Brexit and political turmoil costing the UK billions as investors turn away

Pedro Goncalves
·Finance Reporter, Yahoo Finance UK
Wed, 8 February 2023 

Britain's prime minister Rishi Sunak: The boss of insurance giant Lloyd's of London said that the government needed to restore economic stability following Brexit. Photo:Oli Scarff/Pool/Reuters

Investors are keeping their distance from the UK as Brexit and the revolving door at Downing Street that saw three prime ministers in 2022 dealt a heavy blow to the country’s reputation for financial stability.

The boss of insurance giant Lloyd's of London told the BBC that the UK should not take its position as a global financial centre for granted and that the government needs to restore economic stability.

"We're at an important moment. We've really got to re-prove our value proposition, I think there's a responsibility on government and us in business to get it right.

"I think we can get it right but we have got to work hard," John Neal said.

The latest dent in the UK's reputation for economic stability happened when Liz Truss blew up her own government with a package of unfunded tax cuts and energy-price guarantees.

Markets responded to her announcement with suspicion and fear. Yields on UK gilts shot up by more than 3%, the biggest selloff since March 2020, when the news of the COVID lockdown first broke and the pound fell to its lowest level against the dollar since 1985.

Read more: UK pay for new hires climbs at the slowest pace in almost two years

Higher borrowing costs for the government fed through into rising mortgage rates with hundreds of products withdrawn from the mortgage market.

Deutsche Bank at the time said that investor confidence on the UK economy could no longer be taken for granted.

“If investor confidence erodes further, this dynamic could become a self-fulfilling balance of payments crisis whereby foreigners would refuse to fund the UK external deficit.”

The BoE described the speed and scale of movements in interest rates on UK government bonds as "unprecedented". It had to step in to safeguard the pensions sector with a support scheme – worth a potential £65bn.

But Liz Truss, whose premiership lasted roughly the shelf-life of a lettuce, wasn’t alone in hurting the reputation of the UK as a place to do business.

Neal said other factors that harmed the UK's reputation included having three prime ministers and four chancellors in 2022 as well as the extra costs associated with Brexit.

"All of them don't help us because I think we had huge credibility around stability and certainty," he said. "And I think what we need to do through 2023 and 2024 is begin to rebuild that stability."

Brexit has caused a £100bn-a-year loss in output, leaving Britain’s economy 4% smaller than it would have been inside the bloc, according to according to Bloomberg Economics.

Since officially leaving the European Union, three-years ago this week, UK-based investment has grown 19% less than the G7 average and the economy has forfeited 4% worth of growth, the analysis showed.

Read more: Brexit: Over 7,000 finance jobs traded London for EU

Despite the dents in the UK’s financial stability armour, the Lloyds of London boss believes the government can recover its credibility.

"We're at an important moment. We've really got to re-prove our value proposition, I think there's a responsibility on government and us in business to get it right.

"I think we can get it right but we have got to work hard," Neal said.

Lloyd's of London is the world's largest insurance market, providing specialist insurance services to businesses in over 200 countries and territories.

Crucial moment to ensure EU companies respect the Paris Agreement

Amandine Van den Berghe, Arianne Griffith, Julia Otten, Uku Lillevälli
Tue, 7 February 2023 


A key vote is taking place in the European Parliament's Environment Committee this Thursday, when MEPs will decide whether or not to include climate in their corporate due diligence directive. Climate experts from Client Earth, Global Witness, Frank Bold, and WWF explain why this matters. The article was authored by Amandine Van den Berghe (ClientEarth), Arianne Griffith (Global Witness), Julia Otten (Frank Bold) and Uku Lilleväli (WWF European Policy Office).

It’s been three years since the European Union vowed to become a climate neutral economy by 2050 – a goal that will be impossible to reach without urgently mobilising the corporate world.

Yet in the absence of specific and enforceable legal standards, there is still a systemic lack of action from the private sector. While there’s been a tidal wave of corporate climate pledges, the work that is needed to achieve these commitments simply isn’t being done.

In a study of the 1,000 largest companies operating in the EU, only 23 per cent of them had strategies to address climate risks, and as few as 13.9 per cent disclosed relevant data on their emission reduction targets.

This means that these companies are not aligned to shareholder expectations, and are missing opportunities to properly manage and mitigate the risk a warming world presents to their business.

Companies will soon have to prove that they really are taking climate action, under draft EU law

What is greenhushing? How to spot the sophisticated greenwashing tactics being used in 2023

Could the EU force companies to report their climate impacts?

This week, there’s an opportunity to change this sorry situation. The European Parliament is currently debating the Corporate Sustainability Due Diligence Directive.

This proposal could be the lever the EU needs to compel companies operating on its market to drastically pick up the pace.

Requiring companies to address environmental and climate adverse impacts in their value chains is an essential piece of the sustainable economy puzzle. It also makes good business sense.

But there is a glaring flaw in the current legislative proposal: its narrow definition of what constitutes an ‘adverse environmental impact’ will allow companies to turn a blind eye to significant issues in their value chains – including their emissions.

As the European Parliament political groups battle it out to finalise their opinions on the law, the time to set this straight is now.

What will the Corporate Sustainability Due Diligence Directive include?

Under the Commission’s draft text, companies would only have to spot and stop impacts that result from the breach of one of the 12 international environmental agreements referenced in the law – a list that doesn’t even include the Paris Agreement.

Considering that all sectors - automotive, construction, chemicals, food and drink, raw material, metals, and minerals, fashion and beyond - play an irrefutable role in global heating and nature loss, the current definition of ‘environmental impacts’ will fail to fully capture companies’ environmental footprint. That doesn’t exactly foster fair competition.

The Commission’s proposal would only require companies to include adverse climate impacts as part of due diligence seven years after the Directive enters into force – likely to run into the next decade beyond 2030.

The Paris Agreement was a milestone for global warming. Do we need a similar deal to protect nature?

'Fifty-fifty chance' global warming hits 1.5°C by 2026, warn scientists

This is far too late. Climate science warns that unless we have massive emissions cuts now, the 1.5C goal may soon be out of reach. It is also out of step with the companies that are already developing climate transition plans to manage risk to their businesses.

In order for this law to be fit for purpose, the Environmental Committee of the European Parliament must specify climate as one of the environmental impacts covered by the Directive and urgently fill the large gaps in the EU’s corporate climate regulatory framework.

