Energy News Beat

The current transit deal is due to expire at the end of this year but Bratislava is negotiating to extend it, Prime Minister Robert Fico says

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UAE’s energy giant Adnoc is looking to order liquefied natural gas carriers for its planned LNG terminal in Al Ruwais, according to shipbuilding sources.

Sources told LNG Prime that Adnoc recently issued a tender inviting offers from yards in China and South Korea for six firm plus four optional standard-size LNG carrier newbuilds.

The vessels will feature the latest technologies and GTT’s Mark III Flex+ and NO96 Super+ membrane systems are being considered.

The sources said that the LNG carriers are expected to serve Adnoc’s second LNG terminal in Al Ruwais, but they did not provide any further information.

Adnoc Logistics & Services, a unit of Adnoc, is already working to renew its fleet of LNG carriers and it has six 175,000-cbm vessels on order at China’s Jiangnan Shipyard worth more than $1.2 billion.

The firm will take delivery of these vessels in 2025 and 2026.

These “LNG Jumbo” dual-fuel carriers will feature GTT’s Mark III Flex membrane system and a partial reliquefaction system.

Adnoc L&S’s existing fleet of Moss-type, steam turbine LNG carriers serves the company’s 6 mtpa LNG terminal on Das Island.

Last year, Adnoc announced it will build its second LNG terminal in Al Ruwais.

The firm previously planned to construct the facility in Fujairah and is yet to take a final investment decision on the project.

When completed, the project, which consists of two 4.8 mtpa LNG liquefaction trains with a total capacity of 9.6 mtpa, will more than double Adnoc’s LNG production capacity.

Last month, Adnoc signed a heads of agreement with a unit of Chinese independent gas distributor ENN to supply the latter with 1 mtpa of LNG for a period of 15 years from its planned terminal in Al Ruwais.

This is the first Ruwais LNG supply agreement.

The deliveries are expected to start in 2028, upon commencement of the facility’s commercial operations.

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Energy News Beat

​New Hampshire’s energy department is preparing to road-test a grant program meant to help disadvantaged cities and towns access the environmental and financial benefits of solar power.

The state plans to use $1.4 million from the 2021 federal Bipartisan Infrastructure Act to help fund the installation of solar projects up to 60 kilowatts on municipal buildings or land. The grant will cover up to 95% of the costs of a qualifying solar project for lower-income cities and towns and 60% for other municipalities.

In addition to cutting carbon emissions, solar can also make a community more resilient in case of power outages. And using it to power municipal facilities can save money that can be reinvested in public projects or used to hold down property tax rates in the long-term.

The funding application has been submitted to the U.S. Department of Energy, and New Hampshire is now in “wait-and-see mode,” said Joshua Elliott, director of policy and programs in the state energy department.

The state is also looking at the program as something of a trial run, to see if it makes sense to continue and expand the grant offering in the future.

“We’re looking at this program as almost the guinea pig to see what demand is out there, what can we do, what we can improve,” Elliott said. “Then we’ll use this process to inform what potentially a [larger] municipal program could look like.”

As a whole, New Hampshire lags the region in solar adoption. The state ranks 41st in the country for installed solar capacity, behind even lower-population New England states like Maine, Rhode Island, and Vermont, according to the Solar Energy Industry Association. State policies to encourage solar are limited, with incentives for residential solar maxing out at $1,000 per project and rebates for commercial solar limited to $10,000.

On the municipal level, though, many New Hampshire cities and towns are very interested in solar power. For example, in Hanover, a more affluent town and the home of Dartmouth College, solar arrays provide nearly all the power used by municipal facilities. Smaller towns and those with lower average incomes, however, often have a harder time realizing their solar goals.

New Hampshire property owners already have one of the highest property tax burdens in the country, so proposing that the residents of small, disadvantaged towns pay more to install solar is a big ask, even if there could be financial benefits down the line. Beyond the issue of funding, there are the logistics: researching options, hiring consultants, assessing different grant options.

“If you have the idea that you want solar on the town hall, you have to go from the idea to the implementation,” said Margaret Byrnes, executive director of the New Hampshire Municipal Association. “For municipalities that don’t have that internal staff, it’s a significant lift.”

The grant program aims to lighten that burden. And to maximize the benefits these towns can achieve, the grant guidelines encourage municipalities to skip entering into leasing arrangements and instead buy their solar arrays outright, so they retain the rights to sell renewable energy credits.

“We want all of those benefits flowing to the community itself,” Elliott said.

Colebrook, a town of roughly 2,000 people just 10 miles south of the Canadian border, is looking at the grant program as a potential way to fund a solar array on the roof of its town hall. Tourism is the main economic driver in the remote and scenic town, and there is little industry and few high-paying jobs. The median household income in town is just over $48,000, well below the state median of $91,000.

“We can’t just go out and ask for $150,000 from the town to foot the bill” for a solar project, said Colebrook town manager Tim Stevens. “Any time you have to go back to the town and ask for more money than you did before, that has a negative impact on them.”

