JUNK BONDS

Traders Pile Into Cheap Thames Water Bonds on Restructuring Bet

Tasos Vossos, Neil Callanan and Abhinav Ramnarayan
Thu, April 11, 2024





(Bloomberg) -- Money managers are buying up Thames Water bonds that are trading well below their face value, betting that any haircut from a potential restructuring will prove less painful than current trading levels indicate, according to people with knowledge of the matter.

The wager sees investors buy the operating company’s lowest-priced top-tier bonds, which trade at a discount of about 20% or more to the issuance price because of their lower coupon, the people said, asking not to be named. The popularity of the trade has helped the bonds outperform their higher-price counterparts in recent days.

To hedge against the bet not paying off, some investors are also short selling bonds that trade close to face value, the people said.

Holders of Thames Water’s £16 billion ($20.1 billion) of debt are bracing for a potential haircut after the firm’s parent company, Kemble Water Holdings Ltd, defaulted last week. The government is resisting pressure to bring the UK’s biggest water company into special administration, but creditors are concerned that some kind of restructuring is becoming more likely amid a deepening standoff between Thames shareholders and the water regulator Ofwat.

Special administration, a form of temporary nationalization, would likely lead to a debt reorganization which could see senior bondholders having to take a haircut, analysts at CreditSights wrote in a note on Tuesday.

“We have, in the last few weeks, moved some of the higher cash price bonds into lower cash price bonds from a prudent risk management perspective,” said Luke Hickmore, a portfolio manager at Abrdn Investment Management Ltd. His base case is that Thames Water will eventually receive an equity injection.

Short interest has risen sharply in three high-price Thames Water bonds, an indicator of the size of bets against them. In one case, involving a bond maturing in 2028, the wagers now amount to almost 18.5% of the percentage value at issuance, compared to 1.26% at the start of the year, according to data compiled by S&P Global Market Intelligence. By contrast, bets against three low-price bonds remain below 1.4%.

Companies with large amounts of debt often have bonds with wildly differing cash prices because notes are issued over multiple years at different points in the rate cycle. The average coupon size on the lower-price Thames bonds is about 200 basis points below that of the firm’s other debt.

This disparity can become a trading opportunity when an unexpected redemption occurs. In the case of Thames Water, investors are betting that bonds will be redeemed at around 70-85 cents per pound if the company is placed under special administration. This makes any bonds with a cash price below that look attractive, and anything above look expensive. A 100 basis point gap has opened up between the valuations of the two groups of bonds in recent days.

Thames Water’s parent company, Kemble Water Finance Limited, defaulted on about £1.4 billion ($1.8 billion) of debt last week after shareholders refused to provide £500 million of fresh equity. Tight legal and regulatory frameworks mean Thames Water can operate on its own, but a group of creditors at the operating company have hired advisors for help on potential restructuring talks anyway.

CreditSights analysts Helen Rodriguez and Andrew Moulder outlined six different scenarios for the saga at Thames Water, ranging from an eventual equity injection to a break-up of the business. Bloomberg Intelligence analyst Paul Vickars wrote in a note last week that the firm may require a haircut of at least 20% on its Class A debt to comply with Ofwat’s regulations.

--With assistance from Laura Benitez.

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The Airline Industry’s Biggest Climate Challenge: A Lack of Clean Fuel

Ben Elgin
Thu, April 11, 2024



(Bloomberg) -- In a glimmer of progress for the daunting task of reducing air travel’s climate impact, a newly built plant in rural Georgia is expected to begin pumping out the world’s first commercial quantities of a new type of cleaner jet fuel this month.

The $200 million plant from LanzaJet Inc. will be the first to turn ethanol into a fuel compatible with jet engines. The facility is one of many efforts around the globe attempting to crack one of the biggest problems facing greener air travel: finding and developing cleaner feedstocks that can generate enormous quantities of fuel without triggering ripple effects that end up worsening the climate and biodiversity crises.

Progress thus far has been very limited. Efforts to produce new types of cleaner fuels require hundreds of millions of dollars. But investors have remained wary with would-be plants routinely suffering lengthy delays and struggling to become operational.

“We need to scale-up by 1,000-fold,” says Hemant Mistry, director of net zero transition for the International Air Transport Association, which has pledged that the aviation industry will erase its carbon emissions by 2050, mostly by using huge quantities of cleaner jet fuel.

At its new facility dubbed Freedom Pines Fuels, LanzaJet plans to produce 9 million gallons of sustainable aviation fuel (SAF) per year. In one sense, that’s just a tiny step forward: It would take 100 of these plants to fulfill just 1% of the ravenous appetite of the world’s commercial air carriers, which consumed 90 billion gallons of jet fuel last year.

But it provides a glimpse of one direction the clean fuel industry wants to go. Most SAF today is derived from animal fats and waste oils, which are relatively scarce. Used cooking oil is already widely collected for road transportation with only modest room for growth, while a robust market has long converted animal fats into ingredients for pet food and detergents. Strong demand from aviation could push these other industries to switch to climate-harming ingredients, like palm oil, warn environmental groups.

This has left aviation giants scouring the world for alternatives to meet their climate commitments. IAG SA, the parent company of British Airways, has pledged to up its SAF usage to 10% by 2030. Last year, it gobbled up 17.6 million gallons, or 0.66%, of its total fuel. While that’s a tiny amount, it eclipses US airlines. United Airlines Holdings Inc. has led US carriers, but got less than 0.1% of its fuel from clean sources last year. All of IAG’s cleaner fuel last year came from traditional feedstocks like waste oils, according to Aaron Robinson, the company’s vice president for sustainable aviation fuel in the US.

Read more: How United and Other US Airlines Lost Momentum on Sustainable Jet Fuel

But that could soon change. Three years ago, British Airways partnered with LanzaJet, investing in Freedom Pines’ construction and teaming up on a clean fuels facility in the UK, which they hope will come online by 2028. Both plants will deploy technology known as alcohol-to-jet, which uses chemical reactions to upgrade ethanol into a potent fuel capable of powering jet turbines. IAG hopes to consume its first SAF from the Georgia plant later this year.

