TheChek News Flow

EDF (EPA:EDF) may be on the hook for a greater portion of liabilities relating to its Hinkley Point C nuclear project in the UK than was previously thought, The Times reported, citing Le Journal du Dimanche. EDF owns a 66.5% stake, but would reportedly take on 80% of a potential EUR 5bn overrun in costs, with state-owned Chinese partner CGN taking a lesser proportional hit.

If Hinkley Point is delayed for six months, CGN would be in line for a refund of several hundred million euros from EDF, the item reported. It added that the French company’s ability to finance the GBP 18bn project is increasingly being called into question.

The government of Austria has alleged Hinkley Point is receiving illegal state aid; should its challenge to the European Commission succeed, CGN will be in line for a further EUR 1.6bn payment, the report said. The information came from a note written by former EDF Chief Financial Officer Thomas Piquemal to the group’s audit committee, the report said. It noted that Piquemal, who handed in his resignation earlier this month, believes the Hinkley Point project may jeopardise EDF’s financial situation as a whole.

The report from Le Journal du Dimanche cited a person in the know as saying that the effective rate of return on the projects, estimated at 9% by the French Finance and Economy Minister Emmanuel Macron, now amounts to 8% and is expected to be equal to 6% by the end of the project.

The report also noted that EDF has given CGN several veto rights regarding the management and governance of the project, and in particular concerning the accounting, the budgeting, the payment of dividends and the payment of the board members. The report claimed that CGM would also be able to vote measures even if EDF is against it if it manages to convince the independent board members.

According to the report, several members of the board of EDF are not in favour of voting for the project in its current form and are asking to delay it by two to three years. The delay would give the group time to view how the EPR nuclear project in China is running and how the construction of the similar EPR project in Flamanville, France, progresses. The newspaper claimed that a majority of nine EDF board members, out of the total 17, could be in favour of the delay. However, the government and the management of EDF are pressuring to sign the deal

The Times (London), Journal du Dimanche (France)

A new virtual gold rush is underway.

Even as Bitcoin, riven by internal divisions, has struggled, a rival virtual currency — known as Ethereum — has soared in value, climbing 1,000 percent over the last three months.

Beyond the price spike, Ethereum is also attracting attention from giants in finance and technology, like JPMorgan Chase, Microsoft and IBM, which have described it as a sort of Bitcoin 2.0.

The rise of the relatively new virtual currency has been helped by a battle within the Bitcoin community over how the basic Bitcoin software should develop.

The fights have slowed down Bitcoin transactions and led some people to look for alternative virtual currencies to power their businesses. Enter Ethereum.

Like Bitcoin, the Ethereum system is built on a blockchain in which every transaction is recorded publicly. The promise of such a system is that it allows the exchange of money and assets more quickly and more cheaply than relying on a long chain of middlemen.

But Ethereum has also won fans with its promise to do much more than Bitcoin. In addition to the virtual currency, the software provides a way to create online markets and programmable transactions known as smart contracts.

The system is complicated enough that even people who know it well have trouble describing it in plain English. But one application in development would let farmers put their produce up for sale directly to consumers and take payment directly from consumers. There are already dozens of functioning applications built on Ethereum, enabling new ways to manage and pay for electricity, sports bets and even Ponzi schemes.

All of this work is still very early. The first full public version of the Ethereum software was recently released, and the system could face some of the same technical and legal problems that have tarnished Bitcoin.

Many Bitcoin advocates say Ethereum will face more security problems than Bitcoin because of the greater complexity of the software. Thus far, Ethereum has faced much less testing, and many fewer attacks, than Bitcoin. The novel design of Ethereum may also invite intense scrutiny by authorities given that potentially fraudulent contracts, like the Ponzi schemes, can be written directly into the Ethereum system.

But the sophisticated capabilities of the system have made it fascinating to some executives in corporate America. IBM said last year that it was experimenting with Ethereum as a way to control real world objects in the so-called Internet of things.

Microsoft has been working on several projects that make it easier to use Ethereum on its computing cloud, Azure.

