TheChek News Flow

Reconnecting

As the leaders and ministers of nine northern European countries meet in Belgium’s Ostend to talk wind power today, the UK and the Netherlands will announce a new electricity link as part of efforts to boost green energy, writes Laura Dubois.

Context: European countries want to accelerate the rollout of green energy following Russia’s full-scale invasion of Ukraine, and Moscow cutting off most of its gas supplies to Europe. At a previous wind power summit last year, four countries pledged to produce 65 gigawatt of offshore wind power by 2030 and 150 gigawatt by 2050.

The second edition of the summit will focus on how to increase wind power capacity, Belgian premier Alexander De Croo told journalists last week. “This is not a commitment summit. It’s an action summit,” De Croo said.

Part of that is the new interconnector. The undersea cable dubbed “Lion Link” is to connect the UK and the Netherlands to a Dutch wind farm from the early 2030s onwards and will carry 1.8 gigawatts of energy, according to statements by the two governments.

The planned investment for the connector is €1bn, a person familiar with the talks said.

“This new connection further boosts energy security and energy independence in Europe,” said Dutch energy minister Rob Jetten. It would supply electricity “enough to power 2mn households,” he added.

“We are bolstering our energy security and sending a strong signal to Putin’s Russia that the days of his dominance over global power markets are well and truly over,” said UK energy security secretary Grant Shapps.

The UK already has eight interconnectors with European countries, including the Netherlands, with six more approved by UK regulator Ofgem to be built over the next two years.

Aside from the Netherlands, Belgium and the UK, the summit will be attended by leaders and ministers from Ireland, Germany, Denmark, Luxembourg, France and Norway as well as the EU Commission.

As more countries are taking part than last year, the pledges will rise to 120 gigawatts in 2030 and a minimum of 300 gigawatts in 2050, according to a document seen by the FT.

Representatives from the offshore renewable industry, meanwhile, called for additional investments by governments and the EU to reach the targets.

“Our industry is not large enough today to deliver the nine governments’ commitments and meet the rising demand for renewable electricity and renewable hydrogen,” some 100 companies and organisations wrote in a joint declaration.

DAX:

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Macro :

- ECB to Raise Rates Until Wage Growth Slows, Wunsch Tells FT

- Equities Face Challenge From Debt Ceiling and Inflation: In Play

- Citi Says Japan Investors Turn to Dollar as Ueda Cools BOJ Bets

Keep an eye on :

- AB FP : AB Science Offers Up to EU15m of Shares

- ARM LN : SoftBank-Owned Arm to Build Prototype Semiconductor, FT Says

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- BOL FP : Bollore 1Q Revenue EU4.43B

- ALBPS FP : *BIOPHYTIS FILES $100M MIXED-SECURITIES SHELF

- CO FP : Casino Gets EU1.1B Capital Hike Offer From Holder Kretinsky (1)

- CSGN SW : Credit Suisse Borrowed CHF108b from SNB

- GAM SW : GAM Holding 1Q Net Outflows Investment MGMT CHF600M

- GAM SW : GAM Held Takeover Talks With Zürcher Kantonalbank, FT Says

- GKS GY : GK Software Says Minimum Threshold for Fujitsu Offer Exceeded

- GLEN LN : Klein Emerges From Credit Suisse Saga With Glencore-Teck Role

- GLEN LN : Glencore CEO’s First Big Move Is Chasing Mining’s Toughest Prize

- ICAD FP : ICADE 1Q Revenue EU286.7M Vs. EU324.5M Y/y

- INGA NA : ING Sues ICBC for Copper Deal Losses, Seeks $170 Million: FT

- ITV LN : UK Broadcaster ITV Jumps After Betaville ‘Uncooked Alert’

- KAPE LN : Unikmind Intends to Declare Kape Offer as Unconditional

- LDO IM : Leonardo Shareholder Group Nominates Four Board Candidates

- OR FP : Bettencourt-Meyers Family Firm Takes Stake in April, Echos Says

- NOVN SW : FDA Approves Novartis Facility for Production of Pluvicto in US

- NOVOB DC : Eli Lilly, Novo Nordisk, Sanofi CEOs to Speak at Senate Hearing

- PHIA NA : Philips Sees €575m in Provisions for Recall Compensation

- RTO LN : Rentokil CEO Ransom Sells £6.3m Shares to Fund Property Purchase

- SZG GY : Salzgitter Prelim 1Q Pretax Profit Beats Estimates

- STG DC : Scandinavian Tobacco Acquires XQS for about DKK150M

- SOW GY : Silver Lake to Buy Software AG for EU30/Share in Cash: Snapshot

- TWEKA NA : TKH 1Q Organic Revenue +8.1%

- VAR NO : Var Energi 1Q Ebit $1.43B Vs. $1.53B Q/Q

- DG FP : Vinci Gets €7B Contract for Three Wind-Farm Energy Converters

- VIV FP : Vivendi Reports Quarterly Sales Growth, Agreement to Sell Editis

- VPK NA : Vopak Signs Pacts for New Debt Issuance of €400M Equivalent

- VOW GY : VW to Invest €4.8 Billion Until ‘30 in Canada Battery Factory

Continuing drought conditions leave traders and analysts worried about this year’s output

A lack of rain in Spain has pushed prices for olive oil to record levels, with analysts warning that a particularly dry summer could lead to even lower crop yields later this year.

Olive oil prices have surged almost 60 per cent since June to roughly €5.4 per kilogramme, on the back of a severe drought in Europe that last year ruined olive crops across the continent.

