Greek Debt Deal – Bondholders take 50% Loss- Who Wins and Loses

5 Jul, 2011
Europe,Italy,Spain

According to reports coming from Europe where the summit of major European leaders took place to resolve the growing debt crisis,a deal has been reached on Greek debt.The Euro 350 billion debt which dwarfs the size of the negatively growing Greek economy has been a major source of instability in the last 2 years.The private holders of the Greek government bonds have agreed to take a  50% writeoff on their holdings.This means that if they hold Euro 100 of bonds they have become Euro 50 now as the rest has been written off as bad debt.Not that it was not apparent as Greek CDS and Greek bonds were touching all times lows in the secondary market.In fact the only buyers of Greece bonds were the European Central Bank and the Greek banks.The capital markets had been going up in the last month in the hope of some sort of resolution.The deal does not look like a win win as there will be some big losers in this deal (though they were already losing for some time).Nicolas Sarkozy announced the deal which would be voluntary in nature so that the CDS would not be invoked.Here are the winners and losers from this deal

Losers

1) Greek CDS Holders – They would be one of the biggest losing part as ISDA will not invoke that this is a credit event in which the Greek bonds have defaulted despite the 50% haircut

2) Greek Citizens – They would have been better off if a more sustainable path had been paved since the estimates still call for Greece to have 120% debt to GDP ratio by 2020.This means that they will have to live in a generation of austerity and poverty

3) Greece Pension Funds and French Banks – The French Banks like BNP Paribas,Credit Agricole have the biggest holdings of the debt.So also Pension Funds in Greece and other places which will be suddenly seeing a big hole in their assets column

Winners

1) Euro – The currency has managed to survive this phase of the crisis and has managed to surge at least till now.

2) Italy,Spain and Portugal – The contagion to the bonds of these countries will be contained since Greece has not done a messy default.The yeilds on the bonds of these countries might go down at least temporarily

 

Greek bondholders to take 50% haircut – Marketwatch

French President Nicolas Sarkozy said at a press conference in Brussels that the 50% haircut will be a voluntary agreement.An involuntary writedown could have potentially constituted a “credit event” that would have required the payout on billions of euros in credit default swaps, instruments used to insure debt against non-payment.

Thursday’s deal means that Greece’s debt burden will fall by around €100 billion ($140 billion). Media reports earlier this week had put a possible haircut on Greek government bonds at between 40% and 60%.Sarkozy also announced that the European Financial Stability Facility will see an increase in firepower by four- or five-fold.

An expanded bailout fund is seen as crucial in ensuring that the debt crisis doesn’t engulf Spain and Italy.

Solar Energy Protectionism – Italy joins India,Canada in formulating Domestic Content Requirements

10 May, 2011
China,Italy,Renewable Energy,Solar Energy,Solar Inverters,Solar Panels,USA

Solar Energy has seen a massive boom in 2010 growing by more than 150% as falling solar product prices and increasing subsidies by governments looking to prevent climate change,peak oil and reduce pollution.However most of the solar panel production has become concentrated in China and Taiwan with almost 60% of the world’s solar panel production being done in those regions.The lower costs of labor,cheap cost of capital and good infrastructure has made this possible.However the massive amounts of imports of green products has raised the hackles in developed countries.France had suddenly cut subsidies to the solar power industry citing massive imports of cheap solar panels from China.Note this argument has some basis as European solar module manufacturers have seen huge losses and are shifting factories from Europe to Asia.

Ontario,India also have domestic content requirements

Ontario Canada has a comprehensive solar subsidy policy which mandate that a large percentage of solar components be manufactured in Ontario in order to receive the Feed in Tariffs.The province has managed to attract a lot of manufacturing investment as well due to its local content requirements which requires around 50-60% locally produced parts.This has made Solar Module companies like Silfab and Canadian Solar to set up module plants while companeis like Enphase,Schneider and SMA are setting up inverter plants in the province.Note the local content requirements for Renewable Energy Equipment are nothing new with China implementing a 70% requirement in 2005 for Wind Turbines.Japan which is also a large manufacturer of solar panels with major Japanese solar companies like Sharp,Kyocera has taken Canada to the WTO citing improper competitive practises.India which has one of the largest potential in solar energy installation too has promulgated a law that requires domestic content requirements.Solar Modules must be produced in India to gain FIT under the JNNSM.This law is expected to become stricter with solar cells also to be produced in the country in the future.This has drawn howls of protest from American officials who too tried domestic content in their subsidies under the Stimulus Act.

