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Updated: 1 hour 9 min ago

Look Who’s Talking About Zero Emissions

Tue, 06/09/2020 - 04:00

(Bloomberg) -- Royal Dutch Shell Plc had been turning out about 2.7 million barrels of oil each day until the novel coronavirus took hold of the world. Demand for oil, the company’s core product, dropped almost a third in April, and the price of West Texas Intermediate briefly dipped into negative numbers for the first time.It’s not easy to run an oil major when people suddenly stop needing oil. Chief Executive Officer Ben van Beurden responded by slashing spending and cutting Shell’s dividend for the first time since World War II. And, as critics warned, the company remains saddled with debt from its $53 billion acquisition of BG Group in 2015.This precarious moment for oil makes van Beurden’s push to establish a post-fossil fuel identity for the 113-year-old company more essential—and difficult. He’s not even sure he wants to be known as someone who runs one of the largest oil producers in the world. “The very fact that, in this interview, you referred to us as an oil company is symptomatic of the problems that we are facing,” he told Bloomberg Green.As if to prove the point, van Beurden released a new climate plan in the middle of an historic oil price crash. The goal is to cut all emissions to net zero by 2050, including so-called Scope 3 emissions generated by customers burning Shell’s products. Every internal combustion engine, every power plant, every petrochemical factory—all downstream fossil fuel consumers will one day be required to capture their emissions, or plant forests in compensation.Only three other oil majors—Total, BP, and Repsol— share van Beurden’s ambition, and each applies disparate definitions and methods for attempting to become a paradox: the emission-free oil company. Shell’s plan is perhaps the most ambitious. Success will mean taking steps no oil company has attempted before, such as selling oil and gas only to customers who have the means to eliminate or offset their emissions.Van Beurden, a father of four, spoke to Bloomberg Green by phone on May 14, a time when oil prices were well below half their pre-pandemic levels. He discussed his fears of a disorderly energy transition, his call for increased government action, and his plans to keep shareholders happy. The interview has been edited and condensed for clarity.How do you face your children’s questions about climate change?My children span the ages of 10 to 25. On the 25 end of things, we have deep philosophical discussions. My son understands what we’re doing. He may be critical, but I have convinced him on my fundamental understanding. With the 10-year-old, of course, you can’t. What you can do with a 10-year-old is to say, “Do you trust Papa to do the right thing for you?” And she will say, “Yes, I trust you. I know you love me. I know you will do the right thing for me, and therefore I believe in you.”That’s the nice thing about a 10-year-old. We can’t have that attitude with society. If I asked society, “Do you trust me to do the right thing?” I think I know what the answer is. So we have to work harder to reestablish trust where we have lost it and to strengthen it where we haven’t.What are you doing to gain back that trust?It bothers me to no end that we’re being seen—not by our customers, by the way, but by segments of society—as almost an unwelcome player in the energy scene or in society as a whole. Forgive my bias, but I don’t think that it’s deserving fundamentally, and I don’t think it does us justice. It doesn’t do justice to the people in Shell. It doesn’t do justice to the things that we are doing at the moment.I fundamentally believe we have a core role to play in the energy transition: the capabilities that we have, the scale that we bring, the insights, and everything else. The very fact that, in this interview, you referred to us as an oil company is symptomatic of the problems that we are facing. We’re a much more sophisticated and integrated energy player, and we’re trying to grow our nonoil part much faster than the oil part.Your climate plan relies on working with other industries in developing technology, helping your customers put net-zero emissions plans in place, or buying offsets for them. Has anything ever been done on this scale before?The Montreal protocol to deal with the ozone layer problem and ozone-depleting gases was a clear effort that required massive orchestration initiated by industry. That’s a simpler proposition, because that was just the suppliers of this material that came together with a number of governments. The energy transition is massively complex. It will require orchestration on a scale that the world has never seen. If you don’t start with it soon, it’s going to be highly disruptive at the end or it’s not going to happen. And both are unpalatable conclusions.Wouldn’t customers just choose a different supplier of energy who doesn’t impose such strict climate conditions?You can say it’s a bit of a leap of faith. But then I would also say that it’s a leap of faith for society to say we’re going to get to net zero by 2050. If as a society we need to get to that point of net zero, I would hope and suggest there aren’t going to be too many businesses left who say, Well listen, you know we’re not going to be a part of this net-zero approach.All that will need a very heavy-handed government. Do you support that?If we believe that somehow the market is going to take care of this, that you put a price on carbon and everything will sort itself out, or that we can shame companies into doing it by having ESG frameworks that will tell them what is right and what is wrong, then I think we’re kidding ourselves. This needs a very significant interventionist approach, and all industries have to be part of the intervention.One way to shape government intervention is through lobbying. For example, Shell is a member of the