The terminal will be built close to the port of Tornio, in Lapland. Wartsila is a mechanical engineering company headquartered in Helsinki - it deals in power plants, ship power and services. Wartsila also used to manufacture ships including icebreakers which might prove crucial for Arctic oil exploration.
Monday, 22 December 2014
The Commercial Aspects of Olefins
Olefins are hydrocarbons with chemical structure C[n]H[2n]. Ethylene and Propylene are the two most commercially important olefins used in the production of plastics.
GlobalData is one company that covers olefins, in particular the ethylene industry.
GlobalData is one company that covers olefins, in particular the ethylene industry.
Monday, 15 December 2014
US Strategic Petroleum Reserve Takes $35bn Hit from Falling Oil Prices
The SPR of the United States is the largest such supply of oil in the entire world, maintained by the US Department of Energy (inventory can be tracked here). It was developed in 1975 after supplies were cut off due to the oil embargo in 1973 (the "first oil shock") which brought the price oil from $3 to $12. The next oil shock ("second oil shock") came in 1979.
Its value has fallen fifty percent in only six months. The price paid for the oil averages at around $30 per barrel. In 2005, the US released oil from the SPR in the wake of Hurricane Katrina, and later in 2011 in the wake of the Libyan civil war.
Its value has fallen fifty percent in only six months. The price paid for the oil averages at around $30 per barrel. In 2005, the US released oil from the SPR in the wake of Hurricane Katrina, and later in 2011 in the wake of the Libyan civil war.
Sunday, 14 December 2014
Tuesday, 2 December 2014
Aviva agrees to take over Friends Life at 15% premium to Friend's stock price
The deal is Mark Wilson's first since taking over as CEO of Aviva in 2013. He has a Bachelors in Management from the University of Waikato.
Sunday, 30 November 2014
$100m Spreadsheet Errror in buyout of Tibco by Vista Equity Partners
Shareholder Paul Hiidelson filed the complaint in a state court in Delaware (where 65% of Fortune 500 companies are incorporated). Vista's Chairman and CEO Robert Smith worked in M&A at Goldman Sachs between 1994 to 2000.
Saturday, 22 November 2014
America's Distaste of Wall Street's Involvement with Physical Commodities
Summary of the Senate's Findings
November 20, 2014: Report and Member Statements has been published on hsgac.senate.gov ending a two year investigation into Wall Street involvement in trading physical commodities.
Jacques Gabillon was one of the witnesses who gave testimony.
Much of the discussion revolved around aluminium warehousing and so-called "merry go round" transactions. There was also discussion of so-called "BCR" or bid cost recovery payments.
Focus on Aluminium and Alleged Inflation of the "Midwest Premium"
Discontent among market participants (represented by the Aluminium Users Group, which includes Coca Cola) in the aluminium sector centred around the inflation of the "Midwest Premium" (similar concerns had been raised by industry consumers earlier to the European Commission) and also around extended time to take delivery from physical contracts due to queues at warehouses, created by "merry go round" transactions.
Goldman Sachs entered into a number of these deals with Red Kite (which is said to also hold more than half of the LME's copper inventories).
November 20, 2014: Report and Member Statements has been published on hsgac.senate.gov ending a two year investigation into Wall Street involvement in trading physical commodities.
Jacques Gabillon was one of the witnesses who gave testimony.
Much of the discussion revolved around aluminium warehousing and so-called "merry go round" transactions. There was also discussion of so-called "BCR" or bid cost recovery payments.
Focus on Aluminium and Alleged Inflation of the "Midwest Premium"
Discontent among market participants (represented by the Aluminium Users Group, which includes Coca Cola) in the aluminium sector centred around the inflation of the "Midwest Premium" (similar concerns had been raised by industry consumers earlier to the European Commission) and also around extended time to take delivery from physical contracts due to queues at warehouses, created by "merry go round" transactions.
Goldman Sachs entered into a number of these deals with Red Kite (which is said to also hold more than half of the LME's copper inventories).
Tuesday, 4 November 2014
Largest Turkish Overseas Purchase as Yildiz Eats Up United Biscuits
Yildiz beat off stiff competition from Kellogg's and Burton's Biscuits, eventually offering over £2bn. Murat Ulker tweeted: "United Biscuits is our new star".. Yildiz's previous big acquisition was the takeover of Belgian firm Godiva chocolate in 2007 for £670m.
