Barrons : This Industrial-Gas Giant Is Investing Big in Hydrogen. It’s Time to B

This Industrial-Gas Giant Is Investing Big in Hydrogen. It’s Time to Buy the Stock.

The thunderous force of the Niagara River above the famous falls will soon power a plant three miles away as it pumps out clean energy in the form of hydrogen. It heralds an exciting future for a century-old company, Linde LIN –2.54% , whose bets on low-carbon power look increasingly likely to pay off.

Linde (ticker: LIN) is the world’s largest industrial-gas company, part of an oligopoly of gas producers that operate around the world. For large customers buying gases such as oxygen or nitrogen, Linde builds gas plants on-site and locks in contracts for 10 to 20 years with built-in price escalators. It’s a business model that has produced steady earnings growth.

The Niagara Falls plant, slated to open in 2025, is a new part of its growth story. It will use carbon-free hydroelectric power to make hydrogen, a clean-burning gas useful in industries like refining, steel-making, and fertilizer production. Hydrogen now represents less than 10% of Linde’s sales, but analysts see it growing in importance as the company invests in projects worth tens of billions of dollars. Linde has already found creative uses for hydrogen. It won a first-of-its-kind contract to power a Norwegian ferry with hydrogen, a sign of the element’s growing role in transportation.

Earnings from clean hydrogen could take a few years to appear, but Linde has nearer-term growth drivers, too, including major new contracts with semiconductor fabs. Analysts’ earnings estimates have been rising. When Linde reports earnings next week, they expect the company to have earned $12.07 per share for the year, 13% more than in 2021 and 47% more than 2020. Wall Street sees a 50% jump by 2027.

A potential buying opportunity recently opened up for investors. Since late last year, Linde stock has trailed its peers, largely for technical reasons. It’s down 2% in the past two months, versus a gain of 8% for competitor Air Liquide (AIQUY). Linde recently decided to delist from the Frankfurt stock exchange. Some three-quarters of its trading already occurs on the New York Stock Exchange, but analysts think that forced selling by European funds spurred by the delisting has weighed on shares and could be a hangover for a month or two more.

BMO Capital Markets analyst John McNulty urged investors to “use any weakness as a buying opportunity” and sees “upside potential beyond our $370 target price.” At a recent $332, Linde trades at 25 times expected earnings, below Air Products & Chemicals APD –3.55% (APD) at 26 but above Air Liquide at 23.

Linde gets about $3 billion of its $34 billion in annual revenue from hydrogen, though the processes it uses are not so environmentally friendly. Newer methods are cleaner and will be key to decarbonizing industries.

Hydrogen won’t be as big as traditional renewables like solar and wind, but it has capabilities that those technologies lack. It is combustible and can replace fuels like natural gas in factories, and it can be transported in liquefied form across oceans. For the world to get to a net-zero emissions goal by 2050, hydrogen would have to account for 2% of total global energy use by 2030 and 10% by 2050, compared with 0.1% in 2020, projects the International Energy Agency, or IEA.

There are several ways to produce hydrogen, and they vary in their environmental impact. Almost all hydrogen today is produced by combining natural gas with steam, which separates carbon and hydrogen, creating a product known as “gray” hydrogen. At least two methods can reduce or eliminate the carbon emissions from the process.

One, which makes “blue” hydrogen, captures carbon emissions from natural gas and stores them underground. Linde is already working on blue hydrogen projects. The other method is cleaner, producing “green” hydrogen by separating hydrogen and oxygen in water with a device known as an electrolyzer. If the energy required for that reaction is powered by renewable electricity—like Niagara Falls’ hydroelectric power—the process should be carbon-free. In 2021, water electrolysis accounted for 0.1% of hydrogen production, but electrolyzer capacity was on track to nearly triple by the end of 2022, and rise nearly 100-fold by 2030, according to the IEA.

Government subsidies are fueling the growth. The U.S. Inflation Reduction Act includes lots of support for the industry, bringing the cost of blue hydrogen nearly to parity with gray, and making green hydrogen eligible for subsidies that cut its cost by half.

“The Inflation Reduction Act brings forward projects that otherwise might have been economic several years from now, or may have required further innovation or R&D,” says Jared Mann, an analyst at Neuberger Berman. Linde is the largest holding in the Neuberger Berman Carbon Transition & InfrastructureNBCT –1.32% exchange-traded fund (NBCT), which Mann helps manage.

