LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
People walk along the beach on the Suffolk coast as the Sizewell B nuclear power station can be seen on the horizon, near Southwold, Britain, January 31, 2019. REUTERS/Russell Boyce Acquire Licensing Rights
LONDON, Sept 18 (Reuters) – Britain on Monday opened the search for private investment in the Sizewell C nuclear project, inviting potential investors to register their interest.
The building of the plant by French energy giant EDF in southeast England, capable of producing around 3.2 gigawatts of electricity or enough to power around 6 million homes, was approved in July 2022.
“The government, the Sizewell C Company and EDF, the project’s lead developer, are looking for companies with substantial experience in the delivery of major infrastructure projects,” a statement from the Department for Energy Security and Net Zero said.
The British government announced last year that it would support Sizewell C with around 700 million pounds ($895 million) while taking a 50% stake during its development phase.
“The launch of the formal equity raise opens another exciting phase for the project, following a positive response from investors during market testing,” said Sizewell C Company Joint Managing Director, Julia Pyke.
Reporting by Kylie MacLellan, writing by William James
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SYDNEY, July 28 (Reuters) – The Australian state of Victoria will ban natural gas connections to new homes from next year as part of a plan to cut emissions and lower energy bills, the state climate action minister said on Friday.
Australia’s second-most populous state is the country’s largest consumer of natural gas with around 80% of homes connected but also has ambitious plans to reach net zero emissions by 2045, five years ahead of the federal government.
Minister for Climate Action Lily D’Ambrosio said on Friday that new homes requiring planning permits must connect to all-electric networks. The gas sector contributes 17% of the state’s emissions.
“Reducing our reliance on gas is critical to meeting our ambitious emission reduction target of net zero by 2045 and getting more Victorians on more efficient electric appliances which will save them money on their bills,” D’Ambrosio said in a statement.
The changes will apply to all new public buildings yet to reach the design stage, including housing, schools, and hospitals.
Victoria also launched several grant and training programmes to support electrification, including a A$10 million ($6.7 million) programme to lower prices for solar equipment and heat pumps and a A$3 million package to train tradespeople on new equipment.
The plan comes as southeastern Australia faces potential gas shortages from mid-decade as output falls from the offshore fields, operated by Exxon Mobil Corp (XOM.N), that have long supplied the region.
Rewiring Australia, a non-profit which advocates for electrification, backed the move and said “electrification is the fastest and most cost-effective way to shave thousands of dollars a year from energy bills and lower our emissions.”
Australia last month finalised a package of rules for the domestic gas market including a cap on wholesale prices that was first introduced in December.
($1 = 1.4932 Australian dollars)
Reporting by Lewis Jackson; Editing by Stephen Coates
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June 12 (Reuters) – Duke Energy Corp (DUK.N) said on Monday it has agreed to sell its unregulated utility scale Commercial Renewables business to Brookfield Renewable (BEP.N), (BEPC.N)
in a deal valued at about $2.8 billion.
Duke said it expects net proceeds of about $1.1 billion from the sale, which the company will use to help incorporate more than 30,000 megawatts of regulated renewable energy into its system by 2035.
The proceeds are also expected to help strengthen its balance sheet, avoid additional debt and improve grid reliability.
The deal comes at a time when electric utilities in the United States are largely shifting away from fossil fuels toward cleaner energy sources, including solar and wind, to meet climate goals.
Charlotte, North Carolina-based Duke is planning to spend $65 billion over the next five years, most of it directed toward its transition to low-carbon energy sources, the company’s CFO told Reuters last week.
Duke aims to reduce carbon emissions by more than 50% by 2030 and plans to retire all of its coal plants by 2035. Its goal is to achieve net-zero carbon emissions by 2050.
The sale agreement with renewable power assets operator Brookfield Renewable includes more than 3,400 megawatts of utility-scale solar, wind and battery storage across the United States, along with operations, new project development and current projects under construction, Duke said on Monday.
The deal is expected to close by the end of 2023, Duke said. Morgan Stanley & Co LLC and Wells Fargo Securities LLC are Duke’s financial advisers, with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel.
Duke, which initiated the sale process for the commercial renewables unit in November, reported a smaller-than-expected first-quarter profit last month, hurt by unfavorable weather, lower volumes and higher interest expenses.
Reporting by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri and Pooja Desai
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DUBAI, April 18 (Reuters) – Dubai-based real estate developer DAMAC on Tuesday sold a three-year $400 million Islamic bond, or sukuk, less than initially expected, with a yield of 7.75%, a bank document showed.