The European Parliament are debating due diligence laws this week. - Canva

Clear climate due diligence and effective transition plans

The Commission’s draft law includes requirements for companies to establish a transition plan.

But it should also require companies to carry out an inventory of potential and actual negative climate impacts before they develop these transition plans.

This is a critical step if businesses are to prevent, mitigate, cease, and remedy these impacts successfully. Without knowing these impacts, transition plans risk being nothing more than uninformed guesswork.

Corporate free riders put an unfair burden on climate-friendly companies to reach EU and global climate goals.

Requiring precision in target-setting and the content of the transition plans will ensure companies develop robust plans. This minimises the risk of further greenwashing, which threatens to undermine the transformative action that we need.

In fact, such strict requirements would enable effective implementation of a tool that is already referenced in the EU’s Corporate Sustainability Reporting Directive (CSRD) and Taxonomy

 Regulation.

A wide range of stakeholders - from business to investors - are calling for greater legal clarity on corporate reporting and risk assessment practices as they move to more sustainable operations. Clear climate due diligence requirements would answer this call.
We need to act now to keep the Paris Agreement alive

A reminder of just how much is at stake: recent analysis of European companies’ public emission reduction targets showed that, far from being consistent with the goals of the Paris Agreement, the sector is actually on track for a 2.4C decarbonisation pathway.

That is almost one degree of warming higher than the limit the world must stay within to keep our planet habitable.

The urgency of the climate crisis means we must ensure companies act now.

To do so makes economic sense. After all, climate change could wipe over 4 per cent off European GDP by 2030 in a worst-case scenario. Disasters such as droughts, which currently cost about €9 billion annually across the EU and UK, have severe impact on business operations, impacting the bottom line through financial losses, reduced revenue and increased costs.

It’s now down to the Environmental Committee of the Parliament to ensure this law actually drives meaningful corporate action on climate and doesn’t just open the floodgates to more greenwashing.

Energy firm Equinor under fire after posting record £23.8 billion profits

Holly Williams, PA Business Editor
Wed, 8 February 2023


One of the UK and Europe’s biggest gas producers has become the latest energy firm to stoke mounting anger over “grotesque” record-breaking annual profits.

Norwegian firm Equinor posted underlying earnings of 74.9 billion US dollars (£61.9 billion), more than double the 33.5 billion US dollars (£27.7 billion) it made in 2021.

On a net profit basis, it reported 28.7 billion US dollars (£23.8 billion) compared with profits of 8.6 billion US dollars (£7.1 billion) in 2021.


It follows similar mammoth bottom line profits for oil and gas giants in recent days thanks to last year’s soaring energy prices, with BP and Shell both posting record-breaking figures for 2022, at £23 billion and £33 billion respectively.

Campaigners have taken aim at the firms for raking in huge profits while households and businesses are suffering amid a cost of living crisis and claim the companies have made little progress in switching to renewable energy sources.

Greenpeace hit out at Equinor’s profit announcement and reiterated its call for a bigger windfall tax on the sector.

Protesters from climate campaigners Parents for Future, Mothers Rise Up, and HERO UK Climate Justice Circle are also staging a demonstration outside Equinor’s London headquarters in protest at its figures and its plans to develop Rosebank, the UK’s largest undeveloped oil field.

The activists at Equinor’s headquarters described the figures as “grotesque”.

Mel Evans, Greenpeace UK’s head of UK climate, added: “Equinor is the latest fossil fuel giant to post record profits looted from bill payers’ pockets while destroying the climate last year.

“Just 0.13% of its energy production came from renewables in 2022.

“Instead of giving out more tax breaks for oil and gas drilling, the Government needs to claw back these massive profits and use them to insulate people’s homes and scale up renewable energy.”

A spokesman for Equinor said the group is aiming to “significantly increase investments in renewables, and that we foresee that more than 50% of gross investments will go to renewables and low carbon projects by 2030”.

He added that the Rosebank development “has the potential to strengthen energy security with oil and gas that is produced with a much lower carbon footprint than current UK production” and claimed it will bring in around £26.8 billion to the UK economy through taxes and investments.

The firm’s highest ever annual profit came after a better-than-expected performance in the last three months of 2022, with quarterly underlying earnings edging up to 15.1 billion US dollars (£12.5 billion), against predictions for a fall.

But its report revealed that production from renewable energy sources was 2% lower year-on-year in the fourth quarter.

Equinor – which is majority Norwegian state-owned – is one of the biggest producers of gas in the world, and last year became Europe’s biggest supplier of natural gas after Russia’s Gazprom slashed deliveries amid sanctions against President Putin’s regime, following his invasion of Ukraine.

It has historically supplied around 25% of gas used in the UK.

Anders Opedal, president and chief executive of Equinor, said: “In 2022, we responded to the energy crisis and contributed to energy security.

“With strong operational performance, we delivered record results and cash flow from operations.

“We stepped up capital distribution to shareholders, while continuing to invest in a balanced energy transition and contributing to society with high tax payments.”

The group – which makes the bulk of its profit in Norway, where oil firms pay tax at 78% – said it expects to pay record taxes in 2022, with 42.8 billion US dollars (£35.4 billion) paid in tax related to operations on the Norwegian continental shelf.

Big Oil doubles profits in blockbuster 2022

THE CASE FOR A WINDFALL TAX

LONDON (Reuters) - Big Oil more than doubled its profits in 2022 to $219 billion, smashing previous records in a year of volatile energy prices where Russia's invasion of Ukraine reshaped global energy markets and, in some cases, the industry's climate ambitions.

The profit surge gave the oil companies scope to increase spending on oil and gas projects, and a chance for some to rethink energy transition strategies to meet new demands for security of supply.

The combined $219 billion in profits allowed BP, Chevron, Equinor, Exxon Mobil, Shell and TotalEnergies to shower shareholders with cash.

The top Western oil companies paid out a record $110 billion in dividends and share repurchases to investors in 2022, spurring outraged calls on governments to impose windfall taxes on the industry to help consumers with surging energy costs.

Norway's Equinor on Wednesday reported a doubling of adjusted operating profit in 2022 to $74.9 billion on the back of a surge in European natural gas prices and as it became Europe's largest gas supplier after Russia's Gazprom cut deliveries amid the West's support for Ukraine.

