GLG News by Mr. Himadri Banerji, Chairman and Managing Director
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The Balkan Dilemma: Bulgaria Mulls Price Hike in Natural Gas
December 28, 2008
Bulgaria raises gas prices by 14 pct from Jan 1 | www.reuters.com
It is reported in an article published on the 23rd December in Reuters that Bulgaria's gas monopoly Bulgargaz wants a 21.31% increase in the natural gas prices in Bulgaria starting January 1, 2009. The Bulgargaz proposal provides for a natural gas price of BGN 653.46 for 1 000 cubic meters, with the 20% value-added tax not included, which is an increase by BGN 114.80. The new price would include a transit fee of BGN 19.73. Bulgargaz justifies its proposal with the more expensive US dollar, whose value increased has increased by 15.39%. In addition, the statement of the monopoly reminds that the DKEVR, the regulator, did not approve its suggestion to increase the natural gas prices by 36% in the fourth quarter of 2008, and voted for a 24% increase instead. Bulgaria's DKEVR will decide on the gas price based on how much the central heating costs would increase as it depend primarily on the natural gas prices..
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Pickens, Abengoa, GM's EV: Obama's Energy Vison 2009
December 28, 2008
U.S. expects big drop in oil imports | money.cnn.com
In the December issue of CNN, Steve Hargreaves, their staff writer, reports that as per a US government forecast the imported oil will contribute only 40 percent in the share of total oil usage in US compared to the present 60%. While arriving at this figure, the EIA used an average crude price of $130 a barrel in 2030 which not surprisingly is nearly double the projections made last year for 2030 at $70 a barrel. Similarly the supply forecast for the future has been tuned down to 100 billion barrels per year from the earlier 120 due to lower access to resources. Under these scenarios of volumes and price of oil, the planners have thus reduced the nation's dependence on oil. Consequently they have increased the forecast on contribution from renewables in the US energy mix.The government forecasts that renewables should account for 21% of all energy used in the U.S. by 2030, up from about 15% currently. Even last year EIA said renewable use would remain flat at 15% in 2030.
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Sleaze:Between the Black Sea and the Baltic
December 28, 2008
xxxx | www.nytimes.com
It is reported in a news item in the 20th December edition of NYTimes that investigations have revealed that about $805m was paid to foreign officials by Siemens one of the world’s biggest companies, to win contracts for over six years after the firm’s American listing. Siemens had an annual bribery budget of about $40 million to $50 million. The news item reports that company managers and sales staff used the slush fund to win contract against competitors by bribing corrupt government officials worldwide. Siemens admitted to the omission and paid a fine of 1.6 Billion Dollars the largest fine for bribery in modern corporate history. The Justice Department, however in a settlement, allowed Siemens to plead to accounting violations because it cooperated with the investigation and because pleading to bribery violations would have barred Siemens from bidding on government contracts in the United States. Siemens doesn’t dispute the government’s account of its actions.
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The Market Regulator's Nightmare: Hedgefunds Gone Awry
December 22, 2008
Locked away | www.economist.com
It is reported in an article in The Economist dated 21st Dec 2008, that the hedge-fund firms, Fortress, Tudor Investment, Citadel, D.E. Shaw and Farallon Capital Management have all suspended redemption thereby restricted the right of investors to withdraw their money. The economic downturn has hit most of the hedge funds hard, though some have been able to stem the downward tide by such measures as restricting redemption. The average fund lost 17.7% in the 11 months to the end of November, according to Hedge Fund Research, a consultancy. That may be better than equities but is hardly the “absolute return” the industry promised. And the losses that have been revealed may be understated; had investors been able to redeem all their holdings (forcing managers to sell more assets) things might have been a lot worse. Industry enthusiasts claimed hedge-fund returns were less volatile than their conventional, long-only peers.
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Indonesia Protects its Mineral Wealth
December 22, 2008
Indonesian lawmakers pass new mining law | biz.yahoo.com
In a news item reported in the Associated Press on 18th Dec, that the Indonesian Government after deliberating for three years passed a new mining law which gives more control to local and regional governments, limits the size of the exploration to 100,000 hectares per operation, reduces from 70 years the maximum allowable concession period to 20 years with maximum two extensions of 10 years each, directs processing of minerals in smelters in local industry only and allows permits to companies for exploration and operations separately. Companies from the west who have acquired considerable stakes in the mining industry in Indonesia and analysts have expressed apprehensions that the new law is retrograde and will affect investments so badly required for the growth of the mining sector and in turn will be affecting future production of tin, gold, copper and coal with adverse impacts on global prices of minerals.