“Diversification matters,” says IAG’s Robinson. “That’s why alcohol-to-jet is an area that is quite attractive to us.”

It could sidestep a thorny issue facing some of the industry’s other clean fuel efforts. In the US, airlines are advocating for rules that could allow corn ethanol to qualify for SAF tax credits. It’s contentious because renewable fuels policies enacted in the US nearly two decades ago have led to about 40% of the country’s crop being turned into fuel.

This spiked demand for corn and other crops, spurring land-use changes not just in the US but globally. Those changes included clearing carbon-rich grasslands and forests to plant more crops, which negated most of the climate benefits of corn-based ethanol. Airlines are convinced this can be done with far fewer climate impacts, but doubters abound.

“This industry needs an absolutely huge amount of fuel,” says Alethea Warrington, a senior campaigner at Possible, a UK-based climate charity that is skeptical of SAF and encourages less air travel. “Wherever you try to get this from, it throws up huge systemic problems.”

Freedom Pines will initially deliver scant climate benefits because it will use corn ethanol from the US Midwest to “work the kinks out,” says Jimmy Samartzis, chief executive officer of LanzaJet. As it becomes operational over three to six months, it will transition to using sugarcane ethanol from Brazil, which has fewer land-use impacts. Doing so would reduce heat-trapping emissions by at least half compared to fossil jet fuel, according to the US Environmental Protection Agency.

Read more: Why Green Air Travel Will Be a Lifeline for US Corn Farmers

Samartzis says they’ll also soon use ethanol derived from waste products, like corn stalks and other agricultural residues. That should deliver even bigger carbon savings because they do little to spur land-use changes that could harm the climate.

L.E.K. Consulting, in a report on the SAF market last year, predicted alcohol-to-jet will surpass today’s clean fuels to become the world’s biggest source of SAF by the middle of next decade. “It’s a proven technology and there are abundant agricultural and forestry residues, which work very well with it,” says John Goddard, L.E.K.'s senior partner and vice chair of sustainability.

It’s not the only path forward, though. Several outfits, like Nuseed and CoverCress Inc., which is majority-owned by Bayer AG, are beginning to enlist farmers to plant between their normal rotations of corn and soybeans. This includes carinata and pennycress, which can be converted into biofuels and animal feed. Because these are planted as cover crops when fields would otherwise lay fallow, they don’t trigger land-use changes. But these businesses face a range of hurdles from reluctant farmers to regulatory approvals.

“It’s not for the faint of heart to introduce a new crop,” says Mike DeCamp, chief executive officer of CoverCress, who adds that it could be a decade before the company reaches its full scale. His firm was named a BloombergNEF Pioneer this week owing to the promise of its technology to breed and edit the genes of pennycress to make growing the crop more profitable.

By the 2040s, Goddard and other experts believe a nascent technology called power-to-liquids or e-kerosene will likely eclipse the rest of the market and reduce the risk of land-use change altogether. That fuel is produced by combining a stream of captured CO2 with hydrogen molecules using vast quantities of renewable energy. The output is a liquid fuel with almost no climate footprint.

But the barriers are immense. Capturing CO2 is extremely difficult, and there is little extra renewable energy as governments around the world race to decarbonize. All told, power-to-liquids would cost nearly seven times more than traditional jet fuel, according to L.E.K.

Read more: A Gates-Backed Startup Is Making Fuel From Water and Carbon Dioxide

The difficulties are showcased by Transport & Environment, a nonprofit in Brussels, which has tracked proposed power-to-liquids plants across much of Europe. Although the number of announced facilities climbed to 45 as of January — part of a “largely positive” trend, it noted — all of the major projects remain “hypothetical” as they’ve yet to clear the crucial final investment decision, where money begins to flow and the construction truly commences.

Governments have been throwing a mishmash of requirements and incentives at the industry in an attempt to build momentum. The EU has been at the forefront, with lawmakers there mandating that airlines use SAF in increasing quantities through 2050, when it should account for at least 70% of all fuel. This includes a sub-mandate for pricey e-kerosene, which must go from 1.2% of fuels in 2030 to 35% by 2050.

SAF requirements in the US have gained little traction amid forceful opposition from the airlines. Instead, the Inflation Reduction Act created an incentive for SAF worth up to $1.75 per gallon. That expires in 2027, though, well before most proposed plants will be operating.

“That’s not long enough to get projects built and constructed,” says LanzaJet’s Samartzis.

In the case of Freedom Pines, it took a little help to get it over the finish line. Breakthrough Energy supplied a $50 million grant in 2022 to help keep the project on track.

But if Freedom Pines can ramp up successfully and churn out millions of gallons of SAF, it could do a lot to rev up investor appetite, according to Susan van Dyk, a biofuels consultant and researcher at the University of British Columbia.

Nonetheless, she adds, the industry has a long way to go to catch up to its SAF promises, which requires a 50- or 100-fold increase in production by the end of this decade. “I can’t see that happening by 2030,” says van Dyk. “We just need more of these technologies to be commercial and ramping up.”

CRIMINAL CAPITALI$M

UnitedHealth Chair, Executives Sold $102 Million in Stock Before US Probe Became Public

John Tozzi and Anders Melin
Thu, April 11, 2024 



(Bloomberg) -- UnitedHealth Group Inc. Chairman Stephen Hemsley and three senior executives netted a combined $101.5 million from stock sales made over four months leading up to when the public became aware of a federal antitrust investigation.

The sales occurred between Oct. 16, a week after the largest health insurer in the US reportedly received notice of the Justice Department probe, and Feb. 26, the day before Bloomberg News and others published stories about the investigation. The stock dropped after the investigation was widely reported.

There’s no indication that the trades were executed according to scheduled trading plans in filings related to the transactions. UnitedHealth said officers and directors must get clearance to trade shares, and that trading is limited to certain windows that often open after earnings reports. The trades in question were approved, a spokesperson said. The company reported third-quarter earnings on Oct. 13.

