Drax, the largest coal-fired power station in Europe which supplies about 7% of UK’s electricity consumption, signed a deal yesterday which allows generation of 10 per cent of its electricity using biomass such as wood chips and peanut husks.
French engineering giant Alstom has been engaged to commission facilities for burning 1.5m tonnes of biomass per year. This facility is being added at company’s local fire station at Drax, North Yorkshire.
This £50m biomass generation project will start generating 400 megawatts electricity in late 2009. This will be UK’s biggest biomass project. Despite the landmark deal, investors and environmentalists still feel that European Union’s stringent rules on emission will make Drax unviable. And the company is bound to close one day.
Drax will use resources like willow pellets, corn and sunflower husks and 50 types of biomass fuels, for the generation of electricity. Half of these resources will be procured from within UK and Drax will get the benefit of subsidised price under Government’s scheme of Renewable Obligations Certificates (ROC ).
Alstom will build the entire facility including silos for storage of grains and machinery for the processes.
Though biomass burning results in greater emission, its emission is carbon neutral. By generating 10% of its electricity from biomass, Drax will require lesser number of carbon permits than it buys presently under EU mandate on emission. This is a step in remaining viable in the business of power generation using coal.
Dorothy Thompson, the chief executive, believes that Drax has a significant role in power generation and coal will be an important fuel source for power in the coming years.
First Group, UK’s rail and bus group, has been on a massive expansion plan in the United States. After buying over Laidlaw, owners of U.S.’s popular Greyhound bus service, last year for £1.8 billion pounds, First group is looking to push for further expansion. For this purpose, they intend to raise 230-240 million ponds in share placing.
This cash flow would provide for them the much needed flexibility in their balance sheet. A part of this inflow would be used for refinancing the debt from the take over deal and a part of it would fund further expansion operations.
Chief Executive of First Group, Moir Lockhead, was certain that the synergies gained from the Laidlaw acquisition will pay off better this year, up to $150 million annually, as compared to the $70 million that was predicted. A further cause for cheer is that the Greyhound bus service has now started growing revenues.
First Group’s operating profit for the year looked upbeat, with an increase of an astounding 40% to 360 million pounds. This was in keeping with predicted estimates. Lockhead stated that the group had hedged fuel costs for this entire year and 10% for the year 2009/10. The share policy will be based on oil at $100-$120 million per barrel.
The shares for First Group were trading at 561.5 pence on Wednesday morning, reportedly down by 6%. According to their plan, 43.5 million shares will be placed and will be at the rate of 526-549 pence each. This would help them raise 230-240 million pounds. First Group’s revenue from the start of 2008 until March end was reported to have jumped 26% to 4.7 billion pounds.
Yahoo is regretting after turning down Microsoft’s bid. Irked (or call them angry) shareholders have vented out their discontent. Now the firm will fight for control of the company as Carl Icahn, a billionaire activist, will file a slate of alternate directors who will supposedly replace the current board. Icahn purchased 50 million shares in Yahoo and is said to have lined up at least 12 potential board candidates.
Microsoft had given a final bid of $47.5bn (£24.4bn) earlier this month which Yahoo conveniently turned down. Yahoo had wanted Microsoft to increase its bid of $33 a share to $37.
Yahoo’s second largest shareholder Bill Miller is eager to see what Mr. Icahn and his army can do. Carl Icahn is renowned to waging corporate battles. And a lot of people believe his involvement should pressurize the Yahoo board to restart negotiations with Microsoft.
But Mr. Icahn is not the only guy fighting the abele against the Yahoo board. Irritated investor Eric Jackson has his own campaign to oust the board members. Eric Jackson’s campaign will be all over the net. With Yahoo shares flat for the last four years Google has shown an upward 440%. This is enough to prove the 10 member board is inefficient. This soap opera is surely going to take quite a while to end. Till it ends keep checking this space for more news.
The equity analysts at Merrill Lynch have a massive task up ahead. They have to rethink and press harder in terms of performance. The Wall Street investment bank has ordered its equity analysts to spot companies who’s shares will take a plunge in the next 12 months. The initiative (or call it decree) issued across all it offices will pressurize researchers to double the number of underperforming companies. Apparently about 12 % of all stocks are issued by companies who, according to their insight, would have a negative total return in the year. Other than assessing companies equity analysts even guide their clients on buying, holding and selling stocks. And one of the underlying motives is to attract hedge funds through the initiative. This because hedge funds tend to sell shares it does not already own, in turn shorting the stock.
These companies sell stocks early fearing the fall in price. According to Merrill Lynch this move is designed to add value and better serve their clientele. Now analysts will be pressed to explain their verdict on a company. They will even have to elaborate on the firm’s price performance, risk profile and predict the share price in 12 months. There have been a lot of changes made with the incorporation of the new system. The new rules restrict analysts from recommending stocks unless they can illustrate the rise of a particular share over 12 months. Even remuneration of Merrill Lynch analysts depends on quality of their predictions.
British Energy, UK’s biggest electricity producer has announced that it received several offers of takeover valuing at more than 10.8 billion pounds. The company is in negotiations with three parties: EDF a group made up of Germany’s RWE, Spain’s Iberdrola and France’s Suez.
It had received only one offer, from EDF, last Friday. That bid was less than 700 pence per share.
RWE and Iberdrola are now exploring possibility of making a joint bid.
Suez is also negotiating with British Energy but is unlikely to bid before completing merger with Gaz de France. Suez is keener in participating in UK power plant construction and is pursuing a co-operation agreement with British Energy. British Energy, Scotland, informs that approaches are at initial stage and will take several weeks for finalisation. AS regards Suez’s approach there would be no major investment from their side till merger with Gaz de France is completed..