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Oil Sands in Canada and Bakken Shale in North Dakota: Is it the end of the saga
December 18, 2008
Big Oil Projects Put in Jeopardy by Fall in Prices | www.nytimes.com
The New York Times on the 16th Dec, reports of a scramble for cutting capital spends by all oil companies following the fall in oil prices, and the deteriorating economic condition in USA.There are forecasts that oil prices may fall below 30$ to the barrel and that here is so much surplus inventory due to slackening of demand in oil that Shell is considering using ships for storage. As a result the list of projects getting delayed is rising every day. Wells are being shut down across the United States; new refineries have been postponed in Saudi Arabia, Kuwait and India; and ambitious plans for drilling off the coast of Africa and Australia are being reconsidered. Most significantly, in the search for new sources of hydrocarbons in the tar sands of Canada or the Bakken shale in North Dakota, oil drillers are scaling back exploration where the production is more expensive than in conventional fields.
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International Energy Agency Rings the Alarm Bell on Demand for Oil
December 17, 2008
Oil Demand Down; 1st Time Since ’83 | www.nytimes.com
In the 11th Dec issue of NYTimes, Jad Mouwad reports for the first time since 1983 a global fall in demand for oil, as the world is caught in the cauldron of an economic meltdown post the peak 147$ per barrel which started the demand response. Statistically, the International Energy Agency which works as an adviser to industrialized nations, has projected a world wide demand of 85.5 mbd in 2008. which is 35000mbd lower than the last month's projection. The oil demand may however increase marginally next year, as prices fall further, but global consumption would be much lesser than what was envisaged in the beginning of last month due to the recessionary economic condition in the world, and especially low consumption in China and India. The price of oil is southwardly bound and may eventually collapse leading to complete curtailment of capital spending on discovery and development, seeding a concerted call in cutting production by oil producing companies both in OPEC and outside.
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Exploring New Frontiers in Energy; Methane Gas Hydrates
December 16, 2008
The abundant fossil fuel you’ve never heard of | features.csmonitor.com
In an article by Jeremy Kutner, contributor of The Christian Science Monitor/ magazine dated December 3, 2008, it is reported that a joint effort between BP, the United States Geological Survey (USGS), and the Department of Energy is set to begin in late 2009 or 2010 and marks the first large-scale production test of Methane Gas Hydrate at a drill site at the Alaskan permafrost. If the test is successful and can be scaled up to produce the methane gas hydrates safely this can provide a solution to our energy security question.However the environmentalist and investors doubt whether the safety concerns associated with hydrates can be addressed and production in magnitudes are actually achieved economically.A survey of hydrate estimates published in 2007 put US reserves at around 5,700 trillion cubic feet. The world's reserves had earlier been estimated to exceed all the fossil fuel reserves, though tempered down recently, yet the deposits are abundant.
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LNG supply crunch a reality after 2012?
December 12, 2008
Global LNG supply to surge to 2012, crunch later-BG | www.reuters.com
It is reported as per the article linked that Iberdola one of the world's large wind power companies with assets in gas storage in North America, Coal fired generation in Scotland, and for LNG gassification in UK and Spain, is looking at securing capacity to import liquefied natural gas into the United States as part of its international expansion plans. This implies that there is a rush for building of LNG terminals in United States in anticipation of a predicted supply crunch of LNG from 2012 to 2015. However the article referred on the LNG supply surge and crunch carries the link:http://uk.biz.yahoo.com/10122008/323/global-lng-supply-surge-2012-crunch-later-bg.html and reports that the existing plants will come on line and lead to a supply surge making it a buyer's market> However,due to the present financial crisis new plants constructions are being postponed and this would again lead to supply crunch by 2012.