Typically a company’s general counsel would declare a blackout period barring trading in light of a sensitive investigation, according to John C. Coffee Jr., a corporate governance expert at Columbia Law School. “Apparently, this did not happen” at UnitedHealth, he said in an email.

The DOJ is reviewing whether UnitedHealth’s acquisitions have consolidated its position in some markets in a way that violates antitrust laws, according to a person familiar with the probe who asked not to be identified discussing a nonpublic investigation. The agency has reportedly been looking at potential monopolies in the managed-care industry since at least mid-2023.

UnitedHealth hasn’t explicitly acknowledged the probe and declined to say when Hemsley and the others were informed of it. When asked about the trades, a spokesperson for the insurer said “these directors and officers followed our protocols and received approval from the company.”

UnitedHealth declined to make Hemsley, the other people involved in the trades, or its general counsel available for interviews, and a spokesperson said they had no comment beyond the company’s response.

The company says in regulatory filings that it is subject to “routine, regular and special investigations, audits and reviews” from various state and federal agencies, including the DOJ.

Disclosure Question

Shares of UnitedHealth fell 5.2% in two trading sessions on Feb. 27-28, after the probe was widely reported in financial media. It was first reported Feb. 26 in the Examiner News, a local publication in New York state. The stock has fallen about 15% so far this year through Wednesday’s closing price compared with an 8% gain in the S&P 500 Index.

Whether the investigation should have been disclosed to shareholders hinges on if it’s considered material, said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.

The fact that shares fell after the news leaked “would suggest some materiality to investors,” he said. UnitedHealth says all material information is included in its periodic filings.

Share sales by top leaders are usually vetted by a company’s general counsel, Elson said. They evaluate whether the company must disclose any additional information to the market before the trades occur, he said.

“The question is, when they first were aware of the investigation, was it viewed as material?” Elson said.

Also weighing on the stock is a cyberattack on the company’s Change Healthcare subsidiary. The attack knocked out crucial data and payments systems, sowing chaos throughout the health-care industry.

UnitedHealth operates the largest US health insurer, UnitedHealthcare, and a growing network of clinics, surgery centers, home-care providers and other services under its Optum division. Hemsley has served as chairman since he stepped down as chief executive officer in 2017 after more than a decade at the helm.

On Oct. 17 and Dec. 5, Hemsley exercised a portion of his stock options set to expire in 2024. He sold the shares he’d acquired the same day, netting him $84.9 million, according to filings.

Brian Thompson, CEO of the UnitedHealthcare insurance unit, on Feb. 16 exercised options and sold shares, netting him $15.1 million, according to Bloomberg calculations. Days later, Chief Accounting Officer Tom Roos sold shares worth about $450,000.

Chief People Officer Erin McSweeney on Oct. 16 exercised options and offloaded shares for a net gain of $1.09 million, filings show.

Hemsley’s options were set to expire in February and November 2024, the filings show. The options held by Thompson and McSweeney had several years left until expiration.

While it’s not unusual for executives to periodically sell shares, Hemsley rarely sold stock while he served as CEO. Starting in 2020, he began offloading at irregular intervals: three times that year and again in 2021, then once in 2022, filings show. His net proceeds from each transaction have ranged from around $13 million to as much as $70 million. The Oct. 17 transaction, which netted him $55.7 million, is among the biggest he’s done in recent years.

Hemsley remains a significant UnitedHealth shareholder with more than 1 million shares valued at more than $450 million, held directly and in trusts, according to data compiled by Bloomberg. Each of the three executives also still hold shares in the company.

McSweeney and Roos have occasionally sold shares in recent years. This is the first year that Thompson has sold shares since he became CEO of the insurance division in 2021, at which point he had to start reporting his transactions.

--With assistance from Leah Nylen.

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US bets on climate friendly farming; experts doubt it is climate friendly enough

Leah Douglas
Thu, April 11, 2024 

FILE PHOTO: Farm workers plant Novavine drought-resistant grapevines in Woodland

WASHINGTON (Reuters) - President Joe Biden's administration is offering farmers money for adopting practices that store carbon in the soil to fight climate change, but Reuters interviews with soil science experts and a review of U.S. Department of Agriculture research indicate doubt that the approach will be effective.

Farm practices like planting cover crops and reducing farmland tilling are key to the USDA's plan for slashing agriculture's 10% contribution to U.S. greenhouse gas emissions as the U.S. pursues net-zero by 2050. Ethanol producers also hope those practices will help them secure lucrative tax credits for sustainable aviation fuel (SAF) passed in the Inflation Reduction Act (IRA).

But the farming techniques, which will receive an extra funding boost from Biden's signature climate law, may not permanently sequester much atmospheric carbon in the soil, according to five soil scientists and researchers who spoke to Reuters about the current science.


Four other soil scientists, and the USDA, said the practices can store various amounts of soil carbon, but circumstances will dictate how much and for how long.

The White House referred Reuters to the USDA for comment.

A USDA spokesperson said "the adoption and persistent use of no-till and cover crops are key for the sequestration of carbon on working croplands."

All the experts interviewed by Reuters agreed that no-till and cover crops can have significant environmental benefits such as preventing soil erosion and increasing biodiversity. Yet five of them expressed skepticism about tying climate policy and public money to the practices.

"Will it help with climate adaptation? Absolutely. Should it serve as an offset for more permanent and long-lived pollutants? Absolutely not," said Daniel Rath, an agricultural soil carbon scientist at the Natural Resources Defense Council.

The USDA has spent $1.3 billion in financial assistance to farmers for planting and managing cover crops and $224 million for implementing no-or reduced-till since 2014, according to agency data. That figure is miniscule compared to total USDA spending, but does amount to about 8% of its farm conservation spending in that period.

"If we really want to offset or mitigate climate change, we need to think about different systems," said Humberto Blanco, an agronomy professor at the University of Nebraska-Lincoln. "We need to think about more aggressive strategies."

