand are expected to force Baumann to cut some of its 1,200 workers and put others on a furlough scheme.

“Unfortunately, we will be forced to part with the temporary workers we employ, because we expect next year to be even worse,” said Brockschnieder.

The industry believes the government should intervene to correct what many housebuilders see as a market failure.

They argue that, unlike in previous downturns in the 1990s or early 2000s, residents of large cities such as Berlin, Munich, Hamburg, Cologne and Frankfurt still face a shortage of affordable homes.

“The current conditions — much higher construction costs and an increase of interest rates — are scaring off investors and builders,” said Jörg Hegestweiler, chief executive of BKL Baukran Logistik, which sells and rents cranes to the construction sector.

In September, the industry agreed a 14-point action plan with the federal government that included a mix of tax benefits, attractive subsidy programmes, the lowering of energy-saving standards and simplification of planning and approval procedures.

Building minister Klara Geywitz said the package of measures unveiled on Monday would speed up the sector’s revival by lowering bureaucratic and legal hurdles for builders.

“In order for affordable housing to be built more quickly, we need more speed in planning, approval and construction,” she said. “The pact that the federal and state governments have now agreed on will ensure the necessary acceleration.”

Felix Pakleppa, managing director of ZDB, an association representing 35,000 construction companies, says the package of measures offers a “glimmer of hope” but more is needed.

“To be able to switch into acceleration mode, you first need new orders. And these are becoming fewer and fewer,” said Pakleppa, calling for the government to approve more of the measures agreed in September.

Schubert-Raab, who is also president of the ZDB, said firms still lack certainty.

“Our industry is not a greyhound track — it takes between two to three years for a property to go from the planning stage to being ready for occupancy,” he says. “People wanting to build need security. Without it, nobody will invest.”

FT : Alstom: the French train giant battling to stay on the rails

Alstom: the French train giant battling to stay on the rails
Maker of high-speed TGV trains needs to convince investors it can make Bombardier acquisition work

In 2021, Alstom hailed its acquisition of Canadian rival Bombardier’s train operations as a “unique moment” that would ensure the French company emerged a winner from a new golden age dawning on the global rail industry.

Less than three years later, the sound strategic logic of the €5.5bn deal has been overshadowed by a series of setbacks, the most recent of which has contributed to a cash crunch at the world’s second-largest train manufacturer.

Problematic contracts at Bombardier, together with a broader struggle to manage inventory and the production of its trains, forced Alstom early last month to slash its projections for free cash flow this year.

Now, with billions of euros wiped from the group’s market capitalisation in recent weeks, chief executive Henri Poupart-Lafarge is under mounting pressure to restore confidence in a company that has more than 80,000 employees and supplies trains in markets from Australia to Saudi Arabia.

As well as the perils sometimes hidden in acquisitions, the crisis at Alstom highlights the high-stakes challenge train manufacturers face in managing inventory, orders and cash flow at a time when many governments have championed busier railways as part of the answer to global warming.

“If Alstom had a problem, the whole of France would find itself pretty stuck,” given the company supplies most of the country’s trains and metros, said an executive at a rival manufacturer. “It can pose a major industrial risk.”

Alstom has said that the picture will improve as down payments on contracts trickle in, allowing the company to convincingly extol the benefits of a deal it struck not long after EU regulators quashed its planned merger with Germany’s Siemens.

But the immediate risk is that the group is stripped of its prized investment grade rating — a move that would strain its finances further. Poupart-Lafarge, a company veteran and one-time financial chief who has had the top job since 2016, faces some unenviable choices.

Analysts say the 54-year-old may have no option but to sell assets. Those at JPMorgan estimated that Alstom, now valued at about €5bn, needed a cash inflow of at least €1bn in the next 12 months to preserve its investment grade status.

Moody’s rates Alstom Baa3, just a notch above junk status. After Alstom axed its cash flow projections, Moody’s cut the French industrial group’s outlook to negative and said disposals looked necessary to ensure its ratio of gross debt to core profits heads towards 3.7 over the next 12 months, from above 4.5. 