The issue followed a series of investor calls and meetings that kicked off last week for a benchmark-sized sale, understood to be at least $500 million.
The company, rated BB- by S&P, priced tighter than guidance of around 7.875% released earlier as order books hit over $1.15 billion, a document from a mandated bank showed.
DAMAC’s projects are targeted at the higher-end of the market as the company seeks to take advantage of a property boom in Dubai amid a strong economic recovery after the COVID-19 pandemic.
The company delisted from the Dubai stock market last year after submitting a request to do so in 2021 as the impact of the pandemic weighed on profitability of real estate firms.
Gulf issuers have rushed back to debt capital markets during a typically slow period during the Muslim fasting month of Ramadan, seeking an opportunity to capitalise on lower yields and favourable market dynamics.
Investor demand for sukuk and sustainability-linked, or green, bonds has also spurred new issues.
On Monday, Abu Dhabi National Energy Company (TAQA) raised $1.5 billion from a two tranche deal, including a $1 billion 10-year green bond.
While many issues have been sovereign, or state-linked, DAMAC was a test for appetite for a corporate debt issue in the private sector.
Deutsche Bank, Emirates NBD Capital and J.P. Morgan were mandated global coordinators and bookrunners, and UAE lenders Abu Dhabi Commercial Bank, Dubai Islamic Bank and Mashreq also acted as joint bookrunners on the deal.
Reporting by Rachna Uppal; editing by Andrew Heavens
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PARIS, April 13 – Energy-poor Japan is waging an uphill battle for more investment into natural gas exploration and production among Group of Seven (G7) climate and energy ministers, according to a French ministry official.
This weekend’s G7 ministerial meeting in Sapporo, Japan, is meant to coordinate efforts to address climate change – which are under pressure from energy security concerns after Moscow slashed gas deliveries to Europe last year, causing global supply squeezes and price spikes.
“We understand their (Japan’s) energy reasons, but it’s a request we are combatting in the context of the G7 communique,” the French official said. “There is very strong unity among the other G7 members to avoid any and all language favorable to fossil fuels and gas exploration in these negotiations.”
The Japanese embassy in Paris did not immediately respond to an emailed request for comment.
An initial draft communique proposed by Tokyo had said “demand for (Liquefied Natural Gas) will continue to grow” and called for “necessary upstream investments in LNG and natural gas”, according to a document seen by Reuters.
A subsequent revision, also seen by Reuters, toned down that language, saying global energy supply gaps needed to be bridged “in a manner consistent with our climate objectives and commitments”.
The International Energy Agency, whose director will attend the ministerial meeting, has said reaching the Paris Climate Agreement goal to limit global warming to 1.5 degrees Celsius by 2050 means no new investments in fossil fuel projects.
The French official said the U.S. was generally aligned with European G7 members’ “hostile” stance against language on new upstream gas investments, while Canada was more measured and slightly supportive of the Japanese presidency’s proposal.
France is pushing for more ambitious language “to completely exit fossil fuels” following last year’s commitment to work towards exiting coal use, the official added, with the goal of establishing written commitments in a final draft expected on Sunday that can be taken up by the Group of Twenty countries and at the COP28 climate conference later this year.
Japan still burns plenty of coal and has said it plans to rely on imported natural gas for at least 10 to 15 years — though it will be holding a seminar on the decarbonisation benefits of nuclear power at this weekend’s ministerial meeting, which the French official said would provide an opportunity for “nuclear cooperation discussions, including concrete talks for France to accompany the relaunch of nuclear energy in Japan.”
One possible chink in the armour of European G7 unity: Germany will this weekend be powering down its last three nuclear reactors, creating a power supply gap to be filled by mostly coal and gas.
“It goes without saying that powering up fossil energy to compensate for the exit of nuclear does not go in the direction of the climate action we are collectively supporting,” the French official said. “Negotiations are ongoing, but difficult.”
Reporting by American Hernandez
Editing by Richard Lough and Mark Potter
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SYDNEY, March 28 (Reuters) – Brookfield Asset Management (BAM.TO) will spend about $13.3 billion over the next decade to replace Origin Energy’s (ORG.AX) Australian power generation infrastructure with new-build renewables and storage facilities, a senior executive said on Tuesday.
Origin Energy on Monday agreed to a A$15.35 billion ($10.21 billion) takeover offer from a consortium led by Canada’s Brookfield, nearing the conclusion of one of the country’s biggest private equity-backed buyouts.
Australia’s No. 2 power producer has been looking to speed up its transition to cleaner energy, accelerating the planned shutdown of the country’s biggest coal-fired power plant and selling its gas exploration assets.