IT ALL DEPENDS

Adoption of cover crops and no-till has risen in the past decade; now, 11% of farms plant cover crops and about 40% use minimal or no tilling, according to the most recent USDA agricultural census.

Under the right conditions, planting cover crops and reducing tilling can be positive for the climate, scientists told Reuters.

"If a farmer is using cover crops and getting good growth in the fall and spring, and they’re doing minimal tillage, on most soils, they’re going to add soil carbon over time," said Robert Myers, a professor at the University of Missouri and regional director of extension programs at a USDA research site.

A USDA spokesperson said the benefits largely depend on factors like growing climate, soil type, crop rotation, and other factors.

Five other experts told Reuters that no-till farming commonly results in a higher concentration of carbon in the soil surface but a decrease deeper in the soil profile, resulting in a net zero gain.

Seven experts said the climate benefits of no-till and cover crop techniques can be lessened or reversed if farmers plow their fields again.

"Even if you do build up some extra carbon under reduced tillage, if you then do a traditional plowing, the evidence seems to be that you quite quickly lose the carbon that you’ve been building up," said David Powlson, senior fellow at Rothamsted Research, an agricultural research institution.

Only 21% of farmers report using no-till continuously, according to the 2022 farm census, and about a third alternate reduced tilling with conventional tilling, showed a 2018 USDA report.

A USDA standards document for no-till says loss of carbon in the soil is directly tied to the amount and intensity of the tilling, and other factors like soil moisture and temperature.

As for the SAF tax credit, the Treasury Department is expected to finalize details in coming weeks. The $1.25 per gallon credit is aimed at producers who prove their fuel can cut emissions 50% from those of straight jet fuel.

The program will likely require ethanol producers to source corn from farmers using cover crops, reduced tilling, or efficient fertilizer application, sources told Reuters.

The USDA declined to comment on what the fertilizer application would entail.

The ethanol industry hopes to account for a significant portion of the 35 billion gallons of SAF the Biden administration has pledged to produce by 2050.

The IRA includes some $19.5 billion for farm climate programs over 10 years, and in 2023, about $52.5 million of that money went to cover crops and no-till.

(Reporting by Leah Douglas; Editing by David Gregorio)

US Betting on Energy Shift to Stem Decades of Disappearing Farms

Kim Chipman, Michael Hirtzer and Tarso Veloso
Thu, April 11, 2024 



(Bloomberg) -- The US is betting the transition to cleaner energy combined with massive infrastructure investments will reverse a persistent decline in family farms, creating new revenue opportunities for growers while boosting their ability to compete overseas.

More than half a million farms across America’s landscape have vanished over the last four decades as policies favored consolidation. While the resulting industrial heft has bolstered the US’s status as an agriculture juggernaut feeding the world, it’s wreaked havoc on smaller and mid-sized producers and the rural economies that rely on them.

But a revival is under way, according to US Agriculture Secretary Tom Vilsack. “We have to change the direction, otherwise in 40 years we will be saying we lost another 500 million acres,” he said in an interview Tuesday at Bloomberg’s Chicago office.

His agency is devoting tens of billions of dollars to promote climate-friendly farm practices as the world races to decarbonize, dealing with everything from fertilizers to grazing methods. The aim is to lower the greenhouse gas emissions of farming, and making growers eligible to take part in potentially lucrative new markets like crop-based sustainable aviation fuel.

Initiatives include enabling farms to profit by monetizing their excess renewable electricity, as well as helping them tap into new markets to sell into, including schools and farmer markets. The USDA also is devoting funds to create more robust export opportunities for US producers in regions such as Africa, Southeast Asia and Latin America.

Read More: Number of Farms in America Is Shrinking as Producers Get Older

“This is allowing farmers to say to the next generation: ‘You can be entrepreneurial and make a difference in the world,’” he said.

The opportunity to profit from selling more into local and regional food systems is significant. While farmers may get around 15-21 cents of a dollar spent at the grocery store, they can get as much as 75 cents at a farmers market or other venues in which growers work directly with consumers, Vilsack said.

Yet uncertainty is hanging over whether US farmers can shrink their carbon footprint fast enough to be competitive with grains and oilseeds from other nations, as well as with other pathways for making high-value products like sustainable aviation fuel, or SAF.

In January, the world’s first plant using ethanol of all types to make SAF was unveiled in Georgia. A thousand miles north in Iowa, the country’s biggest producer of corn-based ethanol, farmers and biofuel makers said the opening was a wake-up call to move faster to decarbonize to compete with ethanol from Brazil.

Vilsack, a former Democratic governor of Iowa, predicts a “rapid acceleration” in crop-based SAF investment after the Biden administration releases long-awaited details on federal tax credits aimed at setting off a surge in American production of lower-emitting airplane fuel. The update of a US tool used to calculate greenhouse gases from the transportation and energy industries is expected within a few weeks, Vilsack said.

While the government’s strategy is focused on strengthening the small farmer and rural communities, Vilsack expects the administration’s policies to also bolster the US’s position in world markets. America over the past decade lost its status as the top global shipper of corn and soybeans to Brazil.

Once the US fixes its roads and bridges, and the rail and port systems work more efficiently, America will be able to reclaim its infrastructure advantage, he said. President Joe Biden’s $1 trillion infrastructure law, passed in 2021, will “change the game on exports,” Vilsack said.

While he declined to comment directly on this year’s elections, Vilsack said he sees little risk in a new administration coming in and possibly rolling back efforts to help rural America, as the shift toward clean energy will be hard to stop.

He said farmers 10 years ago would have said “no thank you” to climate-smart programs, but now farm groups and growers are increasingly understanding the benefits.

Changing Mindset

“It’s an unlimited entrepreneurial opportunity to get out of the ‘Get Big or Get Out’ mindset,” he said. The phrase is a reference to the mantra of Earl Butz, agriculture chief under presidents Richard Nixon and Gerald Ford, which was also taken up by President Donald Trump’s farm chief Sonny Perdue.

“Now the rest can get entrepreneurial,” Vilsack said. “They can have two or three income streams and may not have to work that second job.”

