Sunday, April 25, 2010

L N Mittal tops Rich List for sixth year in a row

S Kalyana Ramanathan / London April 26, 2010

Lakshmi Mittal, the India-born CEO of steel maker ArcelorMittal, has for the sixth year in a row, topped the list of Britain’s 1,000 richest people, according to The Sunday Times published today.

With the steel sector rebounding earlier this year, Mittal’s wealth according to this list of the UK’s rich and the powerful, doubled from 2009-levels to £22.45 billion. Mittal, who has been holding the number one rank since 2005, saw his wealth erode to the lowest level in 2009, when he continued to hold the first place but with wealth estimated at £10.8 billion.

The other Indian who made it to the top ten in this list was mining entrepreneur Anil Agarwal of Vedanta Resources, who zipped all the way from the 70th rank in the 2009 list to the number 10 position this year. Agarwal’s wealth in 2010 was estimated at £4.1 billion and rose the sharpest in the top 10, with a jump of 583 per cent over 2009. Mittal’s wealth rose by 108 per cent over 2009 estimates. Both Mittal and Agarwal continue to hold an Indian passport, despite shifting permanent residence to the UK.

Philip Beresford, compiler of the Rich List, in his lead article introducing this year’s list wrote, “Fortunes in Britain are soaring as the world recovers from the 2008-09 crash. Stock markets are up, the banks are back from the brink and economic confidence is blossoming. As a result, the collective wealth of the 1,000 multimillionaires in the 2010 Sunday Times Rich List has climbed to £335.5 billion, up £77.27 billion on 2009. This is a 29.9 per cent increase, easily the biggest annual rise in the 22 years of the Rich List.”

The list released today also comes just 11 days before Britain goes to polls to elect its next government that is fiercely fought between the ruling Labour, the Conservatives, and the Liberal Democrats, which is now seen as the second most popular party (ahead of Labour) by many opinion polls. Beresford also took a dig at the popular belief that the Labour party is pro-poor and pro-working class and said, “The first decade of new Labour was in fact a golden age for the rich in Britain.

When the Blair administration came to power in 1997, the wealth of the then richest 1,000 stood at £98.99 billion. By 2008, it had risen to nearly £413 billion. After a savage bust in 2009 it is clearly heading northwards. This year’s £335.5 billion is nearly 239 per cent higher than in 1997.”

The Rich List is based on the publisher’s estimates of the minimum wealth of Britain’s 1,000 richest people or families.

Therefore, the paper also cautions that the actual size of their fortunes may be much larger than what it has estimated. Valuation were carried out at the beginning of January 2010. Only identifiable wealth are measured — land, property, racehorses, art or significant shares in publicly quoted companies. It does not include bank account (as this detail remains out of access for general public) and small shareholdings in private equity portfolios.

Not so generous?

Neither Lakshmi Mittal nor Anil Agarwal made it to the top 50 in The Sunday Times Giving List — a compilation of the most generous philanthropists in the UK. This list was topped by Christopher Cooper-Hohn, a London hedge fund manager whose recent donations are estimated at £531.2 million. It must, however, be remembered that not all generous gestures are necessarily recorded publicly or even those recorded publicly may be considered in this list. For example, Lakshmi Mittal’s company gave away nearly £16 million worth of steel for the ArcelorMittal Orbit — a public piece of art — to commemorate the 2012 London Olympics. Similarly, Anil Agarwal will be spending $1 billion in building the Vedanta University in Orissa.

Thursday, April 22, 2010

Essar Energy valued at $9.5-11 bn

S Kalyana Ramanathan / London April 23, 2010

Bankers fix price at 450-550 pence a share for the London IPO.

Bankers handling Essar Energy's $2.5-billion (Rs 11,000 crore) initial public offering on the London Stock Exchange (LSE) have fixed the price at 450-550 pence a share. The book building for the issue commenced today and ends on April 29.

The price fixed today takes the valuation of the company to $9.5-11 billion. Essar Energy hopes to offload 25 per cent of the company.

Successful listing would also enable it to be considered for inclusion in the coveted FTSE 100 index. This issue will also be Essar's first offering to investors after 15 years.

As part of this initiative, Essar will list 20-25 per cent of an entity called Essar Energy Plc, which is constituted of the group’s power and oil & gas businesses. Essar had earlier said it would use the proceeds of the listing to fund its expansion in the oil & gas and power vertical. JP Morgan Cazenove and Deutsche Bank AG are the joint global coordinators for the issue, who provided the price band to commence book building.

Essar plans to raise capacity at the Gujarat-based Vadinar refinery to 375,000 bpd (barrels per day) by 2011 from a current capacity of 300,000 bpd. It said if market conditions permitted, the capacity would be increased to 750,000 bpd by 2013, making it India’s largest single-location refinery.

Essar also needs funds for exploration and production across its global portfolio of oil & gas blocks in Asia, Africa and Australia. Additionally, the group’s power business, scaling up from 1,220 Mw currently to 6,100 Mw in Phase I and 11,470 Mw in Phase II, will need capital infusion, the company said.

Essar Energy would be only the second company backed by an Indian promoter to go on the FTSE-100. The only other one is Anil Agarwal's Vedanta Resources.

The FTSE 100 is a market-capitalisation weighted index representing the performance of the 100 largest UK-domiciled blue chip companies. The index represents approximately 88 per cent of the UK’s market capitalisation and is considered suitable as the basis for investment products such as funds, derivatives and exchange-traded funds.

