King coal heads West
The Swiss-based mining and commodity trader Glencore has never disguised its continued interest in coal, which has proved a great money spinner. Former chief executive Ivan Glasenberg argued it was far better that Glencore, with better extraction standards, was responsible for depleting dirty-fuel assets than to follow the Anglo-American example of spinning them out to another, less-monitored entity.
Successor Gary Nagle has gone one better by spending £5.7bn on buying 77pc of Canada-based Teck Resources’ metallurgical coal assets.
Someone in the world needs to make virgin steel, which is why Japan’s Nippon Steel is hanging onto to a 20pc stake.
Some chrome and other assets, which utilise coal, will be thrown into the mix.
The aim is to spin off the coal enterprise within two years to existing investors, leaving Glencore as a cleaner copper and metals entity with a vibrant trading arm.
Glencore-Teck coal will be listed in New York with secondary listings in Toronto and Johannesburg.
London was considered for the main float, but in the end Nagle and Glencore’s advisers considered that the US was a far better bet. New York, with its far deeper liquidity and a less hostile attitude towards investment in fossil fuels – as signified by the recent big oil deals from exxon and Chevron – looked the more advantageous location for an entity, which could be valued at upwards of £17bn.
The war in Ukraine provided a sharp reminder that as the West is in transition from fossil fuels to low carbon alternatives, energy security is paramount. In making the toughest steels, there currently is no serious alternative to blast furnaces.
hydrogen and electric arc furnaces (of the kind planned for Scunthorpe and Port Talbot) do not cut the mustard.
Rishi Sunak signalled in his Manchester conference speech that he wanted to slow down the rush to net zero. his intervention is too late for new London listings.
Tax returns
INVESTORS in Fundsmith have good reason to be grateful to Terry Smith, the founder and brain behind the enterprise.
But when his earnings drop, as they did in the 12 months to March 2023, it means performance has stumbled.
Still, if you are Smith and collecting £31.1m in pay, plus an estimated £113m in partnership fees in a tax haven, life isn’t too bad.
his forensic approach to investment has paid off over the years, delivering more than 500pc to those who have been with him since 2010. Surging interest rates, making bond and old fashioned savings accounts more attractive, together with the Ukraine war led to outflows and negative returns. But he is back in positive territory this year.
No one should begrudge Smith his pay or wealth, which Bloomberg estimated at £1bn. What is more jarring is that so many of the UK’s billionaires escape to tax havens – Smith is in Mauritius – whereas pay-asyou-earn Brits are being pushed into ever higher tax brackets by the freeze on thresholds. A more tax-friendly regime for Britain’s exiled wealthy could unlock far more riches than punishing non-doms.
Lines open
The odds on a successful approach for BT by its biggest investor Patrick Drahi of Altice and/or Deutsche Telecom may be improving. BT reports that the funding deficit in its pension fund, one of the nation’s largest, has shrunk to £3.7bn, down from £8bn in 2020. The buyout cost, in the case of a takeover, would be considerably higher.
Under current plans, BT will continue to pay £600m from income into the pension scheme until 2030 in addition to £180m under a separate asset-backed arrangement. That would see the deficit cleared.
Potential predators will note the Government’s intention to water down the twoyear-old National Security and Investments Act. An earlier ruling offered a clearer pathway to a BT deal, noting that there appeared to be no danger to national security.
That wouldn’t rule out a hectic campaign to keep BT British among MPs, trades unions and some shareholders.
Any would-be buyers would at the very least be obliged to have plans to make good the remaining pension fund shortfall from the outset. They would also need to guarantee the efforts of its openreach offshoot, to wire up Britain with full fibre broadband, are completed.
Better connections, whatever the ownership, are critical to boosting UK productivity.