2023-11-24 09:32

WASHINGTON, Nov 22 (Reuters) - A U.S. appeals court on Wednesday said it struck down the Biden administration's decision to deny small refiners "hardship waivers" that exempt them from nation's biofuel mandates, in a win for the refining industry. In July, the Environmental Protection Agency (EPA) denied almost all outstanding petitions from oil refiners that argued the federal requirement that they blend ethanol and other biofuels into their fuel would cause them financial hardship. The U.S. Court of Appeals for the Fifth Circuit found in favor of refineries that challenged the EPA's decision, including Ergon, Calumet Shreveport and Placid. The court said in its 38-page decision that the EPA's rejection of the waiver requests was "impermissibly retroactive; contrary to law; and counter to the record evidence". Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation's fuel mix, or buy tradable credits from those that do. The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm. The biofuel industry, including producers of corn-based ethanol, have fought the small refinery waiver program for years, arguing that it has been overused in a way that helps the oil industry but hurts American farmers. Refiners, meanwhile, have long argued that the nation's ethanol mandates impose unfair costs on fuel producers, and can threaten the viability of small plants. https://www.reuters.com/legal/us-court-rejects-epas-decision-withhold-small-refinery-biofuel-waivers-2023-11-23/

2023-11-24 06:41

Nov 24 (Reuters) - Bank of England Chief Economist Huw Pill said it had to hold firm in its battle against inflation and it cannot afford to loosen tight monetary policy, the Financial Times reported on Friday. Pill said that the economy was seeing slow growth in activity and unemployment but that was largely supply-driven and not associated with the easing of inflationary pressures. He said that headline inflation had come down, which was largely "exogenously driven" as energy, food and international goods prices had stabilised, but the bank still needed to focus on bringing domestically generated inflation down. "Despite the fact that activity has weakened in our forecast relative to what we anticipated, if you look at those key indicators of the persistent domestic underlying components of inflation (namely services price inflation and pay growth), those things have remained stubbornly high through the summer," Pill told the FT in an interview "Indeed, even in the most recent data, although both have shown a small — but welcome — sign of falling, they remain at very elevated levels," he said, referring to domestic price inflation and pay growth. Pill said that the challenge for the bank was to bring down the components of inflation that have remained high. Earlier this month, Pill had said it was "not totally unreasonable" to think about a rate cut around August 2024 which was priced into the market at the time. Economists polled by Reuters earlier this month expected the BoE will keep its Bank Rate at a 15-year high of 5.25% until at least July, but participants said the bigger risk for the first cut was that it comes later than they expected. https://www.reuters.com/markets/europe/boes-pill-says-bank-must-hold-firm-battle-against-inflation-ft-2023-11-24/

2023-11-24 06:35

SILKYARA, India, Nov 24 (Reuters) - Hopes for the imminent rescue of 41 men trapped in a highway tunnel in the Indian Himalayas for nearly two weeks were dashed by a problem with the drilling equipment, officials said on Friday, but efforts to reach the workers should resume soon. The men, construction workers from some of India's poorest states, have been confined in the 4.5-km (3-mile) tunnel in Uttarakhand state since it caved in early on Nov. 12. Authorities have said they are safe, with access to light, oxygen, food, water and medicines. Attempts to pull them out by drilling through the debris of rock, stones and metal and pushing through an evacuation pipe have been slowed by snags. Rescuers had hoped to finish the drilling late on Thursday but had to suspend it after the platform on which the auger machine is placed was damaged, and subsequently a metal pipe was found stuck to the machine, requiring it to be reassembled, a government statement said. An estimated 15 metres (49 feet) of the debris pile is left to be drilled through and a study using ground penetration radar shows there is no metallic obstruction for the next 5 metres, said Bhaskar Khulbe, a senior tunnel project official. "We have a very big positive in that," Khulbe told reporters. "This means our drilling should be smooth ... and we are much more hopeful," he said, adding that drilling should resume by 11.30 a.m. (0600 GMT). The rescue plan involves pushing a pipe wide enough to pull the trapped men out on wheeled stretchers. Rescue workers rehearsed the evacuation by going into the pipe and being pulled out on stretchers, a video clip provided by authorities showed. A second plan to drill vertically from atop the hill is also being pursued and the drilling machines are being assembled, the statement said. The men have been getting cooked food since a larger lifeline pipe was pushed through earlier this week and the statement said they were sent 200 rotis or Indian round flat bread, lentils and mixed vegetable curry. More than a dozen doctors, including psychiatrists, have been at the site, talking to the men and monitoring their health. They have been told to do light yoga exercises, walk around in the 2-km space they have been confined to, and keep talking to each other. Rohit Gondwal, a psychiatrist, told Reuters they were also considering sending playing cards and board games such as ludo and chess. The collapsed tunnel is on the Char Dham pilgrimage route, one of the most ambitious projects of Prime Minister Narendra Modi's government. It aims to link four key Hindu pilgrimage sites with 890 km (550 miles) of two-lane road, at a cost of $1.5 billion. Authorities have not said what caused the tunnel collapse, but the region is prone to landslides, earthquakes and floods. https://www.reuters.com/world/india/drilling-snag-delays-rescue-41-men-stuck-indian-tunnel-2023-11-24/