Spain, the largest olive oil producer, was hit particularly hard. The country’s farmers typically produce half of the world’s olive oil, though annual supplies have roughly halved to about 780,000 tonnes in the past 12 months.

“In 20 years in the industry I have never seen these prices”, said Vito Martinelli, grains and oilseeds analyst at Rabobank. Last year “was a disaster” for Spain, and the crop in Italy “was also bad, along with other countries in the Mediterranean”. 

2022 marked the driest for Italy since 1800, said Italian data analysis firm Centro Studi Divulga.

The prolonged drought conditions in Spain are casting doubt about a production rebound this year. Last month was Spain’s second warmest March this century and the second-driest, according to the country’s meteorological agency.

April is set to be the driest on record. The Spanish weather forecaster this week said “not a single drop” of rain fell across more than half of the country in the first 17 days of April, with rainfall 23 per cent below normal since the start of the hydrological year in October.

Unusually dry weather this summer could keep prices elevated. “Sporadic rains in Andalucía and Spain in general are not thought to be anywhere near enough”, said Kyle Holland, oilseeds and vegetable oils analyst at Mintec, the commodity data firm.

Olive oil is harvested in the Mediterranean area between October and February, meaning that “if it does not rain very soon, we are going to have a poor crop again”, Holland added. “Good quality olive oil supplies are also lessening as there isn’t much around and buyers naturally want good qualities . . . At this pace, market players are saying we will be lucky to see out the rest of the season with good oils.”

Others are less vexed. “The increase in prices, especially in Spain, is good news because finally, perhaps, the race to the bottom that has damaged all European producers and depressed the whole market is over”, said David Granieri, president of the National Union of Olive Producers.

“In these conditions, we believe that the producers who in recent years have multiplied their efforts to protect biodiversity and produce high quality oils can finally be valued as they deserve”.

Company to build test chip with factory partners, stoking fears it could in future compete with its biggest customers

Arm is developing its own chip to showcase the capabilities of its designs, as the SoftBank-owned group seeks to attract new customers and fuel growth following a blockbuster IPO later this year.

The company will team up with manufacturing partners to develop the new chip, according to people briefed on the move who describe it as the most advanced chipmaking effort the Cambridge-headquartered group has ever embarked upon.

The effort comes just as SoftBank seeks to drive up Arm’s profits and attract investors to a planned listing on New York’s Nasdaq exchange.

The company traditionally sells its blueprint designs to chip manufacturers, rather than getting involved directly in the development and production of semiconductors itself. The hope is that the prototype will allow it to demonstrate the power and capabilities of its designs to the wider market.

Arm has previously built some test chips with partners including Samsung and Taiwan Semiconductor Manufacturing Co, largely aimed at enabling software developers to gain familiarity with new products.

However, multiple industry executives told the FT that its newest chip — on which it started work in the past six months — is “more advanced” than ever before. Arm has also formed a bigger team that will execute the effort and is targeting the product at chip manufacturers more than software developers, they said.

The company has built a new “solutions engineering” team that will lead the development of these prototype chips for mobile devices, laptops and other electronics, according to people briefed on the move.

The solutions engineering arm is led by chip industry veteran Kevork Kechichian, who joined Arm’s top executive team in February. He has held previous roles at chipmakers NXP Semiconductors and Qualcomm, overseeing the development of the San Diego-based company’s flagship Snapdragon chip.

The team will also expand on Arm’s existing efforts to enhance the performance and security of designs, as well as bolster developer access to its products.

Rumblings about Arm’s chipmaking moves have stoked fears in the semiconductor industry that if it makes a good enough chip, it could seek to sell it in the future and thereby become a competitor to some of its biggest customers, such as MediaTek or Qualcomm.

People close to Arm insist there are no plans to sell or license the product and that it is only working on a prototype. Arm declined to comment.

Any move to build chips for wider commercial sale would undermine Arm’s position as the “Switzerland” of the semiconductor industry, selling designs to almost all mobile device chipmakers while not directly competing with them.

Its neutral model has led to its products being found in more than 95 per cent of smartphones, with customers including Qualcomm, MediaTek and Apple.

“Working on intellectual property is one thing but really designing and working with production partners to turn those efforts into physical chips is a totally different arena. It’s more capital intensive,” a former Arm executive with knowledge of the effort told the FT. “At some point in the future [Arm] will definitely need returns to justify that massive investment.”

SoftBank’s push for growth has led Arm to seek out changes to its commercial practices. The chip designer has sought to increase prices and overhaul its business model by charging royalties to device-makers rather than some of its chipmaker customers, the FT reported last month.

Arm acknowledged in its annual report published last week that a principal risk to its business was the “significant concentration” in its customer base. Arm’s top 20 customers accounted for 86 per cent of revenues last year, so “the loss of a small number of key customers could significantly impact the group’s growth”.

That warning came with Arm currently embroiled in a bitter legal dispute with Qualcomm, one of its largest customers, after it accused the chipmaker of using some of its designs without having procured the necessary licence.

There are also widespread concerns in the industry that in-house chips developed by Apple, Arm’s largest customer, are outperforming those made by competitors such as Qualcomm and MediaTek.

“Google thought it could demonstrate the world’s best Android OS so it built the Pixel phone. Microsoft thought it was the master of Windows so it built Surface laptops. So, naturally, Arm thinks it can build best-in-class Arm-based chips, better than chip developers out there,” said Brady Wang, a semiconductor analyst with Counterpoint Research.

But making chips is even more challenging than building devices, Wang said. “It will need generation after generation of development efforts.”