Energy News Beat

Wall Street rushed to embrace sustainable investing just a few years ago. Now it is quietly closing funds or scrubbing their names after disappointing returns that have investors cashing out billions.

The about-face comes after tightened regulatory oversight, higher interest rates that have slammed clean-energy stocks and a backlash that has made environmental, social and corporate-governance investing a political target.

“This really is the result of too many managers looking to cash in on increased awareness and demand for ESG investments,” said Tony Turisch, senior vice president at Calamos Investments.

The third quarter was the first time more sustainable funds liquidated or removed ESG criteria from their investment practices than were added, according to Morningstar. That is a reversal from not that long ago, when companies were rebranding faltering funds to cash in on the billions of dollars flowing into sustainable investment products.

In 2021, Hartford Funds inserted “sustainable” into the name of its core bond product and subsequently saw investors pour $100 million into it. But after missing its own performance targets last year, Hartford is switching gears again.

Later this month, the bond fund will be known as the Core Fixed Income Fund and potentially sell some of the holdings that made it sustainable when it pivots to a conventional investment strategy, according to company filings. Hartford declined to comment on why it is rebranding the fund.

At least five other funds also announced they would drop their ESG mandates this year, while another 32 sustainable funds will close, according to data compiled by Morningstar and The Wall Street Journal.

The retreat comes after investors withdrew more than $14 billion from sustainable funds this year, leaving them with $299 billion, according to Morningstar. Conventional funds also lost money, but the pain was more acute for climate and other thematic products hit by high interest rates and other factors.

Ron Rice, vice president of marketing at Pacific Financial, said a legal fight over the Labor Department’s rule letting retirement-fund managers consider ESG factors may have weighed on the popularity of his firm’s sustainable products.

“We found that the demand for ESG investing, by financial professionals working with retirement-plan participants, was more limited than we anticipated,” he said.

Earlier this year, Pacific Financial removed sustainability from the name of three mutual funds then holding more than $187 million. All three funds subsequently saw their assets under management jump, Rice said.

Political pressure could be factoring into the changes as well. Republican presidential candidate Vivek Ramaswamy has been a vocal ESG critic. Last year, Florida said it was pulling $2 billion of its assets managed by BlackRock in part due to the company’s support of ESG.

Meanwhile, the Securities and Exchange Commission is stepping up oversight of the space and recently adopted a rule to prevent misleading naming conventions. Funds have roughly two to three years to comply, depending on their size.

Already, the SEC is policing the space more closely. In September, Deutsche Bank’s investment arm, DWS Investment Management Americas, agreed to pay $19 million to settle an investigation into alleged greenwashing by the firm for overstating how the company factored ESG data into investment decisions.

At the end of the month, DWS will liquidate a mutual fund the company rebranded as ESG in 2019.

DWS said it addressed the matters with the SEC and that it decided to liquidate the fund due to its small size.

Despite the closures, new ESG funds continue to pop up. Last year, Naperville, Ill.-based Calamos Investments said it would close a $4 million sustainable equities fund that had lagged behind its benchmark from inception, according to company filings.

Then earlier this year, the firm came up with two new ESG funds. They have the same strategy as the closed fund, but brandish NBA superstar Giannis Antetokounmpo’s name.

“While it’s not working currently, we expect that over the long term it will add value to the strategy,” said Turisch of Calamos.

Source: Msn.com

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Golar LNG has announced that the FLNG Gimi has departed Singapore’s Seatrium Shipyard and is now sailing under its own propulsion, supported by an escort tug, toward BP’s purpose-built Greater Tortue Ahmeyim (GTA) hub offshore Mauritania and Senegal.

The voyage is expected to take around 60 days, including refuelling stops in Mauritius prior to rounding the Cape of Good Hope and in Namibia prior to its arrival. The FLNG will then be moored and connected to the hub, which is expected to trigger the start of contractual cash flows under the 20-year Lease and Operate Agreement on the GTA field.

Gimi was converted from a 1975-built Moss LNG carrier with a storage capacity of 125,000 cubic metrrs. It is designed for 20 years of operations on-site without dry docking, with a liquefaction capacity of 2.7 million tonnes per annum and contracted to operate near shore in 30 metrrs of water depth.

