FT : Vitol profits soar to record $15bn on back of energy crisis

Vitol profits soar to record $15bn on back of energy crisis
Commodity trader’s profits in 2022 matched previous six years combined as turmoil swept through markets

Vitol, the world’s largest independent commodity trader, has emerged as one of the biggest winners of the energy crisis, reporting record profits far in excess of its rivals.

The privately owned group, whose top executives are largely based in London, made almost $15bn of net profit in 2022, according to people familiar with the matter.

The bumper profits matched the trading house’s combined earnings for the prior six years and were larger than some of the world’s biggest oil producers, including Italy’s Eni, illustrating how traders have benefited from the extreme volatility in energy markets triggered by Russia’s invasion of Ukraine.

The blockbuster year will mean a bumper payout for Vitol’s shareholders — approximately 450 senior partners spread across the trading hubs in London, Geneva, Singapore and Houston.

Vitol’s rival commodity houses, including Trafigura, Glencore and Mercuria, have also reported record results as the industry profited from the wild price surges and dislocations unleashed by the war. But the scale of Vitol’s returns has far surpassed its competitors.

The jump in Vitol’s profits was bolstered by windfalls in power markets, power generation, refining and the trading of liquefied natural gas. The company’s turnover nearly doubled last year to $505bn, it said last week.

In the UK, Vitol owns and operates five power plants through its partially owned subsidiary VPI, making it a bigger power generator than Centrica. VPI also has three further power facilities under construction in the region — two in the UK and one in Ireland.

The profits made by energy companies have attracted the ire of politicians in several countries, including the UK, which increased its energy profit levy this year. While commodity trading houses have escaped similar treatment, many analysts believe they could be next in line.

Vitol is a Dutch-registered company, with large offices in Geneva, London, Houston and Singapore.

The group is the world’s largest independent oil trader, though it traded slightly less crude last year than in 2021 after curbing the volumes of Russian oil it handled. Vitol stopped trading Russian crude in June.

Chief executive Russell Hardy told the FT Commodities Global Summit last week that a lot of the profits were being re-invested in capex projects to strengthen energy supply, such as upgrading the efficiency of its power stations.

The year ahead is going to be “very different” to last year, in terms of profitability and margins, Hardy said, adding that “it’s a much more conservative market going forward, so our strategy and approach has to reflect that”.

Chief financial officer Jeff Dellapina told the summit that 2022 was a “cyclical high” in terms of profit.

“Last year, performance was strong,” he said. “Most things were working well in terms of our integrated investments across refining, production, power generation, so this was quite a positive year.”

In the past, Vitol has usually returned the majority of its profits to its shareholders through buybacks over time, though there is no formula for how to do so.

Vitol’s LNG trading operations also experienced a big increase in revenue, as the company shipped LNG to Europe to help replace lost Russian gas. The value of LNG cargoes soared last year, and Vitol’s total LNG shipments rose slightly to 17.6mn tonnes of oil equivalent.

Vitol declined to comment.

FT : Bertelsmann chief puts goal of national TV mergers on ice

Bertelsmann chief puts goal of national TV mergers on ice
Thomas Rabe says stance of European regulators means it ‘doesn’t make sense’ to pursue big broadcast tie-ups

The head of Europe’s largest media company has admitted temporary defeat in his goal to create national TV giants capable of challenging global streaming services after the failure of two key proposed tie-ups.

Thomas Rabe, chief executive of Bertelsmann, said the decision by regulators in France and the Netherlands to effectively block big television deals in their countries had forced the group to put the idea on ice.

“It’s very clear [that in] the next two to three years, it doesn’t make sense to come up with large-scale merger plans in TV, because the position which the authorities took in France and the Netherlands is likely to be the same in other countries,” Rabe told the Financial Times.

The boss of Bertelsmann, whose brands include European broadcast network RTL, publisher Penguin Random House and music label BMG, insisted the strategy of creating “national media champions” that could take on the likes of Netflix remained unchanged.

But Rabe said the company would now pursue what he called “alternative paths to scale” such as advertising and distribution partnerships.

“These will be smaller steps to consolidate and create scale,” he said. “But, frankly, [they are] the only steps which are currently available, given the position of the competition authorities.”

