TheChek News Flow

Growth of renewable energy heralds the rise of supercables

Projects are under way to connect regions and countries creating a new era of energy ties between economies

An electricity substation in Lincolnshire, eastern England, marks the landing point for the world’s longest two-way electricity cable. The Viking interconnector stretches across 765km of land and sea to connect Britain and Denmark’s electricity markets. 

The joint project between the UK’s National Grid and the Danish grid operator Energinet started commercial operations at the end of 2023, allowing traders to make the most of differing weathering patterns across the North Sea, importing electricity into the UK when it lacks wind and exporting when it has too much. 

It may not be the world’s longest cable for long. Developers are eyeing giant cable projects around the world as the growth of renewable energy creates huge value in trading electricity across different time zones and weather patterns, in order to match supply and demand.

Developers are making plans to connect Canada to the UK, Morocco to Europe, and Australia to Singapore, with cables stretching across land and the seabed over distances of 4,000km in some cases. 

The projects are expensive, difficult to build and come with added complications such as stretched supply chains, risks of sabotage and requirements for both government and private backing. 

But if they succeed, developers say they could help spur the move away from fossil fuels by making the most of renewable supplies, and mark a significant new era of energy ties between leading economies. 

“These are the hero projects,” says Fiachra Ó Cléirigh, executive vice-president at the engineering consultancy Jacobs, which is working on projects such as the planned 345km Marinus Link between Tasmania and mainland Australia. 

That seems modest compared with the AAPowerLink project being developed by SunCable, owned since 2023 by a consortium led by Grok Ventures, the investment group founded by software company Atlassian’s chief executive, Mike Cannon-Brookes. 

The A$40bn ($26.4bn) project involves building an initial 3GW of solar capacity, with batteries, in Australia’s sunny Northern Territory, and selling the electricity to consumers in Darwin on the north coast and Singapore via a 4,300km cable. It hopes to reach Singapore by the mid-2030s. 

“Countries like Australia have abundant amounts of land, abundant sunshine — abundant ability to produce renewable energy, in contrast to some of our neighbours,” says Ryan Willemsen-Bell, chief executive of SunCable. 

“The ability for us to be able to share the benefits of that is something we think holds great promise. It’s something that is done in the Northern hemisphere already very well, and something that we believe can be replicated in our region.”

On the other side of the world, clean energy investment banker Laurent Segalen and interconnector developer Simon Ludlam are in the early stages of trying to link North America with Europe via a 6GW two-way 4,000km cable between Canada and the UK and Ireland.  

The time difference means the UK could wake up with electricity from Canada’s hydropower plants when Canadian demand is low overnight, and send power back when it’s windy at midnight in the North Sea and New Yorkers are making dinner. 

The response from prospective investors in the North Atlantic Transmission One Link has been positive so far, says Segalen. “We believe that the power of the arbitrage will allow a large participation of private actors. If we start and we realise we need 80 per cent subsidies, we’re simply not going to do it.”

He is confident about its technical feasibility despite the vast, difficult terrain. “We are not inventing a technology. It’s not a moonshot. We take the Viking Link [between the UK and Denmark], and we just try to stretch it five times. There is an existing supply chain.” 

However, significant challenges await. The supply chain is being stretched by growing global demand for cables, transformers and other electrical equipment, both for long-distance electricity trading projects and to connect new wind and solar farms to the electricity grid. 

Manufacturers are reluctant to add new capacity without firm orders, and waiting times are rising. Growing global protectionism could add to the strains. “To achieve economic efficiencies, it would help if supply chains are more global,” says Zhen-Hui Eng, who leads consultancy Baringa’s energy market work in Asia Pacific. 

Political tensions can also emerge if both sides of an interconnector are not getting equal value from it. In Norway, concerns about rising domestic prices as it exports electricity to neighbours have sparked questions over the future of its interconnectors. “Political elements [of the discussion] have grown,” says Ashley Thomas, infrastructure and renewables analyst at Winterflood Research. 

