Tuesday, September 30, 2014

(Reuters) - General Electric Co (GE.N) said on Monday it has won an order worth more than $500 million to provide power-generating equipment to U.S.-based Exelon Corp (EXC.N), including four of GE's highest efficiency gas turbines.
Exelon said it was planning to build two combined-cycle gas turbine units in Texas using the GE technology.
The new units are being built at Exelon's Colorado Bend site in Wharton County, Texas, and at its Wolf Hollow natural gas plant in Granbury, Texas. Each will add about 1,000 megawatts of capacity to the respective sites.
GE said it was the first U.S. order for GE's highest efficiency HA gas turbine, after winning customers from Japan, France and Russia, and now has orders for 13 units.
GE said the H-class turbine being sold to Exelon converts more than 61 percent of gas to electricity. The turbine allows for more than $8 million in annual fuel savings per gas turbine compared to the older F-class technology, GE said.
"With these more efficient turbines, they're just going to use less fuel, and so that helps the consumer and the cost of electricity go down," Victor Abate, president of power generation products at GE Power & Water, said in an interview.
The H-class turbine stands as one of the important products as GE invests further in its power business.
The U.S. conglomerate earlier this year agreed to buy the power arm of France's Alstom (ALSO.PA) for $16.9 billion, GE's largest ever deal.

Aside from the four 7HA gas turbines, GE also will supply Exelon with two steam turbines and six generators. The equipment is expected to ship in 2016, GE said.

Alibaba options active in U.S. trading debut

(Reuters) - Chinese e-commerce heavyweight Alibaba Group's options were among the most active on Monday, their first day of trading, with an even mix of bullish and bearish bets.
The mix implies equal numbers of bets on the Alibaba stock climbing or falling from current levels. The company's shares were down 2 percent at $88.80 on Monday.
Options volume for Alibaba was 122,000 contracts, with 65,000 calls and 57,000 puts traded on Monday, according to data from options analytics firm Trade Alert, making it the day's tenth most active name in the options market.
The volume was about a third of the one-day record volume of 365,000 contracts on Facebook Inc that traded in its options market debut in May 2012.
"It's a tame opening for the first day of options trading," said Brian Overby, senior options analyst at online brokerage TradeKing in Charlotte, North Carolina.
The 30-day implied volatility for the options was at 41.54 percent according to Livevol data. Implied volatility of Chinese Internet stocks Weibo Corp and Baidu Inc were at 60.32 percent and 34.16 percent, respectively.
Implied volatility, a measure of the risk that big moves in the stock pose and a key factor in setting options prices, is typically high for stocks that have recently had their initial public offering.
"I am still showing Alibaba on the easy-to-borrow stocks list so there are not a lot of driving factors to add volatility," Overby said.
Short sellers, when dealing with a stock that is difficult to borrow, sometimes take to the options market to express their short bias and bet on a drop in the stock's price.
The annual cost to borrow Alibaba shares has varied widely in the days since its initial public offering on Sept. 19. It started out in the 25 percent region but soon dropped to just 0.2 percent and has stayed at about that level, according to data from SunGard’s Astec Analytics, indicating little difficulty in making short bets in the name.
"In Friday’s session about 8 percent of all shares currently being borrowed were returned," said Karl Loomes, market analyst at SunGard’s Astec Analytics.
Overall, about 22 percent of shares available for borrowing were being used for short bets, according to data from Markit.
TradeKing's Overby expects implied volatility for Alibaba's options to come in and go somewhere toward the 30-25 percent level over the next week.

At a size of more than $25 billion, Alibaba's IPO is ranked as the world's biggest with some 368 million shares.

Monday, September 29, 2014

Pimco says can handle rise in outflows after Gross exit

(Reuters) - Pimco is bracing for investors to pull out money following the sudden departure of its co-founder Bill Gross but expects the vast majority of clients to stick with the firm and is confident it can handle any outflows, the California-based investment group's chief executive said.
"Should our revenues fall, and frankly we anticipate heightened redemptions here in the early stages - that's to be expected with any transition of a senior person - we're ready for that," Pimco CEO Doug Hodge told analysts on a conference call on Monday, adding that the firm had "ample liquidity".