Monday, 3 November 2014
Russian and Ukraine Get Comfy with Gas Deal
Russia has agreed to supply Ukraine with gas till end of March 2015. Just under one third of European gas comes from Russia, and half of that volume comes through Ukraine. The deal involves Ukraine making some advance payments to Russia for winter fuel.
Sunday, 12 October 2014
Vodafone Researching "5G"
Vodafone has partnered with Dresden University of Technology to research 5G. Dresden is one of many universities joining the telecoms operator in this quest e.g. Carnegie Mellon University and University of Surrey. Vodafone's Head of R&D said that despite 5G being in its "very early stages" it was worth investing "time and effort" to understand the technology.
Sunday, 5 October 2014
Investment Hero Bill Gross Returns to Investment Roots
Bill Gross - for whom "managing money is in my blood" - returns to Investment and exits Pimco management by joining Janus Capital managing a $13m fund, smaller than the $200bn fund he ran for Pimco. An MBA graduate from UCLA, he founded Pimco and has previously served in the Navy as well as played blackjack professionally in Las Vegas. Bill Gross is the second high-profile departure after Mohamed El-Erian (former CEO of Pimco till March 2014 and former CEO of the HMC, the Harvard Management Company) who is now Chief Economic Advisor at Allianz. He has written the book When Markets Collide.
Saturday, 27 September 2014
Dow Chemical to Put Chlorine Business For Sale
Dow Chemical, run by Andrew Liveris, is looking to sell its epoxy and chlorine business. Dow Chemical is an industrials juggernaut with 2013 sales of more than $57 billion. Liveris became CEO in 2004 after working as Chief Operating Officer, succeeding William Stavropoulos.
Friday, 26 September 2014
Solvency II Rules Set for 2015 Launch
Solvency II Rules due in 2015 will set strict rules for insurers; where they will be expected to lay out detailed risk and capital plans. "Inadequate or opaque models" would not get regulatory approval, warned BOE boss Mark Carney.
The technical rules for Solvency II are managed by EIOPA, the European regulator for insurance and occupational pensions.
The technical rules for Solvency II are managed by EIOPA, the European regulator for insurance and occupational pensions.
Wednesday, 20 August 2014
BHP Billiton Announces Dramatic Asset Spinoff
BHP Billiton is demerging - creating a new, smaller yet-to-be-named offspring, focusing on the aluminium, manganese, nickel and silver parts of the business, with the main, larger business (96% of earnings in 2014) focusing on iron ore, copper, petroleum and potash.
Coal will be common to both, and BHP is active in both metallurgical and thermal variants. The President of the coal business, Dean Dalle Valle, has been with BHP for a truly impressive 36 years and ran the Uranium business for three years and started his career as a mine apprentice. He has been profiled in The Australian.
BHP Billiton, which was formed in 2001 from the merger of BHP and Billiton, is a global mining giant, known for acquisitions and its failure in 2005 to take over rival Rio Tinto. One of CEO Andrew Mackenzie's priorities since taking the helm has been to simplify BHP's portfolio. Andrew has a PhD in Organic Chemistry. He worked in BP Research, moved to the Finance division, and became Head of Capital Markets, and the rest, as they say, is history. He has also worked at Rio Tinto as head of the industrial minerals division.
Tim Cutt who heads the Petroleum (and Potash) Business has a degree in Petroleum Engineering from Louisiana Tech. BHP is a big player in deep water exploration in the Gulf of Mexico. The iron ore business is principally in Pilbara, Western Australia, and is led by Jimmy Wilson.
Coal will be common to both, and BHP is active in both metallurgical and thermal variants. The President of the coal business, Dean Dalle Valle, has been with BHP for a truly impressive 36 years and ran the Uranium business for three years and started his career as a mine apprentice. He has been profiled in The Australian.
BHP Billiton, which was formed in 2001 from the merger of BHP and Billiton, is a global mining giant, known for acquisitions and its failure in 2005 to take over rival Rio Tinto. One of CEO Andrew Mackenzie's priorities since taking the helm has been to simplify BHP's portfolio. Andrew has a PhD in Organic Chemistry. He worked in BP Research, moved to the Finance division, and became Head of Capital Markets, and the rest, as they say, is history. He has also worked at Rio Tinto as head of the industrial minerals division.