Golar CEO Karl-Fredrik Staubo commented: “Golar is pleased to complete conversion of the FLNG Gimi. We would like to thank Seatrium, Black and Veatch and other suppliers for another successful FLNG delivery. With Gimi soon on site for start-up of operations Golar will double its operating fleet of FLNGs and bring total installed liquefaction capacity up to 5.1mtpa.

“We look forward to having FLNG Gimi in operation, and to continued long term cooperation with BP, Kosmos and the national oil and gas companies of Mauritania and Senegal. As the leading, independent owner and operator of FLNG units globally, we are committed to enabling monetization of attractive proven gas fields through our market leading operational track record, attractive capex/ton of liquefaction capacity and amongst the industry’s most efficient emissions/ton produced LNG.”

Source: Oedigital.com

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Dive Brief:

Boston is pulling out of the race to be one of the 10 Massachusetts cities and towns allowed to ban fossil fuels in new construction through a state pilot program, Mayor Michelle Wu told The Boston Globe last week.
Wu said she’d gotten “clear indications” that Boston would not be selected for the one remaining spot left in the pilot. In an emailed statement to Smart Cities Dive, she added that the city will instead focus on clearer pathways to get fossil fuels out of buildings, such as zoning changes and a “home-rule petition” to the state asking for permission to develop new building electrification rules.
The city will also continue to advocate for Massachusetts to allow all cities to “have the legal authority to take urgently needed action,” Wu said in the statement. Currently, Massachusetts does not allow municipalities to regulate or restrict the use of fossil fuels in construction, which has drawn the ire of climate advocates and local officials.

Dive Insight:

City ordinances banning fossil fuels in new construction have gone somewhat mainstream since Berkeley, California, passed its trailblazing rule in 2019. These “gas bans” in new buildings are lower-hanging fruit for building decarbonization compared with the thornier challenge of getting fossil fuels out of existing buildings, some experts say.

Massachusetts municipalities have thus far been unable to take part in the movement, however, with the state’s attorney general striking down attempts to date for conflicting with state law. Many cities and towns are eager to pass such rules, though; when the state in 2022 created the pilot program, the 10 slots were almost immediately filled. When one city withdrew from the program, saying it could not meet affordable housing requirements, its coveted spot opened up.

Boston, the state’s largest city, has a building sector that accounts for over 70% of total greenhouse gas emissions. It faced an uphill battle as a potential applicant, however. Part of that is because the program aims to collect data from a diverse set of communities, and Boston is “electrically similar” to others already partaking in the program, a state Department of Energy Resources spokesperson told The Boston Globe.

Some local officials and building electrification advocates in Massachusetts have decried the confines of the state pilot program and are pushing a state bill that would allow any qualified community to adopt such bans. “I don’t believe that, when we have 435 communities in the state, that only 10 should be able to decide for themselves what they can do,” Jeff Cohen, a city councilor in Salem, told the Energy News Network.

Boston seems to agree. The city’s chief of environment, energy and open space, Mariama White-Hammond, said in a Nov. 3 letter to Massachusetts Energy and Environmental Affairs Secretary Rebecca Tepper that the current pilot program setup heavily favors the original communities selected to participate “and pits other communities against each other for the right to advance the public good.”

Although Boston’s potential path to new building electrification is now less clear, the city is still making some progress on building decarbonization efforts. In 2021, the city amended an ordinance to require existing large buildings to reduce greenhouse gas emissions over time with a goal of net zero emissions by 2050. An executive order by Wu in August banned fossil fuel use in new and significantly renovated municipal buildings. The city has also launched several pilot projects to help owners of two- to four-unit housing and affordable housing go electric and become more energy efficient.

“But we need to do more,” White-Hammond said in her letter. “As we have communicated since the passage of state legislation creating the Municipal Fossil Fuel Free Building Demonstration Program, any statewide climate pilot program should include Boston to have the fullest possible impact and representation.”

White-Hammond added in the letter that it seems the state pilot program is designed for smaller communities, and input from Boston about the program design was not implemented in the final regulations.

She said that rather than asking the many stakeholders in Boston “to spend significant time developing an application for a program that has not been shaped for our participation, we will focus on engaging the community around other local and state mechanisms to deliver equitable and urgent fossil fuel-free standards in Boston.”