Rabe has run Bertelsmann since 2012 and was credited with reshaping the company and driving strong revenues and profits at the German family-owned media empire.

But he has suffered a series of setbacks in recent months that have struck a blow to his core strategy.

In October, Bertelsmann abandoned a plan for its French channel M6 to merge with Bouygues-owned TF1 after regulators raised far-reaching objections about the impact on the advertising market and imposed conditions that the companies said would have made the deal unworkable.

In January, the Dutch competition authority blocked a proposed merger between RTL Nederland and Talpa Network, citing similar concerns about the power it would give the new combined entity over the Dutch advertising market.

Bertelsmann was dealt a further blow in the US last year when a New York judge blocked Penguin Random House from proceeding with a proposed $2.2bn acquisition of Simon & Schuster after the US justice department argued the merger would create a “publishing behemoth” that would harm both authors and readers.

Rabe was critical of European regulators and their refusal to change the definition of “relevant market”, used to assess competition risks, to include online advertising as well as television — a move that would have reduced the size of the market share of the combined broadcasters.

He said they had failed to sufficiently take into account the changing media and advertising markets, adding: “That’s a big missed opportunity.”

His comments came as Bertelsmann reported record revenues of more than €20bn in 2022, but the group’s net profits more than halved to €1bn — down from €2.3bn the previous year.

Results at Bertelsmann’s publicly listed RTL group, which is on the front line in the battle against streaming giants, painted a mixed picture. It recorded growth in the number of paying subscribers and revenues from its streaming business, but a 6.5 per cent fall in operating earnings before interest, taxes, depreciation and amortisation — a fall driven partly by declining advertising revenues.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • SMTC -16.4%, ANGO -14.3%, CNXC -6% (also combining with Webhelp), RH -5.5%, AVDL -4.9%, PL -2.3% (also acquiring the business of Holding Sinergise), VRNT -2%, ROG -1.6% (guidance)

Other news:

  • AVDL -4.9% (enters royalty agreement with RTW Investments; prices offering of 10,000,001 ADSs at $8.50 per ADS)
  • VKTX -3.8% (prices offering of 17.242 mln shares of common stock at $14.50 per share)
  • FC -3.4% (approves $50 mln for repurchases)
  • RNA -3% (provides regulatory update on AOC 1001 for myotonic dystrophy type 1 and plans to present top-line data from phase 1/2 MARINA trial at AAN Annual Meeting)
  • STEM -1.6% (prices $200 mln of 4.25% Green Convertible Senior Notes due 2030)
  • BTU -1.1% (confirms fire at Shoal Creek Mine)
  • PRQR -0.8% (stock offering by selling shareholders)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • CXM +16.8%, EVGO +7.5%, NEOG +5.6%, ATAT +1.3%, MANU +1.1%

Other news:

  • VIGL +6.8% (FDA has lifted the partial clinical hold on VGL101 - remains on track to report interim data from Phase 2 trial in the second half of 2023)
  • TREE +6.2% (committed to a workforce reduction plan that is intended to reduce operating costs; the reduction plan includes the elimination of approximately 13% of the company's current workforce)
  • AVXL +5.6% (reports preliminary 48-week open-label extension Parkinson's disease dementia ANAVEX2-73-PDD-EP-001 Phase 2 study data)
  • STIX +4.8% (authorizes $5 mln additional repurchases)
  • LICY +3.2% (Reports Operational and Financial Results for Two-Month Period Ended December 31)
  • GPRE +3.1% (Chairman retiring)
  • PACW +2.7% (joining S&P SmallCap 600)
  • MPW +2.7% (agrees to sell Healthscope portfolio)
  • WW +2.1% (Millennium Management discloses 5.1% stake)
  • MSGE +2% (Board approves spin-off of traditional live entertainment business; Expected to be Completed April 20)
  • WWW +1.5% (working to improve operating performance)
  • SSYS +1.5% (confirms receipt of revised unsolicited acquisition proposal from Nano Dimension (NNDM) for $19.55 per share in cash)
  • VLO +1.1% (awarded $906 mln contract)
  • CR +1% (joining S&P MidCap 400)
  • OMGA +1% (announced a clinical supply agreement with Roche (RHHBY) to evaluate OTX-2002)