2023-11-24 06:11

Mumbai, Nov 24 (Reuters) - The Indian rupee's relative stability is changing hedging behaviour among businesses in the country, spurring them into using creative options structures in place of conventional tools. Companies are using options-structures such as seagulls and range-forwards, bankers say, rather than simply using a forward contract to lock in a rate for future foreign payments and receipts. Exporters say forward sales of their dollar receipts for rupees are not lucrative in the current environment, and dabbling in derivatives enhances returns. Pankaj Kumar, general manager forex at Merino Industries, a small firm with an annual foreign exchange exposure of $130 million to $140 million, has turned to an option structure called the range-forward which will allow him to sell his dollars in a year's time at a rate in the range of 83.50 to 85.60 rupees. Kumar was driven to the structure by the depressed forward premiums on the rupee. A simple forward contract would lock him into a one-year rate of 84.60. He likes the upside potential in a range-forward, alongside the safety of a hedge in case the rupee appreciates. "Used judiciously, options can offer superior results when compared to other hedging instruments," says Samir Lodha, managing director of FX advisory firm QuantArt Market Solutions, that advises about 100 mid-and-large sized corporates. For an efficient hedge, "one needs to have strategies and instruments and dynamism which reduce both risk and cost," Lodha said. Bankers say they are now dealing more in currency options than before. A senior currency sales executive at a large private sector bank says options volumes through October and November are about 40% higher than they were in July. Seagulls and more exotic structures like knock-ins and knock-outs done by importers have been the main drivers of the increase in volumes, he said. Importers seem driven by rupee's low volatility, which makes them reluctant to pay the forward premium to buy dollars. STEADY AS SHE GOES The rupee's volatility has been suppressed by the Reserve Bank of India's heavy hand in supporting markets, even as other emerging market currencies have had to contend with an aggressively hawkish Federal Reserve and surging dollar. The rupee's six-month annualised realised volatility is down to 2.5%, the lowest in nearly 20 years. And, the premium to buy or sell dollars in the forward market has collapsed. The six-month premium has steadily fallen from above 5% in mid-2022 to 1.5% this week. Thanks to the low volatility and depressed forward premiums, a third of the hedging portfolio of companies at his bank now comprises options, the currency sales executive at the private bank said, a doubling of levels seen when premiums were higher and exporters could get attractive forward rates. A widely used option structure is a three-legged, zero cost strategy called the seagull, which allows an importer or exporter to lock in one rate while allowing the firm to exploit an upward or downward move. "A seagull allows you to take a calculated risk, based on your view on the range of the rupee during the tenure of the option," said Alok Agarwal, chief financial officer at Shyam Ferro Alloys, which has an annual currency exposure of about $350-400 million. "You can achieve a rate that is better than the forward rate, and the option strikes can be adjusted to reflect the risk you are willing to take for that." https://www.reuters.com/world/india/indian-rupees-low-volatility-spurs-more-options-hedging-2023-11-24/