Italy joins the Solar Energy Protectionism Bandwagon

Italy has joined the bandwagon as well with the latest version of  the solar subsidy law Conto Energia 4 giving additional 5-10% incentives for solar components manufactured in the European Union.Note it won’t benefit Italy too much as most of the manufacturing in located in Germany,Spain and cheap eastern European countries.What it is going to do is cause more disruption to the Italain Solar Market as China may take Italy to the WTO.Not that China is any better as it implicitly supports domestic companies as most of the government companies award contracts only to Chinese companies without being explicit about it.In fact the growth of the Chinese Wind Power Industry was due to the domestic content requirements law implemented in  2007.

Terra Firma buys Italian Solar Plant Owner Rete Rinnovabile cheaply for over $900 Million – Third Huge Renewable Energy Asset Acquisition

4 Apr, 2011
Italy,Renewable Energy,Solar Energy

Terra Firma,the multi billion pound Private Equity firm has continued its Renewable Energy Asset Buying Spree spending a monstrous 641 millino Euros to buy Rete Rinnovabile a solar plant owner and operator in Italy.The acquired company is a susdiary of Italian market grid operator Terna and owns around 150 MW solar capacity in Italy which witnessed a massive solar boom in 2010.The acquisition values 1 MW at 4.5 Euros which would be considered not an expensive price given the large returns availabe for Italian solar power assets which gets a generous government mandated feed in tariff.The solar power plants are well located near distribution end points which is not a surprise since the company was a subsidiary of the grid power operator.

Note Terra Firma has been acquiring a major renewable energy asset company each year since 2009 when it bought a US Wind Farm Operator Everpower for $350 million and UK LandFill Gas Owner and Operator Infinis Power in 2010.The acquisition is the largest in the solar plant ownership segment and the biggest solar M&A Deal in Europe.Terra Firma plans to further buy more solar plant operators in Italy which is the most attractive solar market in the world currently.Terra Firma is funding the acquisition with a mix of debt and equity with debt forming a larger part than equity.Note this deal gives Terra Firma a major share of the renewable energy asset market in key markets like Italy,UK and USA

Terra Firma Completes Europe’s Most Expensive Solar Acquisition

Terra Firma Capital Partners Ltd., a U.K. private equity firm, purchased Rete Rinnovabile Srl for 641 million euros ($909.8 million), the most expensive acquisition of a solar company in Europe.

Rete was a unit of Italy’s national power-grid operator Terna SpA, which received net proceeds of 204 million euros from the sale, it said today in a statement. Rete Rinnovabile owns 62 solar photovoltaic plants in 11 regions in Italy.

The deal was first announced in October and was funded by debt and equity, according to Terra Firma. The Guernsey, Channel Islands-based company said the deal was the biggest to date for a solar power generator in Europe.

Green Party makes Huge Inroads in Germany ,wins State Premiership in Baden-Wuerttemberg State ;Mass Demonstrations against Nuclear;Italy freezes Nuclear Power as well

28 Mar, 2011
Germany,Italy,Nuclear Energy,Renewable Energy

The Green Party in Germany has continued its massive upsurge in popularity in Germany winning a huge slice of votes in key German states which have gone to polls recently.Green Party in Germany which is founded on the principles of social justice, reliance on grassroots democracy nonviolence, and an emphasis on environmentalism has remained a fringe player.However the recent backlash against the nuclear power plant extension by Merkel,the planning on high speed rail in Stuttgart and the frustration with the foreign and Euro policies of the ruling CDU has led to huge gains.Note Green Parties are found in most European countries though they remain non-existent in major Anglo-Saxon countries.However the recent Japanese nuclear disaster may give a fresh impetus as global warming effects continue to increase and nuclear energy comes under attack.Mass protests against nuclear power continue to be held in different cities in Germany

Shock As Merkel’s Party Loses Her Home State

The Conservatives lost control of Baden-Wuerttemberg for the first time in almost 60 years, ceding it to the Green Party in a local election.