Analyst comments:

  • GMED +3% (upgraded to Buy from Hold at Canaccord Genuity)
  • EQNR +1.8% (upgraded to Buy from Hold at Deutsche Bank)
  • NBIX +1.5% (upgraded to Buy from Hold at Canaccord Genuity)
  • AMT +1.1% (upgraded to Outperform from Market Perform at MoffettNathanson)
  • CCI +0.8% (upgraded to Outperform from Market Perform at MoffettNathanson)

FT : Bankers found guilty of helping to hide Putin’s millions by Swiss court

Bankers found guilty of helping to hide Putin’s millions by Swiss court
Employees of Gazprombank’s subsidiary failed to conduct due diligence on accounts of Kremlin-connected figure

Four senior bankers have been found guilty by a Swiss court of helping to launder tens of millions of francs linked personally to president Vladimir Putin through the country’s banking system.

The four — three Russians and one Swiss national — were employees of Gazprombank’s Swiss subsidiary, and include its chief executive.

A Zurich district court ruled on Thursday that they were guilty of financial negligence in failing to perform due diligence on highly suspicious transactions run through the bank.

Conditional criminal fines of between SFr540,000 and SFr48,000 were imposed, which do not have to be paid if parole conditions are kept over the next two years. Prosecutors had sought custodial sentences.

In their case, prosecutors detailed how accounts had been opened at Gazprombank on behalf of Sergei Roldugin, a cellist and the godfather to Putin’s daughter, without questions being raised about how a musician had amassed vast wealth.

Roldugin deposited SFr50mn in Gazprombank’s Swiss accounts, and promised to funnel at least SFr10mn more annually into them through a complex web of shell companies and offshore trusts.

Judge Sebastian Aeppli said it was “beyond doubt” that the money did not belong to Roldugin.

The funds originally flowed from Bank Rossiya, which Swiss prosecutors said was known to be the house bank of the Russian kleptocracy.

“The chair of the board [Yuri Kovalchuk] is considered Putin’s treasurer,” their indictment noted.

The Gazprombank bankers declared that Roldugin was not a “politically exposed person” — a designation that would have triggered additional internal and regulatory scrutiny — and performed a nugatory investigation to back up such assertions, the prosecution said.

The official internal due diligence file on Roldugin contained only a printout of the website for the Mariinsky theatre in St Petersburg — where Roldugin was a conductor — and a single negative search result on Worldcheck, a compliance database.

“It is notorious that Russian President Putin officially has an income of just over SFr100,000 and is not wealthy, but in fact has enormous assets managed by people close to him,” prosectors wrote in their indictment. “Roldugin . . . [was] a straw man.”

The four bankers may opt to appeal against the verdict to the cantonal appellate court. A further appeal would then be possible on the federal level.

The case was triggered as a result of the Panama Papers leak in 2016, in which a huge cache of documents was disclosed to international media organisations from the Panamanian law firm Mossack Fonseca, the world’s fourth-largest offshore services provider.

Germany’s Der Spiegel magazine and the UK’s Guardian newspaper homed on on accounts they found in the documents under Roldugin’s name.

Shortly afterwards, the Swiss market regulator Finma began an investigation of its own into Gazprombank’s role in the Swiss part of the Roldugin network.

In 2018 the regulator concluded that the bank was “in serious breach of its anti-money laundering due diligence requirements in the period from 2006 to 2016”, and imposed strict penalties.

