Neil Collins’ Notebook – Oil, the fuel of the future
Bernard Looney would rather Trinity College Cambridge did not sell its shares in oil companies. As CEO of BP, it’s understandable that he should believe that turning your back on them is no way to encourage a change in behaviour. It is unlikely that the college grandees are listening. Enough of the students have been convinced that oil is evil to overwhelm anything as intellectual as an investment case. For them, no price is too low to justify holding these destroyers of the planet.
Similar pressure is being brought to bear on local authorities. Friends of the Earth, a militant anti-carbon pressure group, has calculated that the authorities’ pension funds hold £10bn of shares in fossil fuels, including – shock – £3.5bn in coal. Trinity has already capitulated and agreed to sell, and the councils are similarly unlikely to resist. Yet it may not be so easy. Trinity has holdings in 172 fossil fuel companies, but 168 of these are through tracker funds, so the college would have to sell the funds to get out of the earth-destroyers.
The councils will find themselves in the same bind, should they crumble before the FoE pressure. Besides, there may be a serious financial penalty in selling. A year ago, a switch from BP to Orsted, market leader in the offshore windmill business, would have looked smart. These shares more than doubled to their peak in January, while BP halved to their worst, when Covid briefly collapsed the oil price. But the Texan freeze-out exposed an uncomfortable truth about wind farms, and Orsted shares have fallen by a quarter in two months. BP, meanwhile, are 40 per cent above their low. This may owe more to the realisation that oil and gas will remain central to the world’s economy for many years yet than to Mr Looney’s homilies about being nice to “companies who are leaning into the transition”, as he puts it.
One that is not leaning is Total, whose CEO not only believes that shares in green energy companies are in a bubble, but has put his company’s money where his mouth is, selling a half share of its wind and solar farms to Credit Agricole. Like everyone else in the West, he aspires to get to net carbon zero by 2050, but as the Chinese keep demonstrating, when it comes to climate change, words and figures do not agree.
Staberdeen in the back
Nobody would claim that the merger of Standard Life with Aberdeen Asset Management has been a resounding success. When it was announced four years ago, Standard was worth £7.5bn and Aberdeen £3.8bn. The combine is valued at £7bn today. The twin-headed CEO structure has gone, and Stephen Bird, the newish single incumbent, is understandably fed up with it being dubbed Staberdeen.
The usual remedy is a change of name to draw a veil over the past, or as one reader of Wealth Manager website put it, to disguise the sell-off of the Standard Life name, which despite devaluation over the years, probably still has some brand value. The deal to sell it, to the existing partner Phoenix, is described as a “simplification” process, although nothing is simple in the world of life assurance, and the market was unimpressed. On a yield of 6.6 per cent, investors suspect the SLA dividend might be “simplified” too, in a downwards direction. Fortunately for the nation’s savers, there are some reasonable performers among the £500bn of funds that Staberdeen manages. Not those holding SLA shares, obv.
Newts on the line
They know they’re in trouble on the Great White Elephant project when they can’t even look after a few wintering newts. Yes, it’s Britain’s most expensive comedy show, sometimes abbreviated to HS2, the railway few want and nobody needs. It’s now under investigation for “wildlife crimes” for failing to set newt traps properly, leading to the death of at least one unfortunate shrew. If found guilty, there’s the prospect of unlimited fines. Great Crested Newts can be jolly pricey; I K Gricer, my engineer surveying the old railway line which used to join Bicester to Bletchley, calculates that it will cost him £10m to comply with the rules protecting them, providing another excuse for HS2 to over-run its £100bn budget.
Still, help could be at hand. Beleaguered Grant Shapps at the Department of Transport is advertising for a non-executive director for HS2 Ltd, giving someone “a real opportunity to shape the direction of this critical and highly visible project” as it scythes its way through the English countryside. For £950 a day, two days a week, he/she will be holding the leadership to account, with “particular focus is on improvements in HS2’s approach to communications and engagement with communities along the route.” The bureaucrats at DaFT should watch out for an application from Daniel Hooper. Aka Swampy, he may soon find himself able to spare a couple of days a week between burrowings.