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Rosatom’s global nuclear ambition cramped by Kremlin politics


PARIS/MOSCOW The $100 billion overseas order book of Russia’s nuclear power plant builder Rosatom — bigger than all its Western competitors combined — makes it look like the giant in its field.

But if the company — formed in 2007 from the Russian Atomic Energy Ministry and tasked with turning nuclear power into a major export industry — is ever to reach its potential as a global industrial giant, it will have to shed Russia’s reputation for using energy policy as a means to political ends.

Deal after deal has collapsed in Europe, where individual countries and the European Union as a whole consider it a priority to reduce dependency on Russian energy, and relations have deteriorated over Moscow’s intervention in Ukraine.

A project in fast-growing, energy-hungry Turkey — possibly the ideal market on paper — has been stalled because of a collapse in relations between the two countries supporting opposite sides in the Syrian civil war.

And an array of deals announced in poorer developing countries like Egypt, Jordan and Bangladesh seem unlikely to reach fruition any time soon because of the countries’ lack of experience with nuclear power, shortage of capital and grids that are unsuitable.

“Rosatom is pretty good at announcing $100 billion euros of orders in 25 countries, but not an awful lot of these are firm contracts, they are just bits of paper,” said Steve Kidd at East Cliff Consulting.

Since the 2011 Fukushima disaster, the world nuclear industry has been stagnant as Germany and other countries decided to exit nuclear, Japan closed most of its reactors and even China reduced its pace of nuclear expansion.

Supporters say nuclear power still has a future as a proven technology to generate electricity without emitting carbon that causes global warming. But low gas and coal prices and the competition of increasingly cheap wind and solar power have made it uneconomical in large parts of the world.

In the United States, several nuclear plants have closed and in Europe new nuclear plants can only be built with state subsidy, as French utility EDF’s Hinkley Point project in Britain shows.

Yet Rosatom still announces a new deal every few months as it markets nuclear to developing countries. It offers a unique business model in which it finances, builds and operates the nuclear plants, and then takes away the waste.

Experts say many of these deals have little chance of turning into firm contracts, as many of these countries are decades away from being able to use nuclear energy in their grids.

In more developed countries like Hungary and Turkey, where Rosatom won billions worth of nuclear reactor orders, its projects have been stalled for years due lack of funding, local opposition and suspicions about the Kremlin’s political motives.

“The Russians are increasingly viewing their energy fuels and technologies as a lever for foreign policy,” Carnegie Endowment for International Peace associate Mark Hibbs said.

Rosatom declined to comment on the status of its foreign projects or whether its investments had a political component. The Kremlin did not immediately reply to written questions submitted by Reuters.

But Rosatom First Deputy Director General Kirill Komarov said in November the firm’s contracts abroad were solid.

“All of the contracts that we have already signed we think to be very reliable,” he said at a nuclear conference.

FLURRY OF MOU’S

Turkey was an ideal market for Rosatom. A large developing market, with its own scientific community, domestic capital and fast-growing power needs, as well as a cross-roads for energy infrastructure. But it also shows how politics trumps commerce.

In 2013, Rosatom won a $20 billion contract to build four reactors in Akkuyu in what was to become Turkey’s first nuclear plant as Ankara tried to cut reliance on imported energy.

But late last year, Rosatom stopped construction following the downing of a Russian jet flying sorties over Syria near the Turkey-Syria border. The incident led to a crisis in relations between Turkey, which supports rebels fighting against Syrian President Bashar al-Assad, and Russia which has intervened in support of his government.

In April, a source told Reuters a Turkish construction firm is in talks about buying up to 49 percent of the project.

Komarov told Reuters in May the Akkuyu project had not collapsed.

“The project is not subject to sanctions. As far as we know, work is continuing,” he said.

EXPERIENCE

Russia has a lot of experience building reactors abroad: there are Soviet-era reactors all over Eastern Europe.

But without a captive market and facing fierce competition from other vendors, Rosatom has built relatively few reactors since 2007: two in Tianwan, China, one in Bushehr, Iran, and one in Kudankulam, India are working. Rosatom said a second one in Kudankulam will start operating this month.

Experts say some deals Rosatom boasts about are not contracts, just a “memorandum of understanding” or “framework agreement”. Many of these are with countries that will not be ready for nuclear for years, if not decades, such as Algeria, Argentina, Bolivia and Nigeria.