It also lodged a complaint with cantonal prosecutors in Zurich, triggering the formal criminal investigation.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • CXM +14%, STIX +4.8%, SSYS +4%, MPW +3.8%, ATAT +3.4%, GPRE +3.1%, LICY +3%, WW +2.3%, PL +1.7%, WWW +1.5%, PACW +1.4%, TREE +1.1%, WFC +1%, CR +1%, BAC +0.9%, AZN +0.9%, TSLA +0.8%, JPM +0.7%
  • Gapping down:
    • SMTC -13.3%, CNXC -6%, RH -6%, AVDL -4.4%, VKTX -4.3%, BMEA -3.3%, PRQR -3.2%, FC -2.9%, VRNT -2%, BTU -1.7%, ROG -1.6%, EVH -1.3%, FUL -0.6%

FT : EU agrees compromise on nuclear energy amid French pressure

EU agrees compromise on nuclear energy amid French pressure
Paris obtains carve-out for atomic power to be counted towards decarbonisation of industry

The EU member states and parliament have reached a compromise on new targets for renewable energy after agreeing to a carve-out for nuclear power in certain sectors amid pressure from France.

Negotiators agreed to increase the overall binding target of renewable energy consumed in the EU to 42.5 per cent by 2030, up from 32 per cent, according to a statement. They also set an “indicative” target of reaching 45 per cent by the end of the decade.

France had pushed for nuclear energy to be included in countries’ efforts to reach those targets. But at the end of a long night of negotiations, the countries agreed on a more limited concession counting nuclear power towards the target for industry. Nuclear power plants generated about two-thirds of France’s electricity output in 2022.

Nuclear-sceptic countries including Germany and Austria had argued against the inclusion of atomic power, saying that such a move would undermine efforts to expand solar, wind and other renewable sources of energy.

The agreement now includes counting “low-carbon” hydrogen generated with electricity from atomic power plants as part of separate targets for renewable hydrogen used by industry, which can be reduced by one-fifth under certain conditions.

The states would, however, still have to reach the overall renewables goal of 42.5 per cent, regardless of the discount in the industry sector.

Pascal Canfin, head of the environment committee at the European parliament, on Twitter welcomed the “recognition of the role of nuclear energy, which is neither green nor fossil”.

The new law also accelerates permitting procedures for wind farms, solar panels and other renewable energy projects. They would be considered in the “overriding public interest”, meaning they could be exempt from certain nature protection laws.

“It will mean a massive boost for renewable energies in Europe,” said Markus Pieper, who led the negotiations for the European parliament on the directive.

European Commission president Ursula von der Leyen said: “This will help us progress towards climate neutrality, strengthen our energy security and boost our competitiveness — all at once.”

The deal still needs to be endorsed by the European parliament and the states.

While this is usually a formal process, Germany’s recent reopening of a deal regarding rules for car emissions has caused concern that countries unhappy with the outcome of this agreement could make a similar move.

WWD : Louis Vuitton, Valentino to Expand on Sloane Street, London’s New Green Re

Louis Vuitton, Valentino to Expand on Sloane Street, London’s New Green Retail Hub
Major international luxury names are competing for space on London's Sloane Street, which is undergoing a 46-million-pound green refurbishment.

LONDON – Sloane Street is fast becoming a luxury lifestyle hub to rival Mayfair following a series of transformations, the latest of which is a 46-million-pound project to turn it into an oasis of green.

The street, which runs between Sloane Square on the south side and Knightsbridge on the north, is set to undergo a two-year public realm project managed by the majority long-term landowner, Cadogan.

Cadogan has brought in public and private partners, working with the Royal Borough of Kensington and Chelsea Council on the overall execution, and with Louis Vuitton on an innovative “pocket forest” that’s being planted on nearby Pont Street.

Breakout Actress Madelyn Cline Mulls What Comes Next
In an interview, Hugh Seaborn, chief executive officer of Cadogan, said the owners see Sloane Street and its environs as “a global destination for luxury retail.” He noted that the street was originally commissioned in the 18th century by the 1st Earl Cadogan as a stylish destination where court dress makers had their shops and where the latest fashions were born.

This is the first time the street, as a whole, is being refurbished. Seaborn said that Cadogan has been working with the local council to create “a beautiful, inspiring, greener, cleaner and better-connected environment for local residents and businesses.”

Over the years, Cadogan has lured big names such as Tiffany & Co., Louis Vuitton, Valentino, Dior and British labels including Anya Hindmarch and Emilia Wickstead onto the one kilometer-long street, and those brands are now expanding their spaces – or moving to larger premises – as part of the planned two-year project.

Although international tourism is nowhere near its pre-pandemic levels, and retailers remain stung by the U.K. government’s refusal to reinstate tax-free shopping, people are spending money.