Vilsack, who also served as agriculture chief under Barack Obama and is the second-longest serving USDA secretary in US history, said his approach is not about taking on crop-handling behemoths like Cargill Inc. and Archer-Daniels-Midland Co.

“This is about saying we ought to be able to create more options, and then the farmer can make the decision about what is best for his or her operation,” he said. “That’s the beauty of this — it complements, it doesn’t compete.”

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Tesla strike in Sweden continues, union says, contradicting Musk


Wed, April 10, 2024 
By Marie Mannes and Gwladys Fouche

STOCKHOLM/OSLO, April 10 (Reuters) - A strike by Tesla mechanics in Sweden, among the country's longest labour disputes, continues to disrupt operations, a union said on Wednesday, and is drawing scrutiny from investors despite Elon Musk saying the storm is over.

For months Tesla has been under pressure in the Nordics, with sympathy actions since October backing Swedish IF Metall's mechanics' demand for a collective agreement.

Postal workers, garbage collectors, repair centres, port workers, electricians, and cleaners are among those that have refused to handle Tesla business, forcing the company to find alternative ways of running its operations.

"I think the storm has passed on that front," Musk, who has been vocal about his opposition to unions, said on Monday in a live chat on his social media platform X. "I think things are reasonably good in Sweden."

The U.S. carmaker does not manufacture in Sweden, but its electric vehicles are serviced there by more than 120 mechanics.

IF Metall says it remains in dispute with Tesla.

"The strike in Sweden is still very much ongoing, our members are on strike," IF Metall spokesperson Jesper Pettersson told Reuters, adding the union was considering ramping up action.

"(Tesla) want to make an impression that business is as usual for them, but we know - and they know - that that's not entirely true."

Tesla did not immediately respond to a request for comment. It has previously said its Swedish employees have as good, or better, terms than those the union is demanding.

INVESTOR PRESSURE

Musk's comment on Monday came in response to a question from the CEO of Norway's $1.6 trillion wealth fund, which owns 1% of Tesla's stock and is its eighth-largest investor, LSEG data shows.

The fund also raised the issue with Tesla chair Robyn Denholm in March, it told Reuters.

In 2022, the fund backed a shareholder proposal asking Tesla to adopt a policy on respecting rights to freedom of association and collective bargaining. "(We) will continue to follow up on our expectations," said a fund spokesperson.

In December, some Nordic pension funds and other investors sent a letter to Tesla voicing concern. One fund, PensionDanmark, sold its shares in Tesla over the issue.

The ethics watchdog for four of Sweden's state pension funds, with a combined Tesla stake worth 314 million euros at end-2023, said this week it has discussed the strike with the automaker.

The head of the AP Funds' Council on Ethics, Jenny Gustafsson, told Reuters it had highlighted to Tesla how the Swedish model of collective bargaining is "well established and has provided stability and predictability in the Swedish labour market".

DISRUPTING OPERATIONS

Tesla's Model Y remained Sweden's most sold car in the first quarter of 2024. The group's overall registrations in the country declined some 8% year-on-year in the January-March period, broadly in line with the market, data from industry association Mobility Sweden showed.

One union supporting IF Metall's strike said Tesla's operations had still been affected.

"They have been forced to change their way of bringing cars into Sweden and Tesla employees have to handle waste and garbage themselves at the workshops," said Elin Lornbo of the Transport Workers' Union, which is blocking the company from delivering cars to Sweden by ship.

The transport union has said that it believes Tesla is bypassing the blockade by bringing cars in on trucks or by train.

 (Reporting by Marie Mannes in Stockholm and Gwladys Fouche in Oslo;Editing by Elaine Hardcastle)

Tesla investor may table collective bargaining motion at AGM

Gwladys Fouche and Marie Mannes
Thu, April 11, 2024


By Gwladys Fouche and Marie Mannes

OSLO/STOCKHOLM (Reuters) - Tesla investor KLP may ask the automaker's annual general meeting to address CEO Elon Musk's reluctance to engage in collective bargaining, the Norwegian pension fund said on Thursday.

A strike by Tesla mechanics in Sweden, among the country's longest labour disputes, has for months disrupted the automaker's operations and attracted the concern of several Nordic institutional investors.

On Monday, Musk said "the storm had passed on that front". But the strike is continuing and the union leading the action told Reuters this week it may ramp it up.

KLP, Norway's largest pension fund, was a signatory to a December letter sent by Nordic investors expressing their concern about the strike in Sweden and Tesla's reluctance to acknowledge a right to collective bargaining.

"That Elon Musk is saying that the 'storm has passed' is just his way to underestimate the conflict and the issue," Kiran Aziz, KLP's head of responsible investments, told Reuters.

"The conflict is still going and Musk does not really want to understand that collective bargaining is the backbone of the Nordic labour model."

Tesla did not immediately respond to a request for comment. It has previously said its Swedish employees have as good, or better, terms than those the union is demanding.

Aziz said Tesla had not answered the December letter, and KLP was now "trying to figure out how to escalate".

When KLP disagrees with the management of a company in its portfolio, it first tries to establish a dialogue with the company, before moving to outline its expectations to the board, Aziz said.

"The next step with Tesla could be filing a shareholder proposal at its annual general meeting," she said, without elaborating on its contents.

"We will continue to pursue this issue regardless of what Musk thinks so one advice would be that Tesla starts to respond on queries from investors."

KLP holds 900,000 Tesla shares worth some 1.7 billion crowns ($157 million). Last summer it removed Tesla shares from its sustainable funds.

"We did that before the strikes began, because our portfolio managers were seeing that it would come to some controversy," Aziz said. "The Tesla holdings is still in the other funds."

($1 = 10.8039 Norwegian crowns)

(Reporting by Gwladys Fouche in Oslo and Marie Mannes in Stockholm; editing by Philippa Fletcher)

Lufthansa and cabin crew union reach a pay deal to end string of German aviation disputes

Thu, April 11, 2024 



BERLIN (AP) — Lufthansa and a union representing cabin crew reached a pay deal Thursday, concluding the last of several major disputes that have led to recent strikes at Germany's biggest airline and in the country's wider aviation sector.