There is also the sheer challenge of laying cable on the seabed. “There are certain weather windows where you’ve got to get a lot of work done,” says Ó Cléirigh at Jacobs. “In terms of supply chain, it extends beyond the cables and the converter stations to the availability of vessels as well.”

The difficulties associated with getting such mega projects off the ground became clear in June, when the UK government said it would not back X-Links’s proposed project to build a one-way cable taking power from planned solar and wind farms in Morocco to the UK.

The energy department argued the £24bn Morocco-UK Power Project presented a “high level of inherent risk”, related to both delivery and security. Russia’s invasion of Ukraine has heightened concerns about energy infrastructure sabotage.

Developers are trying to find other financial routes to get the project built. James Humfrey, chief executive of the project, remains convinced of the importance of long-distance cables. “Fundamentally, there is such significant value that both sides [of the cable] can benefit,” he says.

Ludlam, one of the co-founders of the North Atlantic project, amplifies that idea. “The single most important nuclear reactor is up there [in the sky] and shines down on us,” he says. “Trying to capture that power is important and the rotation of the earth allows for that, providing we’re interconnected.

“A long-term vision, certainly a private one, is that we do interconnect across the most important and largest economic bases and that we share all the investment we’re making today so that we don’t overbuild, we don’t over-pollute and we utilise our natural resources in the most effective way.”

China-backed miner confident EU will back $500mn Anglo American nickel deal

MMG executive Troy Hey says company plans to keep serving existing European customers

China-backed miner MMG is confident of winning European approval for a $500mn deal to buy Anglo American’s nickel assets, despite concerns about Beijing’s dominance of critical mineral supply chains.

Troy Hey, MMG ’s executive general manager of corporate relations, confirmed that European antitrust regulators had expressed reservations about the group’s Chinese majority ownership.

But he said the company was “confident” it would get EU approval, given that it did not at present operate in the ferronickel market or in Brazil, where the Anglo nickel assets are located. Europe is a major market for the business being acquired by MMG.

“From a competition basis, we’re very confident that as new entrants to this market . . . and with very strong demand in Europe, we’re in a good place,” Hey told the Financial Times.

Anglo’s nickel business had a “solid European customer base” that MMG was “100 per cent committed to” serving, he added.

The deal agreed in February between Anglo and MMG, which is two-thirds owned by state-owned China Minmetals, has attracted criticism from groups who say it will reinforce China’s control of metals that are crucial for the energy transition.

The planned tie-up is part of the London-listed miner’s restructuring plan that it initiated after fending off an attempted takeover by rival BHP. Anglo has since announced a $50bn megamerger with Canadian group Teck Resources.

The American Iron and Steel Institute was among the groups that pushed back against Anglo’s deal with MMG, urging the White House to intervene because it said the deal would reinforce China’s influence over nickel, which is used in electric vehicles and stainless steel.

But Hey argued that Hong Kong-listed MMG’s Chinese ownership would provide much-needed support in a challenging nickel market that has seen prices slump since 2022.

“You have somebody who is able to invest and grow, [is] able to run an asset for the long [term] and sustainably, and continue to produce those products, which are in strong demand, especially in European, Asian and US markets”, he said.

Hey said he expected the EU to make a decision before the end of the year. The deal has not yet been filed with antitrust authorities in Brussels, and an attempt to get quick approval through a simplified procedure was withdrawn in May. 

Separately, Brazilian authorities opened a probe into the sale last week after receiving a complaint from a competitor. Cade, the main antitrust body, said that did not necessarily mean it would block the deal. Hey said MMG was in touch with the Brazilian authorities.

MMG was also looking for opportunities in the copper market, said Hey. “Copper is our number one target . . . [although new] opportunities are difficult to find,” he said. Almost 80 per cent of the company’s sales in the six months to June 30 came from its copper business.

