A striking aspect of the crisis in the ‘30s of the previous century was that this period
represented the final breakthrough of new technologies and industries.
The best-knows examples are electricity and the car industry. Will this crisis also be the cradle
of new technologies and industries?
Many politicians and policymakers hope so. They expect that the current crisis will be the
definitive breakthrough of the ‘green’ economy and its corresponding technologies and
industries.
Clean Energy
Clean energy will be an important branch of the green economy. It’s advantages are evident.
It helps the environment, has positive effects on global warming, reduces the West’s
dependence on the politically instable Middle East and – last but not least – it can be a
source of new prosperity and new employment opportunities’
In fact, clean energy is supposed to be the basis of the new economy. For that reason
governments and the private sector are willing to reach deeply into their pockets to fully
utilize this technology’s potential. A race between countries and continents to reap most
benefits of potential commercial products has started. The question is, who has taken the
lead of the marathon and who has the best prospects for the final victory.
The numbers
Investments in clean energy are not limited to a few countries or continents. It is a global
business. This is slightly exaggerated, because 90% of all investments are made within the
G20. In 2009, these investments amounted to a total of $ 162 billion, almost 7% less than in
2008. This might sound disappointing, but over the previous year investments in oil and gas
dropped almost 20%.
2009 and 2008 will probably be a dip in a long series of annual growth. According to
Bloomberg New Energy Finance, investment will grow 25% during the present year. Most of
this growth is due to governments that over the past few years reserved $ 184 billion to
stimulate this sector. The bulk of which will not reach the market until 2010 and 2011. Thus,
the effects of this huge effort will only become visible within a few years.
The private sector, on the other hand, made hardly any investments. In 2007 this sector
invested $23 billion in for example IPOs; in 2009 this amount had almost been halved.
The same holds true for venture capital. In 2009 its availability decreased to $ 6.4 billion, a
decline of 43%.
And the winner is…..
So, 2008 was a bad year for clean energy and the results of the first quarter of 2009 weren’t
promising either. During the other three quarters, the investments skyrocketed to an average
of $ 32 billion.
De auteur is zelfstandig gevestigd analist. Hij schrijft over uiteenlopende onderwerpen die de beleggingswereld
raken. Daarnaast geeft hij lezingen en presentaties. Weblog, http://wijtvliet.blogspot.com
Informatie: WijtvlietResearch@hotmail.com Tel. 0611918878/0416-854416. Cor Wijtvliet is partner bij De
Weygerbergen, bureau voor performancemeting en vermogensbegeleiding. WWW.Weygerbergen.com
© Wijtvliet Research23
The list of countries that are big time investors in clean energy is not lead in 2009 by the
United States, but by China. The latter invested almost $ 35 billion in clean energy in 2009
only. That year, the United States ‘only’ spent $ 18.6 billion, more than 40% less than in the
year of disaster 2008.
If it wasn’t for the American Recovery and Reinvestment Act, the situation in America would
have been worse.
And how is the European Union doing? This continent likes to promote itself as the content
where the ‘green economy’ is beginning to take shape. For once, the EU is living up to
expectation. In 2009 more than $ 40 billion was invested. Leading country is the United
Kingdom, with investments totaling $ 11.2 billion. Second in line is Spain, which invested over
$ 10 billion. Germany is third, investing an amount of $ 4.3 billion. The Netherlands are not
among the top ten investors. As the Netherlands are only a small country, this is not really
surprising. But the Netherlands also aren’t among the countries whose investments in ‘clean
energy’ have most rapidly increased over the last five years!
This list is (surprisingly) lead by Turkey, whose investments have grown 178% over the past
five years. Brazil and China share the second place, growing 48%. Fourth in line is the first
Western country, representing a growth of 127%: the United Kingdom. Until today, the
Netherlands have not been able to live up to its expectations and ambitions.
What separates the winners from the ‘losers’? Policy! Countries such as China, Brazil, Spain
and Germany have clearly set objectives and started investment- and incentives policies.
Brazil, for example, wants to become the main producer and supplier of bio-ethanol.