Oil companies last year also pulled out of Russia, a major energy producer, leading to huge writedowns, including BP's $24 billion exit from its 19.75% stake in Kremlin-controlled oil giant Rosneft.

LOW DEBT

The sharp rise in oil and gas prices, falling debt levels and the abrupt drop in Russian supplies to Europe also drove boards to increase spending on fossil fuel production as governments prioritised security of supply.

TotalEnergies Chief Executive Patrick Pouyanne said after the French company reported record profits of $36.2 billion on Wednesday that the global backdrop remained very favourable for energy companies, with the relaxing of COVID-19 measures in China pushing up demand for 2023.

"We wouldn't be surprised to see oil back to $100 a barrel," Pouyanne said. Benchmark oil prices are currently near $85 a barrel. [O/R]

European companies that have outlined plans to reduce or slow oil and gas investments and build large renewables and low-carbon businesses to cut greenhouse gas emissions adjusted their strategies.

None were more stark than BP Chief Executive Bernard Looney's move to row back on plans to reduce the British company's oil and gas output and carbon emissions by 2030.

"We need lower carbon energy, but we also need secure energy, and we need affordable energy. And that's what governments and society around the world are asking for," Looney said on Tuesday.

BP's shares hit their highest in three and a half years on Wednesday, building on a 7.6% gain a day earlier following the results and shift in strategy.

Bernstein analyst Oswald Clint called BP "a lesson in pragmatism, prioritisation and performance", rating it "outperform".

"Pragmatism takes priority this week as a world short energy together with governments begging for more from companies like BP causes a response. BP will lean more into oil & gas for the remainder of this decade," Clint said in a note.

(Reporting by Ron Bousso. Editing by Jane Merriman)

‘Sickening’ – Green groups slam BP for slashing emissions target amid record profits


Samuel Webb
Tue, 7 February 2023 


Environmental groups have condemned oil giant BP for slashing emissions targets when its profits hit record highs.

The company said that it had slashed its emissions reduction targets by a third, and will produce much more oil and gas by the end of this decade than previously thought – sparking fury from environmental groups and politicians.

BP said that profit reached £23 billion last year, just days after Shell reported its highest profit on record at nearly £33 billion.

Greenpeace UK’s head of climate justice Kate Blagojevic said: "Not only will BP’s new strategy fail to deliver much-needed energy security in the UK but it will ensure that people across the globe already battling devastating droughts, floods and heatwaves, will continue losing their lives and livelihoods."

Campaign group Global Justice Now said BP’s profit haul was "sickening" and called for a polluters’ tax.

Director Nick Dearden said: "It should sicken people to their core that BP is responsible for more global historic emissions than most countries on earth, yet has no plans to stop polluting even in the face of a global climate crisis.

Enough is enough. It’s time to bring in a polluters tax and hold BP truly accountable for the destruction they’ve wreaked across the planet.”

Connor Schwartz, climate campaigner at Friends of the Earth, said: “Inflation is soaring, real-terms pay has nosedived and energy bills are set to rise higher still in April.

“Fossil fuel companies shouldn’t be able to reap such massive profits while people are paying exorbitant energy costs.

Trades Union Congress general secretary Paul Nowak said BP was “laughing all the way to the bank”.

"Ministers are letting big oil and gas companies pocket billions in excess profits,” he added. “But they are refusing to give nurses, teachers and other key workers a decent pay rise."

Labour shadow climate change secretary Ed Miliband said: "What is so outrageous is that as fossil fuel companies rake in these enormous sums, Rishi Sunak still refuses to bring in a proper windfall tax that would make them pay their fair share.

"In just eight weeks’ time, the government plans to allow the energy price cap to rise to £3,000. Labour would use a proper windfall tax to stop prices going up in April."

Liberal Democrat leader Ed Davey said: "Yet another oil giant has been allowed to rake in huge profits from (Vladimir) Putin’s illegal invasion of Ukraine, while families choose between eating and heating.

"Rishi Sunak has failed the people of this country by ignoring calls for a proper windfall tax. "This Conservative government need to start putting people first instead of allowing energy bills to rise again this April.’’

BP had been one of the first oil and gas majors in the world to announce an ambition to cut emissions to net zero by 2050.

As part of this, it has previously promised that emissions will be 35-40 per cent lower by the end of this decade.

However, on Tuesday the company said it was significantly revising this target to a 20-30 per cent cut.

Boss Bernard Looney said it was about investing in both the transition and the energy that is needed today as he announced an extra $8 billion (£6.6 billion) for oil and gas investment by 2030 and another $8 billion for transition projects.

"With today’s announcement we are leaning further in," he said.

"We are growing our investment into our transition and, at the same time, growing investment into today’s energy system.”

BP said that it now plans to cut oil and gas production by just 25 per cent by the end of 2030 when compared to 2019. The previous target had been a 40 per cent cut.

Why BP is cutting back on its climate goals


Joel Mathis, Contributing Writer
Wed, 8 February 2023

oil barrels. Illustrated | Gettyimages

The road to a carbon-free world just got a little bumpier. BP — the energy company that pledged in 2020 to slash its carbon emissions to net zero — this week announced that its transition to renewable energy will slow down. Instead, The Wall Street Journal reports, the company is going to increase its spending on oil and gas after earning nearly $28 billion in profit for 2022. "At the end of the day, we're responding to what society wants," said Bernard Looney, the company's CEO. Critics say the decision will make it more difficult for the world to slow the rate of climate change. "Just when we need to be rolling back oil & gas production @BP_plc is rolling back its climate commitments," tweeted Doug Parr, the chief scientist for Greenpeace UK. Why is BP backing off its climate commitments? Here's everything you need to know:
What were BP's climate goals?

Even though it's a giant oil and gas company, BP has long tried to present an environmentally friendly image to the public: It even changed its name from "British Petroleum" in 2000 to de-emphasize the whole oil thing — the BP supposedly stood for "beyond petroleum" — and even helped popularize the idea of a "carbon footprint" in an early 21st-century advertising campaign. (Critics said the concept tried to shift the blame for climate change from big oil companies like, well, BP to individual consumers.) And in 2020, the company declared it would slash the carbon content of its products in half by 2050, largely by shifting to renewable energy products. There was skepticism, The Washington Post noted at the time. "It means BP is fundamentally promising to become a completely different kind of energy company by 2050," said Columbia University's Jason Bordoff. "Now we need its actions to live up to its promises."