“We need to see that pace,” Moody’s analyst Nathalie Tuszewski said of Alstom, which had €2.13bn in net debt at the end of March.


The punishment meted out by the stock market since last month’s disclosure is in part a reflection that it was not the Bombardier deal’s first red flag: shortly after completing the acquisition Alstom warned on disruptions to cash flow.

But the October revelations were “a major blow to management’s credibility”, according to Deutsche Bank analysts.

While Alstom does not have large bond or long-term loans maturing in the next two years, the maker of France’s high-speed TGV trains has drawn more on its short-term commercial paper facility in recent months, adding to its costs.

The alternative to selling assets, say bankers and analysts, is a highly dilutive capital increase.

“The market still thinks they need capital,” said one banker who advises on French equities listings, adding that the group could consider finding a big anchor investor that would help shield it from the vicissitudes of the stock market.

Just over an hour after issuing the warning and barely weeks into the job, Alstom’s finance chief Bernard Delpit sought to dispel investors’ fears, declaring: “I will state simply, an equity raise is not on the table.”

Alstom’s biggest shareholders are the Caisse de dépôt et placement du Québec pensions fund that took its stake as part of the Bombardier deal and now holds 17 per cent. French state-backed investment bank Bpifrance is the second-largest, with 7.4 per cent. Both declined to comment.

Alstom, which has been the second-worst performer on France’s blue-chip CAC 40 index since the start of October, is expected to give more information on its finances when it reports first-half results on November 15.

About a third of the €1bn hit to cash flows came from Bombardier, half stemmed from wider challenges in managing inventory and the rest from a drop in the number of down payments on contracts.

Created in the late 1920s and with roots in the eastern France’s Alsace region, Alstom had previously identified €7bn to €8bn of lossmaking contracts out of the €30bn backlog it took on from Bombardier. The company, which competes with the likes of Siemens, Hitachi and China’s state-owned CRRC, remains saddled with roughly a quarter of those.

But the problems revealed last month were from a UK contract called Aventra to build 443 electric trains. Some are already running on London’s new Elizabeth Line as well as for operators such as West Midlands Trains, but the programme has been beset by delays.

In the latest setback, some of Aventra’s customers are putting off taking delivery and paying for dozens of trains in part because they are struggling to recruit drivers for them, according to people familiar with the matter. Aventra will now not be completed until next year, the company has said.


While Alstom tries to resolve the Aventra debacle, the company has been struggling to manage inventories and it completed fewer trains than it had expected in the first half as it races to keep up with a record €87bn order book.

“You end up with trains that take up room, it’s costly. These are not mobile phones,” said one analyst who covers the industry. “And you ended up without the cash from the delivery and late penalties.”

What finance chief Delpit described as “lumpy” cash flows have long blighted the industry. Payments on contracts are not always predictable and can sometimes get snarled up in politics.

In the UK, Alstom’s nearly £2bn contract to build trains for the HS2 rail line is now in doubt after Prime Minister Rishi Sunak radically scaled back the project.

The lumpy cash flow problem has, according to one executive at a rival manufacturer, obscured the fact that rail is likely to be a big winner as governments encourage more people out of cars and on to trains as part of an effort to tackle climate change.

“It’s an industry right in the middle of a push to decarbonise and order books have never been as full, but shares have not followed,” the executive said.

Despite the share price slump, Alstom has suffered — and survived — bigger traumas. In 2004, it required a €2.2bn government bailout when faults with gas turbines it then manufactured threatened to sink the group.

A decade later, the company paid US authorities $772.3mn, then a record fine by the Department of Justice in a foreign bribery case, for giving backhanders via a middleman codenamed “Mr Geneva” “Mr Paris” and “Old Friend” to win contracts in Egypt, Indonesia and other countries.

Some analysts remain confident that the problems will prove fleeting. Last month, Alstom confirmed it was on track to hit other financial targets for its fiscal year to end March, such as sales growth of above 5 per cent and margins of up to 6 per cent. The company declined to comment further ahead of its results next week.

