TheChek News Flow

UK poised to act over Iran sanction breaches

Enforcement agency expects increase in maximum fines in the coming months

The UK’s sanctions enforcement body is looking to bring penalties against companies that have unlawfully dealt with Iran, in a warning shot to banks and other financial services firms.

In a rare interview, Giles Thomson, the head of Britain’s Office of Financial Sanctions Implementation (OFSI), said that the body was “increasingly looking” to take action over Iran.

“In recent months, Iran sanctions have expanded in scope and we’re also increasingly looking at where there might be enforcement action we might want to take there,” he told the FT.

The UK restored its sanctions against Iranian individuals and companies in September after the country failed to uphold commitments on its nuclear and ballistic missile programme. The majority of OFSI’s enforcement action is taken against financial services firms.

Thomson’s comments come shortly after the US issued a temporary oil waiver on Iranian sanctions to allow the Islamic republic to sell oil, including in US dollars.

OFSI, which was created a decade ago to better ensure business complies with sanctions, has stepped up enforcement recently.

In January, it fined Lloyds Banking Group £160,000 for opening a bank account for an ally of Russian President Vladimir Putin, who became the first person to be convicted under current Russian sanctions legislation. This was followed by fines against Deutsche Bank and Apple for breaching the UK’s Russia sanctions.

The Apple case was the first time OFSI issued a financial penalty against a non-UK entity, as well as the first under its new settlement scheme, which allows for fine discounts in exchange for subjects waiving their right to appeal.

Russia is still OFSI’s “number one priority”, according to Thomson. The office has grown from about 30 people to 140 since Russia’s invasion of Ukraine.

While OFSI’s penalties are fairly low by comparison to multinational profits — the highest financial sanction was £20mn against Standard Chartered in 2020 — the department is awaiting legislation to increase them. 

Currently, penalties are capped at either £1mn or 50 per cent of the breach value. This will increase to £2mn or 100 per cent, with the law change expected “in the next few months”, said Thomson.

The department has also been working more closely with the US.

Secondees from OFSI and America’s Office of Foreign Assets Control have been embedded in each other’s operations, with a joint penalty expected in future.

“It’s very much a hope that at one point we’ll see a joint enforcement action,” Thomson said.

OFSI has also been working more closely with other UK bodies. The department is about to second someone to the Bank of England for the first time, Thomson said.

Alongside Iran, OFSI is prioritising a clampdown on the use of cryptocurrencies to avoid sanctions, an asset class that most law enforcement agencies are grappling with.

“We’ve got way more cases than we could ever hope to do,” Thomson, a career civil servant, said. “So we have to prioritise and look at ways that we think will have most impact and are best in the public interest.”

Rates reach highest since 2024 Red Sea crisis in anticipation of fresh levies from US

The cost of freight shipping has risen to its highest since the Red Sea crisis two years ago as businesses rush to stockpile inventory ahead of a fresh round of US tariffs.

Rates on routes between Asia and the US east coast, and Asia and Europe, last week hit their most expensive levels since the summer of 2024 when the crucial trade artery was in effect closed after a series of missile and drone attacks on merchant ships by Houthi rebels in Yemen.

Executives said anticipation of new US tariffs next month had brought forward the annual increase in shipping demand that usually starts as retailers filled inventories before the Black Friday and Christmas shopping periods.

The price of a 40ft container (FEU) — an industry-standard measure — between China and the US east coast rose to $7,880 last week, up 62 per cent from a month earlier, according to shipping platform Freightos. Rates between China and the Mediterranean jumped 47 per cent to $6,431.

The Platts Container Index, which measures rates for shipping ocean containers across key global trade routes, climbed 80 per cent in the 30 days to Wednesday, reaching its highest level since April 2022.

The Trump administration is planning to impose tariffs of at least 10 per cent on dozens of countries from late July following a probe into forced labour practices. Further tariffs on industrial goods are due to be announced next month.

“Uncertainty around tariffs and bunker costs has triggered frontloading of cargo, particularly into the US, pushing freight rates sharply higher,” said BIMCO, the largest shipowners’ association.

The Office of the US Trade Representative this month said it intended to impose tariffs on 60 countries for not doing enough to prevent the import of goods manufactured using forced labour, putting American workers at a disadvantage.