So what changed?

BBC News reports that BP was aiming for at least a 35 percent carbon reduction by the end of this decade — that goal is now targeting a cut of somewhere between 20 and 30 percent. Why? "The shift follows a tumultuous year in energy markets driven by Russia's war in Ukraine that supercharged the industry's profits and drove up costs for households," the Financial Times reports. Looney says the moment calls for his company to drill and deliver more oil and gas to the market right now: "Governments and societies around the world are asking companies like ours to invest in today's energy system," he said. But FT also suggests that BP's climate goals have — despite the big profits that remain — undermined the company's value with shareholders. "Total shareholder returns since Looney took the helm in February 2020 have been the lowest among" major oil companies. And none of those companies have set a hard target to reduce carbon emissions. That means there's pressure to produce bigger returns, and also to back away from measures — like climate goals — that get in the way.
How are those other energy companies doing?

Exceedingly well, financially. Shell made $39 billion in profits in 2022 — the highest in its 115-year history, and more than double the previous year's returns. Chevron made $36 biExxon did even better: $56 billion in profits, which Reuters calls "a historic high for the Western oil industry."

What are critics saying?

BP's decision to cut back on its climate commitments — and the oil industry's mind-bending profits — have naturally produced pushback from climate activists. "It's astounding that in the middle of a climate emergency BP is planning to invest billions more dollars on planet-warming fossil fuels than on clean, green renewables." Friends of the Earth's Mike Childs tells The Guardian. In the UK, at least, there has been growing talk of putting teeth into a windfall tax on oil companies' global profits. There are big obstacles: Jeremy Hunt, the government's treasury minister, said this week he won't raise the tax. "Anything higher will stop investment, increase dependence on Putin and increase energy prices," he said. In the United States, California is also considering a windfall tax on oil companies. But while the Biden Administration has criticized the big oil profits, it's not clear that any federal action is forthcoming.

What's next?

More warming, and more drilling. The two are related. On Tuesday, the United Nations released a report — "Bracing for Superbugs" — saying global warming is contributing to the rise of bacteria, viruses, and fungi that can defeat medications that neutralize them: As many as 10 million people a year are expected to die from such infections by 2050. In the meantime, though, Bloomberg reports that BP's strategy involves "adding drilling capacity in the Gulf of Mexico, the North Sea and the Permian shale formation in the U.S." But at least one expert says that what goes up must come down. "This is a temporary situation," former BP executive Nick Butler tells BBC. "Oil and gas prices are going down and the windfall these companies are making won't last."

BP vowed to help set the oil and gas industry on a greener path. Many who bought in now feel betrayed

Vivienne Walt
Tue, 7 February 2023 


When BP appointed Bernard Looney as CEO exactly three years ago, climate activists believed they might finally have an ally within Big Oil, after decades of deep distrust of the energy industry. Looney—Irish, from a poor farming family—broke the mold of Britain’s century-old company in more ways than one: He vowed to turn BP into a green energy giant, by drastically cutting oil and gas production and plowing billions into renewables. “This is the first oil major to walk the walk,” Mark van Baal, founder of the Amsterdam-based shareholder activist organization Follow This, told Fortune at the time. “If one oil major breaks ranks, and shareholders reward them for it, others will follow.”

That optimism shattered on Tuesday, when BP became the latest oil supermajor to report record-high profits for 2022—while announcing, at the same time, a sharp rollback of its climate targets.

Thanks in part to soaring gas and oil prices over the past year, BP’s underlying profits more than doubled in 2022, to $27.7 billion. (Its exit from Russia, where it had a 19.75% stake in Rosneft, cost the company $24 billion, leaving it with a paper loss after taxes of $2.5 billion.)

Dramatic rollback

Despite the bumper year, however, Looney announced BP would dramatically roll back his key climate promise, which he made in 2020. That year, Looney pledged 40% cut in carbon emissions from BP’s oil and gas production by 2030. He argued that those dramatic shifts were urgent. “Without action, it is a rather bleak future for the world,” he told Fortune in 2020, echoing a central point that environmentalists had made for years.

But on Tuesday, he said that BP’s drop in emissions would likely be a more modest 20% to 30%. “We need continuing near-term investment into today’s energy system,” Looney said, adding that the energy transition has to be “an orderly one.” The company also said it would invest about $1 billion a year in oil and gas production—an apparent about-face from Looney’s earlier statement that the company would steadily reduce its involvement in fossil fuels.

To climate activists, that felt like a knife in the back. “BP’s aim to reduce absolute emissions from their own production was one of the few tangible targets in the entire oil industry,” van Baal told Fortune on Tuesday. “They made enormous profits, and they’re back in their comfort zone,” he says. “They want to hang on to their old business model as long as possible, because it is profitable.”

'Back in their comfort zone'

Van Baal says he will push for far-reaching cuts in fossil-fuel production, in resolutions that Follow This will put forward during Big Oil’s annual shareholder meetings this spring. In a meeting in late 2019, Looney persuaded Van Baal to withdraw a similar resolution, saying he wanted to work with him to roll out climate action within BP, according to Van Baal. Activists believe such resolutions have prompted oil companies to set carbon-emission targets for fear of alienating investors, who increasingly regard climate change as a major risk factor.

BP’s earlier commitments suggested that “the pressure climate-conscious investors were putting on the industry was having an impact,” said Kathy Mulvey, of the Union of Concerned Scientists, an environmental group in Cambridge, Mass. Now, she says, she believes “BP’s climate pledges have been cynical, empty, and opportunistic.”

'Energy trilemma'

Looney argues that the Ukraine war and rising inflation showed how important it was to have a steady flow oil and gas supplies. In a LinkedIn post, he said BP would focus its oil and gas investments on low-cost production. “The world wants and needs energy that’s secure and affordable, as well as lower carbon,” he said, calling it “the energy trilemma.”

Environmentalists said Looney was sugar-coating his rollback of climate commitments. “I’m sorry to say this is a huge disappointment,” Helena Farstad, cofounder and director of London-based climate branding company This is Agency, said in a response on LinkedIn. “BP has demonstrated its lack of leadership.”