Tim Cutt who heads the Petroleum (and Potash) Business has a degree in Petroleum Engineering from Louisiana Tech. BHP is a big player in deep water exploration in the Gulf of Mexico. The iron ore business is principally in Pilbara, Western Australia, and is led by Jimmy Wilson.
Tuesday, 19 August 2014
How Glencore Counters Commodities Cycles: A Review of 2013
Glencore, as its annual report boasts, is a well-diversified commodities company, active in over ninety commodities. It acquired Xstrata in 2013 and realised synergies of around $2.4 billion. Its 2013 revenue came in at 239 billion dollars.
Its KPIs include: EBIT/EBITDA, Funds from Operations (FFO) and Net debt/FFO to Net debt (large expensive projects tend to increase this ratio).
Glencore computes Value at Risk and has set a 1 day 95% VaR limit of $100m.
Glencore shares trade in London (GLEN), Hong Kong and Joburg. Its financial accounts are in USD.
Its KPIs include: EBIT/EBITDA, Funds from Operations (FFO) and Net debt/FFO to Net debt (large expensive projects tend to increase this ratio).
Glencore computes Value at Risk and has set a 1 day 95% VaR limit of $100m.
Glencore shares trade in London (GLEN), Hong Kong and Joburg. Its financial accounts are in USD.
Standard Chartered to Pay $300m AML Fine to NY State Department of Financial Services
Fine Adds to Previous Fines
On top of the fine, the UK bank is banned from accepting new dollar clearing accounts without approval of the State Department (DFS). This fine adds to the $340m that SC agreed to pay in August 2012 after admitting to having violated US sanctions on Iran.
Background to the New York DFS
The New York DFS was created in October 2011 as part of the State budget unveiled by Governor Andrew Cuomo (who assumed office in January 2011), and is a graduate of Albany Law School. DFS is an amalgam of the former New York State Department of Banking and separately Department of Insurance.
Benjamin Lawsky became New York State's first Superintendent of Financial Services in 2011.
On top of the fine, the UK bank is banned from accepting new dollar clearing accounts without approval of the State Department (DFS). This fine adds to the $340m that SC agreed to pay in August 2012 after admitting to having violated US sanctions on Iran.
Background to the New York DFS
The New York DFS was created in October 2011 as part of the State budget unveiled by Governor Andrew Cuomo (who assumed office in January 2011), and is a graduate of Albany Law School. DFS is an amalgam of the former New York State Department of Banking and separately Department of Insurance.
Benjamin Lawsky became New York State's first Superintendent of Financial Services in 2011.
Friday, 15 August 2014
Sunday, 6 July 2014
How much known reserves of natural gas are there?
At the end of 2013, the known reserves of natural gas was 6557 trillion cubic feet. The greatest portion of these reserves are in the Middle East, with 2835 trillion cubic feet, the largest reserves being in Iran. Production, on the other hand, is measured in billion cubic feet.
Thursday, 19 June 2014
Markit goes Public with $24 a share IPO
Markit (NASDAQ:MRKT) has gone public at $24 a share. No money will be raised, however, for the company, and the shares were sold only for the selling shareholders. Over 53 million shares were on offer.
Tuesday, 22 April 2014
What is European and US Power Trading?
Barclay's Exit Is An Opportunity to Reflect
With Barclays announcing the closure of their European and US power trading operations earlier this year, we might reflect on what this business was actually about.
First Step to Understand Power Trading
To understand power trading it is important to understand spark spreads and dark spreads. To understand these spreads, you must think of the cost of power relative to the cost of the fuel required to generate that power. This is vital for a power plant operator to understand.
The Art of the Spark Spread (and what it means for the Spark Spread to be Positive)
Intuitively, the spark spread is the theoretical margin (crude measure of profitability) for a power plant. If the spark spread is positive, it means the price of power is greater than the cost of the fuel. Positive spark spreads means happy days for power plant operators!!
Within the US, spark spreads vary by geographical region and by season. New York City area tends to have relatively high spark spreads.
Measuring the Spark Spread
Spark spreads can be measure in $ per megawatt-hour. The calculation is as follows:
Spark spread ($/mwhr) = Power Price ($/mwhr) - [natgasprice ($/mmbtu) * heat rate (mmbtu/mwhr)].
The mmbtu's cancel out and you are left with $/mwhr.