Where is all the money going?
In spite of the Brazilian efforts, the world saw a considerable decline of investments in biofuel
in 2009. In contrast with wind- and solar power, this fuel is believed to be
environmentally unfriendly. In 2009, more than 50% of the total investments regarded wind
energy, an almost-ready technology whose prices are dropping sharply. Wind energy is
already starting to look like a mature industry
Solar power is expected to thrive the same way, even though the level of investments was
considerably lower than in wind energy. Its prices are dropping and the so-called thin-film
technologies are said to be the final step towards the take-off phase.
Of all investments in ‘clean energy’, 80% is spent on infrastructure, expanding capacity, by,
for instance, building wind turbines. This is mostly done onshore. Here, China is the leader.
Within the EU, the United Kingdom is the number one investor in wind park offshore. Wind
energy is the first clean energy segment that has reached the industrial phase. The green
economy is finally beginning to take shape. For the moment China is in the lead, the USA is
lacking a coherent strategy, while the EU is a strong runner-up. The race is still too close to
call.
Expected IPOs in the US, 2010 and 2011
Codexis Biofuels and Biomaterials, Advanced Enzymes
www.codexis.com
Fallbrook Technologies High-efficiency transmission
www.fallbrooktech.com
Solyndra Solar PV, CIGS
www.solyndra.com
Tesla Motors Electric Vehicles, Automobiles
www.teslamotors.com
Amyris Biotechnologies Synthetic biology for jet fuel,
industrial chemicals and biodiesel
www.amyrisbiotech.com
BrightSource Energy Concentrated Solar Power
www.brightsourceenergy.com
Miasolé Solar PV, CIGS
www.miasole.com
Silver Spring Networks Smart Grid, Networking
www.silverspringnet.com
maandag 12 april 2010
vrijdag 26 maart 2010
The European housing market is still problematic
We might be tempted to overlook it, but the cause of the current economic and financial crisis is the collapse of the subprime mortgage market in the United States.
The collapse of Lehman Brothers was the most striking consequence of the unprecedented decline of this market. If the poor state of the housing market really caused this crisis, then one can be inclined to think that this market’s recovery is a prerequisite for further economic recovery. Thus, THE question is whether and to what extent the economy is recovering.
The development of housing prices
What can we tell about the development of home prices in the year 2010? Have they reached the lowest level and is recovery near or are the prices still declining?
In the United States, it seems the market is over the worst. The so-called ‘Case-Schiller Index’ for home prices hit rock bottom in the spring of 2009, after losing over 30% in three years.
At the same time the United Kingdom housing market is also recovering.
Can we say something about possible trends in the European Union by means of trends in the US? Yes, we can and it appears that, depending on the chosen period and the selected data, the European trends actually follow the American market. The European market is six months to two years slow, though. An example. Both in the US and the European Union, home prices have risen approximately 500% since the 1970’s. In the United States, the market reached its peak in 2006, whereas the EU hit its high in 2008. So far, the decline of home prices has been a lot bigger in the US than in the EU. Whether the fall in price in our part of the world has come to an end, thus remains to be seen.
Are housing prices still too high?
It is possible to formulate an assumption about the level of current home prices, based on a few ratios that may indicate people’s means to own a house under the current circumstances. These are general ratios that do not express peculiarities of different housing markets. An example is the ratio between price and income. In 2003, this ratio broke through the long-term average and culminated in the US in 2005 and in Europe in 2006.
In the United States, it reached 12% above the long-term average, and in the European Union 18%. Within the EU, the regional differences were large. In the Netherlands, Spain and Ireland it culminated at 40%.
Nowadays, in the US, this ratio has fallen below the long-term average. In most of the EU Member States, the ratio still fluctuates around or slightly above the average.
Another ratio is that of mortgage versus income, because interest rates affect the opportunity of buying a home. Looking at this ratio, the situation improves.
In most countries, this ratio is still below the long-term average. Off course, the question is how sensitive these countries are to fluctuations in the interest rates because of the mortgage system.
