FT : European wind industry attacks ‘absurd’ Danish halt to approvals

European wind industry attacks ‘absurd’ Danish halt to approvals
Turbine makers caught out by suspension of scheme owing to EU state aid fears

The European wind industry has called a sudden Danish government decision to suspend approvals for all offshore wind farms “absurd” in light of the EU’s push for a rapid rollout of clean energy supplies.

Denmark has become a leader in wind energy relative to its size thanks to its so-called “open door” programme for approving renewables projects, but this was called to a halt on Monday after the government cited concerns that it violates the EU’s state aid rules.

The interruption comes at a crucial time for Europe as it tries to protect its clean technology industries in response to the billions of dollars of incentives available to clean energy projects through the US’s Inflation Reduction Act.

The European Commission is also trying to push member states to hit higher targets and speed up permitting procedures for new wind and solar power projects as the bloc tries to wean itself off Russian natural gas.

Giles Dickson, chief executive of WindEurope, said that “pausing the established Danish approach to offshore wind development now will seriously undermine all these targets”.

It would also create uncertainty about the substantial wind energy projects that were already under development in the North and Baltic seas.

“That’s completely absurd — especially at a time when the EU is easing its state aid rules to allow for more flexible investments in renewables,” he added.

Rasmus Errboe, chief executive of Orsted Europe, which operates five offshore wind farms in Denmark, called the move “surprising and regrettable”.

“We apparently won’t be able to progress quickly with the largest buildout of offshore wind in Danish history, at a time where Denmark’s two largest offshore wind developers both are ready to invest heavily in the buildout.”

The European wind industry has been clamouring for policymakers to accelerate the slow pace of permissions for new projects. At the same time, it is struggling with rising materials costs and supply chain disruption that has cramped profitability and forced cuts to its workforce.

It can take up to 10 years for onshore wind schemes to receive permits, the think-tank Ember found in a study last year, even though EU legislation says the process should take no more than two years.

EU policymakers have pledged to tackle the issue that has led to delays and cancellations for turbine makers, but the industry has said it has yet to experience a change in the grinding bureaucratic process.

The cost inflation and government interventions in energy markets since Russia’s invasion of Ukraine have also slowed development. Financing for new offshore projects in Europe fell from €27.7bn in 2020 to €16.6bn in 2022, according to WindEurope figures. No investment in offshore wind was made in 2021, it said.

Danish authorities contacted the commission about the future of its scheme last month, after which they were advised that it could be against state aid rules.

Denmark’s climate and energy minister Lars Aagaard said in a statement that the suspension of approvals was “a serious situation for the green transition and especially for the market players who are ready to invest in this form of offshore wind”.

The European Commission responded that it was “in contact with the Danish authorities on this matter” and that it was up to member states to “design measures in line with State aid rules and its policy objectives”.

Last year, commission president Ursula von der Leyen pledged alongside leaders from Germany, Belgium, the Netherlands and Denmark to increase offshore wind capacity in the North Sea by 65GW by 2030 and to “at least” double that by 2050.

“The Danish approach to offshore wind is workable and delivers exactly what citizens and companies all over Europe urgently need: more renewable electricity at low cost,” Dickson said.

FT : UAE grants Russian lender rare banking licence

UAE grants Russian lender rare banking licence
Move would meet growing demand for financial services from Russian expatriates in the Gulf state

The United Arab Emirates has approved a licence for Russia’s MTS Bank, a move that risks exacerbating concerns among western nations over the emergence of the Gulf state as a potential financial haven for Moscow.

Officials and executives briefed on the matter said the decision by the central bank to issue the banking licence to the lender, which is not subject to western sanctions, would meet growing demand for financial services from Russian expatriates. “It’s all about the business case [and] the number of Russians living here now,” said one person briefed on the decision.

Tens of thousands of Russians have settled in the UAE, mainly in Dubai, in the 12 months since the Ukraine invasion to escape financial restrictions in Europe or avoid the military draft back home. Many have complained of difficulty in opening bank accounts, especially corporate facilities, at those lenders already operating in the country. The Russian lender is the first foreign bank in several years to receive a licence in the UAE.