Russia is not the only nuclear vendor to sign MOUs with unlikely customers. China recently signed a nuclear agreement with Sudan, and before its government bailout France’s Areva also spoke of selling numerous reactors in developing countries.

In more advanced emerging markets like South Africa and Vietnam, Rosatom competes with U.S., French, Chinese, Japanese and Korean vendors, all eager to win business in the tight market since Fukushima.

“I would not draw the conclusion that Russia is about ready to take over the nuclear universe,” CEIP’s Hibbs said.

For competitors like GE Hitachi, (GE.N) (6501.T) Toshiba (6502.T) and Areva, (AREVA.PA) Rosatom’s frenetic dealmaking — even if it leads to few firm contracts — is a worry, as it allows Russia to occupy the terrain.

“The Russians are clever, they announce lots of deals and freeze the market, so other vendors stay away,” said a board member of a nuclear reactor builder.

DEALS COME UNDONE

Russia’s most focused nuclear export drive is in Europe, which is trying to wean itself off Russian gas as its main source of energy for power generation. Opponents suspect the Kremlin of aiming to use nuclear power to wield political leverage, the way it has with gas, turning the taps down during confrontations with Ukraine.

“As Russia’s gas card is losing its strength, it tries to play the electricity card,” said Greenpeace Eastern Europe energy specialist Jan Haverkamp.

Several Rosatom attempts to break into the EU market via former East bloc countries have come to nothing, although these projects had seemed like serious prospects a few years ago.

In Bulgaria, a contract to build two reactors at Belene on the Danube River was abandoned in 2012 for lack of financing.

From Kaliningrad, a Russian territory located between Poland and Lithuania, Rosatom hoped to export power to Poland and even Germany with an undersea cable. That plan too was quietly dropped around 2013 as it became clear there was no hope of selling electricity into the EU.

In 2014, Czech utility CEZ scrapped a tender for the $15 billion Temelin project – where a Russian consortium and Westinghouse were the two remaining bidders – due to low power prices and the state’s refusal to provide price guarantees.

That same year, Hungary awarded Rosatom – without a tender – a contract for two reactors in Paks. In November 2015, the European Commission launched proceedings over the contract saying it could infringe the EU’s procurement rules, and opened an investigation into possible illegal state aid.

Rosatom’s best chance to build a reactor in the EU could be in Finland, where it bought a 34 percent stake in consortium Fennovoima from German utility E.ON (EONGn.DE) on condition it could build a reactor in the Hanhikivi peninsula.

After a row about Russian investors trying to use a Croatian firm to circumvent shareholder nationality requirements, Russia finally convinced Finnish utility Fortum (FUM1V.HE) to buy into Fennovoima.

Experts expect Rosatom will divert resources from Paks and other projects to speed up the Finnish project, and stay ahead of China, which also wants to break into the EU.

Chinese utility CGN in 2015 signed a deal with Britain to build a reactor there in exchange for financing French utility EDF’s nuclear project in Hinkley Point.

Meanwhile, whether any new plants ever get built, Rosatom is likely to keep signing new deals around the globe.

“Rosatom likes to sign MOUs everywhere, they like one every few months, for the photo opportunity,” Haverkamp said.

(Writing by Geert De Clercq)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/t6rdndK2GIE/us-russia-nuclear-rosatom-idUSKCN0ZC0QZ

Deutsche Bank CEO says London financial center will weaken but won’t die


BERLIN The chief executive of Deutsche Bank (DBKGn.DE) says London will not die as a financial center but it will become weaker after Britain voted to leave the European Union.

John Cryan, a Briton who divides his time between Frankfurt and London, told Germany’s Handelsblatt business daily that he expects higher volatility than usual on the financial markets in the coming weeks.

“The financial center won’t die but it will get weaker,” Cryan said of London.

Cryan did not comment on the possible direct impact on Deutsche Bank after the referendum. Deutsche Bank employs at least 11,000 staff in Britain.

Cryan is working on a strategic overhaul at Germany’s biggest lender, announcing in 2015 that it would cut 9,000 staff positions, of which 4,000 would be in Germany.