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CLP the First Private Enterprise in China's Ambitious Nuclear Power Program
December 10, 2008
Hong Kong's CLP mulls expanding nuclear capacity | www.reuters.com
Reuters reported on 9th December that CLP or China Light and Power is conducting a feasibility study for two mega nuclear power plants of combined capacity of 2 Gigawatts. CLPCEO, Andrew Brandler confirmed however that it is only a feasibility study and not a firm commitment. CLP, one of the top power companies with assets in generation transmission and distribution in Hong Kong owns 25 percent of a nuclear power joint venture at Daya Bay, in the bordering mainland Chinese city of Shenzhen, partnering China Guangdong Nuclear Power Holding. In keeping with the trends in global utilities, CLP is planning to have 20 percent of its total power supply from renewable including nuclear by 2020. Today renewable constitute a modest 5% share of the total mix in the power supply from CLP.
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Turning alternative energy problems into opportunities
December 10, 2008
Alternative energy ideas power down | www.delawareonline.com
Sandy Shore of Associated Press reported from Denver on 6th Dec that T. Boone Pickens put his massive wind-farm plans on hold in Texas citing the drop in natural-gas prices. At Maryland BP solar-plant project has been scrapped. And the nation's second-largest ethanol company VeraSun Energy is under bankruptcy protection. Thus there is at the present moment a move away from renewable energy. Yet there is an expression of hope and confidence that this is only a temporary setback, as EIA and many others have forecast that renewable energy will form the second largest source of energy overtaking natural gas. So far the growth rate of renewable energy has been a healthy 7.2% per annum and considering that the coal,oil and gas prices will increase again though perhaps not so drastically, and supported by government subsidies and tax credits, one will see growth back on rails for this sector.
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December 10, 2008
Sector Snap: Coal Sector Falls on Weak Demand | money.cnn.com
The article in CNN Money quoting New York Associated Press reports uncertainty in earning outlook for 2009 for companies producing metallurgical coal i.e. Coal used in steel making. This is primarily due to loss of export due to the fall in global steel demand and the subsequent pull back of orders for metallurgical coal. Analysts believe that the coal companies will voluntarily close high-cost mines or reduce output to balance the market, and could also be forced to reduce production due to geology issues, credit issues and customers deferring shipments, thus further aggravating earnings. However, those coal companies which have the least exposure to metallurgical coal, with a high percentage of volumes contracted primarily with domestic power generating utilities and relatively low production costs have less to worry.
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Thermal Coal Gigawatts Soften Impact of Weakening Met Coal Demand
December 10, 2008
Sector Snap: Coal Sector Falls on Weak Demand | money.cnn.com
The article in money.CNN.com quoting New York Associated Press reports uncertainty in earning outlook for 2009 for companies producing metallurgical coal i.e. Coal used in steel making. This is primarily due to loss of export due to the fall in global steel demand and the subsequent pull back of orders for metallurgical coal. Analysts believe that the coal companies will postpone mine development and new capital expenditure and voluntarily close high-cost mines or cut production to balance the market, and could also be forced to reduce production thus further aggravating earnings outlook and the state of the industry. However, those coal companies which have the least exposure to metallurgical coal, with a high percentage of volumes contracted primarily with domestic power generating utilities, with relatively low production costs and a robust product mix of steam and metallurgical coals have less to worry.
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Impact of Low Oil Prices on Development Budgets for Exploration
December 9, 2008
Oil Price Drop Forces Big Energy to Retreat | www.time.com
It is reported in The Time dated Dec 3rd 2008, that energy companies across the country are quickly cutting their exploration efforts due to the steep fall in global crude prices from the 147$ per barrel to less than 48 dollars to the barrel last Tuesday.Thus the first casualty is the development of low yield marginal fields which somehow started looking attractive when there were high oil prices. There is reference in the article to cuts in budget leading to reduction in exploration by 40 percent across the board in the next year. It is mentioned that there are other factors which are contributing to this, 1. The anticipation of stricter regulations and consequent increase in costs and 2.The ubiquitous credit crisis. The impact of all these would aggravate recession, as the growth in the energy exploration industry was so far not affected by the global economic meltdown, and it is even today the provider for over a significant number of jobs.