The Index also accounts for 7.97 per cent of the world’s equity market capitalisation. It began ticking in 1984 and today has 101 companies and 102 stocks (Royal Dutch Shell has two classes of shares) in it.

The timing of Essar Energy's issue and subsequent listing on the LSE comes close to the quarterly review of the constituents of the FTSE 100. The company must start trading on or before May 9 if it hopes to be considered for inclusion in the primary index on LSE. The next review for FTSE-100 comes on June 9 and one condition for being added to the list is that the stock must have been traded on LSE for at least 19 days.

Apart from the brand image, getting on the FTSE-100 list provides more tangible benefits. Exchange Traded Funds (ETFs), that are an integral part of the trading participants on LSE, usually look at the FTSE 100 for investments. The role of ETFs on the LSE has consistently grown year on year over the past 10 years since they began trading on this exchange. The value of ETF trades peaked in 2009 at £50.15 billion and was growing at 44 per cent over 2008.

Essar Energy will have to clear a list of conditions before it hopes to get on the FTSE 100. Apart from the prior 19-day trading rule, the stock must have a gross market capitalisation above the 90th company in the index at the time of review. In today's terms, this would mean a gross market cap of £2.6 billion. Interestingly this comes close to the issue value of Essar Energy's IPO. The stock will also have to pass certain liquidity conditions to be considered for inclusion.

The most fundamental condition, however, is that it must have an LSE listing and be a company registered in the UK. Hence, officially Essar Energy will be a UK-based company when it goes public, with the Indian connection strictly restricted to the promoters' nationality.

Wednesday, April 21, 2010

Half of scheduled air traffic take wings

S Kalyana Ramanathan / London April 21, 2010

Europe’s flight navigation agency Eurocontrol said it expects 14,000 flights — almost half of the scheduled air traffic — to operate in the European airspace today.

For thousands of passengers stranded across Europe, this was the most encouraging news since ash clouds from Iceland’s Eyjafjallajokull (ay-yah-FYAH’-plah-yer-kuh-duhl) volcano hovered across the skies, disrupting flights across Europe and other parts of the world. However, the problem is far from over.

According to Eurocontrol sources, more than 95,000 flights have been cancelled since Thursday, 15 April.

The UK’s flight navigation agency NATS in its statement said part of the Scottish and Northern Irish airspace, including Aberdeen, Inverness and Edinburgh airports, will continue to be available from 1900 today to 0100 tomorrow. The Newcastle Airport, Glasgow and Teesside airports will also be available in this time period.

However restrictions will remain in place over the rest of the UK airspace below 20,000ft. “Flights operating above the ash cloud are now permitted in the UK; between 1900 today and 0100 tomorrow, this will enable aircraft movements above 20,000ft in UK airspace,” NATS said.

British Airways, however, said it will aim to resume some flights into and out of London’s airports from 7pm on Tuesday, April 20 following the proposed reopening of the UK and European airspace by aviation authorities. BA said it has more than 80 aircraft and almost 3,000 cabin crew and pilots out of position, overseas, across its global network.

Airlines across Europe, including German carrier Lufthansa, Dutch airline KLM and the UK’s British Airways, have taken a severe financial blow on account of this six-day struggle to get their flights back in the air.

Airline companies, under the industry body IATA has expressed their displeasure about the manner in which navigation authorities in Europe dealt with the situation. Airlines that carried out their own test flights said several windows of flying opportunities had been missed over the last few days due to excessive caution shown by navigation service providers across Europe. IATA had claimed that its members were losing $200 million in revenues every day since this problem started.

UK regulator to investigate Goldman Sachs

S Kalyana Ramanathan / London April 21, 2010

The market watchdog in UK, Financial Services Authority (FSA), today said it would investigate the London units of Goldman Sachs Group Inc.

This followed a decision by the Securities and Exchange Commission (SEC) of the US to sue the financial major for fraud.

“Following preliminary investigations, FSA has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations. FSA will be liaising closely with SEC in this review,” FSA said in a statement today. No further details were provided.

The New-York based Goldman Sachs is in the dock after SEC filed a suit against it and an employee for defrauding investors of $1 billion through a subprime-related financial product. According to SEC, in early 2007, Goldman Sachs created and sold a CDO (collateralised debt obligations)-linked to subprime mortgages, without disclosing that hedge fund Paulson & Co helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.

FSA’s decision to investigate follows a preliminary investigation, which lasted less than 24 hours.

In an interview to BBC over the weekend, UK Prime Minister Gordon Brown had promised a probe by FSA into Goldman Sachs’ UK operations, saying this was “one of the worst cases of moral bankruptcy” he had seen.

The UK connection to the scandal that is primarily centred in the US comes in the form of the bank's UK-based executive, Fabrice Tourre, who is said to have been stationed in the US when this alleged fraud was committed. While Goldman Sachs has asked Tourre to take indefinite leave, it has also said its 31-year old executive had not committed any fraud.

He is also expected to receive a sizeable bonus this year. Another significant reason for UK's watchdog to investigate the banker is because of the significant loss suffered by Royal Bank of Scotland, which is now 84 per cent owned by British tax payers. RBS, is said to have lost $800 million because its ABN Amro arm had insured the complex deal through a credit default swap.