Again, the answers are promising. At an increase of 200 base points only the Netherlands and the UK would rise above the long-term average. Consequently, houses would become relatively expensive. Dutch (and English) home owners are therefore vulnerable for rising interest rates
Risks remain
The ratios mentioned above, but also ones like the price-rent ratio, portray an unfavourable picture of the home market in a number of European countries. The Netherlands belong to those ‘risk countries’. According to all these ratios, there is a chance that the prices have not yet fully adjusted. The Netherlands compare favorably to other countries. Together with Germany, the Netherlands are the only country that built less houses in 2003-2007 compared to the preceding period.
In countries such as Sweden, Spain and Ireland the production skyrocketed. These countries are now facing oversupply. In Germany, the lower production is a result of its shrinking population. And what about the Netherlands? In that country the declining production is rather due to complicated legal rules than to a decreasing population (except for regions such as Drenthe and Southern-Limburg). In other parts of the country there may still be a lot of hidden demand that can be an obstacle to further (necessary?) price adjustment
Sourche:
Deutsche Bank: Housing markets in OECD Countries. Risks remain in Europe. March 2010
The collapse of Lehman Brothers was the most striking consequence of the unprecedented decline of this market. If the poor state of the housing market really caused this crisis, then one can be inclined to think that this market’s recovery is a prerequisite for further economic recovery. Thus, THE question is whether and to what extent the economy is recovering.
The development of housing prices
What can we tell about the development of home prices in the year 2010? Have they reached the lowest level and is recovery near or are the prices still declining?
In the United States, it seems the market is over the worst. The so-called ‘Case-Schiller Index’ for home prices hit rock bottom in the spring of 2009, after losing over 30% in three years.
At the same time the United Kingdom housing market is also recovering.
Can we say something about possible trends in the European Union by means of trends in the US? Yes, we can and it appears that, depending on the chosen period and the selected data, the European trends actually follow the American market. The European market is six months to two years slow, though. An example. Both in the US and the European Union, home prices have risen approximately 500% since the 1970’s. In the United States, the market reached its peak in 2006, whereas the EU hit its high in 2008. So far, the decline of home prices has been a lot bigger in the US than in the EU. Whether the fall in price in our part of the world has come to an end, thus remains to be seen.
Are housing prices still too high?
It is possible to formulate an assumption about the level of current home prices, based on a few ratios that may indicate people’s means to own a house under the current circumstances. These are general ratios that do not express peculiarities of different housing markets. An example is the ratio between price and income. In 2003, this ratio broke through the long-term average and culminated in the US in 2005 and in Europe in 2006.
In the United States, it reached 12% above the long-term average, and in the European Union 18%. Within the EU, the regional differences were large. In the Netherlands, Spain and Ireland it culminated at 40%.
Nowadays, in the US, this ratio has fallen below the long-term average. In most of the EU Member States, the ratio still fluctuates around or slightly above the average.
Another ratio is that of mortgage versus income, because interest rates affect the opportunity of buying a home. Looking at this ratio, the situation improves.
In most countries, this ratio is still below the long-term average. Off course, the question is how sensitive these countries are to fluctuations in the interest rates because of the mortgage system.
Again, the answers are promising. At an increase of 200 base points only the Netherlands and the UK would rise above the long-term average. Consequently, houses would become relatively expensive. Dutch (and English) home owners are therefore vulnerable for rising interest rates
Risks remain
The ratios mentioned above, but also ones like the price-rent ratio, portray an unfavourable picture of the home market in a number of European countries. The Netherlands belong to those ‘risk countries’. According to all these ratios, there is a chance that the prices have not yet fully adjusted. The Netherlands compare favorably to other countries. Together with Germany, the Netherlands are the only country that built less houses in 2003-2007 compared to the preceding period.
