Centrica proposed rival rescue of energy supplier Bulb
Court documents show the British Gas owner claimed it had a cheaper plan for the struggling supplier
Centrica pitched a rival plan to the Treasury to deal with the bailed-out energy supplier Bulb, claiming its proposal would have required less taxpayer support than a sale to Octopus Energy, court documents show.
Centrica, the owner of British Gas, wrote to the Treasury and energy regulator Ofgem in August and November proposing that Bulb’s 1.5mn customers be divided between “a group of energy suppliers who do not present financial viability risks”.
Bulb represents the biggest UK state bailout of a company since the financial crisis, with billions in pounds in costs set to be spread across almost every household’s energy bill next year.
A break-up and division of Bulb’s customers across multiple suppliers would have involved a “concomitant reduction in the amount of state support that would be required” to successfully transfer Bulb out of special administration, Centrica argued, court filings show.
Centrica, which grew out of the once state-owned British Gas business, is among a group of long-established energy companies, including Eon and ScottishPower, that are seeking a judicial review of the government’s decision to approve Bulb’s sale to Octopus in October. They have complained about a lack of transparency and the speed of the deal.
The High Court is set to decide on Wednesday whether to set a date for the Bulb deal to complete.
The legal process pits the old guard against one of the most prominent new “challenger” energy companies. Fast-growing Octopus was launched in 2016 by the technology entrepreneur Greg Jackson to break up the might of the “legacy” suppliers such as Centrica, which is led by Chris O’Shea, who has previously held senior roles at Shell and the former BG Group.
Bulb was placed into special administration in November 2021. Its effective nationalisation was supported initially with a £1.69bn loan but the UK’s Office for Budget Responsibility has estimated that the total bill to the taxpayer will soar to £6.5bn.
While the business department has argued the final total could be lower, without providing details why, almost every household is likely to be stung by higher energy bills next year as the costs associated with the Bulb rescue will hit consumer bills. The total could exceed £200 per household if the final cost of the bailout exceeds about £5.8bn, based on the number of homes in the UK.
The level of support that Octopus will receive to buy electricity and gas to serve the 1.5mn new customers has not been disclosed. It had previously been reported that Octopus had asked the government for £1bn to buy forward that energy but the money would be repaid as customers pay their bills.
In court documents, Centrica said it had written to the Treasury and Ofgem suggesting an alternative solution for Bulb customers that in its view could be achieved “through less distortive means”.
Centrica has also claimed in the documents that the sale to Octopus risked the “future stability” of Britain’s energy retail market, although this has been contested by people close to the deal. If the sale goes through, the Bulb business would be housed in a new entity that would form part of the wider Octopus group.
Octopus and the Treasury have been approached for comment.
Octopus has previously said it was “clear” other companies could also have asked for “hedging support” from the government, and warned that any further delay to the deal could mean even higher costs for taxpayers.
“Instead of doing so, they waited until a deal was announced and then launched expensive legal action which could cost taxpayers millions, even billions,” Octopus said.