Following SEC's fraud charges, Goldman Sachs group said they are completely unfounded in law and fact and it will vigorously contest them and defend the firm and its reputation. The company also said it had itself lost more than $90 million on the transaction, while its fee was $15 million.

Today's decision by FSA to investigate Goldman Sachs comes when the group announced an impressive first quarter results.The Goldman Sachs Group today reported net revenues of $12.78 billion and net earnings of $3.46 billion for its first quarter ended March 31, 2010. The first quarter earnings nearly doubled, which was significantly contributed by fixed income trading profits. Fixed Income, Currency and Commodities generated quarterly net revenues of $7.39 billion for the firm.

Monday, April 19, 2010

Airlines approach EU for financial aid

S Kalyana Ramanathan / London April 20, 2010

‘Unprecedented situation having huge impact on customers and airlines alike’

Hit hard by a blanket ban on flying, over the last five days, airlines are now seeking financial compensation from the European Union and national governments.

Airline operators across Europe now believe that the economic consequences of the blanket ban are worse than the one they had faced after the 9/11 terrorists attack in the United States. Most airports have been shut since April 15, after an erupting volcano in southern Iceland started spewing ashes across the European airspace.

British Airways chief executive, Willie Walsh, said: “This is an unprecedented situation that is having a huge impact on customers and airlines alike. To assist us with this situation, European airlines have asked the EU and national governments for financial compensation for the closure of airspace. There is a precedent for this to happen as compensation was paid after the closure of US airspace following the terrorist events of 9/11 and clearly the impact of the current situation is more considerable.”

European Commission President Barroso on Sunday decided to set up an ad-hoc group to assess the impact of the situation created by volcanic ash clouds on the air travel industry and the economy in general. EU hopes to have the right analysis to be able to respond appropriately, if needed, and that any measures taken across the EU to respond to economic consequences of this situation are properly coordinated. EU has so far not directly committed to any financial package that can be given to the affected airlines.

IATA, the international aviation industry body had earlier last week said the industry is suffering a revenue loss of $200 million a day. British Airways today claimed that lost passenger and freight revenue together with the costs incurred on supporting passengers is approximately £15-20 million a day. BA also said it has significant funding available to it to sustain a considerable period of closure of the UK's airspace. At the start of the flying restrictions on April 14, 2010 it had more than £1.7 billion in cash and more than £400 million available credit lines which it can draw from, if necessary.

Today IATA, strongly criticised European governments for taking an ad-hoc approach to airport closures and said the decisions were based more on theoretical modelling rather than actual facts. IATA also criticised European governments for their lack of leadership in handling airspace restrictions in light of the Icelandic volcano eruption and urged a re-think of the decision-making process.

Giovanni Bisignani, IATA’s Director General and CEO, said, “Safety is our top priority. Airlines will not fly if it is not safe. I have consulted our member airlines that normally operate in the affected airspace. They report missed opportunities to fly safely. The European system results in blanket closures of airspace. I challenge governments to agree on ways to flexibly re-open airspace. Risk assessments should be able to help us re-open certain corridors, if not entire airspaces.”

IATA called for an urgent meeting of the International Civil Aviation Organization, the specialised agency of the UN, to define government responsibility for the decisions to open or close airspace in a coordinated and effective way based on real data and special operating procedures.

Despite mounting pressure from airline operators, as of now it looks unlikely that European governments will ease the ban on flying in a hurry. Governments across Europe are under tremendous pressure to keep safety as a top priority even if the chances of a risky flight seems remote in some parts. However EU Transport Commissioner Siim Kallas told reporters in Brussels that ‘it is clear that this is not sustainable. We cannot just wait until this ash cloud dissipates”.

Meanwhile, the British government has decided to deploy three Royal Navy ships to rescue British nationals stranded in continental Europe. An estimated 150,000 persons are said to be stranded in different parts of the world. As of noon on Monday, the government said it had not completely worked out modalities of the operations. No such rescue measures have been announced for British nationals stranded in other parts of the world including India (Asia).

The flight ban is expected to remain in force until early morning tomorrow. The European Organisation for Safety of Air Navigation, Eurocontrol said it expects between 8,000-9,000 flights to take place today in European airspace. "On a normal Monday, we would expect 28,000," it said.

UK airspace likely to open up

In a statement issued today, UK's flight navigation service provider NATS said the situation is continuously improving and Scottish airspace will be opened tomorrow for airlines to resume operations. NATS said, “From 0700 (local time), Tuesday, Scottish airspace will be open and south to a line between Teeside and Blackpool. Mainland Scottish airports will be open."

The volcanic eruption has reduced and the volcano is not currently emitting ash to altitudes that will affect the UK. Assuming there are no further significant ash emissions we are now looking at a continuously improving situation. It further said the latest Met Office advice is that the contaminated area will continue to move south with the possibility that restrictions to airspace above England and Wales, including the London area, may be lifted later tomorrow (Tuesday).

Since the closure of all airport in the UK since 15, April, this is the first time the navigation agency has said that flights can return to routine operations.

Flights to be affected on Monday too

S Kalyana Ramanathan / London April 19, 2010

As disruption to air traffic in Europe entered the fourth day, flight navigation service providers said a status quo on flight ban in most parts of Europe was likely to remain on Monday as well.