In countries such as Sweden, Spain and Ireland the production skyrocketed. These countries are now facing oversupply. In Germany, the lower production is a result of its shrinking population. And what about the Netherlands? In that country the declining production is rather due to complicated legal rules than to a decreasing population (except for regions such as Drenthe and Southern-Limburg). In other parts of the country there may still be a lot of hidden demand that can be an obstacle to further (necessary?) price adjustment
Sourche:
Deutsche Bank: Housing markets in OECD Countries. Risks remain in Europe. March 2010
maandag 1 maart 2010
Duurzaamheid is een rijdende trein
Kopenhagen is een eclatante mislukking geworden en het wetenschappelijk gehalte van meerdere IPPC-rapporten staat terecht ter discussie. Te lang hebben IPPC adepten een claim van onfeilbaarheid neergelegd, terwijl discussie een onmisbaar onderdeel van wetenschap hoort te zijn. Wil dit zeggen dat de ontwikkeling rondom duurzaamheid stokt. Nee, integendeel. De ontwikkeling rondom duurzaamheid kun je vergelijken met een trein die het station bijna heeft verlaten, terwijl nog steeds partijen verwoede pogingen doen om aan boord te springen.
Duurzaamheid gaat verder
Wie de heisa rondom het mislukken van Kopenhagen en de felle discussies over de waarde van de IPPC rapporten overhoort en overziet, kan gemakkelijk tot de conclusie komen, dat duurzaamheid gelijk staat aan klimaatverandering. Dat is echter een foute benadering. Duurzaamheid is een verzamelbegrip geworden. Talloze grote problemen vallen, waar overheden, bedrijven en de consument mee te maken, behoren ertoe. Problemen als schaarste aan betrouwbaar drinkwater, diepgaande demografische verschuivingen, schaarste aan grondstoffen en aanhoudend hoge prijzen voor energie hebben weinig met klimaatverandering te maken, maar vragen nu en morgen om blijvende aandacht. Misschien heeft de financiële crisis wel een handje geholpen om de aandacht voor bovengenoemde zaken te bevorderen. Er is meer aandacht gekomen voor de werkwijze van bedrijven binnen en buiten de financiële sector. Dat betekent ook meer aandacht voor corporate governance, eco-efficiency en voor de manier waarop met medewerkers hoort omgegaan te worden. Dat ‘duurzaamheid’ meer en meer onderdeel aan het worden is van de dagelijkse bedrijfsvoering van bedrijven en instellingen bewijzen ook andere cijfers
Een mentaliteitsverandering
Het mislukken van Kopenhagen lijkt zodoende min of meer een op zichzelf staande gebeurtenis te zijn. Dat ‘duurzaamheid’meer en meer onderdeel aan het worden is van de dagelijkse bedrijfsvoering van bedrijven en instellingen, bewijzen ook andere cijfers. Een groeiend aantal institutionele beleggers willen daadwerkelijk duurzaamheid meenemen in hun investeringsbeslissingen. Wereldwijd hebben ongeveer 650 institutionele beleggers, samen goed voor pakweg USD 20 biljoen aan beleggingen, the United Nations Principles for Responsible Investment (UN PRI) ondertekent. Dat is nog maar het begin. Volgens een studie van Booz&Company Consultants kan tegen 2015 het aandeel van duurzaam verantwoord investeren wel eens opgelopen zijn tot 15% à 20% van alle beleggingen in beheer. Het is de combinatie van bovengenoemde problemen, strengere wetgeving en technologische vernieuwingen die beleggers in de richting van duurzaam investeren stuwen. Een bijzondere rol is in dezen misschien wel weggelegd voor pensioenfondsen. Ze moeten zorgvuldig waken over de lange termijn belangen van hun pensioengerechtigden. Kunnen ze dan zaken als watertekorten en CO2-uitstoot links laten liggen, terwijl duidelijk is dat die ontwikkelingen grote risico’s met zich mee dragen, die hun verplichtingen in gevaar kunnen brengen? Het heeft er nu alle schijn van dat duurzaamheid over niet al te lange tijd het doorslaggevende element wordt bij investeringsbeslissingen.