(Reporting by Emma Thomasson; Editing by Digby Lidstone)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/xAijcnWKxDo/us-britain-eu-deutsche-bank-idUSKCN0ZC0M2

Kuka nears deal with Chinese bidder: source


BERLIN/FRANKFURT German robotics maker Kuka (KU2G.DE) is on the brink of agreeing to an investor agreement with Chinese bidder Midea (000333.SZ) that includes a long-term commitment to existing headquarters, factories and jobs, a source close to the negotiations said.

Kuka needs to decide in the coming week whether it wants to recommend the acceptance of Midea’s 4.5 billion euro ($4.99 billion) bid, the biggest German industrial technology company to be targeted by a Chinese buyer in a wave of recent deals.

The source told Reuters that there had been a breakthrough in negotiations between Kuka and Midea, with the results presented to a meeting of the supervisory board on Saturday.

“Now the details just need to be finalised so that the agreement can be signed in the coming days,” the source said.

The agreement to maintain the current headquarters and maintain factories and employees should run until 2023, the source added.

Kuka was not immediately available to comment

The Frankfurter Allgemeine Sonntagszeitung reported that Midea had offered Kika guarantees including the independence of the company’s management and its listing in Frankfurt.

News of Midea’s bid for Kuka last month caused a furor among German politicians, though Midea has since said it would allow Kuka to operate independently and help it expand in China.

On a visit to Beijing this month, Chancellor Angela Merkel signaled that she would not try to prevent a takeover but also left the door open to German firms making a counter-offer.

However, no potential German or European rival bidder has emerged at this stage.

(Reporting by Alexander Hübner and Joern Poltz, writing by Emma Thomasson,; Editing by Stephen Powell)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3XailzSj9VE/us-kuka-m-a-midea-group-idUSKCN0ZC0LS

Many U.S. firms playing catchup after surprise EU exit vote


NEW YORK/CHICAGO The risk that Britain could yank itself out of the European Union had been telegraphed for over a year, but even U.S. companies with “Brexit” contingency plans have said they were shocked it is now on track to become reality, and are just beginning to work through all of the implications.

Caught off guard, some U.S. firms have rushed to place foreign currency orders hedging against further declines in the British pound. Many are seeking legal advice on the impact on trade agreements and regulations, while others begin to consider a potential drop in demand from European economies, company executives and consultants told Reuters.

International law firm Dechert LLP received so many calls from business clients after Thursday’s referendum result became clear that it set up a special hotline to handle the volume.

While heavily regulated financial services and insurance companies were relatively ready for a Brexit, “most of the others haven’t prepared at all,” said Miriam Gonzalez, the London-based co-chair of Dechert’s international trade and government regulation practice.

“It has come as a massive shock and many businesses are struggling to digest that today,” Gonzalez said on Friday.

One U.S. CEO went to bed on Thursday night thinking Britons would vote to stay in the EU. He awoke before dawn on Friday to find out it had swung the other way. One of his first calls was to his finance office, directing them to hedge against further declines in the pound.

“We’re a little naked on that,” said Dan Ariens, CEO of Ariens Co, a family-owned maker of lawn and garden equipment based in Brillion, Wisconsin, “because it was kind of a wait-and-see situation.”

Ariens, with sales of about $700 million last year, operates a factory in Britain – its only one outside the United States — producing riding lawn mowers for the UK and other European countries. “The value of my (UK) business just dropped,” Ariens said.

Herman Miller Inc (MLHR.O), known for its high-tech office furniture and as the inventor of the office cubicle, had factored Brexit into its contingency planning for this year among other global risks, trimming its budgets and “not overfilling open positions” while awaiting the vote, Chief Executive Brian Walker said.

Over the last six months – particularly the last three – the Zeeland, Michigan-based company noticed a slowdown among UK clients, as those planning office complexes or renovations held tight.

But even with that foresight, it was not until he read a legal article on Friday morning that Walker realized that Britain will likely have to rewrite all of its trade agreements as it leaves the EU, a process expected to take up to two years.

“There’s so much uncertainty about how they’re going to implement this, and some of it is unknowable at this point,” he said.

        

    IMPACTS FROM TAXES TO PERSONNEL

The British vote signaled a new direction for Europe, including the potential for additional countries to consider separating from the continental trading bloc. It sent global financial markets into a tailspin on Friday, and the pound fell against the dollar to levels not seen since 1985. CEOs worldwide said they were bracing for long-term disruption, job cuts, and lower profits. [nL8N19G2L4]

     One of the main issues U.S. companies with operations in the UK will have to contend with is whether Britain remains part of the single market. If manufacturers have to start paying tariffs on goods sent from the UK to EU countries and have to go through customs, that would add time and cost to their operations that could favor European competitors.

