Tuesday, March 11, 2014

Hinkley Point decision delay is no surprise given the history

Anyone who has followed the saga of EDF’s Hinkley Point plans has long learnt to take its pronouncements on the project’s timescales with a healthy dose of salt.

These are the reactors, after all, that chief executive Vincent de Rivaz once said would be powering Britons to cook their Christmas dinners in 2017.

Yet the Frenchman has shrugged off the embarrassment of repeated delays to the first power date (six years and counting) in a manner of which Edith Piaf would be proud. Indeed, he has continued to set optimistic project milestones in the face of warnings from partners and rivals alike that they will not be met.

EDF insisted through much of 2012 that its investment decision would come by the end of the year – raising more than a few eyebrows at partner Centrica. That slipped to early 2013 and then, as Centrica pulled out and subsidy talks dragged on, to the end of 2013.

When EDF decided last October to publish a new target of July – leaving itself just nine months to complete the state aid process – it did so despite months of warnings from rivals, such as SSE, that the European Commission deliberations would take at least a year.

The deadline-setting may well be a deliberate policy: first, it was to pressure the Government, now to crank up pressure on the EC to act. But it does little to inspire confidence that we won’t be safer relying on the gas oven for our turkeys come Christmas 2023.

It is easy for EDF to point the finger at EU bureaucracy for the latest delay to the investment decision – now pushed back to the autumn.

The EC now has at least seven state aid cases pending related to UK energy issues. State aid approval of compensation for energy-intensive industries for the carbon price floor has been delayed for many months too and appears victim of an overworked and understaffed Commission. But, in the case of Hinkley, there may be more to it.

The EC’s January verdict made clear that many key details of the contract are simply not yet finalised. “Autumn”, in Whitehall terms, stretches at least as far as November. It would be little surprise if, in EDF terms, it may mean next year. It is also easy for EDF to bang the drum against EU meddling in UK policy in urging approval of the Hinkley deal.

Coal plants running flat-out across Europe and turmoil in renewables policy hardly burnish Brussels’ energy policy credentials. Yet the EC’s dossier published in January raised important questions about the financing of the project, at a time when the UK parliament and the general public have been afforded scant chance to scrutinise the details.

With household energy bill-payers on the hook for what critics have dubbed “the world’s most expensive power station”, those questions have to be answered.

North East has different view on house prices

The booming housing market is again being cited as a potential threat to Britain’s strengthening economic recovery.

Speaking in Darlington, Charlie Bean, deputy governor of monetary policy at the Bank of England, said on Monday that officials were keeping a “beady eye” on property prices as a potential risk to growth.

However, for the assembled audience of local businessmen from the industrial North East, the concerns of a central banker mainly over the affordability of houses in the prosperous South and London will hardly have resonated.

After all, the only real policy tool available to the Bank if it is serious about cooling down surging house prices, other than directly advising Chancellor George Osborne to scrap his Help to Buy scheme, is to raise interest rates.

Both could have a serious impact on the audience Mr Bean was addressing. For many small businesses operating in County Durham, low interest rates are essential to survival.

The region was among those hardest hit by the recession and few are in a position to absorb the higher cost of servicing debt. Neither are they likely to welcome a stronger pound, which would follow higher rates, making it harder to compete in overseas markets.

Concerns over a property bubble fuelled by Help to Buy are less real in regions not benefiting from the flood of “hot money” which flows into London real estate from abroad.

Mr Bean insisted that the Monetary Policy Committee won’t nip the recovery in the bud. His audience in the North East will hope he was indeed thinking beyond the M25.

Regulators may want to unpeel the banana deal

There's only one description for it: going bananas. Considering Chiquita Brands and Fyffes have both been around since the 19th century, you have to wonder why it took them so long.

If it was that simple to put a combined £130m-odd on their share prices, they should have merged a long time ago – maybe back in the 1940s when cartoon character Miss Chiquita was being paraded as the “first lady of fruit”.

Shares in Dublin-listed Fyffes, the junior partner in the deal, despite supplying the chief executive, rocketed 46pc – its highest level since 2000, adding roughly £100m to its market value. Chiquita rose more than 9pc.

Admittedly, being part of a bigger group with $4.6bn (£2.76bn) of annual sales, has its benefits. But the market has already banked far more than the mooted $40m of synergies by the end of 2016 – from such things as lower shipping, port and packaging costs.

Getting cost savings from combining the brands will be tricky too, since each plans to keep its own identity, with the US group hanging on to Chiquita Bananas and Fresh Express and the Dublin-listed company continuing with its blue-label Fyffes and Sol.

You sense, then, that the bigger gains are to come from beating down the price at which they buy bananas for operations in 70 countries around the world – something the producers, not to mention the combined group’s rivals, will inevitably raise with the competition authorities.

With only four companies supplying 80pc of the fruit worldwide – the others being Dole and Fresh Del Monte Produce – there’s a clear risk the regulators will unpeel this deal for a closer look.

Given the excitement around the breakfast table on Monday, that’s one potential banana skin for those who were so quick to gobble up the shares.

telegraph.co.uk

No comments:

Post a Comment