Dow Jones Sustainability Indices
Hoe ver het denken over duurzaamheid inmiddels gevorderd is, valt af te lezen aan de ontwikkeling van de Dow Jones Sustainaibility Indeces. De eerste index stamt alweer uit 1999, the Dow Jones Sustainability World Index. In die dagen bestond er nog grote onduidelijkheid en onzekerheid in hoeverre duurzame factoren zouden kunnen bijdragen aan het economisch/financieel succes van een bedrijf of van beleggingen. Hoewel er nog steeds geen sluitende bewijsvoering is, wijst steeds meer onderzoek in de richting van een positief verband. Die overtuiging is ook terug te zien aan de groei van het aantal indices. Aan het einde van 2009 waren er 15. Er zijn brede indices maar ook zogeheten blue chip benchmarks die samengesteld zijn uit de belangrijkste (grootste) spelers op het gebied van duurzaamheid in een bepaalde regio
Lasten en kansen
De indices weerspiegelen niet alleen de groeiende belangstelling van beleggers en investeerders voor duurzaamheid, maar ook een gewijzigde opstelling bij het (grote) bedrijfsleven. Was duurzaamheid in de jaren negentig vooral een zaak die geassocieerd werden met overheidsbemoeienis, regelgeving en compliance, nu is dat sterk veranderd. Duurzaamheid is een zakelijk concept geworden, een kernthema bij het zoeken naar competitieve voordelen. Dat betekent dat duurzaamheidcriteria meer en meer geïncorporeerd worden in diensten en producten. Duurzaamheid gaat geleidelijk aan van een last naar een kans in een concurrerende omgeving.
Leiders in duurzaamheid
Hoe breed duurzaamheid zich inmiddels heeft genesteld binnen het internationale bedrijfsleven, blijkt uit het overzicht van de Zwitserse vermogensbeheerder SAM, een voortrekker op het gebied van duurzaam beleggen. In hun overzicht van Sector Leaders 2010 figureren Nederlandse bedrijven als Air France-KLM, maar ook DSM en Philips. Zij figureren naast bedrijven als Pepsico, Nokia, Intel, BMW en Deutsche Telekom. In het overzicht van sector movers 2010 komen we Wolters Kluwer tegen naast Starbucks, Cisco, Siemens en Alstom. Duurzaamheid is definitief het spelletje geworden van de grote jongens.
Duurzaamheid gaat verder
Wie de heisa rondom het mislukken van Kopenhagen en de felle discussies over de waarde van de IPPC rapporten overhoort en overziet, kan gemakkelijk tot de conclusie komen, dat duurzaamheid gelijk staat aan klimaatverandering. Dat is echter een foute benadering. Duurzaamheid is een verzamelbegrip geworden. Talloze grote problemen vallen, waar overheden, bedrijven en de consument mee te maken, behoren ertoe. Problemen als schaarste aan betrouwbaar drinkwater, diepgaande demografische verschuivingen, schaarste aan grondstoffen en aanhoudend hoge prijzen voor energie hebben weinig met klimaatverandering te maken, maar vragen nu en morgen om blijvende aandacht. Misschien heeft de financiële crisis wel een handje geholpen om de aandacht voor bovengenoemde zaken te bevorderen. Er is meer aandacht gekomen voor de werkwijze van bedrijven binnen en buiten de financiële sector. Dat betekent ook meer aandacht voor corporate governance, eco-efficiency en voor de manier waarop met medewerkers hoort omgegaan te worden. Dat ‘duurzaamheid’ meer en meer onderdeel aan het worden is van de dagelijkse bedrijfsvoering van bedrijven en instellingen bewijzen ook andere cijfers
Een mentaliteitsverandering
Het mislukken van Kopenhagen lijkt zodoende min of meer een op zichzelf staande gebeurtenis te zijn. Dat ‘duurzaamheid’meer en meer onderdeel aan het worden is van de dagelijkse bedrijfsvoering van bedrijven en instellingen, bewijzen ook andere cijfers. Een groeiend aantal institutionele beleggers willen daadwerkelijk duurzaamheid meenemen in hun investeringsbeslissingen. Wereldwijd hebben ongeveer 650 institutionele beleggers, samen goed voor pakweg USD 20 biljoen aan beleggingen, the United Nations Principles for Responsible Investment (UN PRI) ondertekent. Dat is nog maar het begin. Volgens een studie van Booz&Company Consultants kan tegen 2015 het aandeel van duurzaam verantwoord investeren wel eens opgelopen zijn tot 15% à 20% van alle beleggingen in beheer. Het is de combinatie van bovengenoemde problemen, strengere wetgeving en technologische vernieuwingen die beleggers in de richting van duurzaam investeren stuwen. Een bijzondere rol is in dezen misschien wel weggelegd voor pensioenfondsen. Ze moeten zorgvuldig waken over de lange termijn belangen van hun pensioengerechtigden. Kunnen ze dan zaken als watertekorten en CO2-uitstoot links laten liggen, terwijl duidelijk is dat die ontwikkelingen grote risico’s met zich mee dragen, die hun verplichtingen in gevaar kunnen brengen? Het heeft er nu alle schijn van dat duurzaamheid over niet al te lange tijd het doorslaggevende element wordt bij investeringsbeslissingen.