Source: Smartcitiesdive.com

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Tokyo Electric Power Holdings is accelerating preparations for the restart of the Kashiwazaki-Kariwa nuclear power station in Niigata Prefecture. In the face of escalating fuel costs, restarting nuclear power stations is deemed crucial to stabilizing performance and maintaining a stable power supply. This move holds significant importance for the country’s energy policy as it strives for a decarbonized society.

However, the Kashiwazaki-Kariwa power station, initially scheduled for operation in 2023, faces an uncertain path. That is due to a prohibition on operations resulting from counterterrorism deficiencies.

Responsible Counterterrorism Measures

​​”Good morning. I’m XXX.” After stating their name and displaying their ID card next to their face, employees seek approval from security personnel before proceeding to the biometric authentication gate.

Kashiwazaki-Kariwa boasts the world’s highest energy output. There are over 5,000 people working on a site equivalent to more than 90 Tokyo Domes. To deter potential terrorist threats, multiple checks are conducted during entry and exit.

Despite the time-consuming process, there is a growing acknowledgment onsite that proving one’s identity is a responsibility.

The No 6 and 7 reactors also passed the Nuclear Regulation Authority’s review for restarting. However, in 2021, a series of security flaws related to counterterrorism were discovered. They led to a de facto operating ban. Additional inspections are ongoing.

Hope and Preparations

The current situation leaves the power supply system for the Tokyo metropolitan area less than fully secure.

Driven by an increase in electricity rates, TEPCO anticipates a final shift to profitability this fiscal year 2023. However, that projection relied on the assumption of restarting the No 7 reactor in October. With rising costs in thermal power generation, failure to implement another rate hike could jeopardize the company and return it to a deficit.

TEPCO is prioritizing the human element in preparation for a restart. Its workforce with operational experience on No 6 and 7 reactors has been reduced by about half. The company is intensifying educational initiatives, including accident response training using simulators. It has also arranged visits to operational thermal power plants.

Communications within the facility are now more vibrant. Since August 2022, Managing Executive Officer Takeyuki Inagaki has consistently sent handwritten message cards expressing gratitude to workers actively involved in regional activities. The number of recipients has surpassed 3,000.

“I won’t mention a single word about the resumption of operations until I am convinced myself,” Mr Inagaki emphasizes. He is determined to persist in such initiatives until the actions and mindset at the site undergo a complete transformation.

China’s Economic Coercion

​​On another front, TEPCO’s management faces a new challenge. China is strongly opposing the release of treated water from the Fukushima Daiichi Nuclear Power Station.

This opposition has disrupted the market for many exported scallops and sea cucumbers. Therefore, it is expected that the amount of compensation to fishermen for reputational damage will be higher than expected.

Restarting a single nuclear reactor can contribute to an improvement of approximately ¥120 billion JPY (about $800 million USD) in the balance. That makes the resumption crucial for many reasons. One such reason is the essential need to cover the growing costs of reputational damages afflicting the fishing industry.

Source: Japan–forward-com.cdn.ampproject.org

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The last time European petrochemical plants processed so little of their favorite feedstock, Sweden’s ABBA was the most popular band on the continent, and the Fall of Saigon had marked the end of the Vietnam War. It was 1975, and the region was still licking its wounds after the first oil crisis. Nearly half a century later, the industry is dying.

It would be a mistake to interpret this as a triumph in the fight against plastics. Europe keeps consuming voracious amounts of foams, paints, resins and every other product petrochemical factories make. It’s just replacing indigenous production with imported stuff.

Source: IEA

Petrochemicals are intrinsically energy intensive. In Europe, natural gas is about five times more expensive than in the US. Right now, it’s cheaper to buy ethylene, a building block for plastics, in Texas, and ship it across the Atlantic for further processing in Europe than producing it at home. And that’s precisely what petrochemical companies tell me they’re doing. The net result is loss of economic activity in Europe, an erosion of the bloc’s trade balance in chemical products and, ultimately, the loss of jobs and energy security.

First, some context. On average, a European person consumes around 150 kilograms of plastic a year, more than twice the global average of 60 kilograms, according to the European Environment Agency. Plastics are everywhere – from food packaging to construction materials, from mobile phones to clothes.