Linde hasn’t released many details on earnings expectations from hydrogen, but says it’s pursuing more than $33 billion worth of U.S. clean energy investments, the vast majority related to hydrogen. Those are not speculative investments, the company insists. Linde will move forward only if customers are lined up and expected returns are in the double digits.

If hydrogen works as expected, it will be as invisible as the element itself: a carbon-free energy source that operates in the background of our lives. It will certainly be noticeable to companies like Linde, however, and investors who buy at the right time.

Barrons : Baidu Plans a ChatGPT Rival. The Chinese Internet Giant’s Stock Could

Baidu Plans a ChatGPT Rival. The Chinese Internet Giant’s Stock Could Reap the Returns.

Talk about buying the rumor. Baidu , China’s leading internet search provider, let it be known on Jan. 30 that it will launch a so-called chatbot powered by artificial intelligence, akin to the ChatGPT system that has seized global imaginations.

Its U.S.-listed shares (ticker: BIDU) are up 9%. Markets acting rationally? Maybe. Baidu copycatting ChatGPT within months, assuming it delivers as promised in March, may paradoxically indicate that chatbots aren’t really worth much, at least in their current form.

The technology will be hard to build a moat around, says Matthew Sheehan, a Carnegie Endowment for International Peace fellow who focuses on AI. Other players on both side of the Pacific— Alphabet (GOOGL), Tencent Holdings (700.Hong Kong), Alibaba Group Holding (BABA)—may just be waiting to learn from the first movers’ mistakes. “There’s a question how commoditized this technology will be,” he says. “All the theoretical breakthroughs are in the public domain.”

The value for Baidu could lie elsewhere: cementing its de facto status as China’s AI champion. The company’s growth from search-driven advertising peaked some time ago. Shares are down 40% over the past five years. That pushed Baidu into sustained investments in AI, notably autonomous driving technology.

The company’s “robotaxi” fleet should double this year to 2,000, while an electric-vehicle joint venture with Geely Automobile Holdings (175. Hong Kong) gathers momentum. “The market undervalues some of the growth from these new areas,” says Sharukh Malik, a portfolio manager for Asian equities at Guinness Asset Management.

Baidu’s slower growth shielded it somewhat from the regulatory storm that broke over Alibaba, Tencent, and others during the past two years. “Baidu has been under less regulatory pressure,” says Vivian Lin Thurston, an emerging markets portfolio manager at William Blair.

Baidu is working with government on a “smart crossroads” initiative, Malik adds, deploying its AI systems to adjust traffic lights according to traffic flows. “Baidu is showing its ability to take part in the build-out of national infrastructure,” he says.

China’s near-immediate answer to ChatGPT—again, if Baidu fulfills its promise—also sends a message to the U.S. If Washington’s clampdown on semiconductor exports is meant to keep China from advanced applications like AI, it isn’t working too well so far.

Baidu is using chips from its own Kunlun subsidiary. Sitting on data from one billion or so users, with fewer pesky privacy restrictions, can be as important as hardware for AI development.

That could be Chinese companies’ secret sauce, says Jason Hsu, chief investment officer at Rayliant Global Advisors. “China having more data points and less data privacy makes the AI race a lot more even,” he says.

That race looks to be on in earnest and in public now, whether the chatbots thrive or flop, The drive for AI is rekindling animal spirits among techies, and their investors, as yesterday’s sensations—search, social media, e-commerce—lose some luster.

That’s good news for “tech enablers” like out-of-fashion chip manufacturers, says Pruksa Iamtongthong, senior investment director at asset manager abrdn. “The intuitive winner here is a company like TSMC [ Taiwan Semiconductor Manufacturing (TSM)],” she says.

Hype can be its own reward too, for a while, Hsu adds. “I don’t quite see the fundamental relevance of all this,” he says. “But sentiment will keep steering capital to anything that can claim a connection to China’s version of ChatGPT.”

Barron's : Pfizer Is Moving Beyond Covid. Why Its Stock Is a Buy.

Pfizer Is Moving Beyond Covid. Why Its Stock Is a Buy.
With its packed pipeline, growing R&D spending, and potential deals and share buybacks, there's more to the drugmaker than the market realizes.

Pfizer PFE -0.63% probably did more than any other company to help the world normalize from the pandemic, and it reaped a financial windfall from its twin Covid-19 franchise—the top-selling vaccine and the leading treatment, Paxlovid.