The US and European nations have become concerned about the UAE’s financial interaction with Russia since sanctions were ramped up after the invasion. Brian Nelson, US Treasury under-secretary for terrorism and financial intelligence, raised the issue of the Russian bank’s licence on a visit to Abu Dhabi last week. “[He] conveyed broad concerns about financial connectivity with Russia, even via non-sanctioned banks,” said a person familiar with the discussions.

Nelson met with government counterparts and financial institutions to convey the US’s determination to enforce its sanctions aggressively, according to a Treasury statement ahead of his trip. “Permissive jurisdictions” risk losing access to developed markets for conducting business with sanctioned entities or failing to carry out effective due diligence, the statement added.

MTS Bank, a subsidiary of Russia’s largest mobile operator, and the UAE central bank declined to comment.

The development comes at a sensitive time for the UAE, which was last year placed under enhanced supervision by the Financial Action Task Force, the global anti money-laundering watchdog. The Middle East’s financial hub has hoped to demonstrate that it has tightened financial compliance and boosted criminal enforcement sufficiently to come off the FATF’s so-called grey list. A decision is set to be made later in February.

The presence of assets, such as yachts, belonging to sanctioned Russian oligarchs have raised concerns about deeper illicit financial links between the UAE and Russia.

Abu Dhabi officials have rejected these concerns, saying it endeavours to halt financial flows from sanctioned Russian entities while refusing to discriminate against non-sanctioned companies and individuals.

The authorities urge financial institutions to enforce western sanctions to reduce the risk of losing correspondent banking relationships with US and European lenders.

The Gulf state, frustrated at a perception of the US’s detachment from the Middle East, has been rebalancing its relations towards a multipolar world view that includes Russia, which has engaged aggressively in the region, as well as China, a growing trading and investment partner.

One person briefed on the MTS’s operations said the licence would ease access to bank accounts for Russians and open a new channel for the flow of money into the UAE.

Ilya Filatov, the bank’s chair, visited the UAE last week as the lender prepared to roll out its services in the coming months, the person said.

Rumours of the bank’s imminent arrival have spread in the UAE’s Russian community. “Everyone is trying to track them down here,” said one banker. “This is going to be a game-changer.”

FT : The mystery of Americanas’ missing billions

The mystery of Americanas’ missing billions
A $3.9bn financial hole, a chief executive gone after less than two weeks on the job, a trio of billionaires under fire from banks, and a Big Four auditor that appears to have missed the signs ...

Americanas, the century-old Brazilian retailer, had been keen to modernise its operations and keep pace with more tech-savvy rivals. But the sweeping accounting scandal enveloping the group, which has plunged the company into bankruptcy and shaken corporate Brazil, isn’t quite the exposure it had been hoping for.

The FT’s Bryan Harris broke down the debacle earlier this week: it all began in January when Americanas’ brand new chief Sérgio Rial — the former CEO and chair of Santander Brasil — abruptly quit alongside chief financial officer Andre Covre after the company reported accounting “inconsistencies” of more than R$20bn ($3.9bn).

As its share price plunged, a bitter fight broke out between Americanas — long controlled by private equity firm 3G Capital’s billionaire founders Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira — and its creditors, which include Banco Bradesco and investment bank BTG Pactual.

BTG, which had been forbidden by a Rio court from seizing assets, was quick to launch grenades at Americanas’ powerful shareholders.

“The three richest men in Brazil (with assets valued at R$180bn), anointed as kind of demigods of ‘good’ world capitalism, are caught with their hands in the cash register,” said BTG lawyers in a filing to the court.

Following a two-week standstill, and days after Americanas filed for bankruptcy protection, the three men came out with a statement that they hadn’t been aware of accounting issues at the company and would never support such “manoeuvres”.

One of their main lines of defence: The retailer had employed one of the “most respected independent auditing firms in the world, PwC”, which signed off on Americanas’ last full set of accounts in 2021.

The Brazilian Association of Investors, aka Abradin, has called for regulators to investigate Americanas and PwC, calling the scandal a “multibillion fraud”. PwC declined to comment on any aspect of the case including the fraud allegations.

But probes by Brazil’s Securities Commission, known as the CVM, could take months if not years, as the agency grapples with steep budget cuts.

