David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Volkswagen Cuts EV Output at German Sites as Demand Craters

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The appetite for EVs in Europe has been held back in recent months by higher energy, living and borrowing costs, as well as lingering consumer concerns about charging infrastructure and battery range. The German government’s decision to end subsidies for electric cars in company fleets this month led to a 171% increase in new EV registrations in August compared to the previous year, according to Germany’s VDA auto lobby. 

    Against that backdrop, Germany has led a months-long crusade to extend the use of internal combustion engines under the European Union’s climate plans through the use of so-called e-fuels.

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    Evergrande Liquidation Risk Rises After Creditor Meet Scrapped

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    China Evergrande Group is running out of time to get what would be one of the nation’s biggest-ever restructurings back on track, after setbacks in recent days that raise the risk of liquidation.

    The string of surprise developments include scrapping key creditor meetings at the last minute, saying it must revisit its restructuring plan, detention of money management unit staff and an inability to meet regulator qualifications to issue new bonds.

    That last item is a major setback to its planned restructuring of at least $30 billion of offshore debt that would have creditors swap defaulted notes for new securities. Evergrande’s shares plunged as much as 25% Monday.

    At the epicenter of China’s property crisis, Evergrande is under pressure to finalize a blueprint for its offshore debt restructuring as it grapples with an even bigger pile of total liabilities that amount to 2.39 trillion yuan ($327 billion)—among the biggest of any property firm in the world. The clock is ticking. The company faces an Oct. 30 hearing at a Hong Kong court on a winding-up petition, which could potentially force it into liquidation.  

    The distressed real estate giant said late Sunday it couldn’t satisfy requirements of the China Securities Regulatory Commission and the National Development and Reform Commission to issue new notes. It cited an investigation of subsidiary Hengda Real Estate Group Co., without elaborating. The unit said in August that CSRC had built a case against it relating to suspected information disclosure violations.

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    A Wave of Zombies Is Rising From Private Equity's Slow Carnage

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Sticky bets can create dilemmas. Pensions and endowments can’t force private equity managers to sell. They can’t pull money from a fund without typically paying a price. Nor can they replace a manager unless there's evidence of wrongdoing. That means zombie funds can go on for years, sucking up pension managers' time and eroding returns.

    Reports from 10 major public retirement systems show that they have a median 4% of their private equity portfolios locked up in funds older than 2009. Collectively, that’s $6.8 billion across more than 900 fund investments, some of which date back to the 1990s. Several funds were so troubled that they were delivering losses.

    “Fund lives are going much, much longer,” Miller said. And with asset sales now more difficult, many managers face the same questions: “What, when and how are they going to exit?”

    That’s an inconvenient counterpoint to private equity’s pitch that it can reliably take cash from teachers, police, firefighters and other civil servants and hand it back with significant returns a decade later.

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    Honeywell and ESS Tech, Inc. Collaborate to Accelerate Commercial Deployment of Iron Flow Battery Energy Storage Systems

    This press release may be of interest to subscribers. Here is a section:

    Honeywell (Nasdaq: HON) today announced a strategic collaboration with ESS Tech, Inc. (ESS) (NYSE: GWH) to advance technology development and market adoption of iron flow battery (IFB) energy storage systems. Honeywell has made an investment in ESS as part of this collaboration.

    The relationship builds upon each company’s development of energy storage systems, and brings together ESS’ market-leading, patented IFB design with Honeywell’s advanced materials and energy systems expertise.

    “The demand for long-duration energy storage represents a compelling market opportunity within the energy transition and the combination of Honeywell and ESS technology can accelerate decarbonization for the commercial, industrial and utility sectors,” said Bryan Glover, chief growth officer, Honeywell Performance Materials and Technology (PMT) group. “Our strategic collaboration with ESS will accelerate Honeywell’s ability to bring comprehensive solutions to our customers while working to advance long-duration energy storage across all industries requiring expansive energy storage.”

    “Today, we are creating superior technology in the critical long-duration energy storage industry,” said Eric Dresselhuys, CEO of ESS. “Combining ESS’ innovative technology and deployment experience with Honeywell’s storage and control system expertise will enable us to drive the clean energy transition and deliver value to our customers, shareholders and communities.”

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    No Bazooka, Many Pistols - Stimulus Lifts 2% GDP

    This is compelling headline from Chan Shu, formerly a senior economist at the Bank of International Settlements which helps to emphasise the new Chinese approach to stimulus. Here is a section:

    What’s missing? The government hasn’t so far set out a clear plan to defuse mounting debt risks. Also, a lack of direct support targeting vulnerable households and businesses may make it harder to restore confidence.

    A statement from the July meeting of the Communist Party’s Politburo indicated the top leadership recognized the importance of “formulating and implementing plans to resolve local debt.” But the steps taken so far — such as a debt swap of 1 trillion yuan for local government financing vehicles — pale in comparison to the size of the problem.
    A reduction in tax burdens for households – higher deductions for expenditure on childcare and education — is a positive move but probably too modest to have a material impact on growth. Broader and bolder support measures are required to revive confidence.

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    Russia Halts Diesel Loadings at Ports Following Export Ban

    This article from Bloomberg may be of interest. Here is a section:

    Russia’s decision to ban exports of all types of diesel is adding to pressure in an already tight global market. The lifting of the ban, which came into force on Sept. 21, will depend on how quickly supplies are replenished in the domestic market, according to First Deputy Prime Minister Pavel Sorokin.

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    Saudis Didn't Secure Tesla, Will They Keep Funding Rival Lucid?

    This note from Bloomberg may be of interest. Here it is in full:

    Lucid's liquidity clock was wound until late 2024 with its $3 billion stock sale in June, yet further large injections, perhaps as soon as late 2024, could help stem the cash burn while the company scales operations. Stiff competition in the luxury-end of the auto industry from peers like Mercedes, Tesla, Audi and BMW, and the potential for an economic downturn, add substantial risk to Lucid's journey toward profitability. A takeover by the Kingdom of Saudi Arabia (60% stake in Lucid via the Public Investment Fund) is possible, yet the timing is questionable relative to the company's convertible bonds' 2026 maturity. The potential of such an action makes our view of event risk favorable -- and a consideration given the country's Vision 2030 plan - but it does make the bonds more of a lottery ticket than well-defined credit.

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    November Chart Seminar Interest

    I am considering holding a Chart Seminar in London in November. Please contact Sarah at [email protected] to register your interest.