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IEA says strong action needed to tackle emissions from polluting fossil fuel

The International Energy Agency has called for strong and immediate actions from governments to tackle emissions from coal, as it predicted the amount of electricity generated from burning the fossil fuel would hit a record high this year.

In its annual coal report, the Paris-based group said global power generation from coal was set to jump by 9 per cent in 2021 to an all-time high of 10,350 terawatt-hours, after falling in 2019 and 2020.

“Coal is the single largest source of global carbon emissions, and this year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero,” said IEA executive director Fatih Birol.

“Without strong and immediate actions by governments to tackle coal emissions — in a way that is fair, affordable and secure for those affected — we will have little chance, if any at all, of limiting global warming to 1.5 degrees Celsius.”

The resurgence of thermal coal highlights the difficulties governments face in trying to make the switch to cleaner forms of energy. Even as renewables such as wind and solar are growing rapidly, they are struggling to keep pace with rising demand for electricity and power, leaving fossil fuels to fill the gap.

The IEA said record demand for coal in power generation was driven by the economic recovery from the pandemic. This caused electricity demand to outstrip supply from renewable energy and low carbon energy.

The record-breaking increase in natural gas prices also added to consumption, making it cheaper and more profitable for utility companies to burn coal in their power stations.

Overall coal demand — including its use in steelmaking, cement and other industrial activities — is forecast by the IEA to grow by 6 per cent in 2021 to just over 8bn tonnes. That puts demand on course to a new all-time high as soon as 2022 and remain at that level for the following two years, the report said.

“Global coal trends will be shaped largely by China and India, who account for two-thirds of global coal consumption, despite their efforts to increase renewables and other low-carbon energy sources,” the report said.

At the COP 26 climate summit in Glasgow last month a last-minute intervention from India and China weakened efforts to end coal power and fossil fuel subsidies.

“China’s influence on coal markets is difficult to overstate. China’s power generation, including district heating, accounts for one-third of global coal consumption,” the report said.

Coal prices have soared this year, delivering huge profit windfalls to big producers such as Glencore, Thungela Resources and Whitehaven.

High grade Australian coal — a benchmark for the vast Asian market — hit a record high above $250 a tonne in October on the back of strong demand from China, where production did not keep pace with demand because of tough new safety rules that closed many mines.

Faced with power shortages and blackouts Beijing subsequently ordered its domestic coal industry to go “all out” and increase production. That has brought prices back down to around $150 a tonne, but they remain well above the five-year average.

While it was disappointing that power generation from coal was set to reach a record level this year, Dave Jones of Ember, a climate and energy think-tank, said it would begin to decline soon.

“China has committed to phasing down coal from 2025, while India’s huge renewables target should remove the need for more coal. It will take time for the ship to turn, but time is not on our side to keep 1.5 degrees within reach,” he said.

After Fed signal of future rate rises, Bank of England raises benchmark rate and ECB says increase in 2022 is very unlikely

Europe’s foremost central banks took diverging policy paths a day after the Federal Reserve set the stage for rate rises in 2022, differing approaches that underscore the challenges for policy makers as they balance surging inflation and renewed risks to growth from the fast-spreading Omicron variant of the coronavirus.

The Bank of England became the first of the world’s major central banks to raise its benchmark interest rate since the pandemic began, while the European Central Bank said it would phase out an emergency bond-buying program while ramping up other stimulus measures to keep the 19-nation eurozone’s recovery on track.

Fed officials on Wednesday set out plans to accelerate the withdrawal of stimulus and signaled they expect to raise interest rates three times next year, a major policy pivot that reflects heightened concern about the potential for inflation to stay high.

The shifts show how central banks’ plans to phase out multitrillion-dollar stimulus policies and move toward higher interest rates are playing out at different speeds in the world’s big economies, which are struggling with incomplete recoveries at the same time as inflationary pressures mount.

“I don’t think that something happening at the Fed is bound to happen” in Europe, ECB President Christine Lagarde said at a news conference on Thursday. The U.S., the U.K. and eurozone economies are at different phases of the economic cycle, and received different levels of government support during the pandemic, she said.

The Omicron variant, first identified in South Africa and now detected in more than 70 countries, is further clouding the outlook for an already uneven global recovery.

Officials on the U.K. central bank’s Monetary Policy Committee on Thursday voted eight to one to lift the policy rate to 0.25% from a record low of 0.1%, saying the strength of the labor market meant higher borrowing costs were appropriate to keep a lid on price growth.