“Ethereum is a general platform where you can solve problems in many industries using a fairly elegant solution — the most elegant solution we have seen to date,” said Marley Gray, a director of business development and strategy at Microsoft.

Mr. Gray is responsible for Microsoft’s work with blockchains, the database concept that Bitcoin introduced. Blockchains are designed to store transactions and data without requiring any central authority or repository.

Blockchain ledgers are generally maintained and updated by networks of computers working together — somewhat similar to the way that Wikipedia is updated and maintained by all its users.

Many corporations, though, have created their own Ethereum networks with private blockchains, independent of the public system, and that could ultimately detract from the value of the individual unit in the Ethereum system — known as an Ether — that people have recently been buying.

The interest in Ethereum is one sign of the corporate fascination with blockchains. Most major banks have expressed an interest in using them to make trading and money transfer faster and more efficient. On Tuesday, executives from the largest banks will gather for a conference, “Blockchain: Tapping Into the Real Potential, Cutting Through the Hype.”

Many of these banks have recently been looking at how some version of Ethereum might be put to use. JPMorgan, for instance, has created a specific tool, Masala, that allows some of its internal databases to interact with an Ethereum blockchain.

Michael Novogratz, a former top executive at the private equity firm Fortress Investing Group, who helped lead Fortress’s investment in Bitcoin, has been looking at Ethereum since he left Fortress last fall. Mr. Novogratz said that he made a “significant” purchase of Ether in January. He has also heard how the financial industry’s chatter about the virtual currency has evolved.

“A lot of the more established players were thinking, ‘It’s still an experiment,’ ” he said. “It feels like in the last two to three months that experiment is at least getting a lot more validation.”

Since the beginning of the year, the value of an individual unit of Ether has soared as high as $12 from around $1. That has brought the value of all existing Ether to over $1 billion at times, significantly more than any virtual currency other than Bitcoin, which had over $6 billion in value outstanding last week.

Since Bitcoin was invented, there have been many so-called alt-coins that have tried to improve on Bitcoin, but none have won the following of Ethereum.

Unlike Bitcoin, which was released in 2009 by a mysterious creator known as Satoshi Nakamoto, Ethereum was created in a more transparent fashion by a 21-year-old Russian-Canadian, Vitalik Buterin, after he dropped out of Waterloo University in Ontario.

The most basic aim of Ethereum was to make it possible to program binding agreements into the blockchain — the smart contract concept. Two people, for instance, could program a bet on a sports game directly into the Ethereum blockchain. Once the final score came in from a mutually agreed upon source — say, The Associated Press — the money would be automatically transferred to the winning party. Ether can be used as a currency in this system, but Ether are also necessary to pay for the network power needed to process the bet.

The Ethereum system has sometimes been described as a single shared computer that is run by the network of users and on which resources are parceled out and paid for by Ether.

A team of seven co-founders helped Mr. Buterin write up the software after he released the initial description of the system. Mr. Buterin’s team raised $18 million in 2014 through a presale of Ether, which helped fund the Ethereum Foundation, which supports the software’s development.

Like Bitcoin, Ethereum has succeeded by attracting a dedicated network of followers who have helped support the software, partly in the hope that their Ether will increase in value if the system succeeds. Last week, there were 5,800 computers — or nodes — helping support the network around the world. The Bitcoin network had about 7,400 nodes.

One of Mr. Buterin’s co-founders, Joseph Lubin, has set up ConsenSys, a company based in Brooklyn that has hired over 50 developers to build applications on the Ethereum system, including one that enables music distribution and another that allows for a new kind of financial auditing.

The ConsenSys offices are in an old industrial building in the Bushwick section of Brooklyn. The office is essentially one large room, with all the messy trademarks of a start-up operation, including white boards on the walls and computer parts lying around.

Mr. Lubin said he had thrown himself into Ethereum after starting to think that it delivered on some of the failed promise of Bitcoin, especially when it came to allowing new kinds of online contracts and markets.