This story was originally featured on Fortune.com

BP makes record profit in 2022, slows shift from oil

Ron Bousso and Shadia Nasralla
Tue, 7 February 2023

Logo of BP is seen at a petrol station in Kloten, Switzerland

By Ron Bousso and Shadia Nasralla

LONDON (Reuters) - BP reported on Tuesday a record profit of $28 billion for 2022 and hiked its dividend, but infuriated climate activists by rowing back on plans to slash oil and gas output and reduce carbon emissions by 2030.

The blockbuster profit follows similar reports from rivals Shell, Exxon Mobil and Chevron last week after energy prices surged in the wake of Russia's invasion of Ukraine, prompting new calls to further tax the sector as households struggle to pay energy bills.

Three years after CEO Bernard Looney took the helm with an ambitious plan to pivot BP away from oil and gas towards renewables and low-carbon energy, the company said it will increase annual spending in both sectors by $1 billion with a sharper focus on developing low-carbon biofuels and hydrogen.

But it scaled back plans to cut oil output, now aiming to produce 2 million barrels of oil equivalent per day by 2030, down just 25% from 2019 levels compared with previous plans for a 40% cut.

As a result, BP reduced its ambitions to cut emissions from fuels sold to customers to 20-30% by 2030, from 35-40%. BP still aims to reduce its total emissions to net zero by 2050.

"We need lower carbon energy, but we also need secure energy, and we need affordable energy. And that's what governments and society around the world are asking for," Looney told analysts.

While many investors backed Looney's strategy, which he told Reuters "is working", BP's shares have significantly underperformed top Western energy companies since the CEO took office, remaining largely flat compared with a 17% gain for Shell and a nearly 80% rise in Exxon shares.

"If the bulk of your investments remain tied to fossil fuels, and you even plan to increase those investments, you cannot claim to be aligned" with the 2015 U.N. backed goals to battle climate change, Mark van Baal, founder of activist shareholder group Follow This said.

BP's $4.8 billion fourth-quarter underlying replacement cost profit, its definition of net income, narrowly missed a $5 billion company-provided analyst forecast.

The results were impacted by weaker gas trading activity after an "exceptional" third quarter, higher refinery maintenance and lower oil and gas prices.

But for the year, BP's $27.6 billion profit exceeded its 2008 record of $26 billion despite a $25 billion writedown of its Russian assets.

That allowed it to boost its dividend by 10% to 6.61 cents per share, after halving it in the wake of the pandemic, and announce plans to repurchase $2.75 billion worth of shares over the next three months after buying $11.7 billion in 2022.

BP shares ended 7.6% higher on the day, their best daily performance since November 2020.

Graphic: BP's annual results- https://www.reuters.com/graphics/BP-RESULTS/zdvxoakoepx/chart.png

ENERGY TRANSITION

BP reiterated plans to divide its spending to 2030 equally between the oil and gas business and its energy transition businesses, upping the total budget to up to $18 billion from a previously guided upper range of $16 billion.

Transition businesses, such as renewables and electric vehicle charging, account for around 30% of the current budget compared with 3% in 2019.

BP kept it returns outlook for renewables largely unchanged at 6%-8%, without taking into account debt, even though global offshore wind production costs have soared in recent months.

Looney said BP's wind and solar production will focus more on providing renewable power to generate biofuels and low-carbon hydrogen, focusing particularly in the United States where the landmark Inflation Reduction Act offers investment credits and tax cuts.

BP, whose trading operations further boost renewables returns, maintained plans to have 50 gigawatts (GW) of renewable projects under development and 10 GW operating by 2030.

It said it expects returns of upwards of 15% from its bioenergy business and its combined electric vehicle charging and convenience store businesses, while looking for double-digit returns on hydrogen.

It aims to translate this into a core profit from the transition businesses of $10 billion-$12 billion by 2030, out of targeted total group earnings before interest, tax, depreciation and amortisation (EBITDA) of $51 billion-$56 billion.

BP also wants to increase its focus on renewable natural gas having last year acquired U.S. producer Archaea Energy for $4.1 billion, and it has also set a target to produce 0.5 million-0.7 million tonnes a year of low-carbon hydrogen to initially supply its own refineries.

BP, which increased its 2030 oil price forecast by $10 to $70 a barrel, will focus its global oil and gas operations in nine regions, with plans to sharply increase output from its U.S. shale business and in the Gulf of Mexico.

Graphic: BP's quarterly profits- https://www.reuters.com/graphics/BP-RESULTS/zgpobkjakvd/chart.png

(Reporting by Ron Bousso and Shadia Nasralla; Editing by Kirsten Donovan and Mark Potter)

BP Adds to Big Oil Cash Gusher With Dividend Hike, Buybacks

William Mathis
Tue, 7 February 2023 



(Bloomberg) -- BP Plc hiked its dividend and extended share buybacks after posting a record profit of $27.65 billion for 2022, joining its fellow supermajors by reaping the rewards of soaring oil and natural gas prices.

The cash gusher is delivering significant returns to investors — a 10% increase in the dividend and an extra $2.75 billion of buybacks — while also highlighting a contradiction at the heart of Europe’s oil industry. As major producers talk increasingly about the need to cut emissions and switch to cleaner energy, their polluting fossil fuel business is becoming ever more lucrative as a result of Russia’s invasion of Ukraine.

BP pledged to accelerate investments in both low-carbon energy and fossil fuels. However, the company slowed down its plan to get out of oil and gas and will be less aggressive in curbing its carbon emissions.

By 2030, production of fossil fuels will be about 25% lower than it was in 2019, excluding the contribution from Russia’s Rosneft PJSC. That’s a big revision to its 2020 goal to cut output by 40% by the end of the decade.

Shares of the company rose 3.2% to 493.5 pence as of 8:01 a.m. in London.

“We are growing our investment into our transition and, at the same time, growing investment into today’s energy system.” Chief Executive Officer Bernard Looney said in a statement on Tuesday. “It’s what governments and customers are asking of companies like us.”

BP said it would evenly split additional investment between low-carbon energy and oil and gas, spending up to $8 billion more on each by 2030. Annual capital expenditure could be slightly higher than previously planned, ranging between $14 billion and $18 billion each year for the rest of the decade.