Since Thursday, April 15, flights into and out of Europe have taken a severe beating due to volcanic eruption in southern Iceland, with ashes being spewed into Europe’s busy airspace.

Eurocontrol, the European organisation for the safety of air navigation, in its latest announcement on Sunday said, by the

end of the day, more than 63,000 flights would have been cancelled since the trouble started on Thursday. According to data on flight cancellation released by Eurocontrol, the problems peaked today, with a drop of 84 per cent in flights on Sunday.

There were hopes yesterday that parts of Scotland could provide some respite by helping resume flights, but there has been little improvement in the situation since the update from UK’s navigation service provider, NATS, on Saturday. NATS today retained a red flag for entire UK and said the situation would continue even in the early hours of Monday.

NATS, in a statement issued on Sunday, said there might be limited opportunity in Orkney and Shetland (both northern Scotland) from 1900 (local time) today for some flights to operate under individual coordination with air traffic controllers (ATC).

NATS said the volcanic ash cloud from Iceland was currently spread across the UK. “Based on the latest information from the Met Office, NATS advises that the restrictions currently in place across UK-controlled airspace will remain in place until at least 0100 (local time) tomorrow, Monday, April 19.”

Eurocontrol said the air traffic control services were not being provided to civil aircraft in the major part of European airspace. This included Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, most of France and Germany, Hungary, Ireland, northern Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Slovakia, North Spain, Sweden, Switzerland, Ukraine and the UK.

In some of these areas, the upper airspace had been made available, depending on the observed and forecast area of possible ash contamination. However, it was difficult to access this airspace, as, in most cases, the surrounding area was not available for flights, the navigation agency said.

However, southern Europe, including parts of Spain, Portugal, the southern Balkan area, southern Italy, Bulgaria, Greece and Turkey remain open and flights are operating in these areas.

While navigation experts are providing routine updates on the situation, some of the European airline companies are conducting their own test flights as well. KLM Royal Dutch Airlines said it had carried out a test flight on Saturday evening in the Netherlands, using a Boeing 737-800. The flight was operated to establish whether air quality in the atmosphere met the requirements for safe flight. No problems were encountered during the flight, the Dutch carrier said. German carrier Lufthansa also operated 10 test flights on Saturday.





Flights same day

previous week


(in %)

April 14, 2010




April 15, 2010




April 16, 2010




April 17, 2010




April 18, 2010






Sunday figures based on assumptions at 12.30 Central European Time on April 18 Source: Eurocontrol

KLM President & CEO Peter Hartman said: “At first glance, there is no reason to suspect that anything is amiss. We observed no irregularities either during the flight or during the initial inspection on the ground. If the results of the technical inspection confirm this impression, we are ready to start by returning seven of our aircraft to Amsterdam from Düsseldorf. We hope to receive permission as soon as possible after that to start our operation and to transport our passengers to their destinations.”

KLM Executive Vice-President (Operations) Ype de Haan was also on board the flight, with Hartman as an observer.

The aircraft flew to 41,000 feet (altitude of approximately 13 km), which is the maximum altitude for this type of aircraft. KLM expects to receive the final results of the technical inspection tomorrow morning. It will operate nine further test flights today.

If all of the flights are operated without hitch, KLM hopes to receive permission to resume part of its operations as quickly as possible.

Aviation industry body, the International Air Transport Association, had earlier said its initial and conservative estimate of the financial impact on airlines was in excess of $200 million a day in lost revenues. In addition to lost revenues, airlines will incur added costs for re-routing aircraft, care for stranded passengers and aircraft at various ports.

No change in plan to close unit: JLR

S Kalyana Ramanathan / London April 19, 2010

Though sales picked up in the last few months, it will still implement cost-cutting measures.

Tata Motors-owned Jaguar Land Rover (JLR) today said it had no plans to reconsider an earlier decision to close one of its plants in the UK — a decision that is expected to enable production rationalisation and cost-saving. An announcement on this, as scheduled originally, will be made by the middle of 2010.

The Sunday Times, citing an unnamed company source, today said JLR was reconsidering its decision to close one of its midlands plants in the UK. The reason, the paper said, was the improving sales of its premium and luxury cars.

While it is true that JLR sales have picked up in the last few months, it will continue to implement its cost-cutting measures, one of which is to rationalise production between its three assembly plants in the UK.

In September 2009, when the economic outlook was still bleak and JLR was forced to cut costs, the company said it would rationalise production between two of its midlands plants. The company, however had also said there would not be any additional job cuts on account of this move, even as planned and voluntary redundancies would continue in all its plants.

Though the company has not made any specific announcements on which plant it is likely to close, it was generally understood that the plant at Halewood will be spared, while one of its midlands plants, either in Castle Bromwich or Solihull, will be closed. The company as a whole employs around 14,000 people and the three assembly plants employ close to 9,000 workers — 5,000 in Solihull, 2,000 in Castle Bromwich and 1,800 at Halewood. Castle Bromwich makes some Jaguar models, Solihull makes the Land Rover Defender and Discovery, the Range Rover Sport and Range Rover, and Halewood makes the Jaguar X-Type and Land Rover Freelander models.