Research Calls
- Upgrades:
- Con Edison (ED) upgraded to Neutral from Underperform at BofA Securities
- Cooper (COO) upgraded to Outperform from Neutral at Robert W. Baird; tgt raised to $375
- SoundHound AI (SOUN) upgraded to Overweight from Neutral at Cantor Fitzgerald
- Downgrades:
- ABB Ltd (ABB) downgraded to Underperform from Neutral at Exane BNP Paribas
- American Homes 4 Rent (AMH) downgraded to Peer Perform from Outperform at Wolfe Research
- Carvana (CVNA) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $10
- Civista Bancshares (CIVB) initiated with a Buy at Janney; tgt $27
- CrowdStrike (CRWD) downgraded to Hold from Buy at Stifel; tgt lowered to $120
- LPL Financial (LPLA) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $239
- Methanex (MEOH) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $45
- MillerKnoll (MLKN) downgraded to Hold from Buy at The Benchmark Company
- Nutrien (NTR) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $93
- PennyMac Mortgage (PMT) downgraded to Hold from Buy at Jones Trading
- Solid Power (SLDP) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $5
- Steelcase (SCS) downgraded to Hold from Buy at The Benchmark Company
- Others:
- AerSale (ASLE) initiated with an Outperform at RBC Capital Mkts; tgt $21
- AppLovin (APP) initiated with a Hold at Jefferies; tgt $14
- Choice Hotels (CHH) initiated with a Sell at Redburn
- DocuSign (DOCU) initiated with a Hold at Jefferies; tgt $50
- Fisker (FSR) initiated with an Outperform at Evercore ISI; tgt $15
- Fusion Pharmaceuticals (FUSN) initiated with an Outperform at SVB Leerink; tgt $6
- Hilton (HLT) initiated with a Neutral at Redburn
- Hyatt Hotels (H) initiated with a Buy at Redburn
- Immunocore (IMCR) initiated with an Overweight at Barclays; tgt $80
- Kimball (KBAL) initiated with a Buy at The Benchmark Company; tgt $80
- LCNB (LCNB) initiated with a Neutral at Janney; tgt $19
- Leonardo DRS (DRS) initiated with a Buy at Vertical Research; tgt $14
- LSB Industries (LXU) initiated with a Buy at Jefferies; tgt $20
- Lucid Group (LCID) initiated with an In-line at Evercore ISI; tgt $12
- Marriott (MAR) initiated with a Sell at Redburn
- POINT Biopharma (PNT) initiated with an Outperform at SVB Leerink; tgt $14
- Polaris Industries (PII) initiated with a Neutral at MKM Partners; tgt $117
- Rivian Automotive (RIVN) initiated with an In-line at Evercore ISI; tgt $35
- Tricon Residential (TCN) initiated with a Peer Perform at Wolfe Research
- Wyndham Hotels & Resorts (WH) initiated with a Neutral at Redburn
- XPO Logistics (XPO) resumed with a Neutral at Citigroup; tgt $42
Twitter should cash in on adult content
Will porn be invited to the potential free speech gold rush?
Twitter and Elon Musk have a revenue problem. They also may have a revenue solution: porn.
Amidst hesitant advertisers, widespread layoffs, mass resignations, and Donald Trump’s recent reinstatement, many are understandably panicking at the possibility of Twitter’s demise. Long before Elon Musk became the Chief Twit, unknown writers parlayed dedicated followings into book deals. Marginalized identities found each other and formed cultural communities around hashtags. Small businesses and indie media outlets drove traffic to their sites and products. Many are concerned about what will happen to their livelihoods if Twitter (and $44 billion) goes "poof."
To sex workers, this is nothing new. They’ve been on this ride before. With ever-changing community guidelines and targeted legislation, the adult entertainment industry is regularly booted from social media sites with little-to-no explanation, frequently building accounts with hundreds of thousands of followers before starting back at zero.
Twitter is one of two major social media sites (the other being Reddit) that still allows porn. A recent internal report estimates that 13 percent of Twitter’s content is NSFW. Many of those accounts monetize their followings by sending fans to other sites. OnlyFans reported $932 million in revenue for 2021 with creators getting paid out billions. That’s a lot of money not going to the Big Blue Bird.
Twitter’s Red Team
A "Red Team" of in-house researchers had been developing a way to cut in on that market share since at least early 2021. "Twitter loses a lot of revenue to OnlyFans," says Dr. Olivia Snow, a dominatrix and research fellow for the UCLA Center for Critical Internet Inquiry. She consulted with Twitter employees earlier this year on an Adult Content Monetization product. "So this was going to be a way to cash in on that."
The idea was tabled back in May — a few weeks after Musk’s too-good-to-be-true offer to buy the site. But earlier this month, The Washington Post reported internal communications about a yet-to-be-announced "Paywalled Video" product that sounded a lot like OnlyFans: videos uploaded directly to a tweet with a blurred preview that arrives in your timeline with a pre-set price to unlock. The ability for creators to sell to their fans directly on the platform — and for Twitter to take a cut — has monstrous revenue possibilities for the struggling social media giant.
Ginger Banks, who has been in the adult entertainment industry for 13 years, would be excited for paywalled video on Twitter. "I have 300,000 people following me," she told Mashable. "It’s usually 1-2 percent that end up paying or subscribing [to my content]. It could be really big depending on how they roll it out!"
