Thursday
May082014
by 
Bishop Hill
Bishop Hill Investors shun UK energy market
May 8, 2014 Energy: grid Peter Atherton of Liberum Capital has been liveblogging Centrica's briefing for analysts this morning, and it is clear that all is not well in the UK energy sector (as if we needed reminding):
Centrica expects to continue to shift capital from UK to north America. Lower political risk cited as one of the reasons.
And a few days ago he was telling us about US investors' views on the UK market:
I asked NY investors to rank UK utility sector 1 to 10 for attractiveness. 1 being no way and 10 being unmissable. Average score today was 4.
In Boston, the average was 3.
How are you going to talk your way out of this Mr Davey?
Reader Comments (37)
Ed Davey is the single biggest cause of it, following on the heels of the Huhnatic, and backed by the pantomime cow double act Camoron with Clegg following him in the rear. Remove the CC from the DECC. Power the country forward with a Department of Energy. Driven by a need for low energy costs, and need for security of supply.
Nobody expects anything new...same old, same old. And its all in the best possible taste....NOT
Millibars deserve a mention.. His freeze on energy prices speech
Davey would take this as proof that the government should guarantee even bigger back-handers to the renewable energy sector. As DECC is a Lib-Dem (in)competence we are stuck with this for at least another year.
Anyone investing in wind or any other daft "green" fad at this moment is stupid and deserves to lose their investment.
I only wish I knew a way to make money from a falling share price because if I could find such a way I'd take out my life savings and make a killing as I watch the green-dinosaurs die.
Unfortunately, it won't be the big investors who lose out - it will be some twit, who's just got their retirement fund and believes the green drivel who will sink the lot into "green" investments only to learn that green really means "naive".
"I only wish I knew a way to make money from a falling share price"
Mike, it's called "short-selling".
Ed Davey will not understand what you write in the article. He is biased in the extreme besides having no idea of energy generation, engineering or the sciences. He merely takes what WWF, greenpeace and other activists say as gospel. Of course it is wrong for any such person to rule over anyone, let alone over 60m people. He is as unaccountable as the komissars of the EU.
The problem here is that all of the politicians are EXACTLY the same! From Milliband to Cameron, Clegg, Davey etc! They are exactly the same as each other!
So at the end of the day it really doesn't matter who you vote for, you will get the same politician regardless of which party they belong to.
That means your only real opportunity to vote in something different is UKIP, and the media spearheaded by the BBC is doing everything possible to deligitimise them.
By the way Fen, the huhnatic is very good! :)
Mailman
The problem here is that each of the major parties has a black mark against it in some shape or form. The Tories have twice enacted retrospective taxes, hence cannot be trusted not to do this again. The Lib-Dems are clearly barking mad but are fortunately about as popular as herpes right now. Labour deserves a dishonourable mention for the planned price freeze; explaining why this is a bad thing will be a slow, difficult task when faced with a politician as stupid as the Labour norm.
So, where does that leave us? UKIP? All the alternatives look equally dire, hence nobody with money to invest and a brain in their heads will bother with the UK market.
That is, Boston investors regarded the UK as worth 3/10, not investment in Boston (it seemed a little ambiguous at first reading).
Unfortunately, there are more than a few "green" people who don't think this matters. For many of them "investment" is a four letter word only used by rapacious capitalists.
steveta_uk: "I only wish I knew a way to make money from a falling share price"
Mike, it's called "short-selling"."
When I looked into it, it works by selling stock you don't have and then buying them back at the end of the month. Unfortunately, this just isn't profitable on a long term decline like renewables because each trade costs and the precentage fall isn't fast enough to make a profit (at least with the kind of money I can get).
What I really need to do is to sell "green" shares I don't hold to someone who will agree that I will supply the shares to them (at my own cost) in one or even five years time. There just isn't the mechanism to allow me to do that.
Mailman - no matter which way you vote, the government always gets in!
Jonathan Castle : the government always gets in!
I've always wanted to form a political party to stand on the manifesto that it would "ban political parties".
The problem is not that the government always gets in, but that politicians come from a narrow group of like-minded people so that we end up with the people we least want to run the country (celebrity soundbite, no idea of science, never seen a real job in their lives), running the country.
MikeHaseler:
There. Fixed it for you.MikeH
"a way to make money from a falling share price "
Try 'put options'.
In the choice between green and affordable energy green has had the upper hand since the 1980s. That period has been presided over by both a Labour and Coalition government. This is not a left/right/party issue. Any attribution of motive sounds like conspiracy ideation but the bottom line is that the inputs to the impact and risk analyses seem to have overestimated the dangers and underestimated the costs of precautionary action. Stern, IPCC and green lobby groups have to a lot to answer for. Some hard questions will be asked when the lights start to go out.
Those who know have warning of an impending energy gap for a while now. Business is recognising this. Business needs to fix it but the politicians are unable to back out the regulation and market manipulation that have been put in place without a loss of face. The three main parties can't afford this running up to the 2015 election.