The jump in the dollar against the pound, as well as other currencies, is another headache, since it makes U.S.-made goods more expensive in those markets.

Ariens is one company facing that problem. It uses many U.S.-made parts to assemble its products in the UK, including engines and transmissions. The falling pound means higher costs for those parts, potentially cutting into profit if it does not raise prices.

Another is D’Addario Co, a Farmingdale, New York-based maker of strings for musical instruments and other accessories with sales of about $185 million. CEO Jim D’Addario had followed the debate over Brexit in press reports and had not taken the chance of a pullout seriously. The company does about 30 percent of its business in Europe, and D’Addario’s most immediate concern is the impact of the rising dollar on his products.               

     “The scarier thing to me,” he said, “is that this could lead to the collapse of the whole EU system – that would have a more far-reaching impact.”

     Many different types of regulation will also need to be renegotiated, from intellectual property and branding rights to environmental law. EU citizens currently have an automatic right to work in any EU member country, so companies may face human resources challenges if employees based in Britain from other EU countries will be forced to leave.  

Once the initial panic is over, they will need to work fast to figure out their priorities for lobbying the UK government as it negotiates with the EU.

    “There’s going to be quite a lot of discussion about what shape Britain’s relationship with the European Union is going to take,” said Alex Henderson, a senior tax partner at PwC in the UK. “If your business is going to be affected by those changes, then it’s time to make your voices heard because I believe the UK government will be in a listening mood.”

(Reporting by Timothy Aeppel in New York and Nick Carey in Chicago; Editing by Michele Gershberg and Bill Rigby)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_CrJ5EQOqzg/us-britain-eu-corporates-usa-idUSKCN0ZC0E0

China touts new bank’s greater understanding of developing world


BEIJING The China-led Asian Infrastructure Investment Bank (AIIB) will be different from institutions like the World Bank because it has a greater understanding of the developing world’s needs, officials said on Sunday at its first annual meeting.

Chinese President Xi Jinping proposed the bank two years ago and it began operations in January, with 57 founding member countries and $100 billion in committed capital, which it plans to invest in projects across the region.

The AIIB, which intends to invest $1.2 billion this year, has said it is aiming to meet international standards of governance, though some members say there is still work to be done.

Speaking on the final day of the bank’s inaugural annual meeting, Chinese Finance Minister Lou Jiwei said the AIIB needed to establish its niche.

“The AIIB needs to establish its comparative advantage relative to existing multilateral development banks like the World Bank,” Lou said.

“…Compared with the Asian Development Bank, World Bank and other multilateral development banks, the AIIB’s advantage lies in its keener understanding of the successful experience and lessons of developing countries’ years of development.”

The AIIB’s board approved its first four deals worth $509 million on Friday, with three projects co-financed with the World Bank, the Asian Development Bank, the United Kingdom Department for International Development and the European Bank for Reconstruction and Development.

The co-financed projects are a slum renovation in Indonesia and highway construction in Pakistan and Tajikistan. A power grid upgrade project in Bangladesh will be solely AIIB financed.

AIIB President Jin Liqun said it was the focus on infrastructure that specifically marked out the bank as different and that they were committed to the concept of international best practice.

“The question is, how do you define international best practice? I will not agree to anything which could be considered international best practice unless this kind best practice incorporates the development experience of China and many countries in Asia and elsewhere over the last three or four decades,” Jin said.

“So our bank would like to have the development experience, the so-called international best practice, reflecting the experience of China, India (and) so many countries in Asia. So we should have a different model of development.”

The AIIB is also looking to expand its numbers this year and will take applications for new members through the end of September.

(Editing by Nick Macfie)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/MYuh-mp3_uM/us-china-aiib-idUSKCN0ZC05S

Volkswagen should pay Europeans same compensation as U.S. drivers: EU commissioner


BERLIN Volkswagen AG (VOWG_p.DE) should offer European drivers similar compensation to what the German carmaker is expected to pay U.S. customers, Europe’s Industry Commissioner Elzbieta Bienkowska told a newspaper on Sunday.

“Volkswagen should voluntarily pay European car owners compensation that is comparable with that which they will pay U.S. consumers,” Bienkowska told the Welt am Sonntag newspaper.