But with the share price near an 18-year low, Poupart-Lafarge, who last month left Delpit to try to reassure the market in the immediate aftermath of the warning, has some damage to repair.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Clean-energy stocks are collapsing

Cover:
-Clean-energy stocks are collapsing. Their performance has been the worst in years, triggering related stock valuations to shed tens of billions of dollars and endangering America’s environmental goals. Car makers such as General Motors and Ford Motor have delayed plans to roll out electric vehicles. Offshore wind developers are canceling or delaying their projects and even residents of climate-conscious states like California, are buying fewer solar panels for their roofs. The fallout has caused 76 of the 77 stocks in the Invesco WilderHill Clean Energy ETF—a green-power benchmark—to fall for the past three months (the one stock to rise is a tiny fuse maker). The ETF itself is down 32% since the start of the year, compared with a 14% gain for the S&P 500

Interview:
-This week, Barron’s ventures into the realm of behavioral psychology and its connection to finance; because, it features an interview with Simeon Siegel, a senior analyst at BMO Capital Markets. Siegel has spent 15 years covering retailers and brands, winning accolades from investors and the media for his sharp observations about companies and consumers:
“I love anything that appeals to the emotional nature of spending,” he says. “When a company can turn a want into a need, and cause you to spend way more than you planned—that’s fascinating to me.” The timing of the interview is not coincidental, given that overspending is often on display during the fast approaching holiday shopping season and he also shared his thoughts on TJX Cos and Nike.

Tech Trader:
-Nintendo is changing from a simple videogame maker to a dominant entertainment conglomerate. Nintendo’s success is multifaceted: from game sales to theme parks and movie adaptations. Over the past week, Nintendo reported solid profit growth for the first half of its fiscal year and beat guidance thanks to robust game sales from its latest Mario and Zelda releases. Nintendo raised its fiscal 2024 net profit guidance to JPY 420B yen (about $2.8B) from JPY 340B. It also increased its forecast for software units to 185M million from 180M. But, Nintendo also announced that it’s developing a live-action movie based on its hit videogame franchise, The Legend of Zelda. The film will be co-financed by Nintendo and Sony Pictures Entertainment, with Sony
SONY

The Trader:
-Mercury Systems shares fell 12% to $32 after the company reported a quarterly adjusted earnings of $2 million, down 94% from the previous year and below forecasts for $29M. Revenue was $181M, down 20% versus the consensus estimate. Mercury Systems, a small-cap defense company, has a unique aerospace and defense business, producing electronics and chips found in high-tech military programs like F-35 fighter jets, Predator unmanned aerial vehicles, and Patriot surface-to-air missiles. The company has been investing in research and development and acquiring subsystems, which carry higher sales and profit margins but are more complex than its previous products.
-The energy sector's recent downturn contrasts with the robust fundamentals of individual oil stocks, highlighting the importance of trusting the market. Mid-cap US oil-and-gas companies meet Barron's criteria for growth, value, and momentum. Take Diamondback Energy, whose operations are concentrated in the West Texas Permian Basin. Shares trade for around seven times expected earnings over the coming year—versus 18 times for the S&P 500
—while analysts model earnings-per-share growth of 16% in 2024, four points better than the index. And Diamondback stock has outperformed the S&P 500 both this year and during the market pullback that began in August. The same is true of Targa Resources, Range Resources, and Southwestern Energy.

Features:
-Moody's Investors Service has lowered the US's credit rating from stable to negative, citing the federal deficit as a key driver. The firm retained its top AAA rating for US credit, unlike other major credit rating firms. Moody's said the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths. The agency also highlighted political polarization within US Congress as a concern, as it raises the risk that successive governments won’t reach consensus on a fiscal plan to slow the decline in debt affordability.
-Koch Industries, a company that focuses on zero-emissions, recently launched a unit called Koch Strategic Platforms (KSP) to invest over $1B in start-ups targeting lithium, batteries, and lithium-battery systems. In 2021, the market was enamored with electric vehicles and special-purpose acquisition companies (SPACs). KSP made nearly a dozen green investments through SPACs, providing a glimpse into the investing of America's second-largest private company. However, since early 2021, KSP's picks have posted an average loss of 58% on a cap-weighted basis. The profitable buyout of one firm, REE Automotive, has also seen a 67% loss on average. KSP was disbanded in November, and its holdings were sold to other Koch portfolios. Most investors have lost money on clean-energy stocks since early 2021, with the iShares Global Clean Energy exchange-traded fund down 56% due to rising interest rates and changing prices.