Since the start of 2010, JLR has reported impressive improvement in sales. JLR’s global sales in March 2010 were 23,538 vehicles, higher by 43 per cent. Jaguar sales for the month were 4,642, higher by eight per cent, while Land Rover sales were 18,896, higher by 55 per cent. However, cumulative sales of JLR for the financial year are 193,982 units, lower by 11 per cent. Cumulative sales of Jaguar are 47,418, lower by 24 per cent, while cumulative sales of Land Rover are 146,564, lower by six per cent.

The improvement in sales of JLR has been witnessed only in the recent months. Apart from the March 2010 figures, this is further demonstrated by improving sales numbers reported for February 2010 as well. JLR global sales in February 2010 were 17,197 vehicles, higher by 60 per cent. Jaguar sales were 3,292, higher by 55 per cent, while Land Rover sales were 13,905, higher by 62 per cent.

Apart from new cost-cutting measures, the company has also revamped its top management. Par has brought in Carl Peter Forster, former head of General Motors Europe and Ralf Speth from BMW to lead the company’s turnaround. The start of 2010 also saw the exit of the then CEO David Smith, who had spent 18 months to revamp the company’s operations.

Saturday, April 17, 2010

Hopes pinned on clear space over Scotland

S Kalyana Ramanathan / London April 18, 2010

Flight navigation service provider says ash cloud changing shape

Air traffic remains suspended in the UK and most other parts of Europe for the third day, leaving several thousands passengers stranded in airports and hotel rooms, as southern Iceland’s Eyjafjallajokull (pronounced as ay-yah-FYAH’-plah-yer-kuh-duhl) volcano continues to spew ashes.

Navigation and weather experts expect the situation to remain grim over the weekend. So far, there has been no sign of any improvement to allow short-haul flights to resume operations. National Air Traffic Services (NATS), the UK’s flight navigation service provider, said the volcanic ash cloud from Iceland was moving around and changing shape.

“Based on the latest information from the Met Office, NATS advises that the restrictions currently in place across UK-controlled airspace would remain in place until at least 1 am (GMT) tomorrow,” NATS said in a statement.

NATS said it was looking for opportunities to make some airspace available within Scotland and Northern Ireland, when the ash cloud moved sufficiently, which might enable some domestic flights to operate under individual coordination with the air traffic controller (ATC).

UK Meteorological (Met) office later said it had detected ash dust settling over the UK and there were reports of dust reaching the ground. The Met office-commissioned Natural Environment Research Council (NERC) research plane flew over the North Sea on Friday afternoon and detected three distinct layers of ash, from fine particles at low levels to large particles around 8,000 feet.

“All these observations are consistent with our forecast plumes for where the ash cloud will spread and how it will mix through the atmosphere,” a Met office media release said.

Health experts believe these dust particles do not pose any major health risk to human beings. However, people with respiratory ailments have been advised to stay indoors as much as possible.

“We are also liaising with Health Protection Scotland and the Health Protection Agency and dust collected at Lerwick and Aberdeen has been analysed by Scottish Environment Protection Agency. Preliminary analysis has shown that the properties of the particles appear to be consistent with the properties of volcanic ash, but more detailed analysis is being undertaken,” the Met office said.

Aviation industry body International Air Transport Association (IATA) said its initial and conservative estimate of the financial impact on airlines was in excess of $200 million a day in lost revenues. In addition to that, airlines would incur added costs for re-routing of aircraft, care for stranded passengers and stranded aircraft at various ports.

IATA has set up its crisis centre in Montreal and is closely coordinating with Eurocontrol and European air navigation service providers. IATA represents some 230 airlines, comprising 93 per cent of scheduled international air traffic.

Though the situation of insufficient hotel rooms is yet to reach any alarming levels, UK’s hospitality industry body said its members were facing some problems. British Hospitality Association said eruption was causing problems to hotels with guests staying longer and fresh guests not arriving.

“London hotels are full and coping but, off course, all the forward booking schedules for the next few days are compromised.”

The only silver-lining to this dire situation is that air traffic restrictions are saving the atmosphere from 200,000 tonnes of carbon a day that aircrafts would have otherwise emitted by flying.

Friday, April 16, 2010

UK debates proposed law for takeovers

S Kalyana Ramanathan / London April 14, 2010

UK’s ruling Labour government has kick-started a debate over a new takeover rule that has now come to be known as the “Cadbury law”.

The Labour party in its General Election 2010 manifesto has suggested that it may bring in a new super-majority rule for corporate take overs. Once this legislation comes into effect it would mean prospective buyers of British companies must secure two thirds of the shareholders consent to complete any successful takeover.

This proposed law has been informally given the name ‘Cadbury law’ following the recent successful takeover of Cadbury by American counterpart Kraft Foods — a deal that caused considerable resentment among select local communities.

The law aims to discourage small pockets of investors (like hedge funds) from attempting to cash in on short-term windfalls by buying and selling stake in large British companies.

The Labour party manifesto said it seeks to “encourage a culture of long-term commitment to sustainable company growth, requiring a super-majority of two-thirds of shareholders in corporate takeovers.”

It is not yet clear if this rule will be made a universal code for all possible takeovers or would it be restricted only to critical industries in the utility and infrastructure sectors.

The voice of British industry CBI, gave a guarded response reacting to this proposal. Responding to this new proposal, John Cridland, deputy director general told the The Guardian newspaper, that it was time the national interest test was reviewed.

The UK faced risks that it had not a decade or so ago, such as cyber-attacks, he said. “Are there parts of the national infrastructure which are so critical to the wellbeing of the nation that need a different treatment to an entirely open market? It’s an idea worth examining. The devil is in the detail,” said Cridland.

