Fortum/Uniper: bailout could hinder green investment plan
Finish group’s financial buffer looks thinner if it buys out minorities soon
When the state has to step in to keep on the lights, one worries. When two countries get involved it’s a serious situation.
Nevertheless, shareholders in German gas and electric power utility Uniper remained calm on news the company had secured €10bn of additional facilities. Shares dipped just 2 per cent. The funds came from its Finnish parent Fortum — which owns 76 per cent — and German state bank KfW. The funds will cover Uniper’s growing liabilities on forward power and gas contracts.
Though Uniper depends on Russia for its gas, its minority shareholders have some reason to remain optimistic. Its market value has climbed 30 per cent since early July during the recent surge in European natural gas prices, up 2.5 times. While higher energy prices should translate into more earnings, Uniper sensibly hedges its commodity exposure. However, using these derivatives requires added cash margin payments when potential losses climb too quickly.
Uniper’s balance sheet has recently belied the underlying risk of these derivative positions. In the nine months to September it reported a net debt position of €1.3bn, not so far above its ebitda for the same period. However, it also reported a €4.7bn net loss, owing to mark-to-market losses on derivative contracts. Helping out Uniper should not overly stress Fortum’s balance sheet. Net financial debt there, at just 0.6 times ebitda, sits well below its two times target.
Fortum will find life more costly, though. It hopes to finish a lengthy takeover of Uniper, launched in 2017 soon after its spinout by former owner Eon. Markets have anticipated a buyout of remaining minorities, another boost to Uniper’s shares in the past year. The deal gave Fortum access to continental European power markets. However, buying Uniper roughly tripled Fortum’s carbon footprint, raising some questions about Fortum’s renewable energy plans and requiring more purchases of carbon allowances.
Moreover, Fortum’s financial buffer looks thinner if it buys out minorities soon. Using the three-month average Uniper share price, the cost would be €3.4bn. Net debt would then rise to 1.75 times this year’s expected ebitda, leaving less for its planned green investments.
UNCOOKED ALERT: THG said to ... - Part 4 Wednesday, 5 January 2022, 4:08 pm A private equity firm is rumoured to be circling THG PLC, the London-listed digital retail company behind The Hut Group.
People following the situation have heard rumours bankers from Jefferies have been attempting to broker a deal between a buy-out firm and THG's management team, which is led by Matt Moulding, the founder of THG.
The identity of the buy-out firm interested in THG is unclear but some people following the situation suggested one of the large American private equity houses is studying the company.
The takeover speculation comes after Betaville Intelligence reported in December that THG was at the centre of talk the company could soon be involved in a major corporate event.
Back then people following the situation said the precise details of the transaction are unclear but suggested the "event" might include a takeover of the London-listed business led by Mr Moulding or a spin off of a large division.
THG floated last year to much fanfare but since then has endured a torrid time in the stock market, with the shares falling over 75pc.
In November 2021 Mr Moulding said in a wide ranging interview with GQ Magazine that he might look to take the company private following the company's share price decline.
Readers should be aware that THG's shares have risen subsctantially since Betaville Intelligence published its first Uncooked Alert in December and since then data providers such as IHS Markit have shown short interest in the stock has risen to over 4pc.
Early premarket gappers
- Gapping up:
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- Gapping down:
- ANNX -22.9%, SWIM -9.4%, ARE -5.5%, SGH -4.4%, MLKN -3.1%, AMBA -1.9%, DCBO -1.7%, ITCI -1.5%
Evergrande to meet onshore bondholders in bid to delay payments
Indebted Chinese property group seeks reprieve as it tries to finish construction projects
Evergrande will hold an online meeting with renminbi-denominated bondholders this week as the heavily indebted Chinese developer seeks to delay more repayment deadlines and battles to complete its real estate projects.
Hengda Real Estate Group, Evergrande’s main onshore subsidiary, will hold the meeting and subsequent series of votes from January 7-10 with holders of its Rmb4.5bn ($707m) onshore bond, the company said in a statement to the Shenzhen stock exchange on Wednesday.
Evergrande is at the centre of a crisis across China’s vast property sector, with a cash crunch forcing companies to default on their international debts.