China, the EU, India, Japan and the UK are among the major economies targeted by the proposal, which would set tariffs of between 10 per cent and 12.5 per cent. The US wants new levies to be ready when a global 10 per cent tariff expires on July 24.

Businesses are “trying and where it makes sense for them to get cargo before that deadline into the US, or at least a portion of their goods,” said Michael Aldwell, executive vice-president for sea logistics at Kuehne+Nagel, the world’s largest freight forwarder by volume.

Judah Levine, research lead at Freightos, said higher rates were also caused by customers and freight forwarding companies bringing forward shipments to avoid potential disruption in the summer and increased fuel costs as a result of the current Middle East crisis.

Typically, companies with long-term contracts pay for fuel on a quarterly basis to account for price fluctuations.

Major importers were “pulling some of their peak season volumes ahead of that July increase”, Levine said.

Jonathan Colehower, managing director for global operations and supply chains at technology company UST, said geopolitical ructions and trade measures had prompted some companies to plan further ahead than they did previously.

“They may be overcommitting or over-ordering . . . but many companies are thinking I would rather be safe than sorry.”

Prices per FEU remain short of highs of $9,800 recorded in 2024, according to Freightos, when Houthi strikes forced ships to divert from the crucial trade corridor and go around the Cape of Good Hope, increasing journey times by up to two weeks.

Airlines brace for up to $127bn in extra costs from carbon credit shortage

Emirates could have highest expense because of reliance on long-haul flights, MSCI Carbon Markets says

Long-haul airlines are braced for billions of dollars in extra costs as a looming shortage of carbon credits threatens to drive up prices for the permits required to offset their emissions.

The cost of credits could rise almost eightfold to $100 a tonne by 2035 as airlines’ demand outpaces supply, according to research by data provider MSCI Carbon Markets.

The soaring prices could result in a bill of up to $127bn for the industry over the life of a major international emissions reduction scheme, which compels carriers to buy credits to offset their carbon emissions.

Emirates could incur the highest expenses at $8bn — equivalent to a fifth of its 2025 operating revenue — over the life of the scheme, which covers emissions generated between 2024 and 2035, according to MSCI.

The risk of increased prices comes after airlines and passengers have already been hit by uncertainty over air fares as the US-Iran war drove volatility in jet fuel pricing and put supplies at risk. Airline executives have long said that higher environmental costs feed into ticket prices.

The Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) aims to help achieve “carbon-neutral” growth in the sector. It requires airlines from at least 130 participating countries — including the United Arab Emirates, the US and the UK — to purchase carbon credits to offset emissions from global routes when they rise above 85 per cent of their 2019 levels.

Carbon credits are typically linked to projects that reduce or remove greenhouse gas emissions — such as forest protection or regeneration programmes — but a shortage of eligible initiatives risks restricting supply, driving up prices.

“Historically airlines have assumed these credits are just like any other input: liquid, with stable prices, available on tap when you need it,” said Ben Rattenbury, vice-president for policy at carbon data provider Sylvera. “And of course the situation with Corsia is the opposite.”

Qatar Airways and United Airlines could pay $6bn and $5bn respectively over the life of the scheme in a “high demand and tight supply scenario”, according to MSCI, equal to 26 per cent and 8 per cent of their 2025 revenues.

Emirates has the largest projected demand for credits because of its focus on long-haul routes through Dubai. Others in the top 10 include Turkish Airlines, Singapore Airlines, British Airways, Korean Air, Cathay Pacific and American Airlines.

Under a more benign scenario modelled by MSCI, where supply rises more than expected and demand drops, Emirates could face a lower estimated cost of $2bn over the period to 2035, with costs for Qatar and United falling to $1bn each, MSCI said.

Carriers would also have to pay a further carbon price if the EU presses ahead with an idea to impose additional charges for flights departing the bloc.

IAG, the parent company of BA and Iberia, said MSCI’s estimate that it would need to offset 6.7mn tonnes of greenhouse gases in the first compliance phase of Corsia, covering emissions between 2024 and 2026, was in line with its own modelling. Under the scheme it has until 2028 to buy credits covering these emissions.

Compliance by US operators is uncertain after the Trump administration scuppered global efforts to impose a tax on shipping emissions. But some, including United, have indicated they will voluntarily comply. China is expected to join the scheme next year.

Turkish Airlines’ recent accounts disclose a provision for carbon pricing mechanisms including Corsia, while Singapore Airlines has highlighted its purchase of sustainable aviation fuel that airlines can use to reduce their offsetting requirements.