Rheinmetall chief calls for more investment in low-cost anti-drone capabilities

Top German defence group is ready to supply Poland with air defence systems if asked, says Armin Papperger

The chief executive of Rheinmetall, Germany’s biggest defence contractor, said Europe needed to step up its investment in low-cost air-defence systems to counter the increasing threat from Russian drones.

Speaking after the Russian drone raid into Polish airspace on Wednesday, Armin Papperger also said the company was ready to supply Warsaw with air defence capabilities to help the country protect itself if asked.

Europe needed to develop counter-drone systems “in a very cheap way” while also boosting its production capacity, Papperger told the Financial Times at the DSEI defence show in London.

“I think that Ukraine needs double the size of what they have at the moment, but we have to invest in Europe because Europe has nearly nothing,” he said.

Nevertheless, the production capacity was growing. Rheinmetall had scaled up its own capacity and wanted to produce 200 a year of its mobile air defence Skyranger systems. 

The “capabilities are there, the technology is there and the capacity will build up”, he said. 

Rheinmetall was ready to ship its systems to Poland if it secured a contract, added Papperger, noting that he had met with Polish officials after the Russian drone raid to discuss “what can we do immediately to protect also something on the Polish border”. The company expected to deliver Skyranger systems to Ukraine starting at the end of the year, said Papperger. 

Building up Europe’s air defence capabilities has taken on greater urgency as Russia has stepped up its drone assaults on Ukraine. EU nations have in recent weeks agreed to send air defence systems and munitions to Kyiv from their own stocks. Russia’s drone incursion into Poland’s air space is widely seen as a test of Nato’s defences. 

Papperger said traditional missile-based air-defence systems were expensive relative to the production cost of drones.

“To fire a $200,000 or $500,000 weapon against a $20,000 drone makes absolutely no sense,” he said. The price of drones were likely to fall further, and “we have a system that counters drones for $5,000 and that economically makes a lot of sense”.

Rheinmetall has become a key partner for Ukraine since Russia’s full-scale invasion in February 2022 and one of the biggest corporate winners from the surge in European military spending. 

Papperger said he was confident of meeting the company’s ambitious profitability and revenue targets. Rheinmetall aims to deliver a 20 per cent profit margin on projected sales of €40bn-€50bn in 2030. 

Rheinmetall is seen as a key player in Europe’s drive to consolidate its defence activities and Papperger has pursued an aggressive growth strategy, rapidly expanding from ammunition and tanks to air defence and satellites. The company is closing in on a deal to purchase privately owned naval shipbuilder Naval Vessels Luerssen. 

Rheinmetall has also deepened its ties with US peers in Europe, including a partnership with Lockheed Martin to build the centre fuselage for the F-35 fighter jet in Germany. Papperger, however, said the company was not interested in taking on Europe’s aerospace champion Airbus by moving into planemaking.

The company’s shares have soared in the past three years, making it the best performer in Germany’s blue-chip Dax index and giving it a market value of more than €85bn — not far off from the €90bn market cap of Lockheed Martin, the world’s biggest pure-defence group.

Papperger, however, has his sights on the top spot. 

“At the moment, Lockheed Martin is number one, we are number two. So it’s not so bad. I know that . . . nobody wants to be a number two, but it must not be forever.”

Germany’s industrial heartland braces for AfD wave

Local elections set to cement right-wing shift in North Rhine-Westphalia, a former Social Democrat stronghold

Nevim Bayraktar was at a protest about her dilapidated housing last autumn when she encountered an official from Alternative for Germany (AfD). The care worker from the western city of Duisburg did not realise at first that he was from the far-right party.

“He was so kind and friendly,” she said. And he was “the only one there who stayed” to talk to her. 

Fast forward a year, and the 55-year-old will not only be voting for the AfD but is also running for the party in elections for the local council on Sunday.