The company will target petroleum resources that can be developed quickly, offer a fast payback and overall better returns. Last month, in its Energy Outlook report, BP predicted that Russia’s invasion of Ukraine would accelerate the world’s transition away from fossil fuels as countries seek to boost energy security by generating more renewable energy at home.

BP pledged to deliver higher returns from both clean energy and fossil fuels. By increasing investment and revising oil and gas price assumptions higher, the company said it would grow earnings per share before interest, taxes, depreciation and amortization by 12% a year through to 2025.

BP’s adjusted net income was $4.81 billion in the fourth quarter, down from the record-setting levels reached earlier in the year and missing the average analyst estimate of $5.11 billion.

The profit boom has been healthy for BP’s balance sheet, something that had been a source of investor concern in the years following the 2010 Deepwater Horizon oil spill. Net debt fell for the 11th successive quarter and was down by $9.2 billion over 2022.

--With assistance from Will Kennedy.

UK watchdog says Microsoft's Activision deal hurts gamers

Wed, February 8, 2023 


LONDON (AP) — Microsoft’s stalled $68.7 billion deal to buy video game company Activision Blizzard has hit a fresh hurdle in the United Kingdom, where the antitrust watchdog said Wednesday that it will stifle competition and hurt gamers.

Britain’s Competition and Markets Authority said its in-depth investigation found that the deal could strengthen Microsoft's position in the growing cloud gaming market, “harming U.K. gamers who cannot afford expensive consoles.”

The blockbuster deal also could hurt British gamers by “weakening the important rivalry” between Microsoft's Xbox console and Sony's rival PlayStation machines, the watchdog said in a provisional report.

The all-cash deal, which is set to be the largest in the history of the tech industry, is facing opposition from Sony and pushback from regulators in the U.S. and Europe because it would give Microsoft control of popular game franchises such as Call of Duty, World of Warcraft and Candy Crush.

Microsoft's deputy general counsel, Rima Alaily, said the company is “committed to offering effective and easily enforceable solutions that address the CMA’s concerns.”

The U.K. antitrust investigation is now set to drag on for a few more months. The regulator said it will now seek feedback, including possible options to address its competition concerns, from interested parties for its final report due April 26.

The move dashes Microsoft's hopes that a speedy favorable outcome could help it resolve a lawsuit brought by the U.S. Federal Trade Commission.

The FTC has sought to block the deal, arguing that the merger could violate antitrust laws by suppressing competitors to the Xbox game console and its growing game subscription business.

Microsoft told the FTC’s administrative judge in January that it was working to resolve the U.K. investigation, as well as a separate probe in the European Union, and hoped to bring back proposed remedies to U.S. regulators.

The Activision Blizzard deal is one of several regulatory hassles for Microsoft in Europe, amid expanded scrutiny for Big Tech companies on both sides of the Atlantic over worries that they have become too dominant.

The Associated Press

Britain says Microsoft's 'Call of Duty' deal could harm gamers



Paul Sandle
Wed, February 8, 2023 

LONDON (Reuters) - Britain's antitrust regulator said Microsoft's $69-billion purchase of "Call of Duty" maker Activision Blizzard could harm gamers by weakening the rivalry between Xbox and Sony's PlayStation.

The Competition and Markets Authority (CMA) said the deal could result in higher prices, fewer choices and less innovation for millions of gamers, as well as stifling competition in the growing cloud gaming market.

It said Activision's flagship "Call of Duty" franchise was important in driving competition between consoles, and Microsoft could benefit by making the game exclusive to Xbox, or only available on PlayStation under materially worse conditions.

The mega deal is being scrutinized in the United Sates and Europe as well as in Britain, where the CMA showed its willingness to take-on big tech in 2021 when it blocked Facebook-owner Meta's acquisition of Giphy.

In December, the United States moved to block the deal, citing Microsoft's record of hoarding valuable gaming content. The Federal Trade Commission has set a hearing before a judge for August this year.

The CMA investigation's chair Martin Coleman said his job was to make sure that British gamers were not caught in the crossfire of global deals that could damage competition and result in higher prices, fewer choices, or less innovation.

"We have provisionally found that this may be the case here," he said.

Microsoft, which has pledged to keep "Call of Duty" on PlayStation, said it would address the CMA's concerns.

"Our commitment to grant long-term 100% equal access to ' Call of Duty' to Sony, Nintendo, Steam and others preserves the deal's benefits to gamers and developers and increases competition in the market," Corporate Vice President and Deputy General Counsel Rima Alaily said.

The company stressed that equal meant parity on content, pricing, features, quality and playability for 10 years.

Activision Blizzard said the CMA's findings were provisional and both parties had a chance to respond before it issues a final report by April 26.

"We hope between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals, (and) where competitive, fair-dealing business can innovate and thrive," a spokesperson said.

(Reporting by Paul Sandle and Aby Jose Koilparambil; editing by Michael Holden and Bernadette Baum)

Microsoft’s Activision Blizzard acquisition will harm UK gamers, says watchdog

Mark Sweney and Dan Milmo

THE GUARDIAN
Wed, 8 February 2023 

Photograph: Dado Ruvić/Reuters

The UK’s competition regulator has ruled that Microsoft’s $68.7bn (£59.6bn) deal to buy Activision Blizzard, the video game publisher behind hits including Call of Duty, will result in higher prices and less competition for UK gamers.

The Competition and Markets Authority (CMA), which launched an in-depth investigation in September after raising a host of concerns about the biggest takeover in tech history, said the deal would weaken the global rivalry between Microsoft’s Xbox and Sony’s PlayStation consoles.

“Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation,” said Martin Coleman, the chair of the independent panel of experts conducting the investigation. “We have provisionally found that this may be the case here.”

Related: Hogwarts Legacy review – wizarding wish-fulfilment whose magic wears off

The CMA said possible remedies to address competition issues included selling or spinning off the business that makes Call of Duty, or the entire Activision arm of the combined Activision Blizzard.

However, the watchdog acknowledged that a spin-off into a standalone operation would mean the new business “may not have sufficient assets and resources to operate as an independent entity”.