Dow Jones Sustainability Indices
Hoe ver het denken over duurzaamheid inmiddels gevorderd is, valt af te lezen aan de ontwikkeling van de Dow Jones Sustainaibility Indeces. De eerste index stamt alweer uit 1999, the Dow Jones Sustainability World Index. In die dagen bestond er nog grote onduidelijkheid en onzekerheid in hoeverre duurzame factoren zouden kunnen bijdragen aan het economisch/financieel succes van een bedrijf of van beleggingen. Hoewel er nog steeds geen sluitende bewijsvoering is, wijst steeds meer onderzoek in de richting van een positief verband. Die overtuiging is ook terug te zien aan de groei van het aantal indices. Aan het einde van 2009 waren er 15. Er zijn brede indices maar ook zogeheten blue chip benchmarks die samengesteld zijn uit de belangrijkste (grootste) spelers op het gebied van duurzaamheid in een bepaalde regio
Lasten en kansen
De indices weerspiegelen niet alleen de groeiende belangstelling van beleggers en investeerders voor duurzaamheid, maar ook een gewijzigde opstelling bij het (grote) bedrijfsleven. Was duurzaamheid in de jaren negentig vooral een zaak die geassocieerd werden met overheidsbemoeienis, regelgeving en compliance, nu is dat sterk veranderd. Duurzaamheid is een zakelijk concept geworden, een kernthema bij het zoeken naar competitieve voordelen. Dat betekent dat duurzaamheidcriteria meer en meer geïncorporeerd worden in diensten en producten. Duurzaamheid gaat geleidelijk aan van een last naar een kans in een concurrerende omgeving.
Leiders in duurzaamheid
Hoe breed duurzaamheid zich inmiddels heeft genesteld binnen het internationale bedrijfsleven, blijkt uit het overzicht van de Zwitserse vermogensbeheerder SAM, een voortrekker op het gebied van duurzaam beleggen. In hun overzicht van Sector Leaders 2010 figureren Nederlandse bedrijven als Air France-KLM, maar ook DSM en Philips. Zij figureren naast bedrijven als Pepsico, Nokia, Intel, BMW en Deutsche Telekom. In het overzicht van sector movers 2010 komen we Wolters Kluwer tegen naast Starbucks, Cisco, Siemens en Alstom. Duurzaamheid is definitief het spelletje geworden van de grote jongens.
vrijdag 26 februari 2010
A Greek, no rather a European tragedy
Europe’s economy just isn’t getting anywhere. In the fourth quarter of 2009, the old continent grew only 0, 1% compared to the third quarter. Compared to the fourth quarter of 2008, the economy shrunk almost two percent. In Europe, France seems to be a rare exception showing an economic growth of 0, 7% in the last quarter on 2009... The Netherlands are just up to average with results that balance around the European mean. This year probably will not be any better.
If all goes well, the economy will grow a mediocre 1, 5% in 2010 and 2% in 2011, which is a far from satisfactory rebound after such a depression like crisis.