The UFO union said nearly 19,000 cabin crew will get a pay rise effectively totaling 17.4% in three stages under the three-year deal, plus a one-time payment of 3,000 euros ($3,240) per person to offset inflation. Some bonuses also will be increased.

The union, which originally sought a 15% increase over an 18-month period, will put the deal to a ballot of its members. Its deal with Lufthansa doesn't include staff at two company subsidiaries, Cityline and Discover, where talks are ongoing.

Last month, the Ver.di union secured a pay raise totaling an average 12.5% over two years for some 25,000 Lufthansa ground staff following an arbitration process. There will be bigger raises for some lower earners.

Earlier this week, a separate dispute involving security staff at most major German airports and their employers was resolved. That deal, also reached after arbitration, foresees raises totaling 13.1% to 15.1% over 15 months.

All three disputes led to strikes in recent months that caused widespread flight cancelations.
The disruption was compounded by lengthy strikes caused by a simultaneous dispute between Germany's main railway operator, Deutsche Bahn, and a union representing many of its train drivers. That was resolved last month with a deal that will see the working week of drivers and some other personnel reduced from 38 hours to 35 by 2029 without having their pay cut. They will have an option to work longer for more money.

The Associated Press

Ghana Seeks to Delay Cocoa Deliveries Due to Lack of Beans

Ekow Dontoh, Mumbi Gitau and Isis Almeida
Thu, April 11, 2024 



(Bloomberg) -- Ghana is in talks with traders to postpone the delivery of at least 150,000 to 250,000 tons of cocoa until next season due to a lack of beans, in the latest sign of how a supply crunch is roiling the global market.

The Ghana Cocoa Board, the regulator, is negotiating with major traders to roll over the delivery until sometime during the season that starts in October, according to five people familiar with the negotiations. The beans are supposed to be delivered during the main harvest that will end in the coming months, and some traders are asking for a big discount for the delay, two of the people said.

The talks highlight the severity of the cocoa crisis that’s been caused by poor harvests in Ivory Coast and Ghana, the top growers, and which is threatening to further raise chocolate prices. Prices have surged to a record — topping $10,000 a ton — as the market faces another global deficit, and the scarcity of beans is making it harder for traders, processors and chocolate makers to source supply.

“At present, there are no ongoing engagements. However, we do recognize the potential need to engage with buyers in the near future,” Ghana Cocoa Board spokesperson Fiifi Boafo said. “No issue about a big discount has been brought up for any such discussion.”

Read More: Cocoa Market Risks Breaking Point as Wild Moves Show Stress

No. 2 grower Ghana has faced difficulties fulfilling its contracts in recent seasons due to lower output, forcing it to roll over deliveries and putting more strain on the global market.

The country recently raised the price it pays farmers following the rally and to stop them from smuggling beans to neighboring nations for higher prices. The country’s lack of beans has also hampered its ability to secure funding that it uses to pay its growers.

One trader who also asked not to be identified said their company won’t buy any beans for the 2024-25 season from Ghana until issues over existing contracts have been resolved.

Most Read from Bloomberg Businessweek

Making cement is very damaging for the climate. One solution is opening in California

Thu, April 11, 2024 



It's a major contributor to climate change — the way buildings and roads are made with concrete. It's also a problem that's growing as more of the world develops. So the race has been on to find solutions for a material that's responsible for roughly 8% of global carbon dioxide emissions.

Now one California startup has developed a technology that reduces carbon dioxide in the making of cement and could have the potential to operate at large scale. Fortera intercepts carbon dioxide exhaust from the kilns where cement is made and routes it back in to make additional cement. In its first effort at commercial scale, the technology is being added to a CalPortland facility in Redding, California, one of the largest cement plants in the western U.S. It opens Friday.

“Our target is about being a ubiquitous solution that can work really at any plant,” said Ryan Gilliam, Fortera CEO.

Initially Fortera will produce enough to mix with about one-fifth of CalPortland's product in a blend that reduces carbon by about 10%. Gilliam said there is a strong demand for higher blends that reduce carbon by 40-50%, and for a pure product the company makes, which has 70% lower carbon.

The first large sacks are scheduled to move out the door of the Redding plant the first week of May.

Fortera evolved in part out of an earlier company called Calera that was among the first to convert carbon dioxide into cement starting in 2007. It poured some 100 tons of its low-carbon cement into California office buildings and sidewalks but shuttered in 2014 due to financial challenges. Building on that knowledge, Gilliam founded Fortera in 2019 with several former Calera employees.

There is “pretty much a cement plant every 250 miles in the world,” he said, and most are located near a limestone quarry. Because it works with these existing plants and uses the same material the industry already uses, Fortera says its technology is an economically competitive option to quickly prevent carbon emissions from warming the planet.

One difference from some other low-carbon cement and concrete efforts is it offers at least the possibility of being installed widely at cement plants instead of changing how the industry currently runs.

Fortera’s is one of many efforts to reduce the climate impact of concrete. The American Institute of Architects educates many of the world’s largest architecture firms about carbon emissions from building materials.

Some jurisdictions including Vancouver, British Columbia have building standards that encourage lower-carbon concrete. California passed a law in 2021 that requires the state’s Air Resources Board to develop a strategy for the state’s cement industry to reduce its greenhouse gas emissions by 40% by 2035 and achieve net zero by 2045.

The First Movers Coalition, an organization of more than 90 companies, has an initiative announced in 2021 to create greater demand for low-carbon cement through their immense buying power.

The same year, 40 of the largest cement and concrete manufacturers announced a commitment to making concrete that does not contribute to climate change by 2050 through the Global Cement and Concrete Association. They agreed to reduce emissions from cement, fossil fuel use in manufacturing processes and to develop new ways to capture carbon.

Concrete is the second -most used product on Earth, aside from water. Cement makes up 10-15% of concrete by volume, but accounts for 88% of concrete’s considerable emissions. Other ingredients in concrete are sand, gravel, crushed stone and water.