While the CMA did not completely rule out measures short of a divestiture – for example a “behavioural remedy” such as an iron-clad licence to guarantee distribution of Call of Duty to Sony – it said a structural solution such as a partial sale, spin-off or completely blocking the deal was its preferred option.

“We are of the initial view that any behavioural remedy in this case is likely to present material effectiveness risks,” it said. “At this stage, the CMA considers that certain divestitures and/or prohibition are, in principle, feasible remedies in this case.”

The CMA said there was a risk under the deal that Microsoft could try to make Call of Duty, Activision’s flagship game and one of the most popular and profitable global franchises of all time, exclusively available to Xbox console owners.

Last year, Microsoft attempted to allay competition concerns, saying it would offer its rival Sony a 10-year licence to ensure the title stayed on its PlayStation consoles. However, after Microsoft’s $7.5bn acquisition of ZeniMax in 2020, the parent of studios behind games including The Elder Scrolls, Fallout and Doom, Microsoft moved to make some titles exclusive to its own devices.

“Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own consoles, or only available on PlayStation under materially worse conditions,” the CMA said. “This strategy, of buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions of games studios.”

The CMA said the end result could be that gamers would face “higher prices, reduced range, lower quality, and worse service in gaming consoles over time”.

Microsoft said it believed its 10-year guarantee to continue to offer Call of Duty to rivals on equal terms would be enough to allay competition concerns. “We are committed to offering effective and easily enforceable solutions that address the CMA’s concerns,” said Rima Alaily, the corporate vice-president and deputy general counsel at Microsoft.

The CMA’s ruling is of critical importance as it comes before the publication of official findings of investigations conducted by the European Commission and the US Federal Trade Commission, which in December launched legal action to block the deal.

Anne Witt, a professor of antitrust law at EDHEC Business School, said a full block by the CMA would force Microsoft to abandon the deal worldwide, unless it managed to get the decision overturned on appeal; while if Microsoft agreed to sell Call of Duty, such a move would probably satisfy other regulators.

“If the CMA gets Microsoft to sell Call of Duty it would probably meet the concerns of the FTC and the EU,” said Witt.

She added that regulators were less likely to accept behavioural remedies because they could be circumvented and were expensive to monitor. “If they don’t hammer out some kind of compromise and Microsoft does not accept the structural remedies, the CMA will have no other option than to prohibit the deal,” she said.

Activision Blizzard said it would attempt to change the CMA’s mind, “to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals”.

Microsoft’s all-cash offer for Activision Blizzard, which also publishes global hits such as World of Warcraft and Candy Crush, dwarfs its previous biggest deal, the $26bn takeover of LinkedIn in 2016.

The purchase would result in the Xbox maker becoming the world’s third-biggest gaming company by revenue behind China’s Tencent and Japan’s Sony.

Analysis-Brazil central bank autonomy becomes political punching bag for Lula


People walk in front the Central Bank headquarters building in Brasilia

Wed, February 8, 2023 
By Marcela Ayres and Bernardo Caram

BRASILIA (Reuters) - Brazil's central bank newfound independence that was designed to shield it from politics has turned it into a convenient punching bag for the new government that can use it to fire up its leftist base and blame it for economic woes.

Since his Jan. 1 inauguration President Luiz Inacio Lula da Silva has repeatedly attacked the bank, led by respected economist and financial markets executive Roberto Campos Neto, calling its interest rates excessively high and "shameful" and blaming them for stunting growth.

Further to his left, socialist leader Guilherme Boulos called Campos Neto an agent left in office by Lula's far-right predecessor Jair Bolsonaro to "boycott" the economy.

With the bank's autonomy established by law under Bolsonaro in 2021, its board of directors is no longer changed at the same time when new governments take office, so Campos Neto's term as governor runs until the end of 2024.

Two of his close associates told Reuters that Campos Neto was not considering leaving the bank despite government pressure.

They stressed, on condition of anonymity, that Campos Neto considered the central bank autonomy a crucial institutional gain, and that he played a role in safeguarding it by staying on until the end of his mandate.

Political observers attribute Lula's irritation with the bank to a mix of slowing economic growth and high inflation that could threaten his government's re-election prospects in 2026.

But economists think Lula is putting on an act and see no real danger of him curbing the bank's independence.

"He needs to appease his political base to negotiate more freely later with the central bank," said André Perfeito, chief economist at brokerage Necton.

The bank's benchmark Selic rate is now at 13.75%, and its monetary policy committee has not ruled out further hikes to bring down inflation, which last was 5.87% in mid-January, still far from this year's 3.25% official target.

The committee kept the rate unchanged last week in its first policy decision under the new government, signaling rates would stay high for longer than markets expect due to fiscal risks under Lula.

Soon after taking office, Lula began criticizing the country's official inflation targets a too low. That spurred a rise in longer-term bond yields and weighed on the real, with the Brazilian currency underperforming its emerging market rivals.

Felipe Salles, chief economist of C6 Bank, sees small short-term risks for the independence due to the frictions, but said the government's actual objective could be raising inflation goals.

The official targets are defined by the National Monetary Council, currently comprised of the Finance Minister, Planning Minister, and central bank governor, meaning the federal government has two of the three votes in the committee.

Lula has already argued that the country should pursue its own inflation pattern rather than follow what he called the "European" model, but government officials have played down any possibilities of change.

The mandate of Campos Neto and his current eight directors will expire at different times between now and 2025, and it will be up to Lula to appoint all the replacements, starting with the Monetary Policy and Supervision directors, whose mandates expire by the end of this month.

Lula is expected to appoint a person aligned with his vision to the Monetary Policy position, which plays a major role in monetary policy decisions and oversees the foreign exchange and interest rate desks.

But even if Lula packs the board with people fully aligned with his ideas, Campos Neto and his current directors will retain a majority in the rate-setting committee until the end of the governor's mandate.

Former central bank director Alexandre Schwartsman warned that Lula could indeed ignore Campos Neto's suggestions for rate-setting panel replacements or raise inflation targets.

"If this is the path followed, make no mistake about it, inflation expectations would rise," Schwartsman said.

Former central bank chief Henrique Meirelles, who headed the institution in Lula's first term, suggested the president's talk of the bank's independence was counterproductive.

"The less he talks about the subject, the better one can control expectations and lower interest rates," Meirelles said.