Volkswagen is expected to agree next week to pay nearly $10.3 billion to settle claims by U.S. regulators stemming from its diesel emissions cheating scandal.

The settlement includes offers to buy back nearly 500,000polluting U.S. vehicles and pay an average compensation to owners of around $5,000.

Bienkowska said it would be unfair of VW to treat European consumers differently just because of a different legal system.

“Treating consumers in Europe differently than U.S. consumers is no way to win back trust,” she said.

In Europe, VW officials have said they will repair vehicles to remove illegal software, but have no plans to pay consumers compensation, arguing they have suffered no loss.

(Reporting by Emma Thomasson. Editing by Jane Merriman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/383Z7iZfuHU/us-volkswagen-emissions-eu-idUSKCN0ZC04U

Investor George Soros calls for reconstruction of EU after ‘Brexit’ vote


Billionaire investor George Soros on Saturday called for thorough reconstruction of the European Union in order to save it, even though he warned that Britain’s vote to leave the bloc makes “disintegration of the EU practically irreversible.”

Soros, who warned of financial meltdown if Britain voted to leave the EU before Thursday’s referendum, also said the effects of the decision will likely damage Britain.

“Britain eventually may or may not be relatively better off than other countries by leaving the EU, but its economy and people stand to suffer significantly in the short to medium term,” he wrote in a commentary on the website Project Syndicate.

Soros made huge profits in 1992 by betting against the British pound as it crashed below the preset level and had to be withdrawn from the European Exchange Rate Mechanism.

He warned of a similar meltdown earlier this week, before the vote, predicting a Brexit victory would send the pound down by at least 15 percent, and perhaps more than 20 percent, to go below $1.15, in an article in British newspaper The Guardian.

In the event, sterling fell around 10 percent on Friday, hitting a 31-year low, but never went below $1.32. It is not known if Soros bet against the pound. A Soros spokesman declined to comment on whether the investor made money on bets placed on Brexit.

“Now the catastrophic scenario that many feared has materialized, making the disintegration of the EU practically irreversible,” wrote Soros. “The financial markets worldwide are likely to remain in turmoil as the long, complicated process of political and economic divorce from the EU is negotiated.”

He said the consequences for the real economy would be comparable to the financial crisis of 2007-2008.

Soros said the EU had broken down and ceased to satisfy its citizens’ needs and aspirations. Nevertheless, he called for support to reconstruct it.

“After Brexit, all of us who believe in the values and principles that the EU was designed to uphold must band together to save it by thoroughly reconstructing it,” he wrote. “I am convinced that as the consequences of Brexit unfold in the weeks and months ahead, more and more people will join us.”

(Reporting by Bill Rigby; Editing by Tom Brown and Franklin Paul)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/0GUwPwRhoXY/us-britain-eu-soros-idUSKCN0ZB0VI

Central banks ready to cooperate after Brexit result


ZURICH Central banks are ready to cooperate to support financial stability in the wake of Britain’s vote to leave the European Union, the Bank for International Settlements said on Saturday.

Central bankers gathered at the organization’s global economy meeting in Switzerland discussed the implications of the referendum.

“Governors endorsed the contingency measures put in place by the Bank of England and emphasized the preparedness of central banks to support the proper functioning of financial markets,” said Agustín Carstens, chairman of the global economy meeting.

“Central banks will carefully monitor market functioning and stability, and cooperate closely.”

(Reporting by John Revill; Editing by Kevin Liffey)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ksE2xdSDeZ4/us-britain-eu-bis-idUSKCN0ZB0WE

Investor George Soros says ‘Brexit’ means ‘disintegration’ of EU


Billionaire investor George Soros said on Saturday that Britain’s vote to leave the European Union makes “disintegration of the EU practically irreversible,” and that the effects of Thursday’s referendum will likely damage Britain.

“Britain eventually may or may not be relatively better off than other countries by leaving the EU, but its economy and people stand to suffer significantly in the short to medium term,” he wrote in a commentary on the website Project Syndicate.

Soros made huge profits in 1992 by betting against the British pound as it was withdrawn from the European Exchange Rate Mechanism.

(Reporting by Bill Rigby; Editing by Tom Brown)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/0GUwPwRhoXY/us-britain-eu-soros-idUSKCN0ZB0VI