Hodge said there had been differences with Gross over the strategic direction of the firm but not over investment strategy.

Dubai housing costs soar to Manhattan peaks, forcing moves to outskirts

(Reuters) - An economic rebound has catapulted house prices and rents in Dubai to Manhattan-like peaks, the Gulf emirate's top property website says, forcing increasing numbers of residents to move to its cheaper outskirts or even to consider returning home abroad.
Rents fell 1 percent in the third quarter after 10 straight quarters of price rises, property consultants CBRE reported this week. But the sustained cost of living surge has driven hundreds of families to relocate to smaller homes on the fringes of the opulent, highrise urban canyon that soars out of empty desert.
Research by Dubai website Dubizzle showed rents and house prices in Dubai's prime locations now match those in Manhattan.
"We're talking about $2,000 to $3,000 (a month) for a rental in Manhattan," said Ann Boothello, property product marketing manager at Dubizzle, which attracted 2.4 million monthly visitors to its property pages in the third quarter.
"For a one-bedroom apartment in Manhattan it would be about 1.9 million UAE dirham ($517,388), which would be the same for a prime community here."
Dubai rents and house prices are estimated to have increased broadly by some 30 percent year-on-year, the highest growth rate in the world during the first half of 2014, according to various studies, while in some areas price rises have been much steeper.
Middle- and low-income expatriate families have suffered most from rocketing rents, often including Indians and Pakistanis as well as expatriate Arabs and also some families from affluent Western states.
Construction workers usually live in company accommodations but their families remain in their home countries.
The property market in the city of 2.3 million people rebounded in the last two years after a more than 50 percent plunge in home prices from their peak in the aftermath of the 2008-09 global economic slowdown.
The oil-rich Gulf sheikhdom's reputation as a solid safe haven in a Middle East increasingly torn by political upheaval and civil war has lured tourists and foreign investors alike.
Costs have kept rising and the emirate jumped to 67th spot among the world's most expensive cities to live in the world compared to the 90th position last year, according to the 2014 Mercer cost of living survey.
The leap in living costs was attributed in part to a significant increase in expatriate rental accommodation costs.
Some rents in the Dubai marina, for example, jumped by more than 50 percent between August 2013 and February 2014.
"I don't save a thing," said Abdul, a 33-year-old website programmer from Bangalore, Indiawho declined to give his full name. He relocated with his wife last December to Remraam, a new development built by Dubai Properties 30 km (20 miles) inland on the desert periphery of the city.
"We moved out here because it was the cheapest area, but it will probably go up (in price) next year and we will have to move out of here too," said Abdul.
"We will probably move back to India next year."
At an annual property exhibition in Dubai this week, state-linked companies announced projects they estimated to be worth billions of dollars combined. Among the units on display were mansions in central Dubai priced at 75 million dirham each.
"There's been an exceptional amount of interest for these mansions," said Ajay Rajendran, vice chairman of Sobha Group, which is developing the project.
The increase in activity is causing many - including the International Monetary Fund - to worry that the Dubai market is overheating.
A senior government official said on Sunday that rising inflation needs to be controlled to ensure Dubai remains affordable.
The government has introduced some measures like increased transfer rates and mortgage caps to control prices.

These figured in the slight cooling of the market in the third quarter with average residential rents falling by 1 percent, their first decline since 2012, a CBRE report said. (1 US dollar = 3.6729 United Arab Emirates dirhams) 