Wealthy international residents, students and British locals regularly wait in line to enter stores including Chanel and Louis Vuitton, while hotels including Cadogan, which belongs to Belmond, and Beaverbrook Town House are buzzing.

In 2022, sales growth on Sloane Street was up 7 percent compared with 2019, according to Cadogan. Seaborn described shoppers on the street as “very international” and said most have a home in the area.

It’s no wonder the luxury brands are expanding. In July, Dior plans to double the size of its Sloane Street store, moving into a 9,000-square-foot space at 196-198 Sloane Street, while Louis Vuitton is adding a floor to its existing store, growing by an additional 1,874 square feet.

Bottega Veneta is extending its current space, while Valentino is taking an entire townhouse measuring 8,170 square feet. It will open next year at 185-186 Sloane Street. Walpole, the association of British luxury goods, is moving into a townhouse in May, while Kiton is opening that same month at 49 Sloane Street.

Those changes follow the openings of Emilia Wickstead and Diptyque flagships last year, while Anya Hindmarch has recently added the sixth permanent store to her concept village in the neighborhood, which she has described as “the world’s smallest” department store.

Cadogan has also been upgrading the hospitality offer.

In 2016, it transformed a long and very quiet cobbled side street into the pedestrian strip called Pavilion Road, which is now lined with restaurants, bars, cafés and bakeries.

Later this year, Cantinetta Antinori will open a few steps away from Pavilion Road. The restaurant will be the Antinori family’s first outside Italy and will be located opposite Louis Vuitton. Cadogan said there are more restaurants to come later this year.

The biggest plan of all is in the public realm, where Cadogan wants to transform Sloane Street into a “green boulevard,” with the project set to be completed by the end of 2024.

The project was originally approved by the local council in 2019, but the start of works was delayed due to the pandemic.

There are plans to widen the pavements and add plants, trees and gardens. Beehives and natural ponds in Cadogan Place Gardens will be created to encourage biodiversity.

Cadogan is also promising “elegant street furniture,” enhanced lighting and additional security measures, all aimed at creating a more welcoming environment for pedestrians. It is also planning a series of “traffic-calming measures.”

New “waste collection bikes” are meant to take trucks off the road and further support the improvement of local air quality, and the whole life of the scheme is designed to be ultra-low carbon impact.

London architects John McAslan and Partners, whose recent work includes the transformation of King’s Cross Station, are leading on the public realm masterplan. The landscaping is being overseen by Chelsea Flower Show award winner Andy Sturgeon.

Cadogan said Sturgeon is planning a “royal” color palette of rich maroons, reds, purples and blues for a “diverse and climate-resilient mix of flowers, shrubs and over 100 new trees.”

The Information : Alphabet’s Google and DeepMind Pause Grudges, Join Forces to C

Alphabet’s Google and DeepMind Pause Grudges, Join Forces to Chase OpenAI

OpenAI’s success in overtaking Google with an artificial intelligence–powered chatbot has achieved what seemed impossible in the past: It has forced the two AI research teams within Google’s parent, Alphabet, to overcome years of intense rivalry to work together.

Software engineers at Google’s Brain AI group are working with employees at DeepMind, an AI lab that is a sibling company within Alphabet, to develop software to compete with OpenAI, according to two people with knowledge of the project. Known internally as Gemini, the joint effort began in recent weeks, after Google stumbled with Bard, its first attempt to compete with OpenAI’s chatbot.

The release of Bard was also marred internally by the resignation of a prominent Google AI researcher who had raised red flags about its development to Alphabet CEO Sundar Pichai and other executives.

THE TAKEAWAY
• Researchers from DeepMind and Google are working on software to rival OpenAI’s GPT-4
• High costs and computing needs forced researchers from the two units to work together
• Key AI researcher quit in January after raising red flags about Google’s Bard chatbot


DeepMind has operated more like a rival than a collaborator with regard to Google Brain since Google acquired DeepMind in 2014. The two have been competing to improve some of Google’s products and services and to gain global notoriety for research breakthroughs. Now, though, employees at both of Alphabet’s AI labs agree that OpenAI has outflanked them. Plus, the startup has hired away some of their key engineers and researchers, The Information has reported.

