2024-06-26 11:22

MOSCOW, June 26 (Reuters) - Russian energy giant Gazprom (GAZP.MM) New Tab, opens new tab has signed a memorandum with the National Iranian Gas Company (NIGC) to supply Russian pipeline gas to Iran, it said on Wednesday. No details from the memorandum, which was signed during a visit by Gazprom's head Alexei Miller to Iran at a ceremony attended by Iran's interim president Mohammad Mokhber, were revealed. Iran sits on the world's second-largest gas reserves after Russia, and Moscow has long sought to make inroads into its natural gas business. U.S. sanctions have hindered Iran's access to technology and slowed the development of its gas exports. Gazprom has seen its gas supplies to Europe, once the source of two-thirds of its gas sales revenue, plummeting to post-Soviet lows over the conflict in Ukraine. Last year it incurred losses of almost $7 billion, its first annual loss since 1999. In July 2022 Gazprom signed a memorandum of understanding on energy cooperation with the National Iranian Oil Company (NIOC) worth around $40 billion, but no concrete deals have emerged from that agreement. Under its terms Gazprom was supposed to help NIOC develop the Kish and North Pars gas fields and six oil fields, and to become involved in the completion of liquefied natural gas (LNG) projects and the construction of gas export pipelines. Sign up here. https://www.reuters.com/business/energy/gazprom-signs-memo-with-iran-russian-gas-supplies-2024-06-26/

2024-06-26 11:07

TOKYO, June 26 (Reuters) - JERA, Japan's biggest power generator, said on Wednesday it has concluded a three-month trial of co-firing 20% of ammonia with coal at its Hekinan thermal power station in central Japan with positive results. The utility, along with heavy machinery maker IHI (7013.T) New Tab, opens new tab, started the test at a 1-gigawatt (GW) unit on April 1, in what it said was the world's first trial using a large amount of the gas at a major commercial plant. JERA said results were positive, confirming that nitrogen oxides levels were no higher than when firing coal alone, sulphur oxides were reduced by 20%, and generation of nitrous oxide, which has a strong greenhouse effect, was below the detection threshold. The company, jointly-owned by Tokyo Electric Power (9501.T) New Tab, opens new tab and Chubu Electric Power (9502.T) New Tab, opens new tab, also confirmed that operability was comparable to when firing coal alone, it said. Based on the results, JERA will begin construction in July to enable commercial operation using large-volume fuel ammonia substitution at Hekinan power station. JERA will thoroughly evaluate the recent test's impact on the boiler and peripheral equipment, aiming to establish technologies for wider use of ammonia as fuel in thermal power generation by March 2025. Ammonia, a toxic gas primarily produced from hydrogen derived from natural gas and nitrogen extracted from the air, does not emit carbon dioxide when burned. It is principally used as a raw material for fertiliser and chemicals, but it can also serve as a low-carbon fuel in power generation and marine bunker operations. Japan aims to expand ammonia co-firing to reduce the climate impact of its power plants running on coal - the fossil fuel with the highest CO2 emissions. However, some environmentalists criticize the plan for potentially extending the lifespan of coal-fired power plants. Energy analysts BloombergNEF have said ammonia-coal co-firing is too expensive for widespread use in Japan's power sector and that a coal plant running on up to 50% ammonia would still emit more CO2 than a gas plant. Sign up here. https://www.reuters.com/business/energy/jera-ends-ammonia-co-firing-trial-coal-power-station-with-positive-results-2024-06-26/