Porn stars already know a lot of great marketing ploys to get people excited to spend money on them: games, rankings, limited purchases, raffles, cross-promotional "battles." With a payment method stored on the platform, fans could seamlessly spend with a click or two. No more #LinkInBio or subversive threading strategies to boost impressions for offsite URLs. If Twitter has skin in the game by taking a cut of sales, the company would have an incentive to give those tweets an algorithmic boost.
"I have more faith in Twitter and Reddit being able to monetize adult content," Banks continues. "They have adult content and they’re in the fncking App Store. So, clearly, they have some sort of pull that these other websites don’t have." Apple typically does not allow apps where pornography is freely available. (It’s why OnlyFans does not have a proper app.)
When the world shut down in 2020, waves of newly unemployed people tried their hands (and other body parts) at porn. "A lot of people now know they can turn to [porn] during a period of non-work," says Lotus Lain, who serves as Industry Relations Advocate for the Free Speech Coalition, the adult industry’s trade organization. Lain suggests if Twitter implemented the Paywalled Video product — and allowed adult creators to use it — newbies "wouldn’t even have to start an OnlyFans. It might be easier" to get your sexy side hustle up and running.
Everyone in porn I talk to says the same thing: The more places they can monetize their content, the better. "The thing that I’m cautious about is the lack of security at Twitter," Lain told me a week after trust and safety head Yoel Roth resigned citing the new CEO’s "lack of legitimacy." Lain continued, "I trusted whoever was in power before because it was a mixed group of executives. But now it’s one guy—one unhinged, megalomaniac guy. That is what I don’t trust."
'Elon Musk is obviously an idiot.'
Elon Musk dumped $44 billion into a pet project some suggest he never truly wanted in the first place. And he promised investors a return on their investment. Ninety percent of Twitter’s revenue comes from advertising. Musk wants to change that. But the ideas he has publicly floated have been all over the place from charging government accounts to bringing back Vine to launching an edit function for Twitter Blue subscribers (which is actually a good idea). His rushed rollout of selling verified badges for $8/month backfired so badly that it was shut down after two days.
Paywalled Video, if done correctly, could be a win for Musk, but an internal review deemed the feature as high risk due to concerns around copyrighted content, user trust issues, and legal compliance. Copyright concerns already abound since the CEO slashed his content moderation team last week.
"Elon is obviously an idiot," says Snow. "He doesn’t understand what normal human concerns are in any way, shape, or form. Every time I press a button on Twitter, I hear a ‘boing’ sound and a spring pops out. Little things are falling apart."
Snow has serious concerns about Twitter’s OnlyFans-esque product under Musk. "I think it’s super dangerous. I could see him going full steam ahead and launching a product that doesn’t have any content moderation built in — or even the staff to do that. I can’t imagine him being able to get the nuances of adult content or the privacy around it or the infrastructure necessary to make that work at all because he’s an incompetent sociopath."
The nuances of adult content are many. Musk, a champion of artificial intelligence, probably won’t appreciate the creative complexities of porn that often trip up AI moderation programs. I myself had a video auto-removed from Instagram of me unzipping my fly and pulling out…a microphone. When I "appealed" the decision, it was quickly rejected and threatened with a ban. Anti-porn crusaders like Laila Mickelwait — who has posted child sexual abuse material directly to Twitter herself — have ramped up their push to scrub consensual sexual content from the internet. And since SESTA/FOSTA legislation put platforms on notice in 2018, social media platforms have cracked down on arbitrarily anything suggestive from sex educators to doulas to eggplant emojis.
Porn stars use these sites to build followings to funnel to monetized platforms, but they are routinely banned — even without sharing prohibited content. "The discrimination against sex work and porn is so institutionalized," Banks offers. "There are so many walls, but all it does is force us to innovate."
The Lex Newsletter: UK defence sector is gathering ammunition for an earnings rally
Soaring dollar has sharpened defence ministry’s appetite for higher indigenous weapons capacity
The new cold war between the west and east has particular resonance in the UK. Older Britons reflexively hark back to the second world war when discussing the war in Ukraine or China’s aggression towards Taiwan. Any concession to authoritarians is likely to be lambasted as “appeasement”.