“Our plan is to invest a further A$20 billion of capital to fully replace its power generation and its power purchases with green power that meets all of its customers requirements, and we propose to do that over a 10-year period well in advance of the 2050 goal,” Brookfield Asia Pacific CEO Stewart Upson told Reuters in an interview, referring to a target for net-zero direct and indirect emissions by 2050.
The Canadian firm enlisted Singaporean funds GIC and Temasek [RIC:RIC:TEM.UL] as co-investors in its bid, while MidOcean Energy will gain control of Origin’s 27.5% stake in Australia Pacific LNG (APLNG).
Upson said Brookfield currently has about $60 billion invested in Australia, but the Origin deal would represent a “step change”.
Argo Investments (ARG.AX) Senior Investment Officer Andy Forster said his firm, the ninth-biggest investor in Origin, was positive about the deal, even though it might take time to gain regulatory approvals from the Foreign Investment Review Board and the competition regulator.
“Brookfield seems very committed to making the deal happen,” he added.
Shares were trading 1% higher at A$8.255 on Tuesday morning, below the implied cash-and-scrip offer price of A$8.91 a share, as the deal is not expected to be finalised until early 2024.
The Brookfield-led consortium trimmed its offer for Origin by 1% last month after a government move to cap gas prices hit valuations in the sector.
“We had to take our time to assess all the different developments and make sure that we are comfortable it didn’t have an impact,” Upson said.
Banking industry volatility also slowed the deal, but the financing was fully committed and was not affected, he added.
($1 = 1.5031 Australian dollars)
Reporting by Praveen Menon and Scott Murdoch; Editing by Jamie Freed
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MUMBAI, Feb 14 (Reuters) – Two large companies within India’s embattled Adani Group are likely to repay their short-term commercial paper (CP) debt as they come due over the next few months, instead of rolling them over as is normal, two merchant bankers and a company official directly familiar with the matter said.
The two group companies have about 50 billion rupees ($605 million) worth of CP due to mature through March, data shows, while exchange data shows the flagship Adani Enterprises Ltd (ADEL.NS) has redeemed a total of 2.5 billion rupees of CP since Jan. 25.
That is a day after U.S. short-seller Hindenburg Research accused the group of improper use of offshore tax havens and stock manipulation – allegations the group has denied – that sparked about a $120 billion loss in the group’s market value on concerns including about its ability to refinance debt.
Adani Enterprises and Adani Ports and Special Economic Zone Ltd (APSE.NS) regularly raise funds by issuing CPs – short-term debt instruments issued to meet working capital requirements.
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“We will repay the CPs as and when they mature and are currently not looking to tap the short-term debt market,” an official with one of the companies said on condition of anonymity as they are not authorised to speak to the media.
The official said payments are being made as the securities mature and the company has not got any requests for early redemptions.
“All payments are being made as per schedule,” an Adani group spokesperson said in an e-mail, but did not respond to queries on whether investors are seeking early redemption.
Adani Ports has CPs worth 35 billion rupees due to mature through end March, data from information service provider Prime Database showed.
Adani Enterprises has CP worth close to 15 billion rupees due to mature over February-March and more than 2 billion rupees worth due for redemption from April through January 2024, the data showed.
The Adani Group is unlikely to roll over this debt as it comes due, two bankers said on condition of anonymity as they are not permitted to speak to the media.
“Market sentiment is such that people will be cautious to immediately roll over CPs, and would prefer to cash out. So, we may see them (Adani Group) staying away from the market for some time,” said one banker, who regularly arranges debt issuances for the group.
A second banker, who advises the conglomerate on local borrowings, added the group has not reached out to its bankers asking for a rollover.
“The Adani group generally gets in touch with bankers some days prior to the maturing CPs but has stopped any sort of intimation, hinting that they may look to repay the existing CP holders,” this person said.
Apart from short-term borrowings, Adani Enterprises has not moved forward with plans to launch its debut retail bond issue of up to 10 billion rupees, while Adani Green Energy Ltd (ADNA.NS) has also stayed put on a planned 1.5-billion rupee, 10-year bond offering, according to bankers, including the two mentioned earlier.
“There’s been no communication from the companies on previously proposed bond issuances,” said a merchant banker with a brokerage firm and directly involved in the arrangement.
The Adani Group spokesperson denied media reports that these bond issues have been scrapped, saying this is “speculation” and “not true” in a reply to Reuters’ mail.
($1 = 82.6390 Indian rupees)
Reporting by Bhakti Tambe; Editing by Savio D’Souza
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Feb 13 (Reuters) – Freeport LNG sought permission from federal regulators on Monday to restart commercial operations at its long-idled liquefied natural gas (LNG) export plant in Texas, a move that could soon provide the world with another much needed source of the super-cooled fuel.