2024-06-26 10:57

VW software unit Cariad 'should and will disappear' - analyst JV keeps Volkswagen's capital spending high Rivian rises as much as 37% on Wednesday Funds to help Rivian compete better against Tesla BERLIN, June 26 (Reuters) - Volkswagen (VOWG_p.DE) New Tab, opens new tab shares fell 2% on Wednesday as investors worried about the cost and uncertainties of a joint venture with U.S. electric-vehicle maker Rivian (RIVN.O) New Tab, opens new tab aimed at beefing up the biggest European automaker's position in EVs. Rivian investors cheered the shot in the arm, pushing up the stock of the money-losing company as much as 37%. The shares were up 24.4% at midday in New York, adding nearly $3 billion to its market value. The German group said on Tuesday it would invest up to $5 billion in Rivian as part of a venture to share EV platforms and software. The investment will also bolster Rivian's depleting cash reserves, move the startup closer to profitability and help it compete better in a market dominated by Tesla (TSLA.O) New Tab, opens new tab. The tie-up is the latest shift by Volkswagen from a go-it-alone strategy to bringing in expertise via partnerships in key areas for electrification, from batteries to EV platforms to software. It also underscores the struggle of traditional automakers to build battery-powered vehicles and advanced software even as EV startups grapple with a slowdown in demand amid high interest rates and dwindling cash. But it adds to questions about the future of Volkswagen's own software subsidiary, Cariad, which has experienced years of delays and losses. Questions also remain about whether the two companies will be able to align culture and strategies. "Cariad should and will disappear. The reality is it's going to become irrelevant and die a natural death," said Jefferies analyst Philippe Houchois, adding that no other legacy carmaker had managed to build a competitive software offering alone. Still, Houchois welcomed the change in strategy signalled by the deal. "The old VW would have kept throwing money at the problem - the new VW with (CEO Oliver) Blume is more pragmatic and humble, looking for help elsewhere." Responsibility and resources for developing a unified operating system for vehicles across the Volkswagen Group - dubbed the "2.0" software architecture or "software-defined vehicle" - will be centralised in the joint venture, bringing in expertise from Cariad. The JV will be a repository of Rivian's existing intellectual property, and the company's upcoming R2 SUV will be the first vehicle to use software from the venture. Volkswagen vehicles, including its Audi, Porsche, Lamborghini and Bentley brands, will follow. Cariad will also carry on developing its own projects, including software for automated driving, a Volkswagen spokesperson said. Cariad CEO Peter Bosch said in a LinkedIn post late on Tuesday that the JV would speed up Volkswagen's software development efforts and lower costs. The partnership mirrors aspects of a deal struck between Volkswagen and Chinese EV startup Xpeng in July last year to collaborate on software and a China-specific EV platform, though unlike the Xpeng partnership, Rivian and Volkswagen will not develop joint models. While the software developed with Xpeng is intended for use only in China, that developed with Rivian could technically be used anywhere, the VW spokesperson said, adding the specifics were not yet decided. MORE CAPEX Rivian has been on a steadier footing than other EV startups - some of whom have gone bankrupt - but it still posts losses of nearly $40,000 for every vehicle it delivers. It has been renegotiating supplier contracts and building some parts in-house to slash costs. Prior to Wednesday's gains, its shares had lost half of their value this year. Volkswagen shares have more than halved over the past three years. "Joining forces in this way may also help lower the cost-per-vehicle and bolster defences against the growing might of Chinese EV makers," said Susannah Streeter, head of money and markets at Hargreaves Lansdown. Some analysts who follow VW raised concerns about the size of the investment. "While the transaction could make sense strategically ... we believe investors would prefer VW to sell assets, not buy them," Stifel Research said. Roger Atkins of consultancy Electric Vehicles Outlook also questioned whether Volkswagen and Rivian were compatible. "There's the culture issue - trying to combine Rivian's full-stack vertically integrated and flexible, nimble software approach with Volkswagen's more traditional approach of working with multiple suppliers and middle management is like shoving a square peg in a round hole," he said. Sign up here. https://www.reuters.com/business/autos-transportation/volkswagen-shares-fall-after-5-billion-rivian-deal-2024-06-26/

2024-06-26 10:55

MUMBAI, June 26 (Reuters) - India's government bonds will gradually become a part of JPMorgan's widely tracked emerging market debt index, beginning on Friday. The announcement of the change was made in September, setting the stage for billions of dollars to flow into the world's fifth-largest economy. Here are five things to know as the South Asian nation draws more investment from global bond investors and its stock markets attract increased portfolio inflows. WHAT KIND OF INFLOWS? Indian bonds should receive $2 billion inflows from index-tracking funds around the June 28 inclusion date, followed by a similar quantum each month and total inflows of at least $20 billion over the next 10 months as the country slowly reaches maximum weight in the index (.JPMEMBIGLBL) New Tab, opens new tab. The market has received inflows from active fund managers and other investors totalling $10.5 billion since September's announcement, nearly six times the inflows received from early 2021 to August 2023. About 32-40% of the expected $20-25 billion of index-related inflows to India may have already arrived, JPMorgan strategist wrote in a note on June 25. WHAT FACTORS ARE LURING FOREIGN INVESTORS? Global investors are keen on India's high growth, the government's commitment to fiscal prudence, the rupee's low volatility and the central bank's pledge to bring inflation down. Foreign holdings of India's debt are around 2.4% of total outstanding debt and JPMorgan expects the level to nearly double by the end of 2025. India offers a positive real yield. Although lower than other big emerging markets, its appeal is increased by a backdrop of moderate and controlled inflation and that government's commitment to fiscal prudence and low currency volatility. HOW WILL LARGE INFLOWS IMPACT THE RUPEE? Any dollar inflows should boost the local currency, but a large appreciation is not expected as the Reserve Bank of India (RBI) is likely to absorb dollars and accumulate forex reserves. At $652.9 billion, India's currency reserves are the fourth largest in the world. This indirectly benefits the rupee as large buffers allow the central bank to intervene and smooth volatility. The rupee, largely because of India's active central bank, has been the most stable among major emerging market currencies. "Lower volatility of the Indian rupee makes it an attractive carry story," Sergei Strigo, co-head of emerging markets fixed income at Amundi Asset Management said. HOW WILL THE FLOWS IMPACT THE BOND MARKET? Large foreign flows have pushed government bond trading volumes to the highest in nearly five years. In recent months, foreigners have started buying longer tenor government bonds in the hope of better returns once the RBI starts cutting rates later this year. The larger long-end buying has led to further flattening of India's yield curve with the 3-year to 40-year yield spread at only 11 basis points. Securities included in global bond indices do not have any foreign investment limits. WILL THE INCLUSION CHANGE MUCH FOR INDIAN ECONOMY? The increase in inflows related to the inclusion, alongside a moderate current account deficit, estimated at 1.1% to 1.3% of GDP, is expected to keep India's balance of payments in surplus. A larger set of buyers for Indian debt and the heavy inflows will ensure yields are capped, but analysts say the government may lose some of its budget flexibility as there will be greater scrutiny of its finances. The government's fiscal management will be watched closely, said Vivek Kumar, an economist with QuantEco Research. "Unwarranted indiscipline might involve higher cost for the government." Sign up here. https://www.reuters.com/markets/rates-bonds/five-things-know-india-enters-jpmorgan-em-debt-index-2024-06-26/