It's all a pretty gloomy prospect.
"Investment" is the left leaner's word for subsidy.
A company that supplies and services industrial generators was advertising on the radio yesterday. That would seem to be the business to be investing in.
"a way to make money from a falling share price "
Buy premium bonds and cross your fingers.
Its got to come down to power cuts.
Big ones.
Long ones.
Over Christmas ought to do it...
Barry Woods on May 8, 2014 at 10:27 AM
"Millibars deserve a mention.. His freeze on energy prices speech'
And not to mention his 2008 Climate Change Act!
Yes, the climate is not getting a warmer, but it's a bit of a cheat to pass this act, half way through the current pause in temperature. If only the CO2 concentrations had been falling it would have made some good spin.
How can anyone believe that the author of that act gets a chance to become PM?
I am sure I read somewhere that the Climate Change act was written by a WWF activist researcher and then adopted lock stock and barrel by Milli-brain.
The Labour Party seem to have done a massive job on Milliband's appearance in order to make him seem electable and I am sure brain transplants will soon be available so they can finish the job.
Re: "I only wish I knew a way to make money from a falling share price" Mike, it's called "short-selling".
Short selling is only good for a few years ahead, you can't realistically buy a 10 year option.
You need to invest in something that goes up when green shares go down. For example shares in insurance companies (less extreme weather than expected), landfill sites (less regulation), or nuclear power generators (less competition from renewables). Think creatively and try to pick something that's not too obvious yet.
He won't have to talk his way out of it. The active fault for this lies with the LibDems and with Miliband's freeze promise (the Tories having been only marginally worse than useless).
Consequently the media, dominated by the BBC state propagandist, simply won't report it.
Unfortunately, there are more than a few "green" people who don't think this matters. For many of them "investment" is a four letter word only used by rapacious capitalists.
May 8, 2014 at 11:33 AM | Unregistered Commentermichael hart
Michael, it is absolutely certain that greenpiss et al are investing heavily. Most of it in readiness for a CO² tax but I'm sure you are right when you say that they are not investing in wind/solar/useless tech.
Its got to come down to power cuts.
Big ones.
Long ones.
Over Christmas ought to do it...
May 8, 2014 at 12:58 PM | Unregistered Commentersherlock1
They are coming. Right across europe starting in the UK next year, followed by Germany (minor problem for a while) followed by france (closure of half of our nuclear.
@Dung - The Labour Party seem to have done a massive job on Milliband's appearance in order to make him seem electable.
I'm sorry but every time I see the man I can't help thinking that he was the role model for Goober in the Muppets.
Initially I would have suggested arbitrage between American and Canadian grain prices or other agricultural products.
Unfortunately, agriculture has traditionally also been a highly government-distorted market. So climate may not be the most important factor in determining prices in the medium/long term. And there is no sign yet that increased population is outstripping long-term production growth.
(My heart isn't bleeding for the unreconstructed Malthusians yet.)
May 8, 2014 at 3:59 PM | Unregistered Commenter Yertizz
In the 1980s and 90s a political, satirical puppet show was very popular and it was called "Spitting Image" and it was very funny ^.^
At some point they ran a serial called "The Search for President Reagan's Brain" (it was not known at the time that he was suffering from Altzheimer's :(
I consider that Milli-brain would be a good subject for a revival!
To add to the negatives for would-be investors, Platts is carrying a report that the EU is highly likely to rule that EdF's funding arrangements for Hinckley are illegal.
If correct, the flagship of Davey's energy schemes will be another Mary Rose.
Dung:
The FoE researcher is now the worthless Baroness Bryony Worthington.
http://en.wikipedia.org/wiki/Bryony_Worthington,_Baroness_Worthington
From the Ecclesiastical Uncle, an old retired bureaucrat in a field only remotely related to climate with minimal qualifications and only half a mind.
I guess that during the next few months chickens may come home to roost. We have a winter followed by an election, so the consequences of past policy should be fresh in voters minds when the ballots are cast. Also in the nearer future, the coalition will come under increasing strain as its components seek to establish independent identities for the election campaign.
First things first. As the election draws close, the government may not find it as difficult to jettison Davey and his ilk as has hitherto been the case. So maybe there will be changes and policy will be rationalized. Maybe. In which case Atherton's investments may become worthwhile,
Even if that happens, the consequences of policy to date will dominate in the following winter, which is, of course, the one before the election. Any Atherton type investment is now too late to effect this winter's power supply and is therefore not of immediate political interest. And the consequences of policy to date will be either (1) blackouts, or (2) very high electricity supply costs which will have to be paid from debt or taxes, or by consumers.