“Bitcoin presented the broad strokes vision, and Ethereum presented the crystallization of how to deliver that vision,” he said.

Joseph Bonneau, a computer science researcher at Stanford who studies so-called crypto-currencies, said Ethereum was the first system that had really caught his interest since Bitcoin.

It is far from a sure thing, he cautioned.

“Bitcoin is still probably the safest bet, but Ethereum is certainly No. 2, and some folks will say it is more likely to be around in 10 years,” Mr. Bonneau said. “It will depend if any real markets develop around it. If there is some actual application.”

Italy’s banking sector is braced for further consolidation following its first merger in a decade, agreed last week between mutual banks Banca Popolare di Milano and Banco Popolare.

The deal to combine BPM and Banco Popolare, creating the country’s third-largest banking group by market capitalisation holding €170bn in assets, comes as the Italian banking sector is coming under strain. Investors’ concerns over banks’ exposure to €360bn in gross non-performing loans have sent shares plunging roughly 25 per cent since the start of year.

Nonetheless, demands by the ECB for additional capital and governance, in its role as chief supervisor of the single supervisory mechanism, have left market participants concerned about the difficulties ahead for potential merger candidates, says bankers and analysts.

The ECB demanded that Banco Popolare, which has €21.7bn of gross deteriorated loans compared with €5bn at BPM, acquire a further €1bn via a capital raising — even though both banks passed most recent stress tests. The announcement of the merger and the conditions being imposed led to shares in both banks falling 6 per cent.

Johan De Mulder, analyst at Bernstein, said the weeks of wrangling over the merger terms between BPM and Banco Popolare showed that “the ECB is getting serious about wanting to offload bad debt from bank balance sheets”.

“A successful merger will be used as a template for further consolidation in the sector and shows the ECB’s game in pushing for more aggressive disposals and potential capital raises,” he said.

A law passed by the government of Matteo Renzi in January last year fired the starting gun on the consolidation process. It decreed that Italy’s 10 largest mutual banks, with combined assets of about €500bn, must become joint stock companies by the end of 2016. The Italian government wants consolidation to boost profitability and lending in the fragmented sector of more than 600 banks.

Adding to the momentum, the government this year passed an additional reform to speed up the consolidation of Italy’s smaller co-operative banks.

Davide Serra, founder and chief executive Algebris, a financial-only fund, said the Italian banking system needs “more consolidation as it has more banks than pizzerias”. “But ECB supervisory actions have destabilised market confidence,” he said.

Bankers said the focus now shifts to UBI Banca, with €120bn in assets. Both BPM and Banco Popolare held aborted merger talks with the lender — Italy’s next largest mutual bank in the wake of the merger.

Banca Monte dei Paschi di Siena, Italy’s third-largest banking group by assets, and Genoan Carige, the worst performers in the European stress tests of 2014 are also seeking buyers. Giuseppe Castagna, chief executive designate of the merged BPM-Banco Popolare, has also described the new group as a “consolidator” that could consider more deals.

“We look forward to further consolidation,” said one senior Italian government official.

Still, bankers consider the next potential “flash points” of the Italian banking sector — and test of investor confidence — are capital increases worth about a combined €2.5bn due next month at Popolare di Vicenza and Veneto Banca. These were again demanded by the single supervisor in Frankfurt and underwritten by Italy’s largest banks UniCredit and Intesa Sanpaolo, respectively.

“The key test will be the capital raisings at Veneto and Vicenza,” said Mr Serra

Daniel Loeb, the US activist investor, has urged the board of Seven & i Holdings to select its new chief executive based on competency rather than nepotism, citing rumours that the incumbent is looking to name his son as eventual successor.

The latest attack on the Japanese retailer comes as Third Point — the hedge fund run by Mr Loeb — has taken aim at several companies including Suzuki Motor and robotmaker Fanuc, buoyed by Prime Minister Shinzo Abe’s corporate governance reforms.

In his third letter to Seven & i dated Sunday, Third Point said the retailer faces a succession issue with Toshifumi Suzuki, the 83-year-old CEO, suffering from chronic health issues.