2024-06-26 10:34

LONDON, June 26 (Reuters) - The pound dipped on Wednesday as the dollar strengthened while investors waited for the release of the Federal Reserve's preferred gauge of inflation on Friday. Sterling was last 0.2% lower at $1.2661, around where it has traded for the last two weeks. The euro was down 0.1% against the pound at 84.37 pence after falling to a two-year low of 84.40 pence on June 14 after French President Emmanuel Macron's decision to call a snap parliamentary election rocked Europe's markets. U.S. personal consumption expenditure inflation data, due on Friday, will guide Fed policy and could lead to swings in currency markets. The pound has been one of the best performers this year, down just 0.4% against the dollar, compared with a 3% fall for the euro and 13% drop for the yen. Britain's relatively high services and wage inflation means traders expect the Bank of England to cut rates just once or twice this year. That has kept upward pressure on bond yields, making them attractive to many investors and thereby supporting the pound. Expectations that the Labour party will win a huge majority in the July 4 general election and bring some long-absent stability to British policymaking has also been supporting sterling. Yet economists and investors say there are risks to British financial markets from a Labour party that has been coy about its exact plans for taxing and spending. "With fiscal responsibility, everything that Labour is doing is the polar opposite to the (Liz) Truss fiasco," said Joe Tuckey, head of FX analysis at broker Argentex. "That's definitely on balance a sterling-friendly dynamic." Yet Tuckey said the true determinant of the pound over the rest of the year would be Bank of England interest rate policy. "If you're talking about sterling in the medium term, between now and year-end, this election is not the main driver," he said. "We'll be back to looking at whether the Bank of England cuts in August." The dollar index , which measures the currency against six major peers, was last up 0.2% at 105.88. Sign up here. https://www.reuters.com/markets/currencies/sterling-dips-dollar-strengthens-while-traders-await-us-data-2024-06-26/

2024-06-26 10:14

BRUSSELS, June 26 (Reuters) - The European Commission said on Wednesday that none of the six European Union countries that do not yet use the euro currency meet the criteria to become member of the euro zone, although Bulgaria was the closest. Out of the 27 countries that form the EU, Sweden, Poland, the Czech Republic, Bulgaria, Romania and Hungary still use their own currencies rather than the euro, but they are legally obliged to adopt the single currency eventually. Denmark also still uses its own currency, but it has a legal exemption from adopting the euro. "None of these Member States currently meets all of the criteria for joining the euro area. Bulgaria is the only country that fulfils all but one criterion and where national legislation can be considered to be compatible with the rules of the Economic and Monetary Union," the Commission said. To start using the euro, each of the six countries has to meet criteria of low inflation and borrowing costs, public debt and deficit in line with EU laws and a stable exchange rate. They also have to have their central bank law compatible with EU law on the European Central Bank to protect central bank independence, prohibit monetary financing and the integrate the national central bank in the European System of Central Banks. Sign up here. https://www.reuters.com/markets/currencies/eu-commission-says-no-new-eu-country-ready-join-euro-2024-06-26/