Emirates and Qatar Airways declined to comment. Turkish Airlines, Korean Air, Cathay Pacific and American Airlines did not respond to requests for comment.

High concentration in stock markets and national security concerns send SWFs to private credit and infrastructure

Surging levels of concentration in equity markets are pushing cash-laden sovereign wealth funds into unlisted assets such as private equity, private credit and infrastructure.

The switch is the latest demonstration of how the rapid expansion of AI is reshaping financial markets, with big investors moving out of highly concentrated stock markets and into private credit and infrastructure to make bets on the rapid build-out of data centres and the energy sources needed to power them.

“Capital is rotating towards infrastructure and private credit,” said Benjamin Jones, global head of research at Invesco. “The bar for passive market exposure is rising . . . [there is a] rotation away from concentrated listed equity.”

Invesco’s annual survey of the investment intentions of 90 SWFs with combined assets of $17.2tn found that a net 17 per cent plan to cut their exposure to listed equities, a sharp reversal of intentions from previous years.

In contrast, a net 28 to 35 per cent plan to increase their holdings in private equity, private credit and infrastructure this year. The average allocation to infrastructure had already almost doubled to 9 per cent between 2022 and 2025.

“The AI wave is currently best captured in private credit and infrastructure opportunities,” one Middle Eastern fund told Invesco.

Temasek, Singapore’s state-owned $335bn fund, said 49 per cent of its portfolio was already in unlisted assets as of last year, while Mubadala, the $385bn UAE fund, already has 59 per cent of its assets in private equity, infrastructure and real estate.

The exodus from public markets is largely being driven by surging concentration risk. The weight of the 10 largest stocks in the S&P 500 has doubled to 38 per cent over the past decade, as the Magnificent 7 group of giant technology stocks powered ahead of the wider market.

There has been “a significant turn against equities” this year, said Josette Rizk, head of the Middle East and Africa region at Invesco. “Index-heavy passive strategies now carry significant exposure to a small number of large-cap technology companies, and several respondents described reviewing whether the diversification they assumed [to come] from broad market exposure is actually present.”

She added that one European SWF had noted that “combining passive wrappers can obscure concentration risks that are only visible at the [individual] portfolio level”.

A related concern is that a longstanding inverse correlation between public equities and bonds has broken down since the inflation shock of 2021–22, raising the risk that both asset classes sell off at the same time rather than one cushioning losses in the other.

“The bond-equity relationship that underpinned many portfolio construction frameworks is being questioned. Putting equities and bonds together is not going to give you a resilient portfolio in the same way it did in the past,” said Jones.

In contrast, SWFs have largely shrugged off concerns over the health of private credit, despite fund managers such as Blue Owl, Apollo, Ares, BlackRock and Blackstone limiting withdrawals from their lending funds this year as redemption requests have surged.

Demand for infrastructure investments has risen sharply, partly for the potential financial returns but also because they can align with national security requirements, such as building data centres domestically to sidestep any pitfalls from data being stored in a third country.

Companies in dealmaking blitz as they seek to build the energy infrastructure for data centres

The AI boom is fuelling a record surge in dealmaking in the US power and utility industry, as companies compete for capital to build energy infrastructure for data centres.

Merger and acquisition transactions in the sector hit a record $203.6bn in the first five months of the year, more than 40 per cent higher than the $141.7bn figure for the whole of last year, according to research by Deloitte.

Investment in data centres was $151.5bn, more than double the $68.7bn announced over the same period a year earlier. Investment in data centres in all of 2025 was $321bn.

NextEra Energy’s proposed takeover of Dominion, which had an enterprise value of $112bn, was the largest power/utility deal announced this year, closely followed by BlackRock’s Global Infrastructure Partners and EQT’s purchase of AES Corp, which had an enterprise value of $33bn. There were 77 power/utility deals announced in the first five months of 2026, compared to 157 transactions announced in all of 2025.

Deloitte compiled the M&A data from S&P Capital IQ database, which measures transactions using enterprise value — a metric that includes a company’s equity and debt, minus its cash reserves. US power sector M&A covers regulated utilities, natural gas generation and renewables.

The explosion in dealmaking in a highly regulated industry is being driven by companies seeking to build scale to capitalise on data centre construction and on a growing trend among companies to divest non-core businesses to finance expansion. Private capital has also been attracted to the utility industry, either by taking some assets private or pursuing minority investments.