The scandal has amplified scrutiny on Americanas’ three billionaire backers. The trio rose to fame in the late 1980s after acquiring Brazilian brewer Brahma, which they then parlayed into the world’s largest beer company, Anheuser-Busch InBev, after three decades of aggressive dealmaking.

Lemann, Telles and Sicupira remain controlling shareholders of AB InBev. (Fun fact: as a young executive at Shell in Brazil, AB InBev’s former boss Carlos Brito convinced Lemann to fund his MBA at Stanford.) Through 3G, they also hold stakes in Kraft Heinz and the holding company that controls Burger King.

Until the scandal at Americanas, the three financiers seemed to be gradually bowing out of the spotlight. Lemann, a former Brazilian tennis champion, stepped down from Kraft Heinz’s board in 2021 at the age of 81.

Now, Americanas’ creditors are threatening to go after the 3G founders’ personal wealth if they don’t come up with the cash to rescue the company, Bloomberg reported last week.

Analysts say their kingmaker reputations in Brazil could be at risk.

Said Geraldo Affonso Ferreira, chair of asset manager ESH Capital’s advisory board: “It raises questions about the three billionaires. Could they be doing such a thing at Kraft Heinz [in which 3G Capital owns a stake] and others?”

>>> US After Hours Summary: NEWR +15.3%, FTNT +12.9%, ENPH +7.2%, KD +5.5% highe

After Hours Summary: NEWR +15.3%, FTNT +12.9%, ENPH +7.2%, KD +5.5% higher on earnings; LUMN -16.1%, BKH -5.7%, CMG -4.5% lower on earnings; MANU +12.2% jumps on DailyMail report of a Qatari bid soon

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: NEWR +15.3% (also William Hill is standardizing on New Relic), FTNT +12.9%, ENPH +7.2%, KD +5.5%, TENB +3.6%, RXO +3.3%, HIW +3.2% (also files mixed securities shelf offering), RAMP +2.8%, WFRD +2.5%, ITUB +2.5%, INSP +2.3%, EXEL +2.1%, VFC +2% (also cuts dividend; also commences strategic review for its Global Packs business), PEAK +1%, WU +0.9%, ZWS +0.6% (also announces $500 mln share repurchase auth), AIZ +0.1%, VOYA +0.1%

Companies trading higher in after hours in reaction to news: MANU +12.2% (Qatari investors will bid for MANU within days, according to DailyMailUK), PANW +3.8% (in sympathy with strong FTNT earnings), NCNO +3.5% (announces reseller agreement with Rich Data), BBBY +3.3% (announces closing of public equity offering; provides strategic update), AOSL +1.2% (license agreement with leading power semiconductor automotive supplier), EBAY +0.7% (announces 4% workforce reduction; plans to simplify structure), GPOR +0.6% (provides Q4 production update), MSFT +0.6% (plans to release ChatGPT technology for other companies to customize, according to CNBC), KREF +0.1% (increases share repurchase auth by $100 mln)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: LUMN -16.1%, BKH -5.7%, JKHY -4.9%, CMG -4.5%, SSNC -4.3%, PRU -2.7% (also authorizes new $1 bln share repurchase program), CCK -2.4%, PAYC -2.3%, VSAT -2.1%, RRR -2%, SIMO -2%, HRB -1.8%, ICHR -1.6%, FMC -1.4%, CMP -1%, ILMN -0.9%, AMCR -0.8% (also authorizes additional $100 mln share repurchase program), YUMC -0.8% (also increases dividend), EHC -0.6%, ESS -0.2%, FRSH -0.2%, VRTX -0.2%, NCR -0.1%

Companies trading lower in after hours in reaction to news: XPOF -9.5% (commences 5 mln share offering by selling shareholders), TMCI -6.2% (commences $100 mln stock offering; also files mixed securities shelf offering), RXST -5.6% ($40 mln stock offering) DT -5.3% (commences 15 mln share offering by selling shareholders), AVXL -2.5% (stock offering), ARNC -1.9% (reports loss on sale of Russian ops), FRC -1.9% (stock offering), OPNT -1% (CFIUS approves Opiant merger), ASR -0.2% (reports January 2023 traffic), MET -0.2% (to acquire Raven Capital Mgmt)

>>> US Close Dow +0.78% S&P +1.29% Nasdaq +1.90% Russell +0.76%

Closing Stock Market Summary

The stock market kicked off today's session on a mixed note. The main indices oscillated around their flat lines in the first half of the day as investors awaited Fed Chair Powell's "Conversation with David Rubenstein" at the Economic Club of Washington, D.C. at 12:40 p.m. ET.