Critics inevitably applied it this week to Prime Minister Rishi Sunak’s attitude towards China. He preferred the self-contradictory formula “robust pragmatism”.
There is plenty of support in the UK for higher defence spending among those who believe that if you want peace, you should prepare for war. Winston Churchill, a proponent of the 1930s rearmament and the second world war prime minister, remains a national hero. An affectionate likeness of him as a celestial being even adorns the clock on the side of the FT headquarters where I work.
A recent description of the British army as “only big enough to tootle around at home” by defence secretary Ben Wallace does not inspire confidence. With about 72,000 soldiers, the army is at its smallest size since the Napoleonic wars. But more boots to put on the ground — and soldiers to wear them — look like a low priority despite a global pivot to a more conventional doctrine of defence.
Wallace’s warning came as chancellor Jeremy Hunt paused plans to increase defence spending to as much as 3 per cent of national output by 2030.
That makes it harder for Britain to become more self-sufficient in armaments. The US has supplied three-quarters of UK arms imports over the past decade. The largest contract remains the supply of F-35 jets. The first part of this contract is expected to cost the UK £9bn when it completes in 2026.
The soaring dollar has sharpened the appetite of the UK Ministry of Defence for higher indigenous weapons capacity. Increased armaments costs are harder to tolerate when the bulk of jobs and taxes they generate are headed abroad. US reluctance to share weapons source code is a further issue.
This all bodes well for Tempest, the joint British-Italian-Japanese sixth-generation fighter. If the programme goes ahead, the UK’s key prime contractor BAE Systems will be heavily involved as would Leonardo of Italy, which owns large parts of the UK’s defence electronics industry.
Defence spending can be expected to rise across Europe with a larger share set to land at the feet of domestic manufacturers. In the UK spending has hovered around the 2 per cent mark for the past decade. At the end of the cold war in the early 1990s it was close to 4 per cent.
A small boost would make a big difference. UK procurement accounts for £17bn of a total defence budget of £42bn. An increase in defence spending to 2.5 per cent would push the equipment budget up by two-thirds assuming other spending remained constant, says Sash Tusa of consultancy Agency Partners.
Wallace would struggle to bring the army up to fighting strength quickly, even if money is available. A service career is unattractive to most young people. And it takes years of training to bring new recruits up to speed.
One solution is to outsource supply and support roles to free up current personnel. That would benefit Babcock, a contractor that has been out of favour since a short seller raid a few years ago. The business specialises in site management and training.
The outlook for the whole UK defence sector is positive. This reflects higher spending in other countries and western support for Ukraine. Consensus earnings estimates for the UK’s remaining listed companies for the next 12 months have risen 17 per cent since the start of the year. After several years in the doldrums the sector has re-rated to a multiple of 13 times, in line with the 10-year average.
Industry behemoth BAE now trades at a premium of 15 times earnings. The company’s earnings per share will grow at a 10 per cent CAGR through to 2025, thinks Agency Partners.
Restocking of supplies sent to Ukraine is an important part of the outlook, says Tusa. New orders for depleted kit have yet to start coming in. This is one reason the rally in defence shares began to fizzle out over the summer.
Bureaucratic friction is the reason. But the conventional war in Ukraine has reminded the generals of lessons they learnt during preparations for a war with the Soviet Union. For example, an artillery piece must fire between 100 and 200 rounds per gun daily to be effective in battle. That is equivalent to three to six months of existing UK production simply to supply 100 guns in the field for a day.
Conventional warfare is in part a competition to manufacture weapons and projectiles. That penny is slowly dropping in the minds of politicians. The British defence sector, out of favour through the years of asymmetric threats, should benefit accordingly.