Europe:
-Organized labor has returned to the US, with successful strikes by the United Auto Workers and Hollywood writers and actors. However, 2023 has seen a shift in labor unrest in Europe, with the UK experiencing a post-Margaret Thatcher peak in February and Germany shutting down for a one-day "megastrike" in March. As autumn approaches, the winter-spring labor actions have been successful, with German postal workers receiving an average 11.5% pay increase in March and U.K. teachers receiving 6.5% in July. These union successes have rippled across economies, with wage hikes running at 7% to 8%. Governments have also taken direct action to cushion citizens from inflation, with Germany spending 2% of GDP on energy costs in 2022 and France and Italy each subsidizing 1% each.

Emerging Markets:
-No update this week

Commodities:
-No update this week

Streetwise:
-This week, Jack Hough speaks to David Herro, longtime manager of the Oakmark International fund, about this. Herro sees much value in European stocks. What gives Herro confidence in European stocks now is the comparison with bond yields. Hero likes Lloyds Banking Group, an insurance marketplace associated in America with sometimes dubious reports of celebrity body-part coverage. Herro also likes Bayer. Bayer has had a new CEO since June, American drug executive Bill Anderson, who promises a business shake-up and increased cash flow. “He’s just what the doctor ordered,” says Herro. Shares are 6.5 times earnings.

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-Wall Street traders and brokers are preparing to mitigate the impact of a ransomware attack on China's largest bank, which disrupted US Treasuries trading in the $25T market. The compromised systems forced ICBC Financial Services to send trading data to BNY Mellon.
-Israel's invasion of Gaza has resulted in over 11,000 deaths and a humanitarian catastrophe, raising alarm among the US and Palestinians. The US has backed Israel, but the situation is uncharted territory. Israel has launched the most devastating assault on Gaza since withdrawing in 2005, causing further strife for the civilian population and potential resurgence of Hamas.
-Moody’s has lowered its outlook on the US’s credit rating to “negative” from “stable”, pointing to a sharp rise in debt servicing costs and “entrenched political polarization”.
In a Friday update, the rating agency said that the change to its outlook reflected increasing downside risks to the US’s fiscal strength, which “may no longer be fully offset by the sovereign’s unique credit strengths”.
-The White House said Biden and Xi Jinping would meet in the San Francisco Bay area on Wednesday before they attend APEC. Washington and Beijing are trying to renew efforts to stabilize relations amid rising tensions over issues including Chinese military activity near Taiwan and US efforts to stop China from securing cutting-edge US technology.
-US secretary of state Antony Blinken worries that the Israeli armed forces are killing too many Palestinians. Blinken was speaking, during a visit to India, on Friday after Palestinian officials said the Israeli military had struck hospitals in the north of Gaza, where thousands of people have been sheltering from Israel’s bombardment of the besieged strip.
-After six months of strikes, the actors’ union declared an end to its record 118-day strike, directors, producers, publicists and actors started racing to make up for lost time. On Friday, directors began trying to reassemble far-flung casts to resume shooting on films that were halted in the spring. With actors now able to promote movies again, plans were activated for stars to appear at glitzy premieres and marketing campaigns leading into the awards season.
-Belgian hydrogen start-up Tree Energy Solutions said on Friday it would build a $4B plant in Quebec to produce synthetic natural gas with green hydrogen, as Canada tries to compete with the US in a race to secure cleantech investment. TES Canada will develop the project in Quebec, producing 70,000 tonnes of green hydrogen a year by 2028, among the largest committed in Canada to date.
-Three secretive, family-owned Texas oil companies have been thrust into the spotlight. Mewbourne Oil, Endeavor Energy Resources and CrownRock are the biggest privately owned producers in the Permian Basin of Texas and New Mexico, the engine room of America’s oil industry. These three companies have become prime acquisition targets.
-Chancellor Olaf Scholz has admitted Germany is struggling to sign defense contracts because of uncertainty over the government’s commitment to future funding plans even as he pledged to “guarantee” hitting NATO spending targets for the next decade and a half. Addressing military officials, industry executives and think-tanks at a conference organized by the defense ministry on Friday, the chancellor said he recognized the urgent need for his government to clarify its security spending plans in the medium and long terms.