Mr. Powell didn't say anything too surprising, but the market responded with some volatile price action nonetheless. The main indices initially shot higher, a move that was attributed to Mr. Powell's relatively calm demeanor when asked about Friday's stronger than expected January jobs report.

That initial upside momentum quickly gave way to selling pressure, though, after Mr. Powell said that the Fed will react to the incoming data and will do more rate hikes if the data suggest that is necessary. That disclaimer has been provided by him in the past, however, so it was not surprising either. He also said that the Fed has a significant road ahead to get inflation down to 2.0% and that he doesn't think it will be a quick move to 2.0%.

The aforementioned reversal in the major indices saw the S&P 500 breach support at the 4,100 level, where buyers stepped in (again) and a technical rebound effort took root, supported by short-covering activity. Ultimately, the main indices closed near their best levels of the day. 

The late afternoon push higher also coincided with Microsoft's (MSFT 267.56, +10.79, +4.2%) announcement of its new AI-powered Microsoft Bing search engine and Edge browser. Other AI peers traded up in solidarity, bolstering the broader market. Alphabet (GOOG 108.04, +4.57, +4.4%), Baidu (BIDU 160.22, +17.40, +12.2%), and NVIDIA (NVDA 221.73, +10.84, +5.1%) were standouts in that regard. 

Most of the S&P 500 sectors closed with a gain led by energy (+3.1%), communication services (+2.5%), and information technology (+2.5%). The consumer staples (-0.4%), real estate (-0.3%), and utilities (-0.1%) sectors were alone in the red by the closing bell. 

The Treasury market also experienced some whipsaw price action as Fed Chair Powell spoke, but yields ultimately settled at levels seen before the commentary started. The 2-yr note yield was unchanged at 4.46% and the 10-yr note yield rose four basis points to 3.67%.

  • Nasdaq Composite: +15.7% YTD
  • Russell 2000: +12.0% YTD
  • S&P Midcap 400: +11.0% YTD
  • S&P 500: +8.5% YTD
  • Dow Jones Industrial Average: +3.1% YTD

Reviewing today's economic data:

  • December Trade Balance -$67.4 bln ( consensus -$68.5 bln); Prior was revised to -$61.0 bln from -$61.5 bln
    • The key takeaway from the report is that it reflected a slowdown in global trade, evidenced by a $2.1 billion decline in the three-month moving average for the goods and services deficit to $68.6 billion that resulted from a $2.6 billion decrease in average exports and a $4.7 billion decrease in average imports.
  • Consumer credit increased by $11.6 bln in November (consensus $24.5 bln) following an upwardly revised $33.1 bln (from $27.9 bln) in November.
    • The key takeaway from the report is that total consumer credit expansion slowed in December, with higher interest rates crimping loan demand. Nonrevolving credit saw its smallest expansion ($4.3 billion) since August 2020.

Looking ahead to Wednesday, market participants will receive the following economic data:

  • 7:00 ET: Weekly MBA Mortgage Index (prior -9.0%)
  • 10:00 ET: December Wholesale Inventories ( consensus 0.5%; prior 1.0%)
  • 10:30 ET: Weekly crude oil inventories (prior 4.14 mln)

WWD : Bain: China’s Luxury Market Contracted 10 Percent in 2022

Bain: China’s Luxury Market Contracted 10 Percent in 2022
The consultancy firm expects growth in the sector to resume in 2023, with sales returning to the 2021 level as soon as the first half.

LONDON — With waves of tense lockdowns and rounds of crackdowns on the tech, real estate and entertainment sectors in 2022, China’s personal luxury sales contracted for the first time in five years, a Bain report published Tuesday revealed.

The “Setting a New Pace for Personal Luxury Growth in China” report estimated that spending in the personal luxury space in China shrank by 10 percent in 2022.