It is the first time the Greens have won a state premiership, and they hailed it as a momentous result.

“This is a historic turning point in Greens history,” said party co-leader Claudia Roth at celebrations in Berlin.

It is believed Japan’s nuclear disaster in the wake of the earthquake and tsunami helped increase support for Germany’s anti-nuclear Greens.

Chancellor Angela Merkel last year ignored popular opposition and extended the life of 17 of the country’s nuclear plants by an average of 12 years.

Note the Green Party may gets its first premier in the key Baden-Wuerttemberg State through the support of its ally the Social Democrats.This will be the first time in more than 50 years that the ruling CDU Party loses its hold in this key state which has a massive economy.The Green Party had earlier tripled its vote share in the Saxonia state as well though it was still small at less than 7%.Merkel had earlier decided to suddenly halt the operations of 7 nulcear plants in the wake of the Fukushima incident which had been criticized as an election ploy rather than a change of heart.It looks increasingly unlikely that nuclear power in Germany will be able to live beyond 2021.Note other countries too are rethinking their nuclear plans with Italy putting a 1 year moratorium on investing in new nuclear reactors.Note the Swiss have already done so and China may be in the process of doing so.Note China is a crucial state for nuclear energy and if it does something drastic then nuclear power will be left for dead again.

Nuclear Fears May Give Greens First State Premier In Germany

According to the Politbarometer poll from the ZDF broadcaster Friday, the Greens would more than double their vote in the Baden-Wuertemberg elections to 25%, ahead of 22.5% for fellow opposition party the Social Democrats, or SPD, but behind 38% for the CDU. The CDU’s desired coalition partner, the Free Democrats, may just clear the 5% threshold needed to enter the state parliament, while the smallish Left party probably won’t.

The most likely result in that case would be a coalition of the Greens and Social Democrats

The poll also showed that 47% of voters in the state reckon the Greens have most competence on the issue of nuclear energy, compared with only 17% for the CDU.

Germans are traditional nuclear skeptics and tens of thousands took to the streets against atomic energy in Baden-Wuerttemberg on Saturday, after the first images from what could develop into a nuclear disaster were screened on television.

Related Greenworldinvestor articles for more background

  1. Nuclear Energy in India faces More Local Opposition (NIMBY) as Kovvada join Jaitapur Plant

  2. Nuclear Energy Backlash picks up pace in Europe,Asia in the wake of Fukushima Nuclear Poisoning

  3. Nuclear Operators in Germany threaten Government with Plants Shutdown unless Taxes Withdrawn and Life of Reactors Extended

  4. How will Germany’s Nuclear Plants Extension Affect Green Energy Growth

  5. Germany adds as much Solar Energy in just 1 month as USA’s entire Installed Solar capacity

Did Italian Solar Growth really increase by a mind boggling 500% to 6 GW in 2010

7 Feb, 2011
Italy,Solar Energy

Italian Electricity Regulator really shook the global solar market saying that approximately 6 GW of Solar Installations were done in the country in 2010 up almost 500% from 2010.While 2 GW were installed and connected in 2010,4 GW worth of application were submitted by 50,000 installations which were installed but not connected.This means that that Italy’s target of 8 GW in 2020 was almost fully met in 2010 itself.I had written that Italian Solar Feed in Tariff Subsidy Cuts for 2011 will fail to stop the Boom in Solar Demand and the 2020 target would be met much earlier.But 2010 was not in my wildest projection.The combination of high sunlight,high electricity rates,falling solar module prices and attractive feed in tariff by the government has made investing in solar in Italy a hugely profitable venture.So 6 GW is not totally impossible given the massive supply growth seen in solar panels.Every solar company in the world had been shipping to capacity making it a mystery as to what was the source of such demand.Italy might prove to be the answer.