Hinsdale, a small town near the state’s southern border, has plans to open its transfer station full-time and hopes to build a solar array on the site to help power the operation. A recent report, however, found that most residents’ property taxes had increased between 25% and 48% between 2018 and 2022, making it challenging to ask for yet more money. And there’s a bridge in town that needs to be rebuilt and other pressing infrastructure issues.

“Unfortunately, solar is not on that priority list,” said Josh Green, Hinsdale’s community development coordinator.

He estimates that a 60-kilowatt array at the transfer station would cost about $260,000. With the grant, the town would only have to pay about $13,000 of that total tab.

“The solar grant would definitely help the town out tremendously,” Green said.

Though the planned grant program is modest in size — the total budget will likely be able to fund only a handful of projects — it is well-tailored to the needs of the state, said Melissa Elander of Clean Energy New Hampshire, a nonprofit advocacy group that has been working with municipalities in the northern part of the state to prepare for the launch of the grants.

“It’s a good fit to focus on smaller towns that often get forgotten in some of the larger grant programs,” she said. “I am thrilled that it’s going to be available at all.”

The post Grants would help less affluent New Hampshire towns invest in public solar projects appeared first on Energy News Beat.

Energy News Beat

The Dutch port of Rotterdam said its LNG bunkering volumes reached a record level in 2023 as prices dropped from 2022 and demand continues to increase.

Europe’s largest bunkering port reported LNG volumes of 619,243 cubic meters in 2023, a rise of 53 percent compared to 406,599 cbm in 2022 when volumes dropped considerably due to high prices.

However, LNG bunkering volumes also rose 2.6 percent compared to record 603,690 cbm in 2021.

During the fourth quarter last year, LNG bunkering volumes reached 148,933 cbm, down from the previous quarter’s 204,418 cbm.

The port of Rotterdam said that only its LNG bunkering volumes increased last year due to lower prices of the fuel.

Last year, shipping firms bunkered less fuel in the port Rotterdam with volumes reaching 9.9 million tonnes, down 6.7 percent from 10.6 million tonnes in 2022, it said.

The Rotterdam port is home to Gasunie’s and Vopak’s Gate LNG import terminal.

Gate LNG also handled a record number of vessels last year mainly due to a rise in demand for LNG as fuel.

Gate’s small-scale jetty, which launched operations in 2016, handled record 151 vessels, loading close to 900,000 cbm of LNG last year.

Earlier this month, classification society DNV said that there are now 1006 LNG-powered vessels in operation on order, showing the fuel’s continued importance in the maritime energy transition.

These statistics do not include dual-fuel LNG carriers and smaller inland vessels.

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Energy News Beat

Ankara has assured Russia it will continue to abide by the Montreux Convention, the foreign minister says

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Kiev is now only fighting to prolong the life of Zelensky’s regime, that’s why it’s doing stupid things

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Energy News Beat

This is funny, in a central-bank kind of way.

By Wolf Richter for WOLF STREET.

The Fed confirmed today in a press release at 7 PM EST that its infamous tool to deal with the March 2023 bank-panic and bank-liquidity crisis, the Bank Term Funding Program (BTFP), will cease making new loans to banks, as scheduled, on March 11. Existing loans can continue for their term of up to one year. This decision was disclosed on January 9 by Michael Barr, Fed Vice Chair for Supervision, at a panel appearance.

What’s new – the funny part – is that the Fed also said that, “effective immediately,” it would shut down the arbitrage with which banks have been gaming the BTFP to make some extra bucks. We’ve been discussing this BTFP arbitrage for a while, including here with a chart. The whole thing was a hoot.

The BTFP was conceived in all haste over a weekend in March 2023 and was announced on Sunday after two regional banks, Silicon Valley Bank and Signature Bank, had collapsed and were shut down by regulators on Friday, with visions of contagion turning this into a full-fledged financial crisis.

But the BTFP had a fatal flaw: under certain conditions, the interest rate that the Fed charges on loans at the BTFP (the rate is market-based) could fall substantially below the interest rate the Fed pays on its reserve balances (the Fed sets this rate).

And that’s exactly what happened starting early November during rate-cut mania. It opened up a riotous risk-free arbitrage opportunity that banks took advantage of.

Today the Fed had had it with this deal and shut down the arbitrage for new loans “extended from now through program expiration.” In the press release, it says that the interest rate to borrow at the BTFP will be “no lower” than the interest rate on reserves. And with this change, the arbitrage becomes unprofitable for new loans. The press release:

“As the program ends, the interest rate applicable to new BTFP loans has been adjusted such that the rate on new loans extended from now through program expiration will be no lower than the interest rate on reserve balances in effect on the day the loan is made.

“This rate adjustment ensures that the BTFP continues to support the goals of the program in the current interest rate environment. This change is effective immediately. All other terms of the program are unchanged.”