What does the "heat rate" represent in the spark spread equation
The heat rate represents the efficiency of a generating unit. Market participants tend to use a benchmark heat rate for their calculations, e.g. for their daily prices EIA uses a value of 7,000 Btu/kWhr, representing a fairly efficient natural gas combined-cycle generator. The greater the efficiency of your generating unit, the greater spark spread you can realise as an electricity supplier.
Spark Spreads versus Crack Spreads in Petroleum Markets
Spark spreads tend to be more volatile than crack spreads, due to the volatility of wholesale electric power prices.
Spark Spread versus Dark Spread (Gas versus Coal)
Spark spread is power producer margin for gas-fired power station. Dark spread is the equivalent measure for coal-fired power stations.
Quark Spreads
An analogous measure for uranium-based power stations.
How do you trade the spark spread?
You can trade the spark spread by replicating using "paper" contracts, what the electric producer does. You do this by buying natural gas futures and selling electricity futures. You have then set up a "paper generator".
With Barclays announcing the closure of their European and US power trading operations earlier this year, we might reflect on what this business was actually about.
First Step to Understand Power Trading
To understand power trading it is important to understand spark spreads and dark spreads. To understand these spreads, you must think of the cost of power relative to the cost of the fuel required to generate that power. This is vital for a power plant operator to understand.
The Art of the Spark Spread (and what it means for the Spark Spread to be Positive)
Intuitively, the spark spread is the theoretical margin (crude measure of profitability) for a power plant. If the spark spread is positive, it means the price of power is greater than the cost of the fuel. Positive spark spreads means happy days for power plant operators!!
Within the US, spark spreads vary by geographical region and by season. New York City area tends to have relatively high spark spreads.
Measuring the Spark Spread
Spark spreads can be measure in $ per megawatt-hour. The calculation is as follows:
Spark spread ($/mwhr) = Power Price ($/mwhr) - [natgasprice ($/mmbtu) * heat rate (mmbtu/mwhr)].
The mmbtu's cancel out and you are left with $/mwhr.
What does the "heat rate" represent in the spark spread equation
The heat rate represents the efficiency of a generating unit. Market participants tend to use a benchmark heat rate for their calculations, e.g. for their daily prices EIA uses a value of 7,000 Btu/kWhr, representing a fairly efficient natural gas combined-cycle generator. The greater the efficiency of your generating unit, the greater spark spread you can realise as an electricity supplier.
Spark Spreads versus Crack Spreads in Petroleum Markets
Spark spreads tend to be more volatile than crack spreads, due to the volatility of wholesale electric power prices.
Spark Spread versus Dark Spread (Gas versus Coal)
Spark spread is power producer margin for gas-fired power station. Dark spread is the equivalent measure for coal-fired power stations.
Quark Spreads
An analogous measure for uranium-based power stations.
How do you trade the spark spread?
You can trade the spark spread by replicating using "paper" contracts, what the electric producer does. You do this by buying natural gas futures and selling electricity futures. You have then set up a "paper generator".
Saturday, 19 April 2014
Shell and BP to Supply LNG to Kuwait
Kuwait's demand for LNG imports began in 2009 mainly to provide energy for air-conditioning during the summer months. The current deal is for Shell/BP to supply LNG for five to six summers hence, totalling around 2.5m tonnes a year. KPC has previously signed deals with Vitol as well.
Sunday, 13 April 2014
"Always Keep Learning" - Useful Advice from Microsoft's new CEO
Microsoft's new CEO, Satya Nadella, hails from Hyderabad, India (the capital of Andhra Pradesh) and studied at the University of Mangalore (or Mangalapuram in Malayalam, which is close to the Arabian Sea) where he got his Bachelors in Electrical Engineering.
He has been at Microsoft since 1992. The full form of his first name is Satyanarayana.
As Microsoft's third CEO after Bill Gates and Steve Ballmer, he will be paid $1.2m a year, plus be eligible for a cash bonus of up to $3.6m. In an interview with the Deccan Chronicle, he shared some insights into his work philosophy: "You stop doing useful things if you don't learn".
He has been at Microsoft since 1992. The full form of his first name is Satyanarayana.
As Microsoft's third CEO after Bill Gates and Steve Ballmer, he will be paid $1.2m a year, plus be eligible for a cash bonus of up to $3.6m. In an interview with the Deccan Chronicle, he shared some insights into his work philosophy: "You stop doing useful things if you don't learn".
Sunday, 6 April 2014
How Should Commodities Be Regulated?