Quite predictably, the unions welcomed the Labour party proposal. Unite (the union) deputy general secretary, Jack Dromey, said: “It was wrong that Kraft — a debt-laden American multinational — took over Cadbury, a successful British business. Labour’s ‘Cadbury law’ will help protect successful British companies against predatory bids and plundering by hedge funds making a fast buck.”

The proposed change is likely to be met with some resistance among investing groups. The Association of British Insurers (ABI) said, “Changes to the rules on takeovers must promote good governance and be technically workable. Any plans to require shareholders to vote by a two-thirds majority in company takeovers may fail this test, and entrench weak boards.”

There is also a general fear among investors that such a stringent rule might be interpreted as a protectionist move by British politicians, particualrly ABI members who constitute over 90 per cent of the insurance market in the UK and 20 per cent across the EU. They control assets equivalent to a quarter of the UK’s capital. ABI describes itself as the risk managers of the UK’s economy and society.

It may however be recalled that the three biggest takeovers of British companies by India’s Tata Group — Tetley Tea, Corus steel and car maker Jaguar Land Rover — would have passed the test of the new Cadbury law, as they were all complete takeovers, with the Tata Group securing 100 per cent interest in these companies.

Tata Steel asks Brit MP to be less critical

S Kalyana Ramanathan / London April 14, 2010

Tata Steel Vice-Chairman B Muthuraman today asked a member of British Parliament not to be “over-critical” about the company’s strategy in dealing with problems in Corus.

Muthuraman has written to Redcar MP Vera Baird saying her continued criticism of Corus is damaging the company’s efforts to find a new strategic partner for Teesside Cast Products (TCP).

“Continued criticism of the company and of Corus CEO and MD, Kirby Adams, in particular, was unfair and unwarranted. Such criticism was unhelpful to the company and its workforce,” he has said.

Muthuraman also wishes to meet Vera Baird to discuss issues of mutual interest.

“The Redcar plant was mothballed after a consortium of buyers cancelled a legally-binding 10-year agreement. Corus kept the plant going for as long as it could and at a cost of unsustainable losses of over £150 million to the company.”

Muthuraman said Adams and his team have worked tirelessly to find a solution and continue to do so.

He further said Tata Steel remained open to any credible offer that ensured long-term solution for steel making in Teesside but most offers received so far had been without substance or credibility.

Since the mothballing of TCP operations in northeast UK earlier this year, local activists, union leaders and politicians have been critical about Tata’s approach to the problem that has left nearly 1,700 jobless.

Vera Baird, Redcar MP and Solicitor General for England and Wales, has been particularly very vocal about her views on Tata’s approach to the Corus TCP issue.

Last week commenting on the resignation of Phil Dryden, a senior member of the Corus management team, Baird said, “I intend to ask Tata Vice-Chairman Muthuraman, what is going on? Phil Dryden told me that he spent six months, between March (2009) when the consortium left, and the December decision to mothball the plant, seeking out an equity partner and trying to negotiate a deal which could have saved our steelworks.”

“He was the management member who knew the customers of TCP and the plant’s closest details best. I am disappointed that he has left, however, it is more than a month since a US Dow Jones contact told me of market rumours that he had gone. Corus have simply declined to explain his absence and failed to disclose who is currently carrying out the sale negotiations.”

It may be recalled that an internal restructuring exercise in Corus had cost the company three senior executives over the last four months.

Apart from Dryden, the company had lost Marjan Oudeman, head of strip products and Scott MacDonald head of distribution and building systems.

Vedanta sees record production

S Kalyana Ramanathan / London April 9, 2010

Vedanta Resources, the UK-based mining and metals major, today reported a record quarterly production of iron ore and aluminum for the fourth quarter ended March 31, 2010.

In a statement issued today, the company said iron ore production in the last quarter and 2009-10 was 7.8 million tonnes (mt) and 21.4 mt, respectively, an increase of 59 per cent and 34 per cent over the corresponding periods.

The surge in production was attributed to a 3.6-mt contribution from Dempo’s operations (in Goa) and increased throughput from existing Sesa Goa operations.

During the March quarter, Sesa Goa shipped 7.4 mt of iron ore (with 1.8 mt contributed by Dempo), compared to 5 mt in the corresponding quarter. Despatches for the year were 20.5 mt, an increase of 36 per cent compared to 15.1 mt in the corresponding period.

The expansion of iron ore capacity to 50 million tonnes per annum (mtpa) by 2012-13 was progressing well through a combination of mining and logistics capacity enhancements, the company said. It added expansion of the pig iron plant capacity to 625 kilo tonnes per annum (ktpa) and associated expansion of metallurgical coke plant capacity to 560 ktpa was also progressing well for the scheduled commissioning by the first quarter of 2011-12.

Mined metal production in the fourth quarter was 194,000 tonnes, marginally lower than the corresponding quarter. Full-year production, however, increased five per cent to 769,000 tonnes from the previous year.

Refined zinc and lead production in the reported quarter was 150,000 tonnes and 20,000 tonnes respectively. Full-year production of zinc and lead was 578,000 tonnes and 72,000 tonnes, an increase of five per cent and 11 per cent respectively over the previous year due to higher operational efficiencies. The new 210-KTPA zinc smelter at Rajpura Dariba and the new 1-MTPA concentrator at Rampura Agucha were commissioned during this quarter — three months ahead of schedule.