The world, however, has stopped worrying about Covid—and Pfizer (ticker: PFE) is paying the price. The sales of its two Covid blockbusters may decline over 60% in 2023, after generating a combined $57 billion in revenue during 2022. And there is considerable uncertainty about demand for both in the coming years.

Pfizer stock, too, has fallen out of favor, along with other Covid plays. At $44, it’s down 15% this year, making it one of the worst performers in the S&P 500 SPX -1.04% index. And it’s 30% below its late 2021 peak, badly trailing the rest of the drug group.

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Now looks like the time to buy the stock. Pfizer trades for 13 times projected 2023 earnings and yields 3.7%, more than double the S&P’s dividend rate. The payout, backed by ample earnings and one of the industry’s best balance sheets, looks very safe.

Pfizer is one of the drug group’s bargains, although that view is not widely held. Of the 24 analysts covering the stock, 15 rate it Hold, according to Bloomberg, and there is more debate around Pfizer than about most of its peers. Investors are divided on the outlook for the Covid franchise and Pfizer’s drug pipeline.

There are also some who think Pfizer should be buying back stock—the company stopped repurchasing shares in the second quarter of 2022. It’s possible that its recent struggles could attract an activist investor, who would argue that it should do just that, given the depressed share price. An activist also could press the company to curb its research and development expenditures, which are set to rise more than 10% this year, and to spend less on deals.

But Pfizer’s pipeline might be stronger than it’s given credit for—and pipelines are what drive drug stocks. “The pipeline could surprise on the upside,” says Louise Chen of Cantor Fitzgerald, who has a Buy rating on the stock, with a $75 price target, one of the highest on the Street. That’s the company line as well. “We’re coming off a record year in 2022 and the best times for Pfizer are ahead of us,” says David Denton, the pharmaceutical manufacturer’s chief financial officer.

First, Pfizer needs to get through 2023. While 2022 was incredibly strong—revenue surged to $100 billion, from $42 billion in 2020, and earnings hit a record $6.58 a share—this is a reset year.

As part of its fourth-quarter profit release this past week, Pfizer offered guidance well below Wall Street forecasts. It sees a 30% drop in revenue, to about $69 billion, and a 50% decline in earnings per share to a midpoint of $3.35. That guidance was $1 a share below the consensus estimate, though Pfizer shares were little changed in the wake of the report, a sign that many investors had anticipated the lackluster forecast. (Despite Pfizer’s guidance, the 2023 analysts’ consensus is still nearly $4 a share.)

Much of the disappointing guidance owed to weakness in Pfizer’s Covid business. The company projected that sales of Comirnaty, the vaccine developed with partner BioNTech BNTX -1.62% (BNTX), would fall to $13.5 billion in 2023 from $37.8 billion last year, and that Paxlovid sales would drop to $8 billion from $18.9 billion. The U.S. and other countries have big stockpiles of the Pfizer vaccine that were booked as revenue in 2022, and it may take until midyear to work through them. The same is true for Paxlovid.

But Pfizer is confident that there’s still a future for its Covid franchise. The company sees 24% of Americans, or 79 million, getting a Covid vaccine in 2023 as the U.S. moves to annual boosters, down from 31%, or 104 million, in 2022. It also expects to maintain its 64% vaccine market share.

Pfizer could be too optimistic. There is a growing indifference to Covid, as cases remain depressed nationwide. Reflecting the more blasé attitude, masking has become rarer, even in places such as New York City, where it once was common. Hardly anyone was masked at a recent Saturday night performance at the Metropolitan Opera, which required the audience to wear masks and show proof of vaccination as recently as last year.

Pfizer’s optimism stems, in part, from the prospect of a combined flu/Covid vaccine that it’s developing using mRNA technology. The drugmaker sees 82 million Americans getting a Covid vaccine in 2024, rising to 132 million in 2026, by which time it hopes to have the two-disease vaccine on the market.

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“Imagine in [2026], that you walk into the pharmacy and you ask for your flu shot,” Pfizer CEO Albert Bourla tells Barron’s. “And they will offer you, ‘Do you want the stand-alone flu, or do you want to do the shot together with Covid?.’ I think a very big part of [that group] will say, ‘Give me both.’ “

And with the government out of the Covid business, Pfizer will be able to charge more for its vaccines. It has talked about getting $110 to $130 for each dose in the commercial market, up from about $30 under government contracts. The company sees Covid revenue bottoming in 2023.

Pfizer, however, really wants to shift the discussion away from Covid and to the rest of its business. It projects that non-Covid revenue will rise 6% annually through 2025 and then increase at 6% or better each year through 2030, to at least $70 billion.