Sunday, September 28, 2014

Asia airlines raise hedging volumes on oil price fall

(Reuters) - Airlines in Asia are stepping up jet fuel hedge volumes after oil prices fell below $100 a barrel this month, with some locking in fuel purchases as far out as 2016, suggesting airlines see oil prices bottoming.
Airlines have been cautious about fuel hedging since 2008, when several large carriers scrambled to lock in fuel needs as oil prices surged above $100 a barrel for the first time – only to see them plummet to less than $50 by year-end as a global recession hammered travel demand.
But fuel traders at several regional banks have noted a widespread pick-up in hedge interest as oil prices have dropped, and volumes could rise in the next quarter if oil prices keep falling, they said.
"Volumes increased when Brent crude was at $100 a barrel, and they increased last week when [oil prices] fell further and now [airlines] are waiting for prices to drop to below $95," one trader said, speaking on condition of anonymity, as he was not authorized to speak with the media.
Jet fuel can account for anywhere between 20 and 50 percent of an airline's operating costs, so swings in oil prices can hit their bottom line and have an influence on fare prices.
Airlines have different hedging policies with Australia's Qantas Airways (QAN.AX) hedging as much as 94 percent of its fuel needs for the first half of next year, while Singapore Airlines (SIAL.SI) is hedged at around 52 percent for its 2014-2015 financial year.
The amount of hedging eased after the 2008 crisis but has picked up pace recently with prices on a downward trend.
Brent crude oil prices LCOc1 fell below $100 a barrel on Sept. 8 before sliding to a 26-month low of $95.60 a barrel on Wednesday due to a soft global economic outlook.
Singapore jet fuel prices – widely used as a regional benchmark – have fallen from around $125 a barrel in late June to about $109 currently, and have averaged $119.44 a barrel so far this year, down from last year's average of $122.86, Reuters data showed. JET-SIN
Many airlines are locking in contracts as far ahead as 2015 and 2016, a second trader said, suggesting they view the current oil price level as potentially attractive over the near to medium term.
"They've been quiet for the first six to seven months of the year and their hedge ratios were low, but they're now coming out to hedge. They are hedging at $112 to $113 a barrel for jet fuel flat prices for next year," he said.
Thai Airways International Pcl (THAI.BK) has raised its jet fuel hedging to 63 percent of fuel needs in late 2015, compared with 53 percent until the middle of next year, a senior company official said.
"As long as jet fuel prices are still in the range of $100-$125, we will not post losses," the official said.
Others are taking a more cautious approach. Japan's ANA Holdings (9202.T) and JapanAirlines Co Ltd (9201.T) do not plan to change their fuel hedging strategies just yet, they said.    
Any airlines that locked in long-term contracts at the start of the year, when oil prices were about 10 percent higher, might be facing losses in the second half of this year unless they raised fares, traders said.
"It's better for airlines to do a consistent fixed percentage of regular hedging rather than capturing ups and downs as they usually lose big money because of this," said Kelvin Lau, an analyst at Daiwa Securities Markets (Hong Kong).

ANA did not disclose the price level it hedged, but its business plan for this year assumes a level of $125 a barrel for Singapore jet fuel prices, the company said.

U.S. firms' optimism on China ebbs, wary of local rivals: survey

(Reuters) - U.S. companies are increasingly less optimistic about the business outlook in China, and see growing competition from local rivals who get preferential treatment as a key challenge, a survey showed on Friday.
A US-China Business Council survey of senior executives at its 200-plus member companies showed ebbing optimism about the five-year business outlook for China, which is grappling with slowing economic growth.
The 2014 survey, which will be formally released on Monday, showed 31 percent of respondents were "optimistic" about the mid-term outlook, compared with 39 percent in 2013, although the share of those saying they were "somewhat optimistic" rose.
Eighty-three percent said their Chinese operations were profitable, down from 91 percent in 2013. Half planned to increase resources invested in China in the next 12 months.
The number one challenge U.S. companies faced in doing business in China was competition from domestic rivals, the survey showed, followed by enforcement of intellectual property rights and foreign investment restrictions.
"Optimism continues to be tempered by policy uncertainty," USCBC President John Frisbie said in a statement.
The organization's members include Chevron Corp (CVX.N), IBM Corp (IBM.N), GoogleInc (GOOGL.O) and Wal-Mart Stores Inc (WMT.N).
Most of those surveyed thought Chinese competitors, both state and privately owned, received benefits that foreign companies did not, such as preferential financing or tax benefits. Competition from domestic companies was also seen as the main restraint on profits, followed by rising costs.