“We are seeing a lot of interest from private equity and infrastructure funds,” said Thomas Keefe, senior leader at Deloitte’s US power, utilities and renewables division. “Financial buyers are particularly interested in the kind of consistent cash flows that utilities can provide.”

Keefe said the AI boom had transformed the growth outlook for utilities and power producers with some companies forecasting 50 to 100 per cent revenue growth over the next five to 10 years.

Utilities need to raise tens of billions of dollars to build power plants and transmission lines to serve data centres in order to grow their customer base. As regulated monopolies, their customer base is largely fixed by geography.

“There’s a lot of capital investment that needs to be made, the question is who is paying for it? Scale makes a lot of sense,” said Alex Kania, a utilities and power analyst at BTIG.

The blockbuster deal between NextEra and Dominion gives the latter access to the Florida-based company’s stronger balance sheet, which could lead to a credit rating upgrade for Dominion’s utilities in Virginia and North and South Carolina. This would allow them to issue cheaper equity and access debt on more favourable terms.

The increased power demand from the build-out of facilities required to store an ever-growing amount of data has created “a seemingly unstoppable trend line”, said George Bilicic, global head of power, energy and infrastructure at Lazard.

Bilicic said the boom in power demand goes well beyond AI: “Electrification, the re-industrialisation trend, the rise of EVs and a general GDP-related power demand is a big part of it.

“On top of that, you have hyperscaler and data centre demand driving additional growth but, even without it, you would still see above-norm growth.”

Analysts said the rapid uptick in dealmaking would attract extra scrutiny from regulators because of growing political concerns over electricity affordability. Electricity costs are up 9 per cent nationally since last year, including 8 per cent in North Carolina and South Carolina and 15 per cent in Virginia, where Dominion operates.

Consumer advocates warn mergers could increase costs for consumers by strengthening utility companies’ monopoly power, allowing them to influence regulatory codes and shift costs on to ratepayers. 

Across the country, politicians from both parties have criticised utilities for high consumer costs, with Senators Elizabeth Warren, Chris Van Hollen and Richard Blumenthal launching an investigation into data centres’ role in rising prices, arguing that utilities and Big Tech are making families “bankroll” their incurred costs.

Warren, ranking member on the Senate banking committee, on Monday wrote to BlackRock, Blackstone Group, Brookfield Infrastructure Partners and KKR seeking information on their ownership of data centres and utilities. In December, she pressed BlackRock and Blackstone for information on their utility acquisitions.

NextEra’s previous attempts at merging with Hawaiian Electric and Duke Energy failed.

The utility and power producer industry argues increased scale will enable companies to cut costs and pass on savings to consumers.

In Florida, where NextEra’s subsidiary Florida Power & Light operates, electricity costs have decreased by 2 per cent since last year, while the company claims its customers pay 19 per cent less than in 2019. As a sweetener for the mega-merger, NextEra has offered $2.25bn in customer bill credits for customers in Dominion’s coverage areas.

Consumer advocates in Virginia reject this argument, saying bill credits will quickly run out, leaving customers exposed to long-term risks. “There’s a strong sense that average people are getting screwed in Virginia,” said Brennan Gilmore, executive director of Clean Virginia, an anti-corruption non-profit and political action committee.

Manufacturer squeezed €10bn valuation from cloak-and-dagger Everllence auction but may need more to fund restructuring

Volkswagen chief executive Oliver Blume had less than 48 hours to celebrate the lucrative sale of the carmaker’s €10bn marine engines division before the deal was overshadowed by his plans to axe up to 100,000 jobs.

The sale of a majority stake in Everllence and the scale of the cost-cutting plans revealed last week underline the urgency at Volkswagen as it fights fierce competition from insurgent Chinese brands and adapts to the shift to electric vehicles.

Under the strain of these industry-defining challenges, Volkswagen’s share price has fallen by almost half since Blume took the helm in September 2022, prompting Germany’s largest carmaker to take radical action.

The job-cutting plans reported on Friday, and due to be presented to VW’s supervisory board next month, would be one of the biggest lay-off programmes in corporate history — surpassing brutal culls at General Motors and IBM in the 1990s.

Blume now faces the task of pushing through the huge cuts and deciding whether other VW assets should be sold to meet the resulting restructuring costs and reduce debt, while still ensuring the group makes the investments needed to develop its next generation of vehicles.