OpenAI in November launched ChatGPT, a chatbot that gives humanlike answers and has become one of the fastest-growing apps in history. Google’s own chatbot, Bard, which became available to a limited group of users last week, appears to perform worse on some tasks compared to ChatGPT.

Reflecting Gemini’s importance, Jeff Dean, Brain’s leader and the most senior AI research executive at Google, has taken a technical role in the project, writing code to help make a machine-learning model that would try to match the capabilities of OpenAI’s GPT-4, the model that powers ChatGPT, one of these people said.

The effort is one sign of how Google has shaken up the product road maps at countless teams including search and cloud as a result of competition from ChatGPT and OpenAI’s work to incorporate its tech inside products made by Microsoft—which is funding the startup and paying for its computing needs.

Gemini is a forced marriage. Alphabet’s two AI labs have seldom collaborated or shared computer code with one another. But now, because both wanted to develop their own machine-learning model to compete with OpenAI and needed an inordinate amount of computing power to do so, they had little choice but to work together, said a person with knowledge of the situation.

Red Flag

Bard’s early stumble demonstrates Google’s problems. The chatbot was created in a process so contentious that a prominent Google AI engineer, Jacob Devlin, resigned in January and immediately joined OpenAI, according to a person with direct knowledge and another person briefed about it. Devlin was the lead author of a seminal paper on a method of training machine-learning models to improve their understanding of groups of sentences—an invention OpenAI has incorporated into its language models.

Devlin quit after sharing concerns with Pichai, Dean and other senior managers that the Bard team, which received assistance from Brain employees, was training its machine-learning model using data from OpenAI’s ChatGPT. Specifically, Devlin believed the Bard team appeared to be relying heavily on information from ShareGPT, a website where people publish conversations they’ve had with ChatGPT.

Some Google employees felt the use of such chat logs would have violated OpenAI’s terms of service, which prohibit the use of “output…to develop models that compete with OpenAI,” according to its website. Devlin also told executives he was concerned that by relying on the ChatGPT chat logs from ShareGPT, Bard’s answers would mimic or resemble those of ChatGPT too much.

After Devlin raised the issue, Google stopped using ChatGPT data to train Bard, one person said. The Bard team has been led in part by Sissie Hsiao, a vice president who previously was in charge of Assistant, which is similar to Apple’s Siri voice assistant, said two people with knowledge of the group. A Google spokesperson didn’t comment on Devlin’s resignation and allegation. Spokespeople for OpenAI didn’t immediately respond to a request for comment.

1 Trillion Parameters

The business implications of OpenAI’s early lead over Alphabet aren’t clear. Though it makes plenty of mistakes, millions of people are already using ChatGPT and the technology behind it to quickly generate blog posts and other content, summarize meeting notes and automatically create spreadsheets, among many other tasks, according to a person with knowledge of the figures.

The product has generated relatively little revenue to date, though that could change. Microsoft has attempted to boost its own search engine, Bing, by incorporating a ChatGPT-like feature with OpenAI’s help, but so far that doesn’t appear to have taken meaningful market share away from Google Search. Still, OpenAI appears to have heralded a new era of applications that can understand requests customers make using natural language.

The Gemini project aims to develop a large-language model—a computer program that can understand and generate human-like language—that would have up to 1 trillion parameters, a measure of calculations in a machine-learning model, said one of the people briefed about it. GPT-4 also has around 1 trillion parameters, Semafor reported. Google’s effort requires tens of thousands of tensor processing units. The company’s equivalent to Nvidia’s graphical processing units, TPU microchips are particularly well suited to training large machine-learning models, this person said. Still, the Gemini effort may take months to complete, this person said.

Meanwhile, other teams at Google have been developing their own large-language models as part of a companywide effort to integrate AI into all of its products. Pandu Nayak, a Google executive overseeing search rankings, has been developing a separate model to handle certain search queries, while Google Cloud is creating its own model to sell to cloud customers, similar to the one customers can buy from OpenAI or Microsoft’s Azure cloud unit, this person said.