Almost nine in ten companies were at least somewhat concerned about China's antitrust laws. Regulators have investigated dozens of foreign companies over alleged anti-competitive behavior, and almost one in three USCBC members were worried they would be subject to an investigation.

Saturday, September 27, 2014

European refiners seek sacrificial cuts in fight for survival

(Reuters) - European refiners, in a desperate battle for survival, are investing in costly or trying to close plants that bleed the most money, but industry experts say their efforts fall short of what is needed to make the industry profitable.

Some 1.8 million barrels per day (bpd) of capacity has shut since 2008, with the loss of Coryton in Britain, Harburg in Germanyand Berre l'Etang in France, to name a few, but the industry is still struggling to make decent returns.
"2015 will be a very difficult year for global refining, especially in Europe," said David Wech, managing director at JBC Energy, speaking at the 2014 Platts European Refining Summit in Brussels on Tuesday.
Patrick Pouyanne, president of the refining and chemicals division at Total, said Europe needs to cut refining capacity by at least another 10 percent by 2020 to restore a utilisation rate of 85 percent, the level at which the market is seen as balanced.
"At least 10 refineries have to be shut down by the end of 2020," or cuts of 1.5 million to 2 million bpd, he said at the summit. "It's difficult, but this is the reality of the market in Europe."
Total and Eni are reviewing refining activities in their home markets of France and Italy but face strong opposition to closures from trade unions.
Following the closure of its Dunkirk plant in September 2009, Total promised not to shut any more plants in France for the next five years. In August this year, its chief executive said it did not plan to shut any refinery completely but might reduce capacity.
Eni also said in August that it wanted to cut its refining business by more than half, with Gela, Livorno and Taranto understood to be at risk.
Meanwhile, Hungarian oil and gas company MOL is looking to downsize further following the closure of its Mantova plant in Italy at the start of this year.
Miika Eerola, group senior vice president, downstream production, told the summit, "We have done some of our asset rationalisation ... and we will do some more."
Its Sisak refinery in Croatia is currently idled, but the Croatian government is fighting against a permanent closure. MOL operates Sisak through its 50 percent stake in INA, whilst the Croat government owns close to 45 percent.
The drawn-out process of closing capacity in Europe means that shutdowns always lag behind the contraction in demand requirements as transport vehicles improve their mileage per gallon of fuel.
Isabelle Muller, director general of French refining industry association UFIP, said France had cut refining capacity by about 24 percent between 2007 and 2013 but that gasoline demand had fallen further than production.
At the same time, independent investors such as Gary Klesch and trading houses such as Gunvor have granted reprieves to some plants that had looked marked for closure.
"Some closures could be forced through, but the problem is we are still seeing buying interest," said Wech, referring to Klesch's recent purchase of Murphy Oil's Milford Haven plant in Wales.
"The market will only see capacity consolidated if it is firmly converted into (storage) terminals. You could argue that in Eastern and South-Eastern Europe there is a lot of capacity which is de facto consolidated, but it doesn't really count because it could start up again at any time."
Some European refiners, rather than be forced to the wall, have fought back by making expensive investments to boost high-value middle distillates production.
Unfortunately, this year Europe has been flooded with diesel from the United States and Russia, keeping margins under pressure. As a result, refineries that upgraded have not yet reaped the benefits, Pouyanne said.
This has not deterred majors such as Total and ExxonMobil , however, which both have billion-dollar projects underway to reduce the output of low value, high-sulphur products in favour of middle distillates.
They will face stiff competition from the likes of new plants Jubail, Yanbu and Ruwais in the Middle East and Paradip in India, all expected to ramp up over the next 12 months.
Olivier Jakob, an oil analyst at Petromatrix, said Yanbu in Saudi Arabia would be "an interesting one to watch" in terms of its impact on European distillate balances due to its proximity to the Mediterranean and the fact it is expected to yield 66 percent diesel.