With a sharp cut in 2010,every solar EPC was installing at a feverish pace to get higher returns.However 6 GW seems too high and their may have been some frauds.However  4 GW seems more probable and even this implies a 300% growth in 2010.Note the Spanish boom in 2008 had seen more than 50% of the global demand going to Spain due to the same conditions existing in Italy.So this GSE report does not seem to be too farfetched and might mean that in 2011 we might see a sharp clampdown like Spain in 2009.France has already put a moratorium on solar installations while Czech has put strong retroactive measures such as taxes etc.Italy might be forced to follow the same path as 2011 might see 6-7 GW if the subsidy is not changed.

Italy solar capacity can hit 8,000 MW end-2011: GSE

Italy‘s total installed photovoltaic capacity can reach 8,000 megawatts by the end of this year, hitting a target the country has set for 2020, Italy’s state energy services agency GSE said on Tuesday.

Italy’s total installed photovoltaic capacity, which turns sunlight into power, jumped to 3,000 MW at the end of 2010 from 1,142 MW at the end of 2009 as operators rushed to sign up for generous incentives which expired at the end of 2010, GSE said in a statement.

The total figure would rise to 7,000 MW if capacity installed by the end of 2010 but not yet connected to grid was included, GSE said adding such capacity must be connected to the grid by the end of June to qualify for earlier incentives.

Spate of European Carbon Credit Frauds highlight Emissions Trading Deficiencies

9 Dec, 2010
Europe,Italy

Carbon Emissions Trading has always had profiteering built into it as private companies try to game a government regulated system for reducing GHG emissions.Carbon Trading which came into being after the birth of the Kyoto Protocol has got a lot of consultants and investment banks involved.While many of the schemes to earn carbon credits seem unethical they are not illegal.However a number of frauds have been unearthed in Europe which is the ground zero  for Emissions Trading.The number of frauds have only increased since then with Italy suspending trading and 1.6 million carbon credits stolen from a Romanian carbon registry.The complexity and information asymmetry has always put the insiders in an advantageous position.The red tape and bureaucracy associated with the Carbon Trading Scheme ensures that common people and small business cannot take advantage of the carbon reduction scheme.

Italian Exchange Halts ‘Abnormal’ EU Carbon Trading

Italy’s Gestore dei Mercati Energetici SpA suspended trading of European Union carbon permits on its exchange, citing “abnormal trading” and “presumed irregular or unlawful behaviors.”

Vitelli said it isn’t clear why prices on GME were “significantly lower” than prices on other exchanges, which also include the ICE Futures Europe in London, Climex in Utrecht, Netherlands, NordPool in Oslo and the European Energy Exchange in Leipzig, Germany.

The best example of the Kyoto Protocol and Carbon Trading deficiency is that a luxury hotel can get money for energy efficiency by using LED lighting while a poor person cannot.Also the complex forms,compliance,submission results in a massive amount of money being siphoned off by middlemen  instead of beneficiaries.This has made the Carbon Trading a big cash cow for a lot of investment banks.This has also resulted in voices being raised against Climate Change Mitigation efforts as a way to further increase the profits of banks instead of helping fight Global Warming.

EU warns emissions traders about registry requests

The European Commission has warned participants in its emissions trading scheme (EU ETS) not to respond to requests for account registration information from a Brussels-based company, the Commission said on its website.The Commission first warned participants about the European Climate Registry in 2009.The German emissions registry on Monday told the Commission its members had received more unsolicited emails from the firm requesting they register on its website.

It charges users an activation and maintenance fee of 1,512 euros ($2,016) a year, followed by an installation fee of 144 euros per account, according to its website. Participants in the EU ETS are on high alert after 1.6 million carbon permits went missing from the Romanian registry account of cement manufacturer Holcim last month.

Page 1 of 4
1 2 3 4 →

Most Popular

Recent Comments