Almost all luxury categories were impacted, but those with higher online penetration, such as luxury beauty, performed better than those with a smaller online presence.

The report said the watch market saw the sharpest decline, with sales falling by 20 percent to 25 percent from 2021. Fashion and lifestyle categories saw a 15 percent to 20 percent decline, while jewelry and leather goods performed slightly better, contracting 10 percent to 15 percent.

A few brands managed to stay flat or grew during the challenging market environment.

Bruno Lannes, senior partner at Bain & Company in Shanghai, said three factors contributed to their success. “First, bigger brands outperformed smaller players on average. Second, brands with iconic portfolios did better than those with trendy or seasonal merchandise and finally, brands with a higher concentration of Very Important Clients, or VICs, fared better.”

Bain said some brands achieved higher VIC sales than the global average of 40 percent in China, as the economic slowdown affected entry-level luxury consumers more than ultra-high net worth ones.

China’s thriving duty-free sector, which is mainly driven by a dozen malls on Hainan island, was also heavily impacted in 2022, with sales down 30 percent year-over-year to 35 billion renminbi, or $51.5 billion, the report said.

As a result of the decline, China Duty Free Group, the nation’s largest player in the market, and its affiliates have been aggressively pushing for domestic e-commerce options to offset declines.

Price hikes in the Chinese market have also helped some brands to recoup their losses. Brands’ efforts to harmonize the price between different markets pre-pandemic were thrown out of the window as China became isolated from the rest of the world in 2020. Only a few maintained a global pricing strategy during the pandemic.

The report found that there is a price gap of 25 percent to 45 percent between China and Europe in the leather segment and 25 percent to 345 percent in the jewelry and watches sectors. The price gap for entry-level products is larger than high pricepoint items.

With China reopening on Jan. 8, with all COVID-19-related rules being scrapped, Bain expects that growth in the luxury sector will resume in 2023.

“We believe 2022 was a reset, not a harbinger of more distress,” the report said. “The fundamentals of consumption in China are still intact. Compared to other emerging markets, China is a behemoth for luxury growth. It has a larger number of middle- and high-income consumers, and those populations are projected to double by 2030. In the mid to long term, ‘the next China’ is China.”

Weiwei Xing, partner at Bain & Company in Hong Kong, said with luxury consumption recovering as COVID-19 subsides, mall traffic improves and consumer sentiment rebounds, she expects to see “2021 sales levels sometime between the first and second half of 2023.”

The report also believes that Hainan will rebound and become a key travel destination again, even with the return of international travel.

For those who return to Paris, Milan and London from China, Bain urged brands to adapt and cater to their distinct shopping behaviors and preferences.

“Differences between the Chinese and global luxury market will widen, especially around digitalization, the retail environment, cultural references and relationships with brands. Brands that understand the nuances of the China luxury market will succeed over time,” the report said.

Xing also pointed out that “while optimism abounds, there are also risks. Brands need to resolve pricing gaps between China and Europe before international travel resumes. In addition, as more Chinese high-net-worth individuals are residing outside of China, luxury brands must deliver excellent experiences everywhere in the world.”

FT : BNP Paribas: redeployment of capital promises to drive growth

BNP Paribas: redeployment of capital promises to drive growth
French bank has proved itself to be a steady earner

Optimism is again in the ascendant in the EU. Hopes are running high that the bloc will dodge serious economic damage from rate tightening. The EU’s biggest lender, BNP Paribas, has already recovered the eighth of its market value that it lost in the gloom of 2022.

On Tuesday, boss Jean-Laurent Bonnafé upped BNP’s annual growth target for net income by 2 percentage points to more than 9 per cent by 2025. He also promised big payouts, totted up to €10bn by Jefferies. Both moves took the sting out of lacklustre fourth-quarter profits.

The bank plans to invest €7.6bn of the proceeds from its $16.3bn sale of Bank of the West in expanding existing businesses and on bolt-on takeovers. It aims to exploit retrenchment by rivals and broaden its reach in insurance. BNP expects this deployment of capital to generate an extra €3bn in revenues over the next two years.

Interest rate rises should generate another €2bn by 2025. French banks cannot fully benefit from higher rates because fixed-rate loans and inflation-linked savings accounts are common. BNP is in a better place than some rivals, however, with French net interest income accounting for just 7 per cent of revenues.