The vote for city mayors and councillors in North Rhine-Westphalia, Germany’s most populous state, is the first big electoral test for Chancellor Friedrich Merz’s ruling coalition that took office in May. It is also likely to help the far-right party to strengthen its footing in the west of Germany, beyond its traditional eastern strongholds.

“NRW is a kind of experimental laboratory,” said Kristina Weissenbach, a professor of political science at the University of Duisburg-Essen. “We have many citizens with different income levels and different cultural backgrounds. It kind of mirrors the whole of Germany.”

The election is set to cement a rightwing shift in the Ruhr region that was for decades dominated by Social Democrats.

AfD councillor Alexander Schaary, the party official who first befriended Bayraktar and later asked her to become a candidate, said he was “very much convinced” that they would make gains.

The AfD is likely to strengthen at the expense of both Merz’s Christian Democrats (CDU) and his centre-left coalition partners (SPD), who voters blame for successive broken promises. But while the CDU could still retain control over many of the state’s wealthy cities such as Düsseldorf, the Social Democrats are set for bruising losses to the AfD in places such as Duisburg and its neighbour Gelsenkirchen.

In the post war years, Duisburg was an important coal mining and steel production hub and served as one of the engines of Germany’s “economic miracle”.

But the closure of mines and steelworks led to a sharp fall in industrial jobs.

“There isn’t as much money left,” said Guido Kerkhoff, CEO of the steel distributor Klöckner who also heads a project called the Ruhr Initiative. “The inner cities are emptier. It’s sad.”

Not all of Duisburg is rundown. A port development boasts restaurants and modern apartment blocks with views down the Ruhr river. There are museums dedicated to sculpture and modern art. A former steelworks has been turned into an acclaimed park.

Kerkhoff likes the “honest, direct and unpretentious” local spirit. “You can’t put on a big show here,” he said.

But swaths of the city, especially its northern parts, suffer from social problems including unemployment, child poverty, poor housing and integration challenges linked to high levels of immigration.

In Marxloh, which about ten years ago was dubbed a “no-go area” by the German press, old sofas and abandoned shopping trolleys are dumped on the pavements. Drug dealers could be seen loitering mid-morning, while a 9-year-old girl wandered around alone, unable to explain why she was not at school.

At a local market, stall owner Muammar Demir complained that his customers try to haggle him down to €3 for a ring priced at €7. “They don’t have any purchasing power,” he said.

Duisburg’s large foreign-born population includes Syrians who began arriving after 2015 when then chancellor Angela Merkel opened the doors to around 1mn asylum seekers. There also are EU citizens from Bulgaria and Romania who often work in tough, low-paid jobs such as cleaning, elderly care and meatpacking.

The newer arrivals sometimes have fraught relations with the second- and third- generation descendants of the Turkish “guest workers” who began arriving in large numbers from the 1960s.

These include Bayraktar, whose father arrived from Turkey in 1961 to work at a Ford plant in nearby Cologne. 

Her building in the north Duisburg district of Neumühl has had problems with foreign squatters. She complained about loud parties and said she found human faeces in the basement. “I explained again and again: ‘You must be tidy. We live in Germany. There is quiet time that starts at 10pm,’” she said. “They would say: ‘Sure, sister, we’ll do that.’ And then two days later it would all start again.”

Organised foreign gangs have been accused by authorities of running welfare fraud schemes and housing scams.

Local NGOs and researchers who work with migrants say that claims of widespread benefit fraud organised by criminal gangs are exaggerated and also risk hindering important efforts to promote integration and inclusion.

But the issues are real enough that SPD mayor Sören Link has been compelled to take a tough public stance. The slogan on his campaign posters is “firm stance, big heart”.

As well as the local problems, his party must grapple with its poor image on a national level, and the broader trend of voters abandoning the old established parties. 

Out canvassing in the Meiderich district this week, an enthusiastic troop of young SPD candidates encountered several people who said they would vote for the far-left Die Linke. Another slammed a door in their faces, saying they would vote for the AfD.