NEW YORK TIMES
-Gaza City hospitals are caught in deadly crossfire. As they fight Hamas, Israeli forces are “close in” on hospitals. The chief U.S. diplomat said “far too many Palestinians have been killed.”
-Israel has lowered the Oct. 7 death toll estimate to 1,200.
-Harvard, Columbia and Penn have pledged to fight antisemitism on campus. Columbia suspended two pro-Palestinian student groups.
-The Tunnels of Gaza: a maze of tunnels extends below the Gaza Strip, allowing Hamas fighters to stay out of sight and smuggle weapons and goods.
-Violence in the West Bank escalated to nearly four times its level before Oct. 7, leading to more than 175 deaths.
-Israel is considering a deal for Hamas to release all civilian hostages in Gaza, officials say.
-President Emmanuel Macron of France mourned civilian deaths and urged an Israeli cease-fire.
-Chris Christie, the former governor of New Jersey who is running for president, will travel to Israel.
-Thousands of pro-Palestinian protesters calling for a cease-fire shut down traffic in Midtown Manhattan.
-Germany’s stifling of pro-Palestinian protests is pitting its historical guilt against freedom of speech.
-The FBI has seized NYC Mayor Eric Adams’s phones as campaign investigation intensifies. Agents took the New York mayor’s devices amid an investigation into whether Turkey’s government funneled money to his campaign, people close to the matter said.
-Brianna Suggs, whose home was raided by the FBI, was an unusual choice to run Eric Adams’s campaign fund-raising.
-With Sen. Joe Manchin Out, Democrats’ Path to Holding the Senate Is Narrow
While Democrats will be on defense in many races, Republicans face some messy primaries and a recent history of extreme candidates who have lost key contests.
-Before world leaders arrive, San Francisco races to clean up. The Asia-Pacific Economic Cooperation conference comes at a pivotal moment for the city as it struggles to rebound from the pandemic.
-Treasury Secretary Janet Yellen said the US wanted a “healthy economic relationship” with China.
-Representative Elise Stefanik filed an ethics complaint attacking the judge presiding over Donald Trump’s civil fraud trial.
-Hollywood actors to start voting Tuesday on contract deal. The SAG-AFTRA board voted on Friday to send the agreement with studios to its members for a ratification process that will end in early December.

NY POST
The FBI seized Mayor Eric Adams’ electronic devices early this week as part of a federal probe into his campaign fundraising, The Post has learned. The feds seized the electronics — which included at least two cellphones and an iPad — in connection to an investigation into whether Hizzoner’s 2021 campaign colluded with the Turkish government and others to direct money into his mayoral effort, sources told The Post after the news was first reported by the New York Times. Adams’ campaign attorney Boyd Johnson said the mayor was cooperating with federal authorities and had already reported that a review found “an individual had recently acted improperly.”
-Internal data from Boeing, was published online on Friday by Lockbit, a cybercrime gang which extorts its victims by stealing and releasing data unless a ransom is paid. The hackers in October said they had obtained “a tremendous amount” of sensitive data from the aerospace giant and would dump it online if Boeing didn’t pay a ransom by Nov. 2.
According to a post on Lockbit’s website, the data from Boeing was published in the early hours of Friday morning. The files, which Reuters has not independently verified, mostly date to late October. In a statement, Boeing confirmed that “elements” of the company’s parts and distribution business had experienced a cybersecurity incident. “We are aware that, in connection with this incident, a criminal ransomware actor has released information it alleges to have taken from our systems,” Boeing said. “We continue to investigate the incident and will remain in contact with law enforcement, regulatory authorities, and potentially impacted parties, as appropriate.”