VW’s plan to remove almost one in six of its 625,000 jobs and to close four factories emerged less than two days after the carmaker concluded a hotly contested auction for Everllence that drew interest from top private equity groups.

But any gains booked from the sale could be wiped out by the cost of implementing the new restructuring plan, making it unlikely that VW will boost shareholder dividends, said UBS analyst Patrick Hummel.

“There is a very high likelihood that we will see additional restructuring charges emerging in the second half of the year that could be in the billions [of] euro range,” Hummel said. “All the excitement around the Everllence transaction is pretty much gone from an equity holder standpoint.”

The carmaker managed to reap a near-€10bn valuation including debt for Everllence in a cloak-and-dagger auction, according to people familiar with the matter — significantly more than the €6bn expectation when the process kicked off last year.

VW did not disclose the overall value of the deal with US private capital group Bain, stating only that it generated €7.4bn in proceeds from the majority stake sale including debt. It generated that sum despite selling only a 51 per cent stake at a €10bn valuation because the deal used financing arrangements that increased the unit’s debt, said two people with knowledge of the details.

Its success in extracting such a high valuation — and the likely costs of its restructuring alongside heavy investment to compete with Chinese rivals such as BYD — have fuelled questions among investors and advisers about whether VW will attempt further asset sales and how it will deploy the funds.

The dilemma over further sales comes as investors seeking shelter from the AI-driven sell-off in sectors such as software show renewed interest in industrial assets.

Volkswagen has signalled that it could offload more non-core assets including stakes in battery unit PowerCo and its autonomous driving unit ADMT. It has already cut its stake in truckmaking unit Traton.

The positive view is VW will use proceeds of any sales for investment, while the sceptical take is that the money will simply finance continued inefficiencies, one person close to the company said.

VW investors will hope that any new sales will be as profitable as the Everllence auction. The near-10-month process — codenamed Project Nikolaus after German engineer Nikolaus Otto, a 19th-century pioneer of early gasoline-powered engines — ended with Bain trumping bids from private equity rivals CVC and EQT.

People close to all three bidders — codenamed Denmark, Spain and UK — said the auction had generated lucrative returns for VW and would go down as one of the most memorable in recent German dealmaking. One bidder said the auction process had been “brilliant”, adding: “I’ve never seen anything like it.”

The auction culminated late on Wednesday night as the company’s management and supervisory boards considered the offers. The suitors had handed in sealed bids with their best and final offers in the lobby of VW’s law firm, Linklaters, in Frankfurt at 7am that morning.

Bain, CVC and EQT had already been required to visit separate notaries the previous day, completing legal formalities in advance to speed up the signing of the deal once a winner was chosen. As they waited for a decision on Wednesday, each suitor returned to their separate notaries to await word from VW’s advisers, which included Goldman Sachs and JPMorgan.

The unusual process was also intended to reduce the risk of leaks. Other precautions included asking VW’s own supervisory board members to hand over their mobile phones before they gathered at the carmaker’s Wolfsburg base to consider the final bids.

Another reason for the sealed bids was to address fears that EQT had an unfair advantage after teaming up to bid with VW’s major shareholders Porsche Automobil Holding and Qatar Investment Authority, the people said. Several members of VW’s supervisory board with connections to those shareholders were required to recuse themselves from deciding between the bids.

These steps were sufficient to convince the bidders the process had been fair, while driving up the valuation, said two of the people with knowledge of the process, who added that the bidders had racked up legal and consultancy costs of more than €10mn in a sign of their appetite to buy the unit.

In the end, all the bids valued the business close enough to €10bn to make non-financial aspects tip the scales, according to people familiar with the matter.

While all three parties had agreed similar job and site guarantees for Everllence until 2030, Bain’s overall package was deemed best based on its proposed price, shareholder agreement, sale and purchase contract and value creation plan, the people said.

The US firm also had a better reputation among the pivotal union and works council representatives. CVC, which had the backing of Canadian pension funds on its bid, was viewed as having been more aggressive on cost-cutting in the past, according to three of the people.

Bain also brought in its Asian team, which has expertise in the continent’s massive shipyards, and was willing to shoulder more of the potential risks and costs related to a Japanese probe into engine manufacturers over fuel consumption data, according to two of the people.