The fund said it was concerned by rumours that Ryuichi Isaka, president of Seven-Eleven Japan, could be removed from his position and replaced with another executive in a manoevre to enable Mr Suzuki’s son to eventually head the main convenience store business and then become group chief executive.

“We think the process of selecting the new chief executive rests with the board, not with Mr Suzuki,” Mr Loeb said in a media phone interview on Sunday, adding the choice should not be “Mr Suzuki’s handpicked successor who will in turn appoint his son.”

“This is not a dynasty but a corporation, and corporations are based on meritocracy not on dynasty,” Mr Loeb added.

Seven & i declined to comment on Third Point’s letter. But the company said it did not have imminent plans for management changes and added Mr Suzuki has fully recovered after being briefly hospitalised at the end of the year.

Third Point has not disclosed the size of its stake in Seven & i but Mr Loeb said the fund was a significant stockholder and its equity stake was worth “hundreds of millions of dollars.” Seven & i has a market capitalisation of $38bn.

He sent his first letter in late August and a subsequent one in January, where he called on the retailer to revamp its lacklustre supermarket business and pull out of acquisitions including Barney’s Japan and department store group Sogo & Seibu.

Seven & i has already announced plans to close 40 unprofitable Ito-Yokado supermarket stores over the next five years and shut down two department stores, but Mr Loeb wants it to go further.

On Sunday he said he has yet to decide whether to submit a shareholder proposal on the succession issue for the annual shareholder’s meeting in May. But in his letter, he said: “We have no wish to create a public dispute at a future Annual General Meeting but of course are willing to do so in order to protect our investment.”

Mr Loeb, known for his aggressive activist campaign, has been an active investor in Japan and a supporter of Abenomics, the equities-friendly economic policies of Mr Abe.

Last year, Mr Loeb took aim at Fanuc, successfully urging the robotmaker to make better use of its ample cash pile. It has also invested in Sony, SoftBank and heavy machinery maker IHI Corp.

Capping a process that began late last year, Dell could announce as early as Monday the sale of the company’s IT services unit to Japan’s telecom conglomerate NTT for $3.5 billion, sources briefed on the process tell Re/code.

Dell has been shopping the division — previously known as Perot Services — since last fall as part of a wider effort to raise as much as $10 billion selling assets that aren’t a core part of its business.

The company wants to use those funds to help pay down part of the $50 billion in debt it will incur when it closes on its $67 billion acquisition of data storage company EMC, which would stand as the largest technology deal of all time if it goes through. The sale to NTT is seen as an important signal to the debt markets that Dell will be able to rapidly pay down that debt.

A Dell spokesman had no comment as did a spokesman for Silver Lake, the private equity firm that co-owns Dell. A spokesperson for NTT did not reply to messages left over the weekend.

As recently as December, Dell had hoped to get about $5 billion for the business unit, but sources say NTT is likely to pay slightly north of the $3.5 billion it offered earlier this month. That’s about $400 million lower than the $3.9 billion Dell paid when it acquired Perot Systems in 2009.

During the on-again off-again sale process, Dell approached several international IT consultancy companies including India’s Tata Consultancy Services, Genpact, a U.S.-based firm and CGI, a Canadian IT company. Talks with the French IT services firm Atos reached an advanced stage in January. Sources said the talks ended when the two sides couldn’t agree on a price, and also because Atos’ share price fell.

Royal Dutch Shell (LON:RDSA)’s North Sea assets are being eyed for investment by Neptune Oil and Gas, a Neptune spokesperson confirmed in The Daily Telegraph. The representative said the North Sea assets are being examined as part of Neptune’s general investment strategy.

Neptune, a fund set up to target distressed assets last year by Sam Laidlaw, ex-chief executive officer of Centrica, is believed to have entered discussions on the matter with Shell’s adviser Bank of America Merrill Lynch, the report said.

Lazard was also recently revealed to have been hired by Shell as adviser on a potential USD 30bn asset disposal programme over the three years to come, the item noted.

Daily Telegraph