Is new Shell boss REALLY right man to lead green revolution?
Shell raised eyebrows yesterday when it picked former BhP chief executive Sir Andrew Mackenzie to steer it through the green revolution.
he will take over as chairman in May from Chad holliday, who has been in the role for six years.
Mackenzie, a geologist by training who was knighted in 2020 for services to business, has been a director on Shell’s board since October.
But some have questioned whether he is the right man for the job given that the biggest item on the agenda for energy companies is to make the shift to renewable power and seeing through ambitious climate targets.
The 64-year-old Scot, a doctor’s son from Kirkintilloch, Dunbartonshire, is an oil and gas and mining veteran. he was the chief executive of BhP from 2013 to 2019, and also spent 22 years at Shell rival BP.
his time at BhP was overshadowed by a deadly dam collapse at an iron ore mine in Brazil – the country’s worst ever mining disaster.
An iron mine run by BhP and Brazil’s Vale had been dumping its liquid waste behind a dam.
When the dam eventually burst, it released more than 40m cubic metres of sludge, knocking down most of the village of Bento Rodrigues, killing 19 people, and destroying local wildlife.
Mackenzie will also be taking over at a time when Shell is perceived to be behind BP in its plans for the energy transition.
The company is aiming to reach net zero – meaning it will balance out any emissions it produces – by 2050. But there has been discord within Shell over its strategy – and in late 2020 a slew of executives at its clean energy division all left the group. In a statement, the company said: ‘Andrew brings to Shell his experience of leadership, his global outlook, and a deep understanding of the energy business and climate action.’ But others were more critical. Mark van Baal, the founder of environmental activist shareholder group Follow This, said the appointment was ‘a kind of insult to responsible investors who are increasingly voting for change’.
Follow This has spent years campaigning for Shell to crack down on its emissions and tabled resolutions on the issue at its annual meetings.
Van Baal said: ‘This is a very bad signal to responsible investors who increasingly ask for the company to embark on the
‘Insult to investors voting for change’
energy transition away from fossil fuels to renewables.
‘I think institutional investors who are serious about climate change will not like this.’
Richard hunter, head of markets at Interactive Investor, said Mackenzie would need to prove his critics wrong.
he said: ‘As chairman he’ll be more of a mouthpiece than rolling his sleeves up. But that being said, he’s got this incredible experience, there’s little doubt in his
CV, and there’ll be a lot of crossover in terms of experience.’
Shell’s other main priority is recovering from the blow dealt by the pandemic, which sent it nosediving to a £15.6bn loss last year and forced it to cut its prize dividend by two-thirds.
The oil major will be aided by rising oil prices – which had crashed as the use of car and jet fuels slumped during lockdown but are now back at pre-pandemic levels. Documents filed by Shell yesterday showed chief executive Ben van Beurden’s pay packet fell by 42pc to £5m after 2020’s dire performance. This was partly down to not receiving a bonus.
THERE is no escaping the immense damage done to Britain’s premier engineering group Rolls-Royce by the pandemic. The cash outflow of £4.2bn is truly horrendous and Warren East, for all his efforts to sound positive, acknowledges there will be some permanent scaring.
Airline hours flown, a critical metric for Rolls, will be as much as 30pc down from where they might have been in 2025.
Fears that Covid might prove an existential threat for Rolls-Royce and require a Tory government bail it out for the second time in its history are dismissed. RollsRoyce will ‘thrive’, the chief executive assures us. The aerospace group has managed to juggle several balls at the same time as it has dealt with rolling lockdowns across the globe.
It has burnished its finances and at year end has some £9bn of liquidity. It has also managed to upgrade debt by switching short-term borrowing and bonds into more secure financing with the help of export credit guarantees.
Rolls has also hammered down costs, with 7,000 jobs gone and another 2,000 still to go. It has resolved the labour dispute over the proposed rundown of manufacturing at the Barnoldswick plant in Lancashire.
The best thing which could happen for Rolls-Royce is that the airports do return to service in June allowing it to move towards breaking even in 2021, with a return to profit in 2022 and beyond. The group is allowing Covid to slow down R&D. A pointer of things to come is the deal made with Italy’s air frame group Tecnam to supply Swedish regional airline Wideroe with first generation electric aircraft. For its more traditional long-haul routes, Rolls is counting on creating synthetic fuels, and combined with its new UltraFan engine should offer carbon neutral flying. It is investing, along with government, half-a-billion pounds in its small modular reactor (SMR) nuclear programme which is part of Boris Johnson’s ten-point green deal. What it needs now is the orders to make SMRs a reality.
Shares have taken a terrible battering and in spite of a recent snap back on vaccine hopes are trading at one third of the 2018 price. Air travel in Asia, where wide-bodied jets are used to move people around domestically, is already recovering. But it needs longhaul trans-Pacific and trans-Atlantic travel to return for confidence to be restored.
Partners hit
ANOTHER beloved institution battered by Covid is John Lewis. Not only has Carrie Symonds dumped its Downing Street flat decorations in favour of Lulu Lytle rococo, but it ran up losses £517m before tax in 202021. The shortfall is exaggerated by the big one-off costs which come with store closures. But with underlying profit coming in at £131m it is hard to be optimistic about the coming year, with an additional eight stores to be closed, bringing the size of the portfolio down from 42 to 36.
Partners, used to annual bonuses, job security and the camaraderie of working for a mutual, must be wondering where it will all end. In executive chairman Sharon White, the group at least has imaginative leadership. Middle Britain could soon see smaller, convenience John Lewis outlets springing up in the suburbs and local high streets. The rollout of little John Lewis’s has begun on an experimental basis in the Waitrose store in Crawley and elsewhere.
The fusty departmental store concept is due for a makeover with much more lifeexperience stuff such as more brands, fitness, coffee and sushi bars. Online and click and collect will be sharpened up.
White must keep an eye on the cash outflow. John Lewis doesn’t have the option of paying for change with new equity. There is a cash cushion of £1bn but, with the need for capital spend for the transformation, nothing can be taken for granted.
White is not counting on a ‘coiled spring’ recovery. Longer-term fixes are required.
Mining guru
AS ONE of the world’s ‘most eminent earth scientists’ and champion of ‘the rights of indigenous people’, Andrew Mackenzie may look just the person to take on the role as chairman of Shell.
Yet with big oil is under huge pressure to decarbonise, his commercial background in mining groups BHP and Rio Tinto does not inspire immediate confidence.
Maybe we are missing something.