FT : Oil majors call on Washington and Brussels to intervene in LNG dispute

Oil majors call on Washington and Brussels to intervene in LNG dispute
Shell, BP and Edison accuse Venture Global of worsening EU gas crisis by refusing to honour multibillion-dollar contract

Shell and BP have asked Washington and Brussels to intervene in a bitter dispute with Venture Global LNG, warning the company’s refusal to honour a multibillion-dollar liquefied natural gas supply contracts threatens Europe’s energy security.

In correspondence seen by the Financial Times, the oil majors accuse the US LNG provider of “misconduct” for withholding cargo agreed under long-term supply contracts and instead selling LNG on the spot market.

Shell alleges Venture Global’s “opportunistic” action has enabled it to reap an $18bn windfall because of a spike in gas prices following Russia’s invasion of Ukraine while denting its ability to meet critical energy supply needs in Europe.

The accusations have sparked a war of words, with Venture Global branding as “outrageous” the companies’ “request for interference” from the governments in binding contracts.

The supermajors, alongside Spain’s Repsol and Italy’s Edison, are among several foundation customers embroiled in contract arbitration with Venture Global. Foundation customers agree long-term contracts that help LNG providers attract financing to build their projects.

The European energy groups are all seeking to force the US company to deliver the contracted cargo or pay financial penalties under a process that could take years.

The call for intervention from the joint EU-US Task Force on energy security — set up after Russia’s invasion of Ukraine to spur US gas exports to Europe — marks a significant escalation of the dispute. The body is headed by senior officials, including Ditte Juul Jørgensen, director-general for energy at the European Commission, and Amos Hochstein, US President Joe Biden’s senior adviser on energy.

Shell said in a letter to the officials seen by the FT: “Such short-sighted, unprecedented conduct sets a concerning precedent that could erode market confidence and delay investment in the US LNG export infrastructure that is still critically needed to support Europe’s energy security.”

The letter authored by Steve Hill, executive vice-president of Shell Energy, and dated October 27 urges the task force to press Venture Global to cease its “unjustifiable and damaging” actions and honour its long-term supply agreements.

A separate letter from BP concurred with Shell’s position. “Venture Global’s conduct has shaken confidence in the trustworthiness of American LNG suppliers at a critical time,” wrote Carol Howle, BP’s executive vice-president of trading and shipping.

In its own letter to the officials, dated November 10, Venture Global said it was “honouring its contractual obligations to its long-term customers in strict conformity with its long-term contracts”.

“It is nothing more than the latest in a series of unsuccessful attempts to bully an industry newcomer into waiving its contractual rights in order to increase their own profits beyond recent record highs,” Mike Sabel, the company’s chief executive, and Bob Pender, co-chair, wrote.

Venture Global’s first LNG facility, Calcasieu Pass, located on the Gulf coast in Louisiana, commenced producing LNG in January 2022 and exported its first cargo two months later. But the company argues it has not yet started full commercial operations and is not obliged to supply foundation customers until the commissioning is completed.

It has declared “force majeure” on its contractual commitments on the grounds that the facility’s power supply equipment needs repair.

Shell said the company’s excuse does not withstand scrutiny, as the facility has delivered more than 200 cargo shipments to customers. The nearly 600-day commissioning period for Calcasieu Pass defies industry standards, it added.

In its letter, it alleges Venture Global’s conduct “threatens to undermine the very objectives” of the task force, which is to boost Europe’s energy security. Venture Global retorted that as one of the few companies to successfully finance, commercialise and build capacity it has been “integral” to the increase of US gas exports.

Edison has also written to the task force requesting it “use all of its powers” to force Venture Global to supply the cargo. It accused the company of “profiteering” at the expense of European customers.

Edison cites a report by Wood Mackenzie which forecast Venture Global stands to gain $17.5bn from the short-term market sales, compared to $2.8bn it would receive under long-term contracts with foundation customers.

“This issue is no longer a private dispute between companies,” said Edison in a letter seen by the FT. “Rather it is exacerbating an energy crisis affecting the lives of everyday European citizens. It can no longer be overlooked.”