Gapping down
In reaction to earnings/guidance:
- CRWD -18%, NTAP -10.8%, LESL -7.6%, HRL -5.5%, SDRL -2%
Other news:
- XFOR -14.6% (top-line results from phase 3 trial of Oral Mavorixafor)
- ASPN -11.8% (prices offering of 25263158 shares of its common stock at $9.50 per share)
- ASTS -9.3% (prices upsized $75000000 public offering of Class A common stock)
- SLDP -8.6% (CEO to retire)
- MU -0.9% (makes cautious comments on pricing at investor conference)
Gapping up
In reaction to earnings/guidance:
- TITN +10.6%, WOOF +10%, XPEV +9.8%, WDAY +9.2% (also authorizes new $500 mln share repurchase program), BEKE +7.9%, DOOO +3.9%, CMP +3.6%, HPE +1.8%, ENB +1.6%, DCI +1.4%, NAT +1.4%, FRO +0.7%
Other news:
- HZNP +33.1% (confirms preliminary discussions regarding potential buyout)
- VRDN +15.8% (in sympathy with HZNP M&A news)
- LUNG +9.2% (announces that the Japanese Ministry of Health Labour and Welfare has approved the Zephyr Endobronchial Valve for treating severe COPD/emphysema patients following a positive recommendation by Pharmaceuticals and Medical Devices Agency)
- W +6.8% (reports post-Thanksgiving sales)
- CBL +3% (declares special dividend of $2.20/sh)
- MAXR +3% (to build two new geostationary communications satellites for SiriusXM)
- BIIB +2.9% (Biogen and Eisai presents full results of Lecanemab Phase 3 confirmatory clarity ad study for early Alzheimer's disease at Clinical Trials on Alzheimer's Disease conference)
- WBX +2.4% (private placement of $43.5 mln)
- SANA +2.3% (confirms key program timelines and portfolio prioritization)
- NOTV +1.8% (to close two isolator facilities)
- BRY +1.6% (provides management succession plan; Fernando Araujo to become CEO)
- PBI +1.4% (discusses business strategy)
- BA +1.3% (awarded $398 mln U.S. Air Force modification contract)
- BLUE +1.2% (sells Priority Review Voucher for $102 mln)
- RIO +1% (provides update to progress strategy to strengthen decarbonise and grow)
- CRM +1% (U.S. online sales rose 9% yr/yr during Cyber week)
Analyst comments:
- SOUN +5.3% (upgraded to Overweight from Neutral at Cantor Fitzgerald)
EU wants to use frozen Russian assets to fund Ukraine reconstruction
Ursula von der Leyen says Brussels has ‘the means’ to make Moscow pay for rebuilding war-torn country
Brussels wants to use the frozen assets of Russia’s central bank to generate profits that could be deployed in the reconstruction of Ukraine, as the country’s critical infrastructure comes under sustained attack 10 months into the war.
Under a European Commission proposal, the EU would shift the liquid assets of the Russian state that were frozen under sanctions into a fund, which would be actively managed to generate a “stable and fair net return” to help pay to rebuild Ukraine.
The underlying assets would not be permanently confiscated under the plan, but would be returned to the Russian state if a peace agreement were signed, according to a discussion paper, which stressed the need for co-ordinated action at an international level.
“Russia must pay for its horrific crimes, including its crime of aggression against a sovereign state,” Ursula von der Leyen, the commission president said on Wednesday. “Russia and its oligarchs have to compensate Ukraine for the damage and cover the costs for rebuilding the country. And we have the means to make Russia pay.”
The EU and its allies froze hundreds of billions of dollars of foreign exchange reserves parked in accounts by the Russian central bank early in the conflict. Russia said subsequently that the central bank sanctions had frozen about $300bn out of its gold and forex reserves.
Some EU officials have since spoken out in favour of confiscating the assets outright, including Josep Borrell, the EU’s high representative, who said such a move would be “full of logic”.
But confiscating the sovereign assets would be fraught under international law and officials acknowledge it could create financial stability risks. US Treasury secretary Janet Yellen said in April that confiscating Russian state assets should not be done lightly, should be carried out only in co-ordination with allies and might require legislation in the US.
Under the commission proposal, the Russian state would be entitled to have the assets returned if there was a peace deal, potentially along with some minimal accrued interest. In the meantime, the liquid assets of the Russian state would be invested to generate returns to pay for reconstruction.