It’s rare for a company to issue financial guidance for seven years, but Bourla thinks enough of the pipeline to do it, and he wants to boost Pfizer’s credence within the investment community. It’s a gutsy move. The big drugmaker faces one of the industry’s bigger patent cliffs from 2025 to 2028, when drugs with $17 billion in annual sales will lose protection from generic competition. Among them: Eliquis and Ibrance, best-selling medications for, respectively, strokes and breast cancer.

Pfizer is seeking to fill that void with acquisitions, including three deals—for Arena Pharmaceuticals, Biohaven Pharmaceuticals, and Global Blood Therapies—that it made in 2022 for a combined $26 billion. Those transactions gave Pfizer promising drugs for migraines, ulcerative colitis, and sickle-cell anemia. Pfizer expects these and future acquisitions to be generating $25 billion in annual revenue by 2030. Marshall Gordon, a senior healthcare analyst at ClearBridge Investments, says he has been “pretty impressed” by the deals.

Pfizer also sees at least $20 billion in 2030 sales from its internal pipeline. Key launches there include vaccines for the respiratory syncytial virus, or RSV, meningitis, and the flu, and drugs to treat atopic dermatitis and multiple myeloma, a blood cancer. Bourla also has high hopes for an oral diabetes and weight-loss product known as GLP-1 that is now in clinical trials and could generate yearly sales of $10 billion, Pfizer says. Similar drugs from Novo Nordisk (NVO) and Eli Lilly LLY 2.53% (LLY) have generated lots of excitement, but they are injected.

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Pfizer is investing heavily in research and marketing to support its pipeline and to launch new products. R&D spending is expected to rise 13%, to about $13 billion, this year, one of the industry’s highest totals. In January, Bourla said that the coming year and a half would be “the most important 18 months in the history of Pfizer,” due to a slew of drug introductions.

Wall Street doesn’t have as much confidence in the pipeline, which is more of a show-me story than those of some rivals. One skeptic is UBS analyst Colin Bristow, who recently downgraded Pfizer to Neutral from Buy, in part because he thinks less of what’s coming than the company does.

That skepticism would be deserved for the old Pfizer, known more for having a powerhouse sales force and for making big deals, such as the purchases of Wyeth and Pharmacia, than for being a drug innovator. But times have changed.

Before the Covid vaccine, Pfizer’s pipeline was “struggling,” says Goldman Sachs analyst Chris Shibutani. That’s no longer the case. “The breadth and depth of the pipeline is underappreciated,” says Shibutani, who has a Buy rating and $62 price target, nearly 41% above Friday’s close. He says the stock is inexpensive, trading for 11 times his 2024 earnings estimate of about $4 a share.

Steve Galbraith, the chief investment officer of Kindred Capital in Darien, Conn., credits Bourla, who became CEO in 2019, with re-energizing the company. “Management has completely pivoted the culture back toward science,” he says.

A focus on science doesn’t preclude share repurchases, even if Denton, the CFO, said on the company’s earnings conference call that buybacks are “not high on the priority list.” Pfizer has used its Covid windfall to pay down debt and make acquisitions, but it still has the balance sheet to buy back stock.

Pfizer shares are almost back to where they stood prior to the pandemic’s start in 2019, and Galbraith says the company’s enterprise value—equity value plus net debt—is lower now because its net debt has gone from $40 billion to less than $1 billion. The market value is now around $250 billion. Pfizer could easily take on debt, if needed, to repurchase shares. “They can very clearly do it all—invest in R&D, M&A, and buy stock,” he says.

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But should they do it all? Bourla says that Pfizer remains on the hunt for acquisitions. In fact, the company figures that it’s only 40% on the way to meeting its goal of $25 billion in 2030 revenue from acquired drugs. With biotech companies getting more expensive, Pfizer could spend another $50 billion to try to hit that target.

Galbraith says investors rightly ask whether it makes sense for Pfizer to be buying companies at prices that can run at 10 times revenue or more, when its own stock trades for just four times sales.

Joe Rosenberg, a private investor who retired at the end of 2018 as chief investment strategist at the conglomerate Loews, faults Pfizer for not buying back stock and says it needs to be more disciplined about research and development, and acquisitions. He thinks an activist could target the company.

ClearBridge’s Gordon, conversely, is dubious that Pfizer needs an activist. He gives management high marks for the Covid vaccine and Paxlovid and for “rejuvenating the spirit of the company.” He argues that the broad Pfizer pipeline is “not reflected in the stock’s valuation in a major way.”