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Largest USA Solar Project Hopes for Glory
December 8, 2008
USA-(Abenoga) Arizona Solar Plant Lacks Financing | www.azstarnet.com
It is reported in the Arizona StarBiz on the 4th Dec that Arizona Public Service plans for a 285 MW CSP Solar Plant has run in to a rough wind with financial closure delayed for now. The plant was being built on a build, operate basis by the Spanish company Abengoa Solar Inc which operates in the US. Obviously unless financing is closed, no construction can be started. However the officials of Abengoa are confident to find financing considering that APS is a reputed buyer and are expecting a favorable 9.4% tariff increase decision from the regulator Arizona Corporation Commission. The report however does raise the apprehension that is on every project developer’s mind, that whether the delay by lenders is on account of the credit crunch or is it just a typical lender’s due diligence?
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Beaming Power from Soalr Arrays in space A reality?
December 8, 2008
USA-pINNOVATION-Space solar power-Let The Sun Shine In | www.economist.com
Solar power satellites (SPS) were originally proposed as a solution to the oil crises of the 1970s by Czech-American engineer Peter Glaser, then at Arthur D. Little. Glaser imagined 50-square-kilometer arrays of solar cells deployed on satellites orbiting 36,000 kilometers above fixed points along the equator. As originally envisioned, posed daunting technical hurdles. In the last few years, however, the communications industry has announced satellite projects that suggest the time has come to revisit the solar power satellite idea. Space solar power is still an idea far ahead of its time. But the necessary technology already exists and is gradually falling in cost. The commercialization of space—and, in particular, the enthusiasm building around space tourism with a number of private entrepreneurs joining the league—could be the trend that brings down launch costs and brings SSP within reach and makes it a reality.
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December 8, 2008
Will The Economic Crisis Stall Energy Projects | energy.nationaljournal.com
As the nation slides deeper into the economic crisis, availability of private investment for energy projects will dwindle and aggravated by a plummeting electricity demand, the construction of new plants and the new interstate grids will suffer. The article does not mention specifically about the fate of the renewable energy plants, this situation, therefore brings out the issue decidedly in favor of an opportunity with a tilt towards the carbon fee and clean energy projects like the wind, micro-hydro, and above all CSP and PV. This is especially in light of the inevitability that is that the climate change is irreversible whereas the economic crisis is not.
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Looking through the magnifying glass at the solar industry at crossroads
December 5, 2008
USA-Solar industry pleads for more federal help | www.bizjournals.com
News article in San Francisco Business Times dated 3rd December 2008 reports that the Solar Energy Industries Association, made an appeal to the federal government to bail out the sagging solar power industry with further doles. The association was of the view that the 30 percent solar investment tax credit passed on the 3rd Dec was just not doable by companies as there was hardly any appetite for tax amongst organizations with banks restraining credit at present.Therefore they wanted that the tax credit be made refundable till the credit situation improves. The association suggested further measures and incentives for the industry. 1. Make it mandatory for government buildings to use solar power. 2. Extend tax credits to the solar manufacturing sector 3. Renewable portfolio standard to be made mandatory nationwide.
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The gale of a credit crisis blows the wind away!
November 26, 2008
Amid economic crisis, wind power spins more slowly | features.csmonitor.com
America’s credit crisis is shaking up not only smaller alternative energy sectors like solar and geothermal, but also the largest renewable electricity sector – wind power.As recently as this summer, the cost of power from new wind farm was 8.4 cents per kilowatt hour, cheaper than power from a new gas-fired power plant (9 cents) or a new nuclear plant (9.8 cents). Only coal, at about 6 cents for kilowatt hour, was cheaper.Thus the core issue is the industry wide difficulty of committing to new investments in a period of high uncertainty about borrowing costs
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Uncover the Veil on Glitches and Hidden Liabilities
November 24, 2008
Due diligence, recession style | venturebeat.com
As per the article, financial-statement fraud increases during recessions as management teams grow ever-more desperate to make their numbers. A private CRM software company in Seattle had raised over $50 million from VC firms like Ignition Partners and Sigma Partners, deliberately overstating annual revenue to the board and investors . In 2000 and 2001 similar fictitious revenue were declared by software companies like MicroStrategy, Critical Path, and Lernout & Hauspie. Even if fraud isn’t apparent in past documents, management made assumptions and estimates during happier times that dint reflect present day reality. The author suggests that now, the Venture Capitalists and Investors are therefore relying more on due diligence than during the better and fatter times.
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