The BOE’s action came despite surging cases of the Omicron variant in the U.K., which has triggered new restrictions in the run-up to Christmas in an effort to stem a wave of infections that public-health officials say could overwhelm hospitals. The U.K. on Wednesday reported a record 78,610 Covid-19 cases, the most recorded on a single day.

Omicron is a worry but its economic effects are unpredictable, the majority on the panel said, and its emergence didn’t justify delay.

The BOE’s decision wasn’t widely expected. Though a rate rise had been telegraphed, many investors and economists expected the central bank to hold steady until early next year while the economic effects of Omicron became clearer.

The pound strengthened 0.4% against the dollar. U.K. government bonds sold off with the yield on the benchmark 10-year gilt rising as high as 0.825% from 0.727% on Wednesday before closing at 0.760%.

Stocks declined following the central-bank decisions, with the S&P 500 falling 0.9% Thursday, a day after the broad stocks gauge closed at its second-highest level on record.

The moves at the BOE and the Fed underscore how expectations that high inflation would prove fleeting are giving way to concern that a spell of rapid price growth and low unemployment risks fueling increases in wages and prices, maintaining the inflationary pressure for longer.

The ECB is taking a more cautious approach. The eurozone economy is still below its pre-pandemic level and appears to be slowing sharply, even as the U.S. economy accelerates above its precrisis peak.

“It does feel like central banks are beginning the monetary-policy normalization process at different points in time,” said Mark Zandi, chief economist at Moody’s Analytics. He said differences in each region’s labor markets in particular underpin their policy choices.

“The British labor market is leading the way,” he said, citing continued declines in joblessness following the September end of a government wage-support program. “The U.S. is a bit more scrambled and Europe is flagging.”

The ECB said it would end its €1.85 trillion emergency bond-buying program, equivalent to $2.1 trillion, as planned in March, but expand a separate bond-buying program next year. Taken together, ECB bond purchases will slow to €40 billion a month in April from about €80 billion a month at present, and will continue at least through October. The bank said it wouldn’t increase its key interest rate, currently set at minus 0.5%, until it ends its net bond purchases.

“It is very unlikely that we will raise interest rates in the year 2022,” Ms. Lagarde said.

The ECB said it would gradually scale down its bond purchases to €30 billion starting in July, and €20 billion starting in October. As an extra safeguard, the ECB said it could resume its emergency bond-buying program if necessary “to counter negative shocks related to the pandemic.”

With the Omicron variant, “we are venturing in the realm of uncertainty,” Ms. Lagarde said. In that context, she said, it made sense to gradually reduce bond purchases.

The ECB’s decision to keep its bond-buying program open-ended surprised analysts as it contrasted strongly with the Fed’s decision to phase out bond purchases entirely.

The euro edged up 0.3% to trade at $1.1320 and yields on benchmark 10-year German government bonds rose to minus 0.348% Thursday from minus 0.359% Wednesday.

Supply-chain bottlenecks are squeezing Europe’s large manufacturing sector, and governments across the region have recently reimposed social restrictions to contain a fresh wave of Covid-19 cases. The yields on Southern European government bonds have edged up since the summer, putting pressure on highly indebted governments such as Italy’s.

Still, inflation in the eurozone has accelerated sharply, reaching 4.9% in November, the highest rate since the euro was launched in 1999 and significantly above the ECB’s 2% target. In Germany, inflation has reached 5.2%, uncomfortably high for a nation with deep-seated historical fears of high inflation.

More than a dozen central banks have raised interest rates this year, according to Bank for International Settlements data, as the global economy reopened following widespread restrictions to contain Covid-19.

Norway’s central bank also raised its key interest rate Thursday, despite the country facing its own surge in Omicron cases. The Norges Bank lifted its key interest rate to 0.5% from 0.25%, and said a further increase was likely in March.

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An agreement, which could potentially be worth $30 billion, would rank as biggest ever for software giant

Oracle Corp. ORCL -0.41% is in talks to buy electronic-medical-records company Cerner Corp. CERN 0.72% , according to people familiar with the matter, a deal that could be worth around $30 billion and push the enterprise-software giant further into healthcare.

An agreement could be finalized soon, some of the people said, assuming the talks don’t fall apart or drag out. Should a deal come together, it would rank as the biggest ever for Oracle, which has a market value of more than $280 billion.

Kansas City, Mo.-based Cerner designs software that hospitals and doctors use to store and analyze medical records and other healthcare data. It has a market value of around $23 billion. With a typical takeover premium, a deal would be expected to value the company at something like $30 billion, though exact terms being discussed couldn’t be learned.