So which consequence will we have to live with? If I am right, I recall a learned and scholarly article - you know - the sort of stuff that appears in the Spectator or the Economist - that was, some time back, reproduced or linked to in Bishop Hill. This assured us, after a nit picking review of energy supply and consumption, that there will be no blackouts but that the lights will be kept on by very expensive electricity.
Which may be a pity. Because blackouts would make existing policy and the responsible government very vulnerable to attack.
So we will most likely find ourselves snug and well lit and wondering how to attack the government for over-spending in order to keep us so. This, I fear, will hardly be riveting, being the stuff of which day-to-day politics is made without usually resulting in anything more significant than political double unspeak.
So how will government go about defending itself? Well, I doubt it will charge all the extra costs to consumers - that would make total costs and the cost to the individual consumer too easy to identify and expose, both provoking an attack on the government and providing the attack forces with powerful weapons.
No. Consumers will not have to pay extra! Has it not already been announced in Parliament that extra costs could be paid from taxes? This is a no-brainer for the government: totals involved can easily be concealed and minimized and the poor and middle class majority can be told that the rich will pay most of what is required. And anyway, if Davey is already gone it was all his and the Lib's fault. It will be an uphill battle, mounting an attack against these defences. Yawn! Yawn!
And then a devious government could charge it to capital - increase the national debt. And then no one has to pay - that is left to our children. And why not? After all, it is their life, free of dangers from man-made global warming, that will be made possible by recent energy policies. And paid for that way, the extra costs become investment into the country's future and making such investments is what good governments do. How can such virtue be attacked?
So what will the two bits of the coalition be thinking? The scenario they contemplate will, I guess, look something like the speculations I have set forth above, albeit possibly more devious and complex. However, immediate investments will not be important except if they are for supply options that can be brought on-line very quickly - like the hugely expensive diesel generators that were, I recall, said to be the means of keeping the lights on in the article I refer to above.
No. The Conservative side, which can still persuade itself it has a chance in the election, will not be so alarmed by the situation. The range of obfuscations and subterfuges available will give it much comfort. They will be quite happy to role out a set of excuses such as is postulated above. Yawn! Yawn! They will want investment in energy, of course, for the long term, but it will not be of immediate importance. So they will probably be happy to put off the rift with the Libs that such investment would cause and the matter will stay in the in-tray until the election is out of the way.
In the up-coming situation, the Lib side of the coalition will know they have little influence and so will be free of need to strategize in any realistic fashion. Their posturing will be designed to preserve their virtues in the eyes of committed greens and will exclude any examination of the merits of the green case - any such exam being a sin against the religion. Not that the LibDems are as stupid as such thinking makes them look. Clegg, I believe, is an ex-Eurocrat of some sort and is therefore able and well practiced in the darker political arts. Davey has a PPE degree and that almost certainly means he is bright. Their current problem is that at some point in the past they made a decision to adopt the green cause, probably in the belief, correct at the time, that it looked virtuous and really meant very little. And now that the green cause turns out to have grave consequences, it would be disastrous to abandon it since it would alienate the only support they have without attracting any new constituency. So they will continue, maybe in vain, to promote renewable energy without regard to the country's well being or to the discouragement that it causes to investors in energy.
So the chickens will probably go AWOL.
And I doubt Davey will see that the Bishop's challenge - to talk his way out the situation - is worth addressing. It has no significance in respect of the big upcoming political event - the election. And nobody in the political world is going to say he is wrong about that!
Short sighted, politics? No! (Sarc)
""Investment" is the left leaner's word for subsidy."
Exactly, when Lefties use "Investment" it's invariably just a smart way of saying spending that appeals to & feeds their allusions of understanding 'business' while being equaly innariably with other peoples money.
Real business people view investment in terms of cost & returns, whereas Lefties just see it as more on the never never.
As an observer from the Antipodes (roughly), it appears to me that as regards leadership, Brits have learnt nothing since WWI. Still lions led by donkeys!
Invest in the manufacturer of DEFRA approved "smokeless" wood/multifuel burners there are lots of blocked up chimneys in the UK just waiting to be re-opened. Also invest in forests?
Re: "I only wish I knew a way to make money from a falling share price" Mike, it's called "short-selling".
Short selling is only good for a few years ahead, you can't realistically buy a 10 year option.
You need to invest in something that goes up when green shares go down. For example shares in insurance companies (less extreme weather than expected), landfill sites (less regulation), or nuclear power generators (less competition from renewables). Think creatively and try to pick something that's not too obvious yet.
I disagree, options can be sold over and over again provided the the strike price criteria isn't met. If your bet is better than the buyers bet. Even if it is, then presumably you've made a profit on the actual sale especially selling options on shares you already own. Options are highly leveraged though, bit of an all or nothing deal, so a run of losses can work out bad. I'm looking at them for earning something off stock I already own, since I already hold the shares and I set the strike price, and the only risk is I make less than I could have if I had sold them myself.
Still I'm not sure I'd buy a losing stock just to sell options off of them :-)