The amount of gas flowing from U.S. pipelines to Freeport jumped on Monday to its highest since the facility was shut by a fire in June 2022 after the company restarted one of the plant’s three liquefaction trains, which turn gas into LNG for export.
But energy regulators and analysts have said they do not expect Freeport, the second-biggest U.S. LNG export plant, to return to full commercial operations for months.
In a filing with the U.S. Federal Energy Regulatory Commission (FERC) on Monday, Freeport asked for permission to put what it called Phase 1 of its restart plan into commercial operation.
Phase 1 includes the full restart of the plant’s three liquefaction trains, two storage tanks and one LNG loading dock.
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Freeport said it would appreciate an answer from FERC on Monday “if at all possible,” as it was ready to restart liquefaction Train 2 now and expects to be ready to restart Train 1 in the next few weeks.
Gas flows to the plant were on track to reach 0.5 billion cubic feet per day (bcfd) on Monday, according to data provider Refinitiv, up from an average of 43 million cubic feet per day since federal regulators approved Freeport’s plan to start cooling parts of the plant on Jan. 26.
That is still only a fraction of the 2.1 bcfd of gas Freeport can turn into LNG when operating at full power. One billion cubic feet of gas is enough to supply about 5 million U.S. homes for a day.
Despite the increase in feedgas flows to Freeport, U.S. gas futures fell about 5% on Monday, putting the contract on track to close at a 25-month low.
That is because the gas market was more focused on a decline in domestic demand for the fuel for heating with the weather expected to remain mostly warmer than normal for the rest of February.
FULL OPERATIONS STILL MONTHS AWAY
On Saturday, Texas residents grilled U.S. energy regulators over their supervision of Freeport and other LNG plants.
Bryan Lethcoe, a regional director at the U.S. Pipeline Hazardous Materials Safety Administration (PHMSA), said it would take “a number of months” for Freeport to return to full operation.
That is similar to the “mid-March or later” timeframe many energy analysts have projected for Freeport’s full return.
Officials at Freeport had no comment.
A couple of Freeport’s customers – Japan’s JERA (9501.T), (9502.T) and Osaka Gas (9532.T) – have said they do not expect to get LNG from the plant until after March.
Freeport’s other big buyers include units of BP PLC (BP.L), TotalEnergies (TTEF.PA) and SK E&S.
BP’s Kmarin Diamond was the first vessel to pick up LNG at Freeport since the plant shut.
The tanker, which has already left the facility and is on its way to the Suez Canal in Egypt, picked up LNG to create space in Freeport’s storage tanks for new LNG expected to be produced.
There is already another vessel at the plant – Prism Agility – operated by South Korea’s SK E&S, according to Refinitiv and other ship tracking data.
Reporting by Scott DiSavino; Additional reporting by Deep Vakil in Bengaluru; Editing by Marguerita Choy and Paul Simao
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MANILA, Feb 10 (Reuters) – Citicore Renewable Energy Corp, one of the Philippines’ biggest solar power producers, is planning to go public this year to fund a $4 billion investment in new solar projects over the next five years, its CEO said on Friday.
“For a country such as ours with limited oil and coal but have abundant sun, wind and water, it is imperative we deploy capital investment into renewable energy,” Citicore President and CEO Oliver Tan told reporters.
Citicore will file documents for an initial public offering in the second quarter and complete its listing within the year, Tan said, adding it will be large enough to attract foreign investors for an international tranche.
Fresh capital from the listing will allow Citicore, which has an installed capacity of 241 megawatts via solar panels, to invest $800 million this year to increase output to 1 gigawatt (GW), and around $4 billion to reach 5 GW within five years, Tan said.
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The Philippines, an archipelagic country among the most vulnerable to climate change, aims to increase renewables in its power mix to 35% by 2030, from 21% in 2020, and to 50% by 2040. Coal accounted for nearly 60% in 2020.
Citicore is also pursuing seven offshore wind projects with a total capacity of 3 GW.
Citicore is the parent firm of Citicore Energy REIT Corp (CREIT.PS) and is a sister company of Megawide Construction Corp (MWIDE.PS).
Citicore REIT on Friday listed its maiden ASEAN Green Bond in the Philippines’ fixed income trading platform. It raised 4.5 billion pesos ($82.6 million) from its bond sale to fund acquisition of land for its renewable energy portfolio.
($1 = 54.50 Philippine pesos)
Reporting by Neil Jerome Morales
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