American Petroleum Institute and the Western States Petroleum Association, whose climate policies don’t align with Shell’s. When will you resign your membership in the groups that don’t align with your climate plans?Many of these institutions aren’t just lobbying groups. They’re very good institutions to help set standards to make sure that we run responsibly our operations, etc. They do take positions, as well, and we want to make sure that the positions mirror the positions that we stand for. Where that’s not the case, we’ll try to influence and moderate and modify and everything else. And if we feel there’s no progress anymore, then we’re better off to say, “I’m sorry, we have an irreconcilable difference of opinion,” and we step out of it.Assuming you don’t get government support to advance research in hydrogen production and carbon capture and storage, what will you have to do to make those viable?Stay with the program a little bit longer. That’s exactly what we’re doing. You could take a negative view and say we knew that hydrogen was a good thing and we knew that CCS [carbon capture and storage] was needed, but it hasn’t happened. I’m not signing up for that approach. We need a lot of hydrogen in the mix. We need significant CCS. My prediction is that in the next few years you will see CCS projects come off the ground. You will see very large-scale hydrogen projects come off the ground as well. And I hope we will be associated and involved in each and every one of them.How do you see Shell’s role in developing next-generation energy technologies such as small nuclear power plants or cheaper solar or floating wind turbines?We tried that, and it didn’t work. Others could spend much more money on it with much lower return expectations. But we should actually work with the underlying commodity and the attributes of electrons and hydrogen molecules that are being produced by it. Because that’s where our core capability is, and there’s nobody placed as well as we are to do that type of system integration.Is what’s happening now a disorderly energy transition, which you’ve said is one of your biggest fears?What’s happening now is disorderly, but it’s not a transition. We’re seeing that if you want to somehow cut out 25% energy use or hydrocarbon-based energy use, you need draconian measures to get to that reduction. You need to lock down people. You need to shut down the economy. It shows the magnitude of the challenge, how complicated it is, and what the consequences would be if you really wanted to have a very simplistic approach to getting rid of oil and gas.Does the pandemic change when the world reaches peak demand for oil?I do think we will come out of this as a different society, maybe a radically different society. Attitudes will be different. Demand patterns may be different. We may see lower-for-longer demand. On the other hand, all the techno-economic challenges of the energy transition are still there. We still have to figure out how we’re going to use so much more electricity compared to today. Things will be different.The 2015 acquisition of BG happened when the outlook for liquefied natural gas was very bullish. It’s not so bullish now. How do you see the future playing out? We still very much believe that with the current supply-demand outlook, this is a fundamentally strong sector that will grow at a rate close to 4% per year. It’s the fastest-growing sector in the hydrocarbon space. And we’re the ones best positioned to take advantage. We will obviously flex our investment program to be aligned with where we believe the sector will go, but the profitability of the business and the outlook of this business is going to be as good as what you saw before the pandemic.With a drastic cut in dividends, aren’t you risking alienating investors?I would imagine the companies or investors who look at us merely as a dividend machine will consider us now less valuable. But then there’s another group that looks at the underlying intrinsic value of the company. There will be some investors who decide they don’t need to go elsewhere and some who will find it very interesting.Is the dividend cut resetting expectations of lower returns in a green transition? That is obviously not the reason why you would do that. We had to reduce the shareholder returns because we didn’t have the money to make these returns under the current circumstances. That doesn’t mean we can now invest in lower-return businesses. This energy transition requires a different type of investment and a different type of company. It’s not going to happen if there are no returns to be made.But with oil at such low prices, how will you fund the transition to clean energy?I would like to think that oil and gas prices, chemical and marketing margins will not stay at depressed levels. If they do, then we have a permanently changed world, and you have to then reinvent the company much more structurally than what we’re currently doing. At the moment, we’re taking countermeasures; we’re not reinventing the company. If there are less attractive investments available in oil and gas, then obviously the capital will be allocated elsewhere in favor of sectors that do bring good returns.Are returns on renewables now becoming comparable to those on oil and gas?By the time you make an investment decision in oil and gas assets, you’ve already spent a lot more money on the development of that asset. If you want to make a comparison between projects in the power sector, or even in the chemical sector and the resource extraction sector, you have to look at the return of the entire portfolio. If you do that, there isn’t that much difference. We expect to make 8% to 12% return in the power sector in which we’re building wind parks and solar parks. And 8% to 12% currently we don’t even make in our upstream business. For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Tesla, Amazon Backer Baillie Gifford Invests $35M In Air Taxi Startup Lilium