Next, the data. The petrochemical industry runs largely on two feedstocks: natural gas and naphtha, with the latter being a byproduct of refining oil, similar in some ways to gasoline. According to the International Energy Agency, European naphtha consumption will drop this year to a 48-year low of 34.2 million metric tons. Usage is down 18.5% from pre-Covid-19 levels, and almost 40% below the all-time high set two decades ago.

With processing so low, the industry’s workhorses, called steam crackers, where the naphtha and the gas is transformed into chemical building blocks, are operating at uneconomical rates. Because of their enormous fixed costs, companies typically run their steam crackers as close to capacity as they can throughout the year. Anything below 90% is a source of concern; 85% is bad, and 80% is seen as catastrophic. In recent quarters, however, they have run at loss-making rates of between 65% and 75% of their capacity.

In private, industry executives say they can only lose money for so long — so closures look certain in 2024. Using a more diplomatic language, the IEA said last week that “it is increasingly difficult to see how the continent’s petrochemical industry can recover its previous strength.” I have spent the last few weeks talking to industry executives, and the answer they give is “it won’t — period.”

European companies are adapting accordingly. When BASF SE, the company synonymous with petrochemicals in Europe, met investors a couple of weeks ago, its executives wanted to talk about anything but their home base. Look at their slide presentation, and prominent is the construction of a new factory in Zhanjiang, China, with a $10 billion price tag. “Construction activities stepped up, with currently more than 15,000 construction workers on site every day,” the slides read.

Across European chemical companies, the proportion of spending in new projects into Asia has jumped by about 50% during the past decade and a half, according to estimates by Jefferies Financial Group Inc., an investment bank.

How does that translate to the economy? Before the pandemic, Europe’s chemical trade balance with the rest of the world was typically in the black to the tune of $40 billion. Last year, the surplus narrowed to just $2.5 billion. Although it’s likely to recover somewhat in 2023, the outlook for 2024 is somber.

If European policymakers are worried, they’re hiding it well. There’s no sign of alarm in Brussels, Berlin, Madrid or London. Perhaps one can glimpse some signs of concern in Paris, but that’s about it. Right now, many European nations are busy trying to bail out the offshore wind industry — but what about the petrochemical companies producing the resins and plastics used to manufacture the blades?

Europe has lost other industries to Asia. Steel, textiles and shipbuilding all moved east. This time, the competition isn’t just China, but also the US, thanks to abundant hydrocarbons there. Domestic production of hydrocarbons under President Joe Biden is booming.

Industrial and energy policies matter. If Europe wants to preserve some of its old industrial power, policymakers must publicly support the petrochemical industry – even if it’s unpopular with climate-conscious voters. The industry itself also has some soul searching to do. Consolidation is urgently needed. Right now, there are too many companies — and chief executive officers — per ton of plastic produced. Cost cutting should start at the top.

Source: Bloomberg: 

Javier Blas

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China’s Hudong-Zhonghua has kicked off the construction of a new series of 23,000-teu LNG dual-fuel containerships for French shipping giant CMA CGM.

The shipbuilder held the steel cutting-ceremony on November 17 for the vessel with a working name H1904A on November 17.

Hudong-Zhonghua said this is the first of four 23,000-teu vessels CMA CGM ordered last year.

CMA CGM is expected to take delivery of these ships in 2025 and 2026.

The vessels will have a total length of 399 meters, a width of 61.3 meters, and a design draft of 14.5 meters.

Such as the previous vessels, these LNG-powered giants feature WinGD’s dual-fuel engines, as well as GTT’s 18,600-cbm fuel tank.

Hudong-Zhonghua and Jiangnan, both part of CSSC, previously delivered nine 23,000-teu LNG-powered vessels to CMA CGM.

In June 2021, CMA CGM welcomed the ninth and the last vessel in this series, Sorbonne, in its fleet.

Image: Hudong-Zhonghua

Hudong-Zhonghua said in separate statement that the 13,000-teu LNG-powered containership, CMA CGM Bahia, has completed its gas trials on November 17.

This is the first of six 13,000-teu LNG-powered containerships Hudong-Zhonghua is building for CMA CGM.

The Chinese shipbuilder launched this LNG-powered containership in May this year.