Bain declined to comment on the potential risks of the probe. Everllence said it did not manufacture the engines under investigation and was “not aware of any claims for damages or regulatory proceedings against Everllence or its employees in connection with this matter”.

Following the success of the Everllence auction in stoking competition between bidders, advisers are hoping that recent pitches to VW to sell crown jewels such as its motorcycle brand Ducati — an idea it explored in 2017 — or to list supercar maker Lamborghini will gain traction.

Some analysts said the likelihood of VW selling these brands was low and cautioned that offloading lossmaking assets such as PowerCo would be unlikely to be as lucrative as the Everllence sale.

The chief executive of Volkswagen’s US pick-up truck brand Scout told the FT this year that an IPO of that business was also an option. The company is conducting a feasibility study for bringing in outside investors to the Scout brand, one person familiar with the deliberations said.

VW’s bosses are also being forced to consider whether to save money by reducing the amount they invest in some of its businesses, such as PowerCo.

“The best thing would be just to stop investing and accept the fact that what you’ve spent so far are just sunk costs. I think that might be the best financial outcome,” said Hummel.

Volkswagen declined to comment on the potential sale of other significant assets. It said that a decision on how to use the proceeds from the Everllence sale would be taken at a later date.

Holding the cash on its balance sheet could reduce the pressure to keep cutting investments, but management could also face pressure to share the spoils with investors.

“When you look at their profitability and the cash flow in past years it’s not a silly idea to keep it,” said one person close to the company.

Virgin Media O2 bonds slide as broadband rivals squeeze cash flow

Telecoms group’s bonds tumble as altnets take market share and investors fret over £2bn Netomnia deal

Bonds issued by Virgin Media O2 have slumped as credit investors grow concerned that intense competition in the UK’s broadband market and a £2bn acquisition by its parent companies will squeeze the indebted group’s cash flow.

The price of VMO2’s €1.81bn bond due in 2032 has dropped from above par to an all-time low of 91 cents on the euro over the past six months. Investors are now demanding a yield of almost 9 per cent to hold the company’s long-dated debt.

The UK’s broadband providers are under pressure from rising network development costs and lower than expected uptake of fibre services. VMO2, jointly owned by Telefónica and Liberty Global, has also been squeezed by “altnet” providers that have undercut their prices and poached their customers.

The challenges have resulted in a jump in the cost of insuring against a default of VMO2, which carries more than £20bn of debt.

The spread on the company’s five-year credit default swap climbed to 622 basis points this month, its highest level since 2010. The price of VMO2’s CDS has risen faster than that of any company tracked by the iTraxx Crossover — an index of 75 European junk-rated corporates — so far this year.

Tom Steabler, senior credit analyst at Federated Hermes, said VMO2 had underperformed relative to peers, and that its revenue and earnings are expected to decline by between 3 and 5 per cent this year.

VMO2 made a £1.75bn pre-tax loss in 2025 according to its consolidated accounts, down from a £2mn profit the year before. It recorded a goodwill impairment charge of £1bn during the year, “primarily related to the impacts of the UK market and macroeconomic conditions in the UK on estimated future cash flows”.

The UK’s altnets, which have proliferated since Ofcom took steps to encourage more competition in the sector in 2021, have raised £31bn over the past decade to fund their expansion.

Rating agency Fitch this month downgraded VMO2’s long-term credit rating further into junk territory, from BB- to B+, because of its “high leverage” and declining revenue and profit. The rating agency said it expects VMO2’s leverage, the ratio of debt to ebitda, to “rise above 6.0x over the next two years”.

The downgrade excluded the impact from the £2bn acquisition of Netomnia, the UK’s fourth-largest broadband network, by VMO2’s parent companies.

VMO2’s owners are joining forces with private equity firm InfraVia Capital to buy Netomnia through their fibre joint venture Nexfibre.

As part of the deal VMO2 will receive £1.1bn in cash and a 15 per cent equity stake in Nexfibre, in exchange for migrating traffic from 4.6 million homes to the joint venture’s network. However, it will have to pay fees to access Nexfibre’s network in future.

While the upfront cash will allow VMO2 to finance its debts in the short term, investors are worried by the longer-term hit from the access fees.

New Street Research analyst James Ratzer estimates they will eventually amount to £250mn per year and reduce VMO2’s free cash flow from £200mn in 2026 to about £80mn in 2028.