Tue, 06/09/2020 - 01:06

Baillie Gifford has invested $35 million in Germany-based air-taxi startup Lilium, the Financial Times reported.What Happened The United Kingdom-based private investment firm holds a nearly 4% stake in Lilium as a result of the investment that valued the startup at more than $1 billion, according to the Financial Times.Baillie Gifford is looking for "situations where there is the potential for a really transformative new market or product in the long term, while recognising that these will often take a lot of time to come to fruition," investment manager Michael Pye told the Financial Times.The firm is best-known for being the largest external investor in electric vehicles maker Tesla Inc. (NASDAQ: TSLA) and was also an early investor in Amazon.com Inc. (NASDAQ: AMZN), the Space Exploration Company (or SpaceX), Spotify Technology SA (NYSE: SPOT), and Airbnb Inc.Baillie Gifford, earlier this year, invested in California-based Lilium rival Joby. Pye told the Financial Times that the firm's Lilium funding is higher than what it invested in Joby.Lilium, which is aiming to launch five-seater city-to-city air taxis, has raised $375 million to date, according to the Financial Times.Image Credit: Lilium.See more from Benzinga * IBM Discontinues Facial Recognition Technology, Says It Can't Condone 'Racial Profiling' Or 'Mass Surveillance' * Facebook-Backed Jio Platforms Gets 0M From Abu Dhabi Sovereign Fund As It Looks To Challenge Amazon, Walmart In India * Chinese Online Grocery Seller Dada Welcomes 'Better Auditing And Regulation,' As Company Starts Trading At Nasdaq(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.


PG&E to Sell San Francisco Headquarters, Move to Oakland

Mon, 06/08/2020 - 22:34

(Bloomberg) -- PG&E Corp. said it plans to sell its iconic downtown San Francisco headquarters and relocate to Oakland, a move aimed at lowering costs after the California power giant exits bankruptcy.PG&E, which has called San Francisco its home since the utility’s founding in 1905, will move in phases starting in 2022, the company said in a statement Monday. It plans to lease its new building at 300 Lakeside in Oakland, with the option to purchase the property from developer TMG Partners.With the move, PG&E becomes one of the most high-profile companies to leave San Francisco for Oakland, a cheaper city located just across San Francisco Bay. The sale of its headquarters also allows the utility to profit off of investor interest in its longtime hometown, one of the tightest and most expensive U.S. office markets.PG&E said any net gains realized from a sale would be passed on to customers, and a transaction wouldn’t occur until it exits bankruptcy. The company, which filed for Chapter 11 more than a year ago after its equipment was tied to deadly wildfires, is seeking to win court approval of a $59 billion restructuring plan by the end of this month.“Our new Oakland headquarters will be significantly more cost-effective, is better suited to the needs of our business, and is a critical part of fulfilling our commitment to operate in a fiscally responsible way that will enable us to achieve our operational and safety goals,” Bill Smith, PG&E’s interim chief executive officer, said in the statement.PG&E said TMG will upgrade its Oakland property at its own cost according to the company’s specifications, which will allow for a flexible office layout and new safety measures in the wake of the coronavirus pandemic. The location will also make commuting easier for the majority of its employees who already live in the East Bay, PG&E said. It plans to consolidate its two other East Bay offices into the new Oakland headquarters.The utility’s 1.7 million-square-foot (158,000-square-meter) San Francisco complex was constructed between 1923 and 1925, according to its registration form for the National Register for Historic Places. It’s located in the South of Market neighborhood, an area that’s popular with technology companies.One broker estimate last year implied the property could fetch more than $1 billion. Still, it’s unclear how the market has changed since then given the Covid-19 outbreak.Demand in San Francisco by fast-growing tech firms, and local restrictions on building, have long pushed rental rates higher and buoyed the value of buildings. But the pandemic has made many companies reassess their needs with most of their employees working from home. Facebook Inc. and Twitter Inc. have said that many of their staff may permanently work remotely.“Even if most workers continue to work full-time in the office, plausible projections for increased remote work should put a sizable dent in long-term demand” for office space, analysts from real estate research firm Green Street Advisors wrote in a report last month. “That is highly unwelcome for a sector that was already facing challenging fundamentals and lofty valuations.”(Updates with details of the move starting in the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