The AfD is not without its own problems. In North Rhine-Westphalia the party has been wracked by years of infighting, including over the role of a member of parliament from the region who once declared himself “the friendly face” of Nazism. Still, that didn’t stop it almost doubling its vote share to close to 27 per cent in northern Duisburg in February’s parliamentary election.

One local SPD official expressed dismay at some of the AfD’s candidates having “no clue” about local governance and instead spending time “posting cat videos” on social media.

But the party’s lack of governing experience does not bother disillusioned SPD voters such as Pascal Leier, a postman and father of two young children.

He is alarmed by what he says is the large numbers of children at his daughter’s kindergarten who don’t speak German.

He says that the far-right party is untested, but adds: “I want to see what the AfD could actually do if it had power.”

Beyond its small software division, the company’s entire model relies on constantly selling new shares

There is a scene in American high school films where the dorky protagonist, nose pressed against the window, watches a party they weren’t invited to. The sting stems not just from missing the fun, but from the deeper pain of denied validation.

For the company formerly known as MicroStrategy, now rebranded as Strategy, that party is the S&P 500 index. Last week, it was left outside in the cold.

Superficially, the rejection seems baffling. With a market cap of around $95bn and $14bn in second-quarter operating income, the company meets the criteria for index inclusion. Nevertheless, the committee added mobile app marketing company AppLovin, trading platform Robinhood, and construction and infrastructure services group Emcor in its quarterly rebalancing. That leaves Strategy — which owns 640,000 bitcoin or 3 per cent of the entire supply — as one of the largest companies outside the index. 

After the decision, executive chair Michael Saylor posted a slide on X showing the stock outperforming bitcoin and various indices including the blue-chip stock index, adding the caption, “Thinking about the S&P right now.” His online supporters were less restrained, calling the decision a “total clown show” and insisting “S&P 500 needs $MSTR, $MSTR doesn’t need S&P 500.” 

Like most deities, the S&P committee offered no explanation. One likely reason is that Strategy functions more like a bitcoin investment fund than an operating company, and the index explicitly bars funds. 

Strategy’s legacy software arm is a footnote. Instead of products or services, Strategy’s primary output is paper — and not of the pulp and cellulose variety. It issues common stock, preferred instruments, and convertible bonds to raise capital, which it then uses to buy and hoard bitcoin. And its reported operating income comes not from cash flow but from accounting gains tied to changes in bitcoin’s price. This fund-like structure arguably might count against inclusion.

To be fair, Strategy’s pivot from software to bitcoin in August 2020 has massively benefited stockholders. Since then, the stock has risen 25-fold, compared with bitcoin’s ten-times gain. But the model is showing cracks. It relies heavily on selling new shares at a premium to the net asset value of its bitcoin holdings. Strategy grandly terms this “bitcoin yield” — a measure that tracks increases in bitcoin per share but offers no actual income.

Problems emerged last autumn when Strategy announced a $21bn plan to issue equity. While presented as a three-year programme, it was exhausted within a few months. Since this surge in issuance began nine months ago, the stock has underperformed bitcoin itself. The “bitcoin per share” has increased, but the stock has dropped from a high of $543 in November to $325 today. Its premium — the amount it trades above the value of its bitcoin — has shrunk from around three times in November 2024 to 1.5 times today. 

As one of Saylor’s most high-profile supporters wrote on X: “If you liked $MSTR at $500 with 331,000 BTC . . . [n]ot sure why you wouldn’t like $MSTR at $330 with 638,460 BTC.”

This underperformance raises an uncomfortable question: with spot bitcoin ETFs now widely available, is Strategy a sub-optimal way to own bitcoin?

As the premium erodes, the constant need to issue new shares weighs heavier. Saylor has tried to ease this pressure with four new classes of preferred stock, but investor demand has been patchy. Just last week the company managed to sell $200mn of common stock but only $17mn of preferreds.