Consequently, the total zinc smelting capacity increased to 879 KTPA. Silver production was 1.65 million ounces in the fourth quarter, nine per cent higher than the corresponding period. Full-year silver production was 5.7 million ounces, 34 per cent higher than the previous financial year. Construction activities at the 100-KTPA lead smelter at Dariba and the 160-Mw captive power plant is progressing well for scheduled completion in second quarter of the current financial year, the company said.

It further added the Sindesar Khurd mine project was on schedule for progressive commissioning from first quarter of this financial year. Copper cathode production at the Tuticorin smelter was 80,000 tonnes in the fourth quarter, lower than the corresponding prior quarter, primarily due to low copper grades. Cathode production for 2009-10 was 334,000 tonnes, an increase of seven per cent compared to the previous year.

Aluminium output at record level

Aluminium production in the March quarter was a record 159,000 tonnes, a 19 per cent increase over the corresponding prior quarter. Full-year aluminium production was 533,000 tonnes, 15 per cent higher than the previous year. The increases were mainly on account of 264,000 tonnes contributed by the Jharsuguda aluminium smelter, partially offset on shut down of Balco I smelter in the first quarter.

The Balco II smelter continues to operate above its rated capacity. The company sold 956 million units of power during the quarter, compared to 435 million units sold in the corresponding quarter. This was mainly on account of surplus power from Balco I due to the shut down of aluminium operations, and from the Jharsuguda captive power plant. For the full year, 3,279 million units of power were sold, compared to 882 million units in the previous financial year.

UK flights stay grounded, travellers take land route

S Kalyana Ramanathan / London April 17, 2010

The situation in UK’s air travel industry remains grim for the second day, as all airports remained closed due to smoke and ash emanating from an Icelandic volcano over the last 36 hours.

Passengers in major airports remained stranded, even as alternate land transport services were pressed into action to cope with the increased demand.

Eurocontrol, the European Organisation for the Safety of Air Navigation, said the cloud of volcanic ash was continuing to move east and south-east and the impact would continue for at least the next 24 hours. Eurocontrol is an intergovernmental organisation, made up of 38 states and the European Community.

It also said that airspace was not available for operation of civilian aircraft in Ireland, UK, Belgium, Netherlands, Denmark, Sweden, Norway, Finland, Estonia, the north of France, including all Paris airports, parts of Germany including Düsseldorf, Cologne, Hamburg, Berlin and the airspace around Frankfurt, parts of Poland including Warsaw airport.

National Air Traffic Services (NATS), the UK’s leading air navigation services provider, said the cloud of volcanic ash continued to cover much of the UK and the eruption in Iceland continued. “Following a review of the latest Met Office information, NATS advises that restrictions preventing flights in English-controlled airspace will remain in place until 0100 (UK time) tomorrow at the earliest,” it said.

NATS said the flights in Northern Ireland and the Western Isles of Scotland, to and from Glasgow and Prestwick would continue to be allowed until 1900 (UK time), subject to individual co-ordination. North Atlantic traffic to and from Glasgow, Prestwick and Belfast might also be allowed in this period.

Alternate transport service provider like Eurostar today started providing additional seats for air passengers, wished to connect to continental Europe to Paris and Brussels.

National Rail, one of largest railway network in UK, said coach services to and from Scotland and London were on sale today, with hundreds of extra seats added to help people stranded as a result of the airport closures. Eurolines, the European coach operator, added nearly a thousand extra seats to Europe, with its services to Dublin, Paris and Amsterdam most in demand. “Demand is very high, but more coaches are being added on a regular basis,” a note from National Rail said.

Paul Bunting, National Express managing director, said, “Coach travel is proving to be very popular and we are adding in as many extra services as possible to cater for demand, especially to and from Scotland. Eurolines coach services to Europe are particularly busy, with people still wanting to get their destination across the Channel.”

Despite the large number of passengers stranded at airports, hotels in London did not report any unusual surge in demand. However Premier Inn, a large network of budget hotels, said it was witnessing an increase in bookings at the airport sites. This group also said it was not running out of rooms for those travelling on a budget.

Stocks prices of airline operators British Airways and Ryanair dropped on London Stock Exchange. BA stocks fell by 1.65 per cent to £238.6, while low-cost carrier Ryanair fell by 2.63 per cent to £3.89. Stock prices of European operators Lufthansa and Air France-KLM, however, improved by 3 per cent and 3.9 per cent respectively on LSE. (all changes as of 3:30 pm, UK time).

Analysts said that a few days of flight disruption would not be financially damaging for airline operators. However, it would worsen if the situation continues to remain grim for a longer period.

Volcanic eruption in Iceland stops air traffic to London

S Kalyana Ramanathan & BS Reporters / London/New Delhi/Mumbai April 16, 2010

A volcanic eruption in Iceland on Wednesday afternoon spewed smoke and ash over many parts of northern Europe, disrupting air traffic.

Britain, in particular, was substantially affected. All flights into and out of the UK were cancelled for safety reasons, with all major airports ordered closed. The restrictions would be reviewed tomorrow.