Manufacturing one ton of cement emits nearly one ton of carbon dioxide. There hasn't been a simple replacement.

“The societal benefits of concrete are absolutely immense … it’s the backbone of modern society,” said Thomas Guillot, CEO of the Global Cement and Concrete Association. Other materials sometimes fail to compete because they are not as durable, can't support as much weight, or can't stand up as well to heat, he said.

HOW FORTERA'S TECHNOLOGY WORKS

Cement manufacturers heat kilns to about 2,500°F (1,400°C) to break down limestone and separate it into carbon dioxide and calcium oxide.

Fortera's process sucks the carbon dioxide out and pipes it into a machine where it is turned into a solid. Its technology works at around 1,800°F (1,000°C), which requires less energy and emits less carbon.

When the captured carbon dioxide is mixed with calcium oxide, it turns into a kind of limestone that becomes cement-like when wet. This product, which Fortera calls ReAct, is blended with other ingredients to make concrete.

Fortera uses a 15% blend of ReAct in concrete because that is all that is allowed under existing industry standards that regulate material strength and durability.

The company is trying to get a product that is 100% ReAct approved as a replacement for cement and says its testing has shown it can meet international requirements, but the regulatory process will take over five years.

Some of the fastest-growing consumers of cement are in Southeast Asia and Africa, so global solutions are critical.

“The United States has to do what it can and be a leader to help other countries,” said Mike Ireland, president and CEO of the Portland Cement Association, the national trade association for U.S. cement manufacturers. “But we have to get the rest of the world, particularly the Global South, as they industrialize to leapfrog some of the technologies we had.”

Carbon emissions from cement manufacturing is “an existential threat to the world and for our industry,” he said.

___

The Associated Press’ climate and environmental coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.

Isabella O'malley, The Associated Press

REAL ANARCHO CAPITALI$M

Pharmaceutical giant Bayer is getting rid of bosses and asking nearly 100,000 workers to ‘self organize’ to save $2.15 billion


Orianna Rosa Royle
Thu, April 11, 2024 

risztian Bocsi/Bloomberg—Getty Images

In a bid to claw back $2.15 billion, the struggling pharmaceutical giant Bayer CEO is doing away with middle managers and 99% of the company’s 1,362-page corporate handbook, allowing nearly 100,000 employees to self-manage.

Bayer, the 160-year-old German company known for inventing aspirin, has been stuck in a rut; Its market cap has plunged to two-decade lows—spurred by its so-far disastrous acquisition of Monsanto—and its CEO Bill Anderson believes that flatting hierarchy and slashing corporate bureaucracy could be key to turning it around.

When Anderson took the helm last June, he learned that the company’s rules and procedures handbook was longer than War and Peace. It’s why, he says, when listening to feedback from the firm’s workforce the same complaints surfaced repeatedly.

"They basically said: 'Increasingly, we can't get anything done,'" Anderson told Business Insider. "It's just too hard to get ideas approved, or you have to consult with so many people to make anything happen."

“We hire highly educated, trained people, and then we put them in these environments with rules and procedures and eight layers of hierarchy," Anderson added. "Then we wonder why big companies are so lame most of the time."

So, the company is going boss-less, or as he calls it “dynamic shared ownership”.

Whether or not it’s a fancy metaphor for a headcount reduction, Anderson has insisted that this new way of working could be revolutionary. “We don’t have to be that good to beat the current system,” the 57-year-old chief executive told the Wall Street Journal.

In the coming years, Bayer’s workforce will consist of constantly evolving “5,000 to 6,000 self-directed teams” that work together on projects of their choosing for 90 days, before regrouping for their next project.

Employees of Bayer's consumer-health division have already gotten a taste of this new structure—they’re being shown how to practically sign off on each other's ideas without a manager in sight.

“Stand up, share an idea,” a corporate trainer ordered them during a training session, according to The Journal. "You're going to self-organize."
Is going boss-less enough to fix ‘broken’ Bayer?

Whether or not Anderson’s plan lands, it will buy him time: The company is worth a quarter of its $122 billion peak from nine years ago, its shares have tanked by more than 50% in the last year and investors are urging it to split.

The company has accumulated around €34.5 billion ($37.5 billion) in debt, not much less than the company’s €47.6 billion ($51.7 billion) in sales last year.

To top that off, since its acquisition of Monsanto in 2018, Bayer has been fighting thousands of claims that its Roundup weedkiller causes cancer.

Even Anderson has compared the current state of the company to the time he fractured his leg skateboarding—“badly broken”. But looking ahead, he wrote in Fortune that "our radical reinvention will liberate our people" while saving the company about €2 billion ($2.15 billion) in annual organizational costs by 2026.
But cutting out middle management is nothing new

It’s not clear exactly how many managers will be laid off or demoted (Bayer didn’t respond to Fortune’s request for comment). However, the Journal reported that 40% of management positions are heading for the chopping block in the U.S. pharmaceutical division alone.

Although Anderson is pitching the move as an innovative way of transforming its corporate hierarchy and giving employees more choice, trimming middle management to save costs and become more efficient is nothing new.

In fact, middle managers—defined as non-executives who oversee employees— made up almost a third of layoffs last year.

At Meta, where Mark Zuckerberg declared 2023 was going to be its “Year of Efficiency”, middle managers were the toll in that quest.

“I don’t think you want a management structure that’s just managers managing managers, managing managers, managing managers, managing the people who are doing the work,” Zuckerberg told staff in an all-hands meeting.

After laying off thousands of workers, the billionaire tech entrepreneur said that “flattening” its internal hierarchy was core to its restructure—and he credited Elon Musk as the source of inspiration behind having “fewer layers of management.”

Meanwhile at Google—where more than 30,000 managers are employed—12,000 people lost their jobs, and at Intel Corp. managers’ pay was slashed. Even beyond the tech industry, layoffs at Citi and FedEx have massively impacted managers.