This explains why the brave talk about the S&P 500 can’t conceal real disappointment. Beyond its small software division, Strategy’s entire model rests on constantly selling new shares. Index inclusion would have delivered a steady pool of forced buyers for every new share Strategy created. Stephens Inc estimates that S&P admission would have compelled passive funds to buy 50mn shares worth around $16bn.

The next rebalancing comes in December. Then we’ll see if the S&P’s rejection of Strategy was a temporary delay or a verdict on Strategy’s model. For now, the index has decided that a company whose main product is its own stock isn’t quite ready for prime time. 

US to urge G7 to impose high tariffs on China, India over Russian oil purchases

Trump administration extends call for tougher measures beyond EU as it pushes Moscow to agree Ukraine peace deal

The US will pressure G7 countries to hit India and China with sharply higher tariffs for buying Russian oil in an attempt to force Moscow into peace talks with Ukraine, according to four people briefed on the plans.

In a video call on Friday, finance ministers from the Group of Seven leading economies will discuss a US proposal for a round of new measures as Donald Trump steps up efforts to broker a peace deal in Ukraine.

The US president this week urged the EU to impose up to 100 per cent tariffs on China and India but is now expanding the push to include G7 allies.

“Chinese and Indian purchases of Russian oil are funding Putin’s war machine and prolonging the senseless killing of the Ukrainian people,” said a US Treasury department spokesperson.

“Earlier this week, we made it clear to our EU allies that if they are serious about ending the war in their own backyard, they need to join us and impose meaningful tariffs that will be rescinded the day the war ends,” they added.

“President Trump’s Peace and Prosperity Administration is ready, and our G7 partners need to step up with us.” 

The spokesperson declined to state a figure for the planned tariffs but people familiar with the situation said the US had proposed levels of between 50 and 100 per cent. 

The US last month increased tariffs on Indian imports to 50 per cent over the country’s purchases of Russian oil. In April, Trump sharply increased tariffs on Chinese imports but scaled them back in May after a severe market backlash.

EU officials know that imposing such steep tariffs on two key trading partners would be difficult given the economic impact and likely retaliation from Beijing. The bloc is hoping to seal a trade deal with New Delhi within weeks as it seeks closer ties with a rising Asian power.

But Brussels hopes to persuade the US that it can achieve similar pressure through other measures such as tougher sanctions on Russian energy producers and bringing forward a 2027 deadline for its member states to stop buying Russian’s oil and gas. 

That, three European officials said, would require Trump to put pressure on Hungary and Slovakia, two countries led by pro-Russian leaders who continue to buy Russian oil via pipeline and have vetoed tougher EU sanctions in the past.

The EU is already debating whether to put sanctions on China for buying cheap Russian oil and gas.

Dan Jørgensen, EU energy commissioner, met US energy secretary Chris Wright on Thursday to discuss replacing Russian liquefied natural gas for American supplies.

“We need, as fast as possible, to make sure that we get rid of the dependency that we still have . . . on Russian energy,” he said. 

The EU still buys around a fifth of its gas from Russia, down from 45 per cent before the country’s full-scale invasion of Ukraine in 2022. 

Canada, which holds the G7 presidency and hosted the group’s last summit in Alberta in June, said it called the meeting “following discussions with the US”. 

It said they would “discuss further measures to increase pressure on Russia and limit their war machinery”.

“The G7 is resolved in its opposition to Russia’s illegal and unjustified war,” said John Fragos, spokesperson for Canada’s finance minister. 

The talks would include proposals for “tariffs on nations that continue to fund Russia’s war machinery”, said a Canadian government official who spoke on condition of anonymity. 

Ottawa also faces a dilemma over such a move. In June prime minister Mark Carney launched an effort to rekindle relations with India after a two-year rift. Similar overtures have been made to Beijing, as Canada diversifies its economy away from the US.