Whether an activist surfaces or not, Pfizer stock looks inexpensive, and investors get a safe yield of almost 4% while they wait for an underappreciated drug pipeline to develop.

Pfizer is an “iconic, blue-chip company,” says Goldman’s Shibutani. It looks ready to remind investors of that fact.

>>> US Close Dow -0,38% S&P -1,04% Nasdaq -1,59%


Closing Stock Market Summary

The stock market showed some impressive resilience to selling efforts early on before the main indices faded away around midday and ultimately settled the session near their worst levels of the day. Market participants were likely driven by a feeling that the market had gotten overbought/overextended and was due for some consolidation.

Investors reacted negatively to some disappointing earnings and/or guidance from several notable companies, namely Alphabet (GOOG 105.22, -3.58, -3.3%), Amazon.com (AMZN 103.39, -9.52, -8.4%), Qualcomm (QCOM 135.02, -0.83, -0.6%), Starbucks (SBUX 104.30, -4.85, -4.4%), and Ford (F 13.23, -1.09, -7.6%). Apple (AAPL 154.50, +3.68, +2.4%) also missed earnings estimates and traded down 2.0% at this morning's low, but recovered from its early loss and closed the session with a gain.

The main sticking point for investors is that the disappointing earnings guidance does not bode well for the overall 2023 earnings picture. 

Market participants were also digesting stronger than expected economic data that created some doubts as to whether the Fed will pause its rate hikes soon and cut rates at all before the end of the year. Briefly, the January Employment Situation Report showed some stunning growth in nonfarm payrolls (+517,000), and the January Services PMI was stronger than expected and back in growth mode with a 55.2% reading. 

Treasuries sold off sharply in response to the data releases. The 2-yr note yield rose 21 basis points to 4.29% and the 10-yr note yield rose 14 basis points to 3.53%. The U.S. Dollar Index rose 1.2% to 102.96. Separately, the fed funds futures market is now accounting for the prospect of a third 25 basis point rate hike in May. According to the CME FedWatch Tool, the probability of a rate hike in May, in addition to the one that is fully priced in for March, increased to 61.8% from 30.0% yesterday. 

Equities sold off in a broad and orderly fashion today. The Vanguard Mega Cap Growth ETF (MGK) closed down 1.5%, the Invesco S&P 500 Equal Weight ETF (RSP) closed down 1.2%, the S&P 500 closed down 1.0%, and the Nasdaq closed down 1.6%. 

All 11 S&P 500 sectors registered losses ranging from 0.1% (financials) to 3.1% (consumer discretionary). 

  • Nasdaq Composite: +14.7% YTD
  • Russell 2000: +12.8% YTD
  • S&P Midcap 400: +11.4% YTD
  • S&P 500: +7.7% YTD
  • Dow Jones Industrial Average: +2.4% YTD

Reviewing today's economic data:

  • January Nonfarm Payrolls 517K (consensus 190K); Prior was revised to 260K from 223K; January Nonfarm Private Payrolls 443K (consensus 175K); Prior was revised to 269K from 220K;
  • January Unemployment Rate 3.4% (consensus 3.6%); Prior 3.5%; January Avg. Hourly Earnings 0.3% (consensus 0.3%); Prior was revised to 0.4% from 0.3%; January Average Workweek 34.7 consensus 34.4); Prior was revised to 34.4 from 34.3
    • The key takeaway from the report is that it has the market questioning its own conviction about the prospect of the Fed cutting rates before the end of the year, as it is thought the remarkable strength of the report could have the Fed questioning its own conviction about pausing rates soon.
  • January IHS Markit Services PMI - Final 46.8; Prior 46.6
  • January ISM Non-Manufacturing Index 55.2% (consensus 50.3%); Prior was revised to 49.2% from 49.6%
    • The key takeaway from the report is that business activity for the services sector, which comprises the largest swath of U.S. economic activity, quickly rebounded into growth mode after contracting for the first time since May 2020 in December. That should be seen as supportive for the soft-landing scenario.

Cummins (CMI), ON Semiconductor (ON), and Tyson Foods (TSN) are among the companies reporting earnings ahead of Monday's open. 

There is no U.S. economic data of note on Monday. 

FT : EY under fire over its two roles at battery start-up Britishvolt

EY under fire over its two roles at battery start-up Britishvolt
Big Four consultant took over administration of failed company after being paid £500,000 a month as adviser

EY has come under fire over its switch from adviser to administrator of failed battery start-up Britishvolt as questions mount over a possible conflict of interest created by its twin roles.