2023-11-24 06:01

SYDNEY, Nov 24 (Reuters) - The long-term value of hotly contested $10.6 billion takeover target Origin Energy (ORG.AX) has been muddied by a government plan to accelerate the rollout of renewable energy, announced just hours before a key shareholder vote. The Australian government announced plans on Thursday to underwrite 32 gigawatts (GW) of new wind, solar and battery projects. Two energy experts told Reuters it could spur investment worth at least A$30 billion ($20 billion). The announcement contained no figures. The plan to reshape the electricity market, where Origin is the second largest power producer, has scrambled the outlook for electricity prices, future investments, and existing plants. It was released just before Origin announced a last-minute revised offer from Brookfield (BAM.TO) and EIG as it became clear investors would reject the consortium's earlier bid. Origin's board delayed the vote to Dec. 4 to consider the bid and the impact of the 32 GW scheme. The uncertain outlook for Origin under the government's new policy has made some investors say it makes more sense than ever to sell to the suitors, but top shareholder AustralianSuper is adamant it wants to hold on. More renewables will ultimately lower electricity prices, squeeze margins and shorten the life of Origin's existing coal and gas assets, said Max Vickerson, an equity analyst at Morgans. "This move accelerates the destruction of value at the legacy assets owned by Origin and AGL," he said, referring to Origin's rival AGL Energy (AGL.AX). "Cheaper wholesale prices are not a good thing on balance for Origin." However, the potential for new investment via the government's scheme undercuts Brookfield's argument that Origin and Australia needed its deep pockets to decarbonise quickly, Vickerson said. Brookfield has not commented publicly on the scheme, but a person close to the asset manager said the revenue guarantee for eligible projects would diminish the benefits of having a large customer base for a big power producer, like Origin. Should others take up the government's underwriting offer, Origin could potentially save billions by letting others build new wind and solar farms and simply contracting power for its 4.2 million customers, said Tom Leske a director at Churchill Capital, which advises event-driven hedge funds. "But ultimately there's so much variability about what the economic outcome is going to be," he said. Pension giant AustralianSuper has argued Origin's stake in fast-growing British renewable energy company Octopus Energy, gas assets and millions of customers position the company well for the energy transition. The government's new scheme only strengthens the fund's conviction about Origin, according to a person familiar with AustralianSuper's thinking. However, Simon Mawhinney, chief investment officer at fund manager Allan Gray, which owns a roughly 3% stake in Origin, said the government's plan appears likely to push down returns. More uncertainty only strengthens the case for taking the A$9.43 on offer today, he said. "The price was fair given our perception of the risk and rewards before the announcement. This adds a lot of uncertainty." "It's probably good for consumers and the environment and bad for everyone else," he said. ($1 = 1.5366 Australian dollars) https://www.reuters.com/markets/deals/australias-clean-energy-plan-muddles-106-bln-takeover-fight-origin-2023-11-24/

2023-11-24 05:55

Uruguay wants trade deal between Mercosur, China Mercosur-China deal could pressure Paraguay over Taiwan ties Uruguayan beef exports to China face higher tariffs than Australia BEIJING, Nov 24 (Reuters) - Uruguayan President Luis Lacalle Pou and Chinese Premier Li Qiang are keen to keep working on a bilateral free trade agreement as well as pursue one between China and the wider Mercosur trade bloc, according to a joint statement. The statement follows a Thursday meeting in Beijing between the two and comes after China and Uruguay this week upgraded their bilateral relationship to a "comprehensive strategic partnership," elevating Montevideo's ties with Beijing to those of Argentina and Brazil. Beijing is seen as particularly interested in an FTA with Mercosur as that could put pressure on Paraguay, the last remaining South American country with ties to Taipei, to rethink its links with Taiwan which China considers part of its territory. The statement said that Uruaguay and China were committed to pursuing a bilateral FTA and noted that a joint feasibility study had been completed. "At the same time, the two sides are willing to promote China-Mercosur FTA talks," it added. Lacalle Pou first proposed a bilateral FTA with China in 2021 to secure similar opportunities for its exporters as those enjoyed by Chile, Costa Rica, Ecuador and Peru - countries which have secured tariff-free access to the world's second-largest economy. "Uruguay is firmly committed to close relations with China and active participation in the Belt and Road Initiative (BRI)," Lacalle Pou said, according to a readout of the meeting in Chinese state media. Uruguay was also "willing to... accelerate establishing an FTA between Uruguay, Mercosur and China," Chinese media quoted him as saying. But Uruguay faces stiff opposition from fellow Mercosur members Argentina, Brazil and Paraguay who want their bloc to settle an FTA with Europe instead. Last November, they warned they could take "measures" against Uruguay if it forged ahead with its plans to unilaterally negotiate an FTA with China. Uruguay has also applied to join a major trans-Pacific free trade pact that China also aspires to join, but both Montevideo and Beijing must overcome significant political hurdles before that is possible. Li was quoted as saying that China and Uruguay should take the signing of Belt and Road Initiative cooperation documents as an opportunity to promote a continuing increase in bilateral trade. China accounted for 27% of Uruguay's exports in 2022, United Nations Comtrade data shows. At present, Uruguayan beef, which constituted two-thirds of those exports to China, is subject to a 12% tariff. By comparison, other major beef exporters Australia and New Zealand, which have FTAs with China, pay tariffs at 3.3% and 0%. Uruguay came close to signing an FTA with the United States in 2006, but its government at the time eventually rejected the deal over fears of expulsion from Mercosur if it did so. According to a study conducted by the National Meat Institute of Uruguay in 2021, if China signs an FTA with Uruguay, the meat industry can implement a 0% preferential tariff, which will reduce tariffs by $150 million. https://www.reuters.com/markets/uruguay-wants-speed-up-trade-talks-with-china-mercosur-puts-pressure-paraguay-2023-11-23/