British Energy did not comment on this stand of Suez. Its eight power plants are beset with technical problems since last 2 years. The company is likely to benefit from government’s plan of building more nuclear power plants to avert electricity shortages. Government is keen on building power plants, with minimum emission of CO2.
Vodafone’s chief executive Arun Sarin has decided to step down by end of July. He will be replaced by Vittorio Colao, currently responsible for Vodafone’s European operations. Sarin, who was heading the mobile giant since 2003, said that he has accomplished the task, assigned to him after the exit of Sir Christofer Gent.
Sarin pulled Vodafone out of difficult markets, at the same time extended it’s reach to different global markets quite successfully. He cut company’s debts, introduced mobile telecom products and made history with India’s Hutchison Essar takeover in 2007. Sarin more than doubled company’s user base from 100m to 260m in the span of 4 years.
In 2006, 10% of shareholders claimed he lacked vision and voted against his reappointment. But Sarin proved them wrong by reporting a jump of 5.7% (£10.1m) in operating profits and the growth of 14% (£35.5bn) in revenues. Mr.Sarin is confident that Vodafone’s operating profits will zoom to £11.5bn in the current year with phenomenal growth in the new markets.
Sarin’s future plans are not known but he is likely to move into private equity. Sarin’s successor Vittorio Colao, 46, rejoined Vodafone in 2006, and since then been identified as future CEO.
Banks are becoming increasingly unfriendly with their customers. They are finding a softer way of recovering their profit loss by making customers pay heavily for different everyday services. Many of the largest banks have increased charges for overdrafts, credit cards and mortgages, while pushing through heavier cuts in interest rates and refusing bad credit loans to customers. Halifax gave a double blow to the customers by cutting high-interest account rates by one percentage point and raising overdraft charges by 60 basis points. Alliance & Leicester and HSBC introduced rate cut of half point on premier account, while Royal Bank of Scotland and Natwest raised overdraft rates.
Current account holders of Nationwide will be in deep trouble as the bank is proposing to cut credit interest rate to 2% from existing 3.75% and enhance overdraft charges by 3 percentage points.
Rising food prices, mortgage rates and utility expenses are making people’s life more difficult.
As per Michelle Slade, an analyst at Moneyfacts, banks are keeping margins up, as their profits are shrinking due to credit crunch. They are anticipating a cap from Office of Fair Trading on penalty charges levied by them on over daft and bouncing of cheques.
A £12 cap on credit card charges had boosted the card sales from 14.9 per cent to 16.4 per cent. The recent hike in overdraft rates is aimed at pre-empting the move to put a cap on current-account fees.
Banks are becomign increasingly tighter with their money, often point blank refusing to dispense bad credit loans and reducing interest rates on savings but not mortgages.
These are the tactics played by the banks to add more to their profits at the cost of consumers’ hard earned money.
UK manufacturers are facing tough times. Their cost estimates and budgets are going haywires. The official figures for April indicate a record increase in factory gate prices and producers’ costs. According to the Office for National Statistics, rise in input prices is 23.3% over last year. The rise in out put prices is 7.5% for the same year. This is the highest rise in both the input and out prices since 1986.
The economy is set for slow down. Government’s tax changes in alcohol and tobacco duties, rising fuel and food prices caused shoot up in the input and output prices have resulted in high rise in food and fuel prices. Rising material and energy prices are making it difficult to run the business.
According to BBC’s report, manufacturers are passing on burden of rising costs to the consumers. The pressure is building on retailers. So far they are not able to pass this on to the final consumer. The Bank of England is also unclear whether retailers will be able to mange this or not.
Analysts at Capital Economics feel that higher costs will result in consumer slow down which will compel retailers to cut down their margins to offset the costs. The final consumer will thus be spared from paying for the rising costs.
The Government is facing threat of being sued on the issue of nationalisation of Northern Rock. Private share holders had a shot in their arm when Lender’s largest share holder, SRM Global joined them in suing the Government on this issue.
SRM is approaching the high court to force the Government to reveal its planning on proposed nationalisation. It would like that conduct of Government, HM Treasury, Bank of England and Financial Services Authority in the decision making for nationalisation be subjected to investigation by the High Court. It wants judicial review of procedure to calculate shareholder compensation.
Government is trying to cover up its handling of important issue by rejecting requests to release documents pertaining to reasons for pursuing nationalisation. SRM is seeking court’s intervention in this regard.
UK Shareholders’ Association and SRM are of the view that Government has conveniently imposed such constraints in the calculation of level of compensation that it will be of nil value as against Northern Rock’s book value of minimum £4 a share.
SRM argues that Government has exploited the position of Bank of England for its commercial gains. Government has a hidden plan of selling the bank and making a profit at the cost of shareholders.
Hewlett Packard is going head-to-head in the out sourcing market with IBM. It is confirmed that out sourcing specialist Electronic Data System will be bought for £7.13bn ($13.9bn). With this deal HP will jump to second place from fifth in the global computer consulting and outsourcing market, next only to IBM.
Electronic Data Systems will be a separate business unit, reporting to HP chief Mark Hurd. Mark Hurd, is the architect of company’s turn-around after the exit of Carly Fiorina three years ago. He is confident that deal will help in expanding business into government and manufacturing sectors and will enhance capability in outsourcing corporate computer networks. The deal is going to boost revenue of computer services from 16pc to 30pc. The deal though will result in overlap between customers; Mr. Hurd states that EDS will continue using services and hardware of companies other than HP.
EDS has a strong track in outsourcing; it will therefore be the key areas for expansion of business.
HP could not buy Price Waterhouse’s technology consulting arm, in 2000. The deal was clinched by IBM.
HP then bought Compaq, the manufacturer of computers, for $20bn in 2002. But it did not help HP in expanding into services and outsourcing business. EDS deal is sure to bring the eluding success closer to HP.