The Big Four consultancy was a longstanding adviser to Britishvolt, playing a central role in devising its failed strategy, seconding a team to the company for almost two years, and collecting millions of pounds in fees.

Last month administrators from EY were ushered in to find a buyer for the business when it collapsed, igniting concerns over conflicts of interest in a sector MPs have branded a “wild west”.

EY’s move from adviser to administrator “must be a conflict of interest”, said one industry figure who was close to the Britishvolt process.

“You have to laugh,” said an EY insider of the firm’s dual duties.

Several Britishvolt employees also questioned the validity of EY’s twin responsibilities during a heated video call between staff and the administrators last month, according to two people.

It is not unusual for advisers to be subsequently appointed as administrators.

While some insolvency specialists argue that administrators have an advantage if they know the business well, critics say such arrangements create a risk that advisory firms will in effect be marking their own homework, threatening their independence.

EY was on Friday still processing four separate offers for the business, having received bids on Wednesday, according to people briefed on the process.

These included a group of current shareholders, Australian battery group Recharge Industries, private equity group Greybull Capital, and another bid, believed to be from a finance group. A decision was expected by Monday morning, the people said.

EY’s administrators’ fees will be paid in priority to amounts owed to Britishvolt’s creditors, as is normal in an insolvency.

Since the firm was appointed as administrator, new details have come to light that expose the closeness of the existing relationship between the companies.

Before the company’s collapse, Britishvolt paid EY £500,000 a month, according to two people. During some months, the start-up spent more money paying consultants, which included EY, than it did its own staff, one of the people said.

EY was involved from a very early stage, and was instrumental in helping Britishvolt position itself as a functioning enterprise, according to multiple people who worked with or for the start-up.

“They wrote the whole business plan from scratch, they did everything,” said a person who had close involvement at the time.

EY’s ties to the battery start-up became even closer when Britishvolt’s chief financial officer, its head of finance systems and innovation, and the chief of staff to its chief executive were all hired from the consultancy in 2021.

In addition, EY used its relationship with the start-up to boost its corporate sustainability credentials, despite its global boss criss-crossing the world in a private jet dubbed “EY One”. The project was one of a select few the firm highlighted as it reported its annual global revenues in September.

The Britishvolt project was also a chance for EY to demonstrate its connections with the UK government. Its team advising the start-up included Mats Persson, a former chief of staff to Sajid Javid during his spell as UK chancellor, and special adviser to David Cameron when he was prime minister.

Ministers offered Britishvolt a support package worth £100mn if the company raised private funding and began construction work. In the end, Britishvolt hit neither target, and the money was never paid out.

EY declined to answer whether Persson was involved in lobbying for Britishvolt as it sought taxpayer funding.

In response to a detailed list of questions about Britishvolt, EY said it “was an unsecured creditor of the company at the time of the appointment of administrators [because of fees owed to it for its earlier advice], but will not vote on any creditor resolutions that may be required as part of the administration process”.

It added that “creditors of Britishvolt and monies owed will be disclosed in due course as part of the administrators report”, and declined to comment further.

Although EY has not been accused of breaking any rules, questions over its role come at a sensitive time for the sector, as the government considers overhauling the way the insolvency profession is regulated.

The sector has also faced a backlash after high-profile fines against Deloitte in 2020 and KPMG in 2022 over misconduct by their insolvency teams.

In a public consultation on oversight of the sector, which closed in March, the government said the scandals had “contributed to a perception of a lack of objectivity and integrity generally by insolvency practitioners”. This “is almost as damaging to the reputation of the insolvency profession as a lack of objectivity and integrity itself”.

The government’s proposed changes include replacing self-regulation by professional bodies, which detractors say is insufficiently robust, with a statutory regulator.

Unlike other professions such as auditors and lawyers, insolvency practitioners are also regulated as individuals rather than at firm level.

Government proposals for the sector include replacing its current system with one where firms employing insolvency experts are directly accountable for their conduct and the management of conflicts of interests.

The government has yet to publish its response to submissions made during the consultation.

“I would hope that the government’s report would at least in part address the problem of perceived or potential conflicts of interest by moving towards the regulation of firms rather than individual practitioners,” said David Ereira, partner at law firm Paul Hastings, and former chair of the government’s Insolvency Service.

“But until the government publishes its response, we just don’t know.”