Summit Notebook

Hard road on Japan’s nuclear policy

By Kevin Krolicki

Suddenly Taro Kono doesn’t look like quite the lonely maverick in Japan’s Liberal Democratic Party.

Kono, a member of the lower house of parliament, has been an unrelenting critic of Japan’s pursuit of nuclear power since he was first elected in 1996. That made him an odd fit with the LDP, which ruled Japan almost continuously from the mid-1950s to 2009 and put nuclear power at the center of Japan’s energy policy.

“For the past 15 years, it has felt like Taro Kono against the LDP,” he told the Reuters Rebuilding Japan Summit.

But since the Fukushima Daiichi accident triggered by the March 11 earthquake and tsunami, Kono’s call to scrap nuclear in favour of renewable energy and conservation has moved from the fringe to something closer to the mainstream of political opinion.

About 50 lawmakers attended a recent study group he sponsored on energy policy, out of 722, and Kono sees a prospect for a kind of “green alliance” between sympathetic LDP lawmakers and some in the Democratic Party of Japan.

Is emerging Europe out of the woods yet?

A surge in portfolio inflows is flooding into emerging central Europe, although yield-hungry investors are picking solid policy and higher growth over countries still struggling to put the crisis behind them.

After deep contractions across the region, a two-speed recovery is underway, with countries boasting better debt fundamentals like Poland and the Czech Republic for the moment ahead of those who depend on foreign lending.

Investors are also dipping into countries like Hungary, but struggles by the new centre-right Fidesz government to get its budget deficit under control mean it is lagging for now, along with fellow International Monetary Fund benefactor Romania.

“There has… been clear differentiation between the more robust and the weaker economies of the region,” Goldman Sachs wrote in a research note on the region.

“We believe that the region’s stronger economies — namely, Poland, Turkey, Israel and the Czech Republic — will be the first to see an acceleration in financial inflows both in debt and, increasingly, equity.” Turkey and Israel are often grouped with emerging European markets.

Extremely easy monetary policy in the world’s developing economies, including expectations the Fed will push ahead with more asset-buying, plus continued worries over debt in troubled euro zone countries like Greece and Ireland have helped push investors into these higher-yielding countries.

But these new, more volatile, portfolio flows carry risks.

Welcome to the 2009 Reuters Paper and Packaging Summit

The global paper industry has struggled for more than six years to claw its way out of a slump, as soft demand and overcapacity have kept prices down, leading to poor earnings, production curtailments and layoffs.

The current global downturn has further eroded demand for basic materials, including paper, as print advertising has dropped steeply in the crisis. Companies have been forced to run just to stand still, temporarily or permanently shutting mills and axing staff.

The sector is now at a crossroads. Will businesses after the recession look roughly the same, only smaller? Will demand ever return when electronic books and newspapers are surging? With many forestry companies big producers of biomass, what role will green energy play in the future?

Don’t mention the R word

Policitians are often scared to use the “R” word, because a recession makes them unpopular. Investment bankers dislike the “R” word too, but in this case it stands for regulation. Regulation and lots of it is being cooked up in Washington and Brussels in response to the excessive risk-taking that helped bring on the credit crisis. Credit derivatives are in the firing line as the bad guys of the credit crisis and derivatives in energy and commodities could get caught in the cross-fire. Oil could also take a hit after rampant speculation was blamed for driving the price to a record of nearly $150 a barrel last year. Although the quest to get rid of excesses is driven by good intentions, industry insiders say there will be unintended consequences and argue the regulators could have underestimated the difficulty of their task. “It’s not easy to bring back the genie into the bottle,” Libya’s top oil official Shokri Ghanem told the Reuters Global Energy Summit.

from LEGACY Reuters Summits:

The best geologists want to be in Tullow’s team

Tullow Oil is the Manchester United of the energy world -- at least when it comes to recruiting the finest talent. The oil industry has long complained of the difficulty of recruiting enough highly-qualified staff, but as Europe's largest independent oil explorer by market value, Tullow says it is a magnet for all those geologists ambitious to add discovering a new field to their CVs. "If you are successful, you will always attract... like everyone wants to play for Manchester United," Aidan Heavey, chief executive of Tullow Oil, told the Reuters Global Energy Summit. Many oil companies, he said, have ceased exploring, partly because of a difficult financial climate, partly because of a lack of opportunities. Tullow's exploration successes include major finds in Uganda and offshore Ghana. Apart from snapping up the finest geologists, Tullow has also been busy grabbing credit. Heavey said banks had made available $2 billion in credit in March this year. "It's a huge achievement in the current market," Heavey said. "It's probably soaked up most of the credit available for small oil companies."

OPEC’s special relationship with the U.S.