The world’s most indebted developer with more than $300bn in liabilities, ranging from onshore and offshore bonds to sums owed to contractors, Evergrande is in the early stages of a large-scale and politically sensitive restructuring process.
The group has missed a series of payments on offshore bonds since September. It has typically transferred the funds before 30-day grace periods expired but failed to do so at the end of one such period in December, leading rating agency Fitch to say it had officially defaulted.
At its meeting this week, which will involve holders of separate onshore renminbi-denominated debt maturing in January 2023, Evergrande will seek to change the date of a redemption option that would allow investors to redeem them from January 8 to July 8. It will also aim to delay a coupon payment due over the same period.
Investors and Chinese authorities have stressed the need to resume work at Evergrande’s hundreds of projects, for which homebuyers often pay before construction is completed, after a widespread halt in activity last year. On December 26, Hui Ka Yan, the group’s billionaire chair, said in a social media post the aim was to deliver properties to owners.
Trading in Evergrande’s shares was suspended on Monday after Chinese media said the company would be forced to tear down 39 residential buildings in the southern province of Hainan. In a filing to the Hong Kong stock exchange on Tuesday, Evergrande confirmed the demolition order from local authorities.
The group stated its contracted sales in 2023 were Rmb443bn, a 39 per cent fall on last year according to Citi analysts, who also noted that its sales fell 99 per cent in December year on year.
Evergrande also said it would “continue to actively maintain communication with creditors, strive to resolve risks and safeguard the legitimate rights and interests of all parties”.
Advisers to a group of international Evergrande bondholders, which include law firm Kirkland & Ellis and boutique investment bank Moelis, complained in October of a lack of meaningful engagement from the company.
Separately, shares in Huarong, China’s biggest bad debt manager and the focal point of creditor concerns earlier in 2021, lost half their value when trading in the group resumed on Wednesday.
Trading was suspended last April when the company failed to release its results, leading to a collapse in the prices of its offshore bonds. In August, the group disclosed record losses of $16bn and subsequently revealed details of a $6.6bn bailout from state-backed companies including Citic. Huarong was previously majority owned by China’s finance ministry.
Its shares slumped as much as 55 per cent in Hong Kong and Huarong’s perpetual bonds, which were trading as low as 54 cents on the dollar in May, are now close to their par value.
Hello,
Please find attached Future and Derivative Desk weekly chart book + trade ideas.
Update trade Ideas:
Entry Date
Long/Short
Underlying Future
Strategy
Entry level
Expiry Date
Market Level
Exit Date
Exit Level
Dec 21, 2021
Long
TYH2 10 Year Treasury
(+) TYH2P130/129 Put Spread Vs (-) TYH2 134 Call
Zero Cost
18.2.22
29/64
Dec 21, 2021
Long
USH2 Treasury Long Bond
USH2P 156 / 152 / 148 Put Ladder
18/64
18.2.22
53/64
4.1.2022 (50%)
T/Pon 50% at 45/64
Dec 21, 2021
Long
GCG2 Gold
0GCG2 1830 / 1870 2*3 Call Spread
7.00
26.1.22
15.50
Dec 28, 2021
Long
SI1 Generic Silver
Long from 23.24, tgt 25.50 & 28.00 + S/L < 21.40
23.24
22.96
Dec 28, 2021
Long
RXH2 German Bund
RXH2 172 / 170 / 167 Broken Put Fly
0.20
18.2.22
0.30
Dec 28, 2021
Short
EDH4 Eurodollar March 2024
2EH2 98 Put
5.0
11.3.22
6.0
January 3, 2022
Long
EDH3 Eurodollar March 2023
0EH2 98.625 / 98.4375 1:2 Put Spread
0.5
11.3.22
1.0
Please let us know if there is anything else we can assist, Have a great week - Thank you.