(Reporting by Marcela Ayres and Bernardo Caram; Editing by Tomasz Janowski)

Americanas accounting scandal was a 'fraud,' says CEO of Brazil's Itau

Wed, February 8, 2023 

 People walk in front of a Lojas Americanas store in Brasilia

SAO PAULO (Reuters) - The chief executive of Brazil's biggest private lender Itau Unibanco said on Wednesday that the accounting inconsistencies that led retailer Americanas SA to request bankruptcy protection represent a case of 'fraud'.

Milton Maluhy Filho's remarks came after Itau, which had a multi-million-dollar exposure to Americanas, had to set aside more cash for bad loans in the fourth quarter.

Maluhy added that Itau has not identified any case similar to that of Americanas, which reported around $8 billion in debt after disclosing "inconsistencies" in its accounting.

(Reporting by Aluisio Alves; Editing by Steven Grattan)

Grocery CEOs snub Ottawa profiteering inquiry, exacerbating tensions with politicians


Jake Edmiston
Wed, February 8, 2023

metro-0208-ph

The heads of Canada’s top supermarket chains have so far snubbed parliamentarians investigating allegations of profiteering in the grocery business, exacerbating tensions with politicians who appear keen to confront the country’s oligopolies over inflation.

Quebec grocery giant Metro Inc. sent chief financial officer François Thibault to a hearing held by the Commons agriculture committee on the evening of Feb 6.

That’s not who some members wanted to see. Alistair MacGregor, the NDP member of Parliament from Vancouver Island who helped launch the profiteering inquiry late last year, wanted to know why Thibault’s boss, chief executive Eric La Flèche, didn’t show up instead.

“Your sector is going through a very deep crisis of confidence with the Canadian people,” MacGregor told Thibault. “Given the state of Canadian anger with the high cost of food, why wouldn’t Mr. La Flèche take the opportunity as the face of his company to publicly come here and defend it? Why is he not here today?”

Thibault responded: “Well, I’m a leader of the company.”

MacGregor was equally offended at the previous hearing, in early December, when Loblaw Cos. Ltd. and Sobeys’ parent Empire Co. Ltd., opted to send lieutenants instead of the CEO. The Retail Council of Canada, a lobby group that represents the grocers, said the original invitations didn’t ask for CEOs. But after the December hearing, MacGregor asked the committee to reissue invitations to Loblaw, Empire and Metro, this time specifically requesting that the head of the company show up.

But at the Feb. 6 hearing, La Flèche wasn’t there.

A matter of trust

MacGregor rattled off the various scandals that dog Canada’s big grocers, including the ongoing Competition Bureau investigation into allegations of bread-price fixing, and the 2020 Hero Pay affair that pushed Ottawa to strengthen rules against wage-fixing. The government is also pressuring the industry to create a new watchdog to stop the large retail chains from bullying farmers and food processors. And the Competition Bureau has launched a study of whether heavy consolidation in the food industry — where five retailers control roughly 80 per cent of sales — has helped drive inflation.

“And then we, you know, have a parliamentary inquiry into this matter, and for the three biggest chains in Canada, not one single head of the company came to publicly defend their company,” MacGregor said. “We do have the power to act, and whether that’s strengthening our competition laws or giving more resources to the Competition Bureau, those are options that we have. But my question to you sir is, what is the sector going to do to regain that trust?”

“Well, I firmly believe that customers show their trust every day,” Thibault responded. “We do hundreds of thousands of transactions every day.”

“So that’s it? You just – you think you do have the trust at present?” MacGregor said.

“Yes,” Thibault said. “We fight every day to gain that trust and keep that trust.”

“With respect, that’s completely opposite to what we’re hearing,” MacGregor said, just as his allotted time elapsed.

‘Look at the margins’

Canada’s top three grocers deny it, but they haven’t been able to shake accusations of profiteering from the worst food inflation since the early 1980s. Economists at progressive think-tanks, including the Canadian Centre for Policy Alternatives, have questioned how the chains have expanded margins and increased profits while grocery bills soared, up around 11 per cent year over year according to the latest consumer price index from Statistics Canada.

Metro, along with Loblaw, has urged its critics to consider their gross margins when trying to determine whether stores are marking up products more than necessary. Gross margin measures the portion of sales left over after subtracting the grocer’s cost on that product. So if a grocer hiked prices only enough to pass on cost increases from their suppliers, the company’s overall sales would increase but the margin would stay stable.

The grocers have said their gross margins on food sales are stable at best. Metro said in an earnings update last month that those margins are actually getting worse, as the company puts on more promotions to try to compete for cash-strapped customers.

“You have to look at the margins,” Thibault told the inquiry. “The food margin was lower and it was compensated by a larger margin in pharmacies.”

Metro owns the Quebec pharmacy chain Jean Coutu and Loblaw owns Shoppers Drug Mart. Both argue that as the pandemic waned, customers started buying more higher margin beauty products and over-the-counter cold medication, leading to an improvement in the overall gross margin. (Empire doesn’t own a national pharmacy brand and has said its improvements are coming from a three-year turnaround project that is aimed at finding $500 million in annual cost savings.)

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Accounting experts say the pharmacy explanation is plausible, but Metro and Loblaw’s public financial documents don’t break down the gross margin by category, so it’s impossible to confirm.

“When we look at the financial statements, there seems to be something a little bit opaque,” Bloc Québécois MP Yves Perron asked Thibault during the hearing. “Don’t you think that your industry would benefit from being more transparent about these kinds of facts?”

Thibault said Metro publishes its financial results according to the “accounting norms and standards that are in place.”

Liberal MP Leah Taylor Roy pressed further, asking why Metro doesn’t publish the data — regardless of whether it’s required by accounting guidelines.

“We can look at this any way you want and talk about all the costs that are coming through. But facts don’t lie. And executive pay has gone up. Dividends have gone up. You said investments have gone up. But workers salaries haven’t gone up,” she said. “I continue to hear this emphasis on margins and accounting guidelines. But I’ve also heard from you that you want transparency and everything has to be open. I don’t think there’s any requirement that you only report margins the way you are.”

Time ran out before Thibault could response to the question.

In a statement later, Metro spokesperson Marie-Claude Bacon declined to provide a breakdown of the company’s gross margins in food versus pharmacy. “It is information that we do not disclose,” she said in an email.