On the new BTFP term sheet released today, applicable to new loans, the rate calculation paragraph now reads (I marked the new language in bold; IORB = interest on reserve balances):

“The rate for term advances will be the one-year overnight index swap rate plus 10 basis points, provided that the rate may not be lower than the IORB rate in effect on the day the advance is made; the rate will be fixed for the term of the advance on the day the advance is made.

When the worker bees at the Fed hashed out the terms for the BTFP over the weekend (eating pizza and sleeping on the floor?), they overlooked the possibility that the market-based interest rate to borrow at the BTFP – the one-year overnight index swap rate, plus 10 basis points – could fall substantially below the Fed-set interest rate that banks earn on their reserve balances.

In March 2023, the rate at the BTFP was close to the rate the Fed paid on reserves. But during rate-cut mania starting in early November, Treasury yields from one-year on up plunged, and related yields plunged in parallel. By mid-December, banks could borrow at the BTFP below 4.8%, and then leave the cash in their reserve accounts at the Fed and earn 5.40%. Risk free, hassle-free income for nothing.

From July through October, the BTFP balance was around $110 billion. But at the beginning of November, it began to surge. Last week, it jumped by a $14 billion. Since November 1, it has jumped by nearly 50%, or by $52 billion, to $161 billion.

On Thursday, the Fed will release the new figures through Wednesday, and the balance likely jumped again. But that should be the last increase in the BTFP balance because the door to make money on this circus has effectively closed now:

The post “Effective Immediately,” Fed Shuts Down Arbitrage Opportunity with the Bank Term Funding Program (BTFP) appeared first on Energy News Beat.

Energy News Beat

With uncanny precision?

By Wolf Richter for WOLF STREET.

The deal came up during D.R. Horton’s earnings call with analysts, without the two companies being named. The analyst posing the question referred to it as “a large acquisition by an offshore player of a domestic homebuilder,” and everyone knew what he was talking about.

One of Japan’s largest homebuilders, Sekisui House, had agreed to buy US homebuilder MDC Holdings on January 18 for nearly $5 billion, or $63 a share, a 19% premium over the prior day’s closing price, and a 41% premium over the 90-day volume-weighted average trading price. Sekisui House has been buying smaller and regional homebuilders in the US since 2017. But MDC will be its largest acquisition in the US.

Sekisui House’s bid was impeccably timed after the huge rate-cut-mania rally that had kicked off in early November and had driven some homebuilder stocks to all-time highs

But D.R. Horton’s earnings call had sent homebuilder stocks skidding, now for the second day. D.R. Horton shares [DHI] fell 9.2% yesterday and another 2.7% today, to $139.21, the lowest since December 12. The company disclosed that gross profit margins narrowed by 2.2 percentage points quarter-to-quarter, as the massive costs of mortgage-rate buydowns came home to roost.

The three-year chart also shows the dizzying rate-cut-mania rally starting at the beginning of November, and how the stock has tripled since February 2020. So January 18 was a good time to buy a homebuilder?

And the other homebuilder stocks also sagged yesterday and today. The exception was MDC, whose stock was propped up by the $63-a-share purchase price written into the merger agreement; it just dipped a little to $62.62.

The Homebuilders ETF [XHB] rose to an all-time high on January 22, two trading days after the Sekisui-MDC deal was announced.

The ETF – in addition to homebuilders, it includes big retailers, such as Home Depot and Lowe’s, building materials suppliers, and other companies related to the housing construction and remodeling industry — has doubled since February 2020. The announcement of the acquisition of MDC had fueled a two-day rally on hopes for more big acquisitions before D.R. Horton poured cold water on it yesterday. The ETF has now sagged for the second day in a row.

With buyers stretched by sky-high prices and mortgage rates that have doubled over the past two years, and with builders having to offer smaller and lower-priced homes and having to buy down mortgage rates aggressively at a substantial cost to keep sales from collapsing, as they have already collapsed for existing homes, while their stocks are perched at all-time highs, it’s now a perfect time for Sekisui House to buy a big US homebuilder, no?

During the D.R. Horton earnings call, the analyst wanted to know if D.R. Horton, which had become the largest homebuilder in the US in part through a series of acquisitions, would also go out and buy a big one because that stuff gets Wall Street all excited.

But CEO Paul Romanowski brushed it off. He said, “we’re more interested in the smaller tuck-in builders that may add to our market share in an existing market or give us some entry,” and he added, “I don’t see on the horizon a significant large acquisition.” So that was that. More cold water.

Surely, it took weeks from the beginning of the talks between Sekisui House and MDC to when they signed the merger agreements on January 17. So they may have started talking during the rate-cut-mania, when only the sky was the limit.  And it sure looks like a bell getting rung at the top for homebuilder stocks, when a foreign company makes a big acquisition in the US during a mania-rally, just when the housing market has gotten very complicated and difficult.

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The post Did the $5-Billion Acquisition of Homebuilder MDC Holdings by Japan’s Sekisui House Mark the Top for Homebuilder Stocks after the Rate-Cut-Mania Rally? appeared first on Energy News Beat.