This would an unprecedented initiative, a commission official said, stressing that it would need to be discussed at EU level and with international partners. There had already been preliminary talks with the US about the topic, another official added.
However, EU work on the plan is being hamstrung by a lack of information about the whereabouts and scale of the frozen Russian central bank assets — even those held by various EU central banks. The commission discussion paper stated the total amount of Russian public assets immobilised in the EU was “currently unknown”.
One of the commission officials said there was not enough information flowing from member states, calling for “more and better” data.
Potential ways to seize and utilise Russian assets for Ukraine’s benefit were also discussed at a summit of Nato foreign ministers in Bucharest on Tuesday, according to people involved in the discussions.
While a demand for action on the assets was not included in a joint statement agreed by the Nato ministers, many endorsed the EU’s efforts to explore the idea.
“Russia must be punished,” said one of the people involved in the Nato discussions. “So that means seizing these assets, using them to help Ukraine and finding a [legal] way to justify it.”
The commission is also pushing forward with plans to make sanctions violation a crime across the EU, a move that could facilitate the confiscation of private assets. It said that almost €18.9bn of private assets, belonging to oligarchs and other entities, was currently frozen in the EU.
The commission is separately proposing the creation of a specialised court backed by the UN to investigate and prosecute Russia’s “crime of aggression”.
Tod’s Factory Teams With Moncler Genius, Palm Angels
A dedicated communication campaign is fronted by Naomi Campbell.
MILAN – Two brands teaming on a capsule collection is customary in the industry, but a new three-way collaboration between Tod’s, Moncler and Palm Angels will be unveiled Wednesday for fall 2022.
The men’s and women’s collection hinges on two Tod’s signature shoes, reinterpreted by Palm Angels for Moncler Genius, with a dedicated communication campaign fronted by Naomi Campbell.
The “Tod’s x 8 Moncler Palm Angels” project is part of Tod’s Factory, a creative laboratory launched in 2018 with the goal of creating unconventional projects with designers and artists from the world of luxury and design, unveiling collections, capsules and limited editions, reinterpreting Tod’s style and heritage through their own creativity.
“I am interested in the quality of the product and the passion lying behind it, so for any collaboration I turn to the best in class for each category,” said Palm Angels founder and creative director Francesco Ragazzi. “These collaborations are not really a means for people to talk about us, but a way to experiment, filtering the products with our vision and learning each time by pairing with such giants as Tod’s and Moncler so we can also expand important categories.”
Ragazzi grew up wearing Tod’s shoes and expressed his admiration for what the brand represents, “the values it expresses, which are linked to our culture of beauty and recognized globally. We talk a lot about Made in Italy but, in my opinion, it is never enough.” He touted Tod’s artisans and their craft and said he “approached the design of this collection with respect, adding elements of contrast while retaining the essence.”
Ragazzi blended American sports and pop culture references with Italian taste on Tod’s signature Gommino loafer, updated with an inlaid flame motif. “There is always an American perspective for me, this meeting of Italy and the U.S.,” Ragazzi said.
In the same spirit, elements of mountain sportswear are reworked for the W.G., a new version of the iconic Winter Gommino, which now has the details of a snow boot and the volume of a mountaineering boot.
Campbell is photographed by Philadelphia-born photographer Quil Lemons, lounging in Miami wearing a gold Keon jacket paired with gold track pants or a sparkling black crop top and pants combo under a puffer vest. Deck chairs, basketball courts, diving boards and seaward jetties serve as the background for the images, which have a vintage ‘90s spirit.
“It’s a playful collection, laid back, which is the essence of Palm Angels,” Ragazzi said of the one-off capsule. “Three brands coming from different worlds collaborated to tell this story, all aligning to see the product in a new, disruptive way. This creates energy, which is a must in fashion.”
Tod’s Factory was launched in September 2018 with Alessandro Dell’Acqua, followed by Alber Elbaz in July 2019. In March 2020, it was the turn of Maiko Kurogouchi, the designer behind the Japanese label Mame Kurogouchi. In June 2021, Hender Scheme, by Japanese designer Ryo Kashiwazaki, created a capsule collection of shoes, bags and apparel.