Oracle, a Silicon Valley veteran that last year moved its headquarters to Austin, Texas, is one of the biggest software providers to other companies and organizations.

In August, Cerner tapped David Feinberg as chief executive officer, a role he assumed in October. Mr. Feinberg came from Oracle rival Google, where he had led the Alphabet Inc. unit’s push into healthcare and helped strike partnerships with some of the country’s largest hospital systems to collect and analyze their data.

Oracle already has a significant presence in healthcare, offering technology meant to help health insurers, healthcare providers and public health systems parse data to increase efficiency and improve patient outcomes.

Oracle shares closed Thursday at $103.22, down slightly amid a broad-based tech selloff and just off an all-time high reached the day before. They jumped over 15% last week when the company reported fiscal-second-quarter results that topped estimates and Chief Executive Safra Catz reiterated the expectation that full-year revenue growth would accelerate from the year earlier. Ms. Catz, who became the sole CEO in 2019, said she expects the company’s operating margins to be the same or better than they were pre-pandemic.

The company also increased the authorization for share repurchases by $10 billion.

Buying Cerner could help Oracle with its pivot toward the cloud. Investors have warmed to Oracle as the company ramps up its focus on winning cloud-computing business, after initially being slow to embrace the booming market for storing and analyzing data on remote servers. Oracle has been trying to make up ground in recent years after falling behind companies such as Amazon.com Inc. and Microsoft Corp. , which both now have market values well exceeding $1 trillion thanks in part to thriving cloud units.

A deal for Cerner would follow Microsoft’s agreement in April to buy artificial-intelligence company Nuance Communications Inc. for $16 billion, in a bet on the growing demand for digital healthcare tools.

Oracle was founded by outspoken billionaire Larry Ellison and others in 1977. Mr. Ellison owns roughly 42% of the company’s shares, a stake that is worth well over $100 billion. Mr. Ellison passed the CEO reins to Ms. Catz and the late Mark Hurd in 2014, but remains chairman and chief technology officer.

A deal for Cerner would easily top Oracle’s next-largest transaction, the roughly $10 billion purchase of enterprise-software firm PeopleSoft Inc. that closed in 2005, followed by a $9 billion deal for cloud-software provider NetSuite Inc. in 2016.

In 2020, Oracle showed an appetite for bigger deals when it beat out Microsoft in bidding for the video-sharing app TikTok’s U.S. operations. The Trump administration’s concerns about TikTok’s Chinese ownership had effectively put the business in play, but the deal was put on hold indefinitely by the Biden administration.

Cerner, founded in 1979, competes with the likes of privately held Epic Systems Corp. and Athenahealth Inc., which recently agreed to a sale to one group of private-equity firms by another for around $17 billion including debt.

Cerner shares rose slightly to $79.49 Thursday.

An Oracle-Cerner deal would rank as one of the largest takeovers of 2021, which is shaping up to be one of the busiest ever for mergers and acquisitions. Merger activity in the U.S. is up 78% to $2.45 trillion, according to Dealogic, as lofty stock prices and easy money embolden companies to strike deals and special-purpose acquisition companies are formed at a breakneck pace.

City broker’s clean-up strategy raises hackles; Nick Train on the defensive; and bedtime reading in the van Beurden household

Liberum: redemption day

Goodwill has been in short supply at Liberum, the employee-owned boutique broker, which is ringing in the festive season with a forcible squeeze on its own shareholders.

In July, Liberum’s board began a programme to simplify its capital structure by buying back so-called growth shares held by existing and former staff. Holders were advised to sell on the company’s internal marketplace to avoid a mandatory buy-in. The G shares, which carry equal voting and dividend rights to the ordinaries but add a redemption clause in the event of a listing, accounted for about a quarter of the total in issue at the start of the year.

With the clean-up now largely complete, holdouts this month received a letter that laid out the repurchase terms. They say Liberum has set its final offer at around a 30 per cent discount to the prevailing price. Liberum declined to comment on the terms offered.

Why have the holders resisted selling earlier? A suspicion among some is that Liberum has been tidying its ownership structure in mind of a potential sale, though company insiders insisted there was nothing happening to support that idea.

Liberum, which last year reported an £800,000 profit on revenue of £45.9m, is no stranger to takeover speculation. In 2018 it was approached by Macquarie, the Australian investment banking group, and has been linked before and since with numerous City mid-cap peers including Bob Diamond’s Panmure Gordon.