>>> Up
* Amadeus Raised to Overweight at Barclays; PT 70 euros
* Chrysalis Investments Raised to Buy at Jefferies
* Deutsche Wohnen Raised to Buy at Kepler Cheuvreux
* ElringKlinger Raised to Overweight at JPMorgan; PT 16 euros
* Ferguson Raised to Buy at Berenberg; PT 15,000 pence
* LSE Raised to Buy at Citi; PT 9,300 pence
* Marks & Spencer Raised to Add at AlphaValue/Baader
* Ocado Raised to Buy at Berenberg; PT 1,990 pence
* Pirelli Raised to Overweight at JPMorgan; PT 7.50 euros
>>> Down
* Axfood Cut to Sell at Carnegie; PT 230 kronor
>>> Down
* Axfood Cut to Sell at Carnegie; PT 230 kronor
* Continental Cut to Neutral at JPMorgan; PT 110 euros
* Investors House Cut to Reduce at Inderes; PT 6.20 euros
* Nestle Cut to Underperform at Jefferies; PT 110 Swiss francs
* Stabilus Cut to Underweight at JPMorgan; PT 62 euros
* Volvo Cut to Neutral at JPMorgan; PT 210 kronor
>>> Initiation
>>> Initiation
* Carnival Reinstated Hold at Jefferies; PT $24
* Kloeckner initiate with OutPerform at Oddo BHF
* Telenet Rated New Buy at Jefferies; PT 42.50 euros
>>> Call
* Telenet Rated New Buy at Jefferies; PT 42.50 euros
>>> Call
* Amadeus Raised to Overweight at Barclays, Sees Market Share Gain
* Barclays Stays Positive on Stocks, Sees Supply Problems Easing (+)
* Higher Yields Can Support Value Trades Like U.K. Stocks: Citi (+)
* LSE ‘Simply Too Cheap’ After De-Rating, Citi Upgrades to Buy
* Nestle Downgraded at Jefferies on Downside Risks to Consensus
* Ocado Is Upgraded to Buy at Berenberg on Attractive Entry Point (+)
* Telenet Has Clear Path to Unlock Value, New Buy at Jefferies
* Watch Crypto Prices to Gauge Power of Retail on Stocks, RBC Says
* Watch Crypto Prices to Gauge Power of Retail on Stocks, RBC Says
- Allegro (AL0 TH) +1.8%
- Just Eat Takeaway (T5W TH) +1.5%
- Amundi (ANI TH) +1.3%
- ASML (ASME TH) +1%
- Watch European Tech Stocks After Peers in Asia, U.S. Decline
- Novo Nordisk (NOVC TH) +0.8%
- L’Oreal (LOR TH) +0.8%
- Stellantis (8TI TH) +0.7%
- MTU Aero (MTX TH) -0.8%
- Uniper (UN01 TH) -0.8%
- German Energy Giant Uniper Gets $11 Billion for Margin Calls (1)
- Shell (R6C TH) -0.9%
- OPEC+ Agrees to Keep Adding Supply as Market Looks Tighter in 1Q
- Tomra (TMR TH) -1%
- BP (BPE5 TH) -1%
- OPEC+ Agrees to Keep Adding Supply as Market Looks Tighter in 1Q
- Continental (CON TH) -1.8%
- Continental Cut to Neutral at JPMorgan; PT 110 euros
- Lufthansa (LHA TH) -2.1%
- Lufthansa Could Gain on Rising Fuel and Demand
- CD Projekt (7CD TH) -2.2%
- Prosus (1TY TH) -3.2%
- Watch European Tech Stocks After Peers in Asia, U.S. Decline
DAX:
- Henkel (HEN3 TH) +1%
- Continental (CON TH) -1.8%
- Continental Cut to Neutral at JPMorgan; PT 110 euros
MDAX:
- Evotec SE (EVT TH) +1.6%
- Deutsche Wohnen (DWNI TH) +1.3%
- Deutsche Wohnen Raised to Buy at Kepler Cheuvreux (1)
- Aixtron (AIXA TH) +0.9%
- Watch European Tech Stocks After Peers in Asia, U.S. Decline
- Uniper (UN01 TH) -0.8%
- German Energy Giant Uniper Gets $11 Billion for Margin Calls (1)
- Lufthansa (LHA TH) -1.6%
- Shares gained 14% in the past two sessions
SDAX:
- SUSE (SUSE TH) +2.6%
- LPKF (LPK TH) +1.8%
- PVA TePla (TPE TH) +1.8%
- Dermapharm (DMP TH) +1.8%
- About You (YOU TH) +1.6%
- Schaeffler (SHA TH) -0.6%