BNP’s core equity tier one capital ratio of 12.3 per cent is slightly above its 12 per cent 2025 target. Disposal proceeds will help fund a €4bn share buyback. That is on top of a buyback and dividend payout amounting to 60 per cent of 2022 distributable income.

The bank has raised its return on tangible equity to 12 per cent in 2025, from 11 per cent before. The price-to-tangible book value has risen two-fifths to 0.7 in the past 18 months, placing it 75 per cent higher than Société Générale’s.

Trading at a low price/tangible book value multiple compared with return on tangible equity has become the norm for European banks. BNP has proved itself to be a steady earner. The mood of investors is brightening, but that discount will be hard to shift.

Reuters - Italy's CDP sounds out banks, funds on rival bid for TIM grid, sources

Italy's CDP sounds out banks, funds on rival bid for TIM grid, sources say
17:13:19 Italy's CDP sounds out banks, funds on rival bid for TIM grid, sources say - Reuters News
07-Feb-2023 17:12:28
CDP prepares response after KKR move for telecoms grid
TIM board to meet on Feb. 24 to decide on KKR's proposal
Italy looks at ways to put TIM's grid under state control
By Elvira Pollina and Giuseppe Fonte

MILAN, Feb 7 (Reuters) - Italian state lender CDP is sounding out banks that could help finance its offer for Telecom Italia's landline grid while also speaking to infrastructure funds though time is tight to recruit another co-investor, sources close to the matter said.

CDP is seeking to finalise its bid after U.S. investment firm KKR KKR.N last week filed its own offer for the same Telecom Italia (TIM) asset.

KKR, which already owns a minority stake in the former phone monopoly's network, put forward a non-binding proposal to acquire a controlling stake in a new company comprising the network as well as TIM's submarine cable unit Sparkle.

Two sources familiar with the matter told Reuters KKR's approach valued the venture at about 20 billion euros ($21.4 billion).

TIM, which has called a board meeting for Feb.24 to decide on KKR' s approach, said the U.S. fund has indicated Feb.28 as the deadline for its proposal, adding it remained open to assess alternatives in the meantime.

Carving out and ceding control of TIM's prized landline is a focal point of TIM's CEO Pietro Labriola strategy to reshape the debt-laden group.

Treasury-owned CDP, which is a shareholder in TIM, was also studying a multi-billion offer for the network and still wants to bid for TIM's grid after KKR's move, people familiar with the matter told Reuters.

Among others, CDP has been sounding out Blackstone BX.N, Global Infrastructure Partners (GIP) and Brookfield BIPC.N for a role in its potential bid, the people said, declining to be named as discussions are private.

Blackstone declined to comment. GIP and Brookfield did not immediately respond to a request for comment.

The sources also said CDP is tapping banks specialized in infrastructure financing to test their interest in funding a potential bid, including UniCredit CRDI.MI, Intesa Sanpaolo ISP.MI, Bnp Paribas BNPP.PA and Credit Agricole CAGR.PA.

The banks had no immediate comment.



MACQUARIE ROLE

One of the sources said CDP is likely to present a bid with Australian fund Macquarie only, as there is little scope for another fund joining the venture given the tight deadline.

The bid could come as early as next week, the person said, cautioning deliberations are still ongoing.

Macquarie is a minority investor in Open Fiber, a wholesale-only fibre optic unit controlled by CDP and it has been involved for months in a plan to combine the two network infrastructures.

Prime Minister Giorgia Meloni repeatedly said her government wants to secure public control of TIM's network.

But there is no common ground yet within her administration on how to reach such a goal and it was no clear whether a CDP bid would receive the blessing of the Treasury.

Economy Minister Giancarlo Giorgetti believes Rome has "multiple options" to put TIM's network under strategic government control, a separate source said, without elaborating.

In its approach for TIM, KKR has left the door open to a public entity to become a shareholder in the network company, a person briefed with the matter said last week.

A sale of a majority stake in the network could enable cash-bleeding TIM to cut its 25.5 billion euro debt pile and help promoting heavy investments needed to upgrade the infrastructure from old copper to fibre.