After Novavax Inks DoD Contract, Is Operation Warp Speed Ahead? Top Analyst Weighs In

Mon, 06/08/2020 - 19:55

Another day, another stride forward in the race to develop a COVID-19 vaccine.On June 4, Novavax (NVAX) revealed it will receive $60 million from the U.S. Department of Defense (DoD) to further the advancement of its experimental vaccine candidate, NVX-CoV2373, in the U.S., through JPEOCBRND-EB (Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense Enabling Biotechnologies).As per the terms of the agreement, NVAX will work with multiple biologics contract development manufacturing organizations (CDMO) based in the U.S. to increase the scale of antigen and Matrix-M adjuvant production, which are both components of the vaccine. The end goal is to produce 10 million doses for the DoD in 2020, which will then be used in either a Phase 2/3 trial or under an Emergency Use Authorization (EUA).Weighing in on this development for B.Riley FBR, five-star analyst Mayank Mamtani tells investors he’s “encouraged” by the grant, arguing that the U.S. military is a “key population subset of national security importance.”However, Mamtani believes the implications go even further. “We believe this development is in sharp contrast to 3/6 media report speculating NVAX being excluded from the list of five finalists chosen by the Trump administration via Operation Warp Speed (OWS). In fact, this development further strengthens our conviction in a sizeable funding to be secured from U.S. BARDA which has ~$4 billion leftover from the original $6.5 billion allocation under the CARES Act for COVID-19 vaccine development and manufacturing; AstraZeneca/Univ. of Oxford, Moderna, J&J and Merck have been the beneficiaries to date, which might have been potential alternatives considered for this DoD contract,” he explained.While some investors might see the need for U.S.-based CDMO to deliver on this contract as a cause for concern, Mamtani points out that NVAX has already secured capacity. The $388 million grant from the Coalition for Epidemic Preparedness Innovations (CEPI) should be enough to support it through the Phase 2b trial. The non-dilutive funding will instead go towards the Phase 3 NVX-CoV2373 clinical efficacy (outcomes) study and large-scale manufacturing activities. The analyst added, “Here, we think U.S. BARDA could likely commit to secure access for '2373 to be expanded in high-risk, frontline workers and/or elderly in an effort to allow for approval of a tried and tested recombinant protein-based vaccine.”With earlier availability of the candidate for stockpiling now likely, the deal is sealed for Mamtani. The analyst rates NVAX a Buy along with a $74 price target. (To watch Mamtani’s track record, click here)      In general, other analysts echo Mamtani’s sentiment. 5 Buys and 1 Hold add up to a Strong Buy consensus rating. Given the $50.83 average price target, the upside potential comes in at 13.5%. (See Novavax stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.