Virgin Media O2 said it has a “robust capital structure” and that it “continues to invest heavily in our business to lay strong foundations for the years ahead”.

It added that the Netomnia deal was “a value accretive win-win for both parties . . . the combined Virgin Media O2 and Nexfibre fibre footprint is set to expand to 20 million [homes] in future, positioning us as the single biggest competitor to Openreach”.

Storage facilities in the EU are not being refilled fast enough ahead of colder months

Europe is set to enter the heating season with the lowest gas storage levels in at least 15 years, threatening higher prices for businesses and households this winter.

Storage facilities in the EU are forecast to end the critical gas restocking season, which typically runs between April and October, only 76 per cent full, according to the consultancy Wood Mackenzie. That would be the lowest peak for stored gas since at least 2011, according to data from Gas Infrastructure Europe.

The low levels come after the US-Iran war cut off shipments of liquefied natural gas through the Strait of Hormuz, through which a fifth of the world’s supplies are normally transported, and reduced production from Qatar and the United Arab Emirates.

EU storage facilities started the restocking season only 28 per cent full after a particularly cold winter, a lower level than normal for the time of year. They are currently 48 per cent full on average, according to GIE.

European gas prices soared after the joint US-Israel attacks on Iran at the end of February, but they have been relatively stable recently even before Washington and Tehran struck an interim peace deal earlier this month. This has resulted in a different problem as the price at European gas hubs fell too low to lure LNG cargoes, typically from the US.

“We’re at a critical stage of the summer for Europe’s gas restocking plans,” said Natasha Fielding, an analyst at Argus Media. “While the announced US-Iran deal has pushed down gas prices and raised hopes for a flood of Mideast Gulf supply returning to the market, the longer we see constrained LNG supply, the lower start-of-winter European gas stocks will be and the bigger the chance of winter price spikes.”

European benchmark gas prices are trading at about €40 per megawatt hour (MWh), barely higher than before the US-Iran war began on February 28 and within a normal range for this time of year. Even when prices surged in the first few weeks of the war, they remained far below the €342/MWh peak reached following Russia’s invasion of Ukraine in 2022.

Refilling got off to a slow start in April, as high summer gas prices gave companies little incentive to restock.

The European Commission on Sunday said that “current storage levels do not raise immediate concerns for energy security”, adding that “80 per cent storage . . . is enough to secure winter supply”. Storage levels currently stand about 10 per cent below the pre-crisis average while EU gas demand has reduced by 17 per cent, the spokesperson noted.

The Commission has advised member states to fill storage facilities to 80 per cent, or as low as 75 per cent, to ease pressure on prices. The nonbinding target has stood at 90 per cent in recent years.

“We need a high level to make sure that we are ready for next winter [but] we want to do it in a way that it doesn’t lead to increases in prices in the short term,” EU energy commissioner Dan Jørgensen said on Friday.

The European storage situation could change if a wave of LNG supply hits global markets.

Empty Qatari LNG carriers started heading back towards the Gulf almost immediately after the preliminary peace deal was signed. Qatar’s Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani said this week that the country’s production would return to normal within weeks from all LNG facilities, except two units struck by Iran during the conflict.

However, analysts question the pace at which Qatari volumes will return to the market.

If the undamaged units at Qatar’s vast Ras Laffan LNG facility reach full capacity by the end of July, European gas storage would probably end the restocking season 74 per cent full, Goldman Sachs commodities analyst Samantha Dart estimated in a recent note. If that happens a month later, European storage facilities could enter the winter only 70 per cent full, she said.

Shipping through the Strait of Hormuz faced a setback after a vessel was struck in the waterway on Thursday. Whether flows will continue after the end of the 60-day ceasefire extension agreed by Washington and Tehran remains uncertain. This puts Europe in a difficult position, analysts warn.

Commercial speculators are increasingly betting on higher winter prices in the futures and options markets, said Energy Aspects in a note.

Tom Marzec-Manser, director for European gas and LNG at Wood Mackenzie, said that although gas prices may fall further in coming months as more LNG shipments leave the Gulf, he expects “prices to go back up again as we move into winter and it will create risks, particularly in a cold weather scenario” at the start of 2027.

The EU’s plan to ban Russian LNG, which currently accounts for about 14 per cent of Europe’s total LNG imports, completely from January 1 also raises the prospect of a gas crunch during the European winter.