The potential threat to airplanes from volcanic ashes is more than just a perceived one. In 1982, a Boeing 747 operated by British Airways lost power in all four engines when flying at 37,000 ft. The flight avoided a major catastrophe and it was discovered that the cause was volcanic ashes only after it had safely landed.

As many as 14 direct flights to London from India were cancelled by various airlines. They said any decision on the flights to be operated tomorrow would be taken only then.

However, flights from India to the other major destinations of Paris and Frankfurt weren’t affected.

“We will not be able to operate services from (the affected) airports until further notice. Customers booked to travel on a cancelled flight can claim a full refund or rebook their flight for a later date,” said a release from British Airways here.

Since it was not certain whether the restrictions on flights would continue on Friday as well — there were reports that the visibility and safety problems could continue for 36 hours, which would mean till well into tomorrow evening — airlines were declining to give any clear assurance.

Travel agencies are advising leisure travelers to avoid England and Nothern Europe for the time being. “Most people go to the UK for higher studies, business trips or to meet friends and relatives. Very few go for leisure. We are advising the leisure travellers to consider other locations and suggesting they avoid Northern Europe,” said Subash Goyal, chairman, Stic travel group.

“All flights for today have been cancelled. Airlines are permitting rescheduling without any extra charges. We are communicating with the people who booked with us and reviewing their travel plans,” said Sabina Chopra, co-founder, of a travel portal.

“If the grounding does continue for another day, we will likely refund passengers who may want to cancel or provide the option of flying to Paris,” said a spokesperson for Air India. Jet and Kingfisher Airlines were working on similar plans.

Flights to London constitute seven per cent of the total international capacity from India, according to data available from the Centre for Asia Pacific Aviation. The worst effected would be British Airways, which has a 39 per cent share of the capacity, followed by Jet which has 24 per cent. Then comes AI (21 per cent), Kingfisher (seven) and Virgin (five), says Capa.

Sunday, April 11, 2010

"Bad banker" and a pro-tax campigner, dressed as fabled thief Robin Hood debate the introduction of the 0.05 per cent Tobin tax on all financial transactions, while seven year old Oisin Bouche-Ross contemplates a more dramatic step as he takes aim at the banker. This proposed tax considered by governments across the world and among G20 nations in particular is expected to be one of the key issues debated in the upcoming UK elections as well. Supporters of this tax in London today took to the streets and campaigned for its implementation by which ever party comes to power after the May 2010 General Elections in the UK.

Restructuring claims three bigwigs in Corus

S Kalyana Ramanathan / London April 10, 2010

The new structure aims to service customers better.

An internal restructuring exercise in steel major Corus has so far claimed three big names. Over the last four months, three top executives in the Tata Steel-owned UK steel major have left the company. The three who left were Phil Dryden, division head for Corus Long Products, Marjan Oudeman, head of strip products, and Scott MacDonald, head of distribution and building systems.

Corus, however, remained unfazed by these losses and said the heads of these divisions had chosen to leave on their own.

Details of this new internal structure in Corus are still being worked out. Hence, the company is unable to provide details of the proposed new structure or the possible benefits it hopes to gain from the change. It said the new structure would be a “unified, one-sided, customer facing structure” integrating the management of all divisions within the company. The idea behind attempting to realign the company was to service customers better, the company further said.

From a customer’s point of view, Corus at present has nine major divisions — aerospace, automotive, construction, consumer products, energy & power generation, engineering, packaging, rail and security & defence. Corus is Europe’s second-largest steel producer (after ArcelorMittal) with annual revenues of around £12 billion and a crude steel production of over 20 million tonnes. The combined strength of Corus, along with parent Tata Steel, adds up to 28 million tonnes, with over 80,000 employees in four continents.

Corus has been part of Tata Steel since April 2007, with the latter acquiring the UK-based steel maker for £6.2 billion in that year.

The departure of these top executives also comes at one of the most difficult periods in the company’s history. With the global steel industry still trying to come out of recession and the resultant slack demand, Corus, in particular, has been affected by a forced mothballing of its Teesside Cast Products (TCP) plant in northeast UK. Politicians, community workers and union leaders have been exerting considerable pressure on the company to find a new buyer for the TCP plant or other ways and means to keep the plant running. The partial mothballing of the TCP plant in February this year had resulted in 1,700 job losses in the company. In 2009, a global consortium of steel buyers prematurely dropped out of a 10-year buying contract, directly affecting TCP’s operations. This one contract was expected to consume nearly 80 per cent of the plant’s output.

Political leaders in Redcar (where TCP is located) have been campaigning for the revival of the steel works in the region. Vera Baird, member of Parliament for Redcar, reacting to the exit of Phil Dryden, said, “I intend to ask Tata Vice-Chair Muthuraman, what is going on? Phil Dryden told me that he spent the six months, between March (2009) when the consortium left, and the December decision to mothball the plant, seeking out an equity partner and trying to negotiate a deal which could have saved our steelworks. He was the management member who knew the customers of TCP and the plant’s closest details best. I am disappointed that he has left; however, it is more than a month since a US Dow Jones contact told me of market rumours that he had gone. Corus has simply declined to explain his absence and failed to disclose who is currently carrying out the sale negotiations.”

While there have been media stories suggesting a possible buyer for TCP may have been found, there is no official statement from Corus supporting this. Meanwhile, the company is also proceeding with legal course against the buyer-consortium that had broken the 10-year contract and landed TCP in trouble.