Hudong-Zhonghua and Jiangnan Shipyard are each building six LNG-powered ships for CMA CGM as part of a deal revealed in April 2021, but the six vessels at Jiangnan have a capacity of 15,000 units.

Moreover, the new LNG-powered vessels also feature GTT’s Mark III containment system and WinGD’s dual-fuel propulsion.

The vessel’s LNG tanks have a capacity of 14,000 cbm.

Hudong-Zhnoghua said that CMA CGM Bahia is equipped with the world’s first CMD-WinGD9X9DF-2.0 main engine.

Following delivery, it will be the largest dual-fuel containership operating on South American routes, it said.

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Poland’s Gaz-System said it had not received binding capacity orders at a “sufficient level” to proceed with the implementation of the second FSRU as part of the LNG import project in Gdansk Bay.

In July this year, Gaz-System launched a binding season for capacity bookings at the planned second FSRU with a capacity of 4.5 bcm in July this year.

Prior to that the firm completed a non-binding market test to asses the demand for additional regasification capacity and the interest in export of regasified LNG towards Slovakia, Lithuania, Denmark, Germany, as well as the Czech Republic and Ukraine.

Gaz-System said in a statement that the submission phase for long-term binding offers has ended on October 27.

The overall objective of the binding FSRU 2 open season procedure was to confirm the interest of market participants in increasing the regasification capacity of the FSRU terminal which would justify the implementation of the project.

However, the procedure “did not result in Gaz-System obtaining binding orders at a sufficient level to proceed with the implementation of the FSRU 2 project,” the firm said.

“Nevertheless, the interest in the regasification services declared by the participants imply that discussions may be continued in the future,” Gaz-System said.

The firm said the project will be the subject of further analysis.

In addition, the hydroengineering infrastructure that will be built as part of the FSRU 1 terminal project will also provide for the possibility of a second storage and regasification unit development if market demand for the FSRU 2 is confirmed in the future, Gaz-System said.

Currently, Gaz-System said it continues its efforts aimed at installing the first FSRU in the Gdansk area and designed to provide annual regasification capacity of up to 6.1 bcm.

Oslo-based BW LNG, a unit of Singapore’s BW, and Japan’s MOL have been shortlisted by Gaz-System to provide Poland’s first FSRU as part of the Gdansk LNG import project.

The provisions of the term sheet do not constitute binding obligations for the parties but set out the ‘roadmap’ for further negotiations of the charterparty and their essential content will be reflected in the final charter agreement, it said.

Gaz-System plans to conclude the deal with one of the two firms for a period of 15 years.

Poland’s Orlen has booked entire 6.1 bcm per year of regasification capacity at Gaz-System’s planned FSRU-based LNG import facility.

Orlen is already in charge for all of the supplies coming to Gaz System’s LNG import terminal in Swinoujscie, Poland’s first such facility, via PGNiG.

The firm completed in November last year its merger with Poland’s dominant gas firm, PGNiG.

Gaz-System plans to launch the FSRU-based project, backed by the EU, in early 2028.

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China’s liquefied natural gas (LNG) imports rose in October compared to the same month last year, according to customs data.

Data from the General Administration of Customs shows that the country received about 5.17 million tonnes in October, a rise of 29.5 percent compared to the same month last year.

LNG imports in October dropped compared to 5.69 million tonnes in September. The country’s imports in September declined after rising for seven months in a row.

China imported 56.25 million tonnes of LNG during January-October, up by 11.5 percent compared to the same period last year, the data shows.

However, Chinese LNG imports fell last year due to due to very high spot LNG prices and Covid lockdowns, which affected economic activity.

LNG imports dropped compared to the January-October period in 2021 when China imported 64.50 million tonnes of LNG.

Including pipeline gas, China’s gas imports rose by 8.8 percent year-on-year to 96.50 million tonnes in January-October.

The country’s pipeline gas imports rose by 1.2 percent in October to 3.62 million tonnes, the data shows.

Japan was the world’s top liquefied natural gas importer in 2022, overtaking China, but both of the countries took fewer volumes when compared to the year before.

However, China has overtaken Japan this year.

Japan’s LNG imports rose by 6.4 percent year-on-year in October to about 5.41 million tonnes

During the January-October period, Japan imported some 54.3 million tonnes, down by about 1.9 million tonnes compared to China’s 56.2 million tonnes.

 

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