This story was originally featured on Fortune.com

 

Researchers show chemical found naturally in cannabis may reduce anxiety-inducing effects of THC

Study finds an essential oil, d-limonene, significantly reduces feelings of anxiety and panic, without altering the desired effects of marijuana’s active ingredient

JOHNS HOPKINS MEDICINE

 

IMAGE: 

A JOHNS HOPKINS MEDICINE-LED TEAM HAS SHOWN THAT D-LIMONENE (LEFT SIDE OF GRAPHIC), AN ESSENTIAL OIL DERIVED FROM CITRUS — AND FOUND IN CANNABIS — SIGNIFICANTLY REDUCES FEELINGS OF ANXIETY AND PANIC, WITHOUT ALTERING THE DESIRED EFFECT OF THC (RIGHT SIDE OF GRAPHIC), THE PRIMARY PSYCHOACTIVE INGREDIENT OF CANNABIS.

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CREDIT: M.E. NEWMAN, JOHNS HOPKINS MEDICINE, USING PUBLIC DOMAIN IMAGE

FOR IMMEDIATE RELEASE

A Johns Hopkins Medicine-led research team has added to evidence that a chemical found naturally in cannabis (also known as marijuana) can — in the right amounts — lessen the anxiety-inducing effects of tetrahydrocannabinol (THC), the primary psychoactive sister chemical found in cannabis. The finding has the potential to advance the medicinal use of THC, and reduce the risks of its recreational use in some people.

The substance, called d-limonene, is one of the most abundant terpenes, or essential oils, in the cannabis plant, and has shown promise in rodent studies in reducing anxiety behaviors. However, there has been little research on d-limonene or other terpenes in humans. As a group, terpenes are responsible for the taste, aroma and color of plants.

In a recent study, first published online April 1 in the Journal of Drug and Alcohol Dependence, investigators tested the effects of vaporized d-limonene alone and mixed with THC to examine the anxiety-reducing effects in humans. They found the addition of d-limonene significantly reduced overall ratings of feeling “anxious/nervous” and “paranoid” compared with rating the effect of THC alone.

As cannabis legalization becomes more prevalent, its use for both medicinal and non-medicinal purposes is expanding rapidly. In recent years, selective breeding of cannabis plants has resulted in strains that contain upwards of 20% – 30% THC, compared with an average of 12% a decade ago. This may make it more difficult for users to be consistent with the amount of THC they consume on a given occasion.

THC interacts with receptors in the brain to produce feelings of relaxation and euphoria. However, researchers say that when a user is exposed to higher-than-usual doses of THC, the drug can also trigger anxiety, fear and panic.

“People use cannabis to help reduce anxiety, depression and post-traumatic stress disorder, but since THC levels vary widely, if a person overshoots their tolerance of THC, cannabis can induce anxiety rather than relieve it,” says study senior author Ryan Vandrey, Ph.D., professor of psychiatry and behavioral sciences at the Johns Hopkins University School of Medicine. “Our study demonstrates that d-limonene can modulate the effects of THC in a meaningful way and make THC more tolerable to people using it for both therapeutic and non-therapeutic purposes.”

In the study, 20 healthy adults with a median age of 26 participated in up to 10 outpatient sessions, during which they inhaled vaporized d-limonene alone, vaporized THC alone, vaporized THC and d-limonene together, or vaporized distilled water (as a placebo).

The study was double-blinded, meaning neither the researchers nor participants knew who was receiving which mixture. Twenty participants completed nine test sessions, while 12 participants also took part in an optional tenth session of THC combined with a triple-dose (15 milligrams) of d-limonene to test the extreme extent of the essential oil’s dose response curve. This was conducted after appropriate safety data were obtained from the lower doses (1 milligram and 5 milligrams).

In all participants, the researchers measured subjective drug effects, subjective ratings of mood, vital signs (heart rate and blood pressure) and cognitive performance (measures of memory, psychomotor ability and attention) at baseline, and then an additional nine times after initial exposure over the course of each of the six-hour test sessions. They also collected blood and urine samples from each subject before, during and after each six-hour session to test for THC and d-limonene levels.

The research team concluded that combining d-limonene with THC significantly reduced subjective indicators/reports of THC-induced anxiety in participants. These reductions were greater as the dose of d-limonene was increased.

Additionally, they saw no interference with THC’s subjective, cognitive or physiological effects when co-administered with d-limonene, as well as no effects from d-limonene alone that differed from the placebo test.

“This study is a first step in uncovering how we can mitigate risks of THC when used in medicine, and also is targeted at making cannabis safer for the general, non-therapeutic consumer,” says study lead author Tory Spindle, Ph.D., associate professor of psychiatry and behavioral sciences at the Johns Hopkins University School of Medicine.

The researchers plan to continue experimenting with other terpenes alone and in combination with THC to see how they interact with each other, as well as replicate the d-limonene study in larger and more diverse clinical populations. They also plan to test alternative methods of administration, such as oral ingestion.

Along with Vandrey and Spindle, members of the study team from Johns Hopkins Medicine are George Bigelow, Lauren Pollak and C. Austin Zamarippa. Other team members are Ethan Russo at CReDO Science, and Uwe Christians, Jost Klawitter, Cristina Sempio, Touraj Shokati, Bridget Tompson and Alexandra Ward at the University of Colorado Anschutz Medical Campus.  

Spindle has served as a consultant for Canopy Health Innovations Inc. and has received research funding from Cultivate Biologics. Vandrey has served as a consultant or received honoraria from Mira1a Therapeutics Inc., Jazz Pharmaceuticals, Charlotte’s Web, Syqe Medical Ltd. and WebMD. Russo is the founder and CEO of CReDo Science and a scientific adviser to True Terpenes.

A patent application (PCT/US2022/014296) has been submitted by The Johns Hopkins University on behalf of Vandrey, Spindle and Russo for the use of d-limonene to reduce THC-induced anxiety, based on the data presented in this study (after the trial concluded and data were analyzed).

The other study authors do not have financial or conflict-of-interest disclosures.