The United States may fondly dream of independence from imported oil, but it would do well to remember that the traffic is not one way. OPEC Secretary General Abdullah al-Badri told the Reuters Global Energy Summit he had been hearing for years that the world’s biggest oil consumer was seeking ways to avoid importing OPEC oil, but he was confident it would carry on burning fossil fuel for years to come. “I am of an age when I can tell you I have been hearing this for the last 40 years,” Badri said. “We will see another president, with two terms, before we see any change.” He also warned the U.S. it should be careful what it wished for. “We would like to tell them they buy most of the resources of our member countries. We are sending them back more than 50 percent of that income to OECD countries, and the U.S. is one of them, to buy medicine, equipment, aeroplanes, spare parts, clothes.” “Don’t forget the medicine,” he added.

Nasdaq president to finance companies: come hither

A fertile planting ground for tech, biotech and even some energy offerings, Nasdaq OMX has historically struggled to lure listings in some other areas, notably financial services.

Now, that could be about to change, Nasdaq OMX President Magnus Bocker said at the Reuters Exchanges and Trading Summit. As Nasdaq looks for ways to attract new listings and end a virtual drought in IPOs, it sees financial services firms as one of the most promising areas.

That Nasdaq would at least be hoping to narrow the gap in financial services listings with NYSE, the traditional ruler of the space, is not as out of left field as it might sound.

The exchange has already made some inroads and can point to some recent conquests like CME Group, which moved from a dual listing on Nasdaq and NYSE to a sole Nasdaq listing. Northern Trust, the fund administrator which has weathered the financial crisis with relative ease compared with some larger rivals, is another bright point.

And looking forward, such longtime NYSE stalwarts as Morgan Stanley and Citigroup have both recently been reportedly eyeing spinoffs of high risk units — like Morgan Stanley’s trading desk and Citigroup’s Phibro energy unit. And there’s even talk that Bank of America could eventually spin off Merrill Lynch.

Kuwait’s Noor bullish on Pakistan

Pakistan’s foreign reserves are dwindling fast and many worry about the country descending into chaos. But Naser Al-Marri, managing director of Noor Financial Investment Co. is taking a longer view of the country. “I love Pakistan,” he told a Reuters summit. “For me Pakistan is a mini-China.” The country’s potential lies in its agricultural resources and its potential as a bridge for ferrying energy into fast-growing China. Marri’s Noor, a major shareholder in Karachi Electric Supply Company, urged Gulf Arab desert countries to invest more in growing crops in Pakistan. Gas could also flow from the Gulf to China through Pakistan, he said. As Pakistani president Asif Zardari visits Saudi Arabia seeking aid, he would be heartened by some long-term optimism. “Many people don’t like Pakistan, but I am sure in five years, Pakistan will be the place to be,” Marri said.

Will environment be forgotten in crisis? OMV says no.

There are some who say the economic downturn means ambitious plans to fight global warming should be put on ice.

But Wolfgang Ruttenstorfer, the head of Austrian oil and gas group OMV, reckons cutting carbon emissions is inevitable in the long run, despite the financial crisis and its impact. 

“I think the price signals of the last two years will not be forgotten by consumers and politicians and therefore the thrust towards renewables will continue, maybe at a slightly slower pace,” he told the Reuters Central European Investment Summit. 

For some, going green is a luxury in harder economic times: Poland and Italy aren’t too happy about European Union legislation to fight climate change and say it could hurt their economies at a time of slower growth.

The EU has stressed that climate plans will be affordable but as the worst financial crisis in 80 years continues to unfold there are doubts over whether there will be enough money or willpower to invest in cleaner energies.

“We stay committed,” Ruttenstorfer says. “We have our future energy fund and we will continue to work on this and definitely not put it on the shelf.”

OMV has been aiming to make its refining more environmentally-sound, to cut down on carbon dioxide emissions and is participating in pilot carbon capture projects. Cleaner gas-fired power plants are also seen as a good option by the company.

No gain without pain for European paper makers

The current slew of bad news was necessary to get European forestry companies to act, the head of the world’s top paper and board maker Stora Enso said on Wednesday.

For years the European paper industry has suffered from overcapacity, which has kept a lid on prices, while increasing costs of wood and energy have eaten into already low margins.

But Stora’s Chief Executive Jouko Karvinen, speaking at the Reuters Paper Industry Summit in Helsinki, said there has been a silver lining to the “perfect storm” of bad news.

“The good companies will come out of the storm stronger than they were ever before,” he said.

“And as bad as the past eight years have been, and as much as we complain about every possible problem right now, I have one thought: there may be a good thing with this storm. Maybe we will finally get our act together and make decisions that need to be made and start making some real money one day. It will take a little time, but that’s the goal,” he said.