A Crash in the Dollar Is Coming

Mon, 06/08/2020 - 17:00

(Bloomberg Opinion) -- The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. At the same time, the world is having serious doubts about the once widely accepted presumption of American exceptionalism. Currencies set the equilibrium between these two forces — domestic economic fundamentals and foreign perceptions of a nation’s strength or weakness. The balance is shifting, and a crash in the dollar could well be in the offing.The seeds of this problem were sown by a profound shortfall in domestic U.S. savings that was glaringly apparent before the pandemic. In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, fell to 1.4% of national income. This was the lowest reading since late 2011 and one-fifth the average of 7% from 1960 to 2005.Lacking in domestic saving, and wanting to invest and grow, the U.S. has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982.Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point. The culprit: exploding government budget deficits. According to the bi-partisan Congressional Budget Office, the federal budget deficit is likely to soar to a peacetime record of 17.9% of gross domestic product in 2020 before hopefully receding to 9.8% in 2021.A significant portion of the fiscal support has initially been saved by fear-driven, unemployed U.S. workers. That tends to ameliorate some of the immediate pressures on overall national saving. However, monthly Treasury Department data show that the crisis-related expansion of the federal deficit has far outstripped the fear-driven surge in personal saving, with the April deficit 5.7 times the shortfall in the first quarter, or fully 50% larger than the April increment of personal saving.   In other words, intense downward pressure is now building on already sharply depressed domestic saving. Compared with the situation during the global financial crisis, when domestic saving was a net negative for the first time on record, averaging -1.8% of national income from the third quarter of 2008 to the second quarter of 2010, a much sharper drop into negative territory is now likely, possibly plunging into the unheard of -5% to -10% zone.             And that is where the dollar will come into play. For the moment, the greenback is strong, benefiting from typical safe-haven demand long evident during periods of crisis. Against a broad cross-section of U.S. trading partners, the dollar was up almost 7% over the January to April period in inflation-adjusted, trade-weighted terms to a level that stands fully 33% above its July 2011 low, Bank for International Settlements data show. (Preliminary data hint at a fractional slippage in early June.)But the coming collapse in saving points to a sharp widening of the current-account deficit, likely taking it well beyond the prior record of -6.3% of GDP that it reached in late 2005. Reserve currency or not, the dollar will not be spared under these circumstances. The key question is what will spark the decline?Look no further than the Trump administration. Protectionist trade policies, withdrawal from the architectural pillars of globalization such as the Paris Agreement on Climate, Trans-Pacific Partnership, World Health Organization and traditional Atlantic alliances, gross mismanagement of Covid-19 response, together with wrenching social turmoil not seen since the late 1960s, are all painfully visible manifestations of America’s sharply diminished global leadership. As the economic crisis starts to stabilize, hopefully later this year or in early 2021, that realization should hit home just as domestic saving plunges. The dollar could easily test its July 2011 lows, weakening by as much as 35% in broad trade-weighted, inflation-adjusted terms.The coming collapse in the dollar will have three key implications:  It will be inflationary — a welcome short-term buffer against deflation but, in conjunction with what is likely to be a weak post-Covid economic recovery, yet another reason to worry about an onset of stagflation — the tough combination of weak economic growth and rising inflation that wreaks havoc on financial markets.Moreover, to the extent a weaker dollar is symptomatic of an exploding current-account deficit, look for a sharp widening of America’s trade deficit.   Protectionist pressures on the largest piece of the country’s multilateral shortfall with 102 nations – namely the Chinese bilateral imbalance — will backfire and divert trade to other, higher-cost, producers,  effectively taxing beleaguered U.S. consumers.Finally, in the face of Washington’s poorly timed wish for financial decoupling from China, who will fund the saving deficit of a nation that has finally lost its exorbitant privilege? And what terms — namely interest rates — will that funding now require?Like Covid-19 and racial turmoil, the fall of the almighty dollar will cast global economic leadership of a saving-short U.S. economy in a very harsh light. Exorbitant privilege needs to be earned, not taken for granted.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Stephen Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of "Unbalanced: The Codependency of America and China."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Hedge Funds Are Dumping Spirit Airlines Incorporated (SAVE)

Mon, 06/08/2020 - 16:22

In this article we will check out the progression of hedge fund sentiment towards Spirit Airlines Incorporated (NYSE:SAVE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and […]


Is Immunomedics, Inc. (IMMU) Going to Burn These Hedge Funds?

Mon, 06/08/2020 - 16:15

In this article you are going to find out whether hedge funds think Immunomedics, Inc. (NASDAQ:IMMU) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among […]


Hedge Funds Cashing Out Of VMware, Inc. (VMW)

Mon, 06/08/2020 - 14:30

In this article we will check out the progression of hedge fund sentiment towards VMware, Inc. (NYSE:VMW) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 […]


Hedge Funds Have Never Been This Bullish On Annaly Capital Management, Inc. (NLY)

Mon, 06/08/2020 - 14:25

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial […]


Biden tax hikes would be stock-market headwind, analysts say

Mon, 06/08/2020 - 13:44

Joe Biden's tax hikes would be a 150-point hit to the S&P; 500 before taking into account secondary effects, analyst says.


 
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