The recent takeover of JP Morgan's physical commodities business by Swiss trading house Mercuria (founded by two former Goldman Sachs traders, or more specifically Goldman Sachs J Aron unit, after spending time at Cargill) for $3.5 billion, is an ambitious move for the relatively new commodities trader, starting out as a ten-person team supplying oil to Polish refineries. It now employs over a thousand people, with revenues topping over $100bn last year. Analysts remark that the remarkable fact about Mercuria is its aggressive efforts to scale the business. How would Mercuria be able to succeed where JP Morgan could not? One answer lies in regulation.
As Mercuria is not a bank in the sense that it does not take deposits from customers, regulation is different than for a deposit-taking institution. Further, it falls under Swiss regulation rather than North American legislation. JP Morgan's exit is prompted by capital constraints and increasing regulatory scrutiny, particularly on US banks that have been the subject of controversial bailouts. So uneven regulation is one source of competitive advantage that Mercuria has over JP Morgan.
It should be emphasised that the duo who built Mercuria, Marco Dunand and Daniel Jaeggi, came from a banking background, and it is remarkable that they have found a way to leverage that while succeeding in a way that banks have failed.
As Mercuria is not a bank in the sense that it does not take deposits from customers, regulation is different than for a deposit-taking institution. Further, it falls under Swiss regulation rather than North American legislation. JP Morgan's exit is prompted by capital constraints and increasing regulatory scrutiny, particularly on US banks that have been the subject of controversial bailouts. So uneven regulation is one source of competitive advantage that Mercuria has over JP Morgan.
It should be emphasised that the duo who built Mercuria, Marco Dunand and Daniel Jaeggi, came from a banking background, and it is remarkable that they have found a way to leverage that while succeeding in a way that banks have failed.
Thursday, 20 March 2014
Goldman's Launches India Public Sector ETF
GS (specifically GSAM) is launching a Public Sector Enterprise ETF which will feature 10 Indian public sector companies (March 2014), including ONGC, Gail, Coal India, Bharat Electronics, Engineers India (EIL) and Container Corp.
Some tickers to watch (tickers are NSE unless otherwise stated): BEL, CONCOR, GAIL.
Some tickers to watch (tickers are NSE unless otherwise stated): BEL, CONCOR, GAIL.
Saturday, 18 January 2014
IBM's $1.2bn Data Centre Commitment
IBM is committing more than $1.2 billion to expand its data centres and support cloud computing initiatives, in anticipation of a $200 billion global market for cloud services by 2020.
In 2013, IBM acquired cloud services company SoftLayer (founded in 2005), which rents out servers starting at $159 a month for a dedicated machine, some of the rentals made via Digital Realty (NYSE: DLR).
IBM is also building out a Watson division at a cost $1bn. Watson is IBM's AI machine which has built-in natural language capabilities. It aims to use SoftLayer as a cloud distribution mechanism for services based off Watson.
In 2013, IBM acquired cloud services company SoftLayer (founded in 2005), which rents out servers starting at $159 a month for a dedicated machine, some of the rentals made via Digital Realty (NYSE: DLR).
IBM is also building out a Watson division at a cost $1bn. Watson is IBM's AI machine which has built-in natural language capabilities. It aims to use SoftLayer as a cloud distribution mechanism for services based off Watson.
Wednesday, 1 January 2014
Fireworks in Riga as Latvia Joins the Euro, not so for Lithuania
Valdis Dombrovskis, Prime Minister of Latvia (and a trained physicist), declared 1 January 2014 as a "big opportunity for Latvia's economic development". Some Latvian locals have expressed concerns over inflation, and indeed Latvia's central bank does expect a modest rise in prices, to bring inflation to 2%.
Two-thirds of the Baltic States are now Euro-enabled.
Amongst the other Baltic States, Estonia has already joined the euro in 2011, and Lithuania aims to do so in 2015. Ex-communist Poland has retained the zloty and is tight-lipped about the prospect of joining the Euro.
Say "Atta" to the Latvian lats, as another European currency hits the history books!
Two-thirds of the Baltic States are now Euro-enabled.
Amongst the other Baltic States, Estonia has already joined the euro in 2011, and Lithuania aims to do so in 2015. Ex-communist Poland has retained the zloty and is tight-lipped about the prospect of joining the Euro.
Say "Atta" to the Latvian lats, as another European currency hits the history books!
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