Europe’s Weakness
Europe’s bad economic performance is also reflected in the quarterly results of many European companies. According to Bloomberg 75 percent of all American companies did better than expected, but only few European corporations managed to meet expectations
European profits might not have been that bad, but revenues are stagnating or even declining. This means that many European companies are still busy streamlining (read: laying off people) their business.
A mediocre growth of 1, 5 to 2 percent is most likely to result in an ample labor market in the years to come. Randstad Human Resources has recently confirmed this. They do observe economic improvement, mostly in the United States though.
According to Statistics Netherlands (CBS), the only bright spot in the Dutch economy during the fourth quarter of 2009 was our export. Consumer demand was down and overall investments were disappointing. Most European corporations seem very reluctant to undertake any investments. This can be derived from, for instance, the annual and quarterly reports of Dell and Hewlett Packard, two world-wide operating companies. Both IT giants observe that demand in the United States and Asia has significantly risen while Europe is staying behind.
Dell remarked also that most of the demand comes from multinationals upgrading their ‘outdated IT infrastructure’. Mid- and small caps have not yet started this process.
It can be inferred that even American entrepreneurs still haven’t been convinced by the economic recovery and that credit facilities are not yet fully in place.
However, one can also conclude that 2010 will be a profitable year for Dell and Hewlett Packard. If the US economy gets more flesh on its bones and if Microsoft Windows 7 stands all tests the economy might grow surprisingly fast in the second part of the year.
Greek tragedy
Whether Europe will experience the same level of growth as the United States remains to be seen. In the first place, economic growth is traditionally lower in Europe. Secondly, the PIIGS countries pose a real threat to the economic recovery in Europe. Companies like the Swedish/Swiss ABB clearly doubt the power of the European economy. In 2010, this company will drastically cut back $ 3 billion instead of $ 2 billion. The company clearly doubts whether private investments will actually rise after all economic incentives will have ended. In order to beat its competitors, the company wants to lower its costs significantly.
But there is another problem. In order to join the European Union and enjoy the benefits of the Euro, Greece falsified its official statistics, which is a deadly sin. As a result, Greece was able to borrow money on the same terms as Germany. And borrowing it did. A lot and with a great deal of verve. The country now faces a deficit of 12, 7%.
For years, the ECB, the European Central Bank tolerated this and even lended Greece all the money it needed. All good things come to an end, and now the international financial markets are turning against this country. Greece has become the symbol of undisciplined financial and fiscal policies of many EU Member States. Greece itself does not cause a huge problem. The country represents less than 3% of the European GDP. The danger of infection is what really matters. After Greece, the financial market may turn against the other PIIGS countries and maybe even against Belgium and Austria. That can seriously damage the Euro.
Because it is unclear how the EU will combat the crisis, many investors are already getting rid of their Euros. It also affects the policies of the European Central Bank. The ECB will not be able to raise interest rates in the short run. The combination of higher European interest rates and strict austerity policies in the PIIGS countries will burden these countries only even more. But at the same time, the PIIGS countries are keeping the rest of the EU hostage.
The current crisis has shown the weaknesses of the monetary union. A monetary union cannot function without a political union, but that process is far from finished.
If all goes well, the economy will grow a mediocre 1, 5% in 2010 and 2% in 2011, which is a far from satisfactory rebound after such a depression like crisis.
Europe’s Weakness
Europe’s bad economic performance is also reflected in the quarterly results of many European companies. According to Bloomberg 75 percent of all American companies did better than expected, but only few European corporations managed to meet expectations
European profits might not have been that bad, but revenues are stagnating or even declining. This means that many European companies are still busy streamlining (read: laying off people) their business.
A mediocre growth of 1, 5 to 2 percent is most likely to result in an ample labor market in the years to come. Randstad Human Resources has recently confirmed this. They do observe economic improvement, mostly in the United States though.
According to Statistics Netherlands (CBS), the only bright spot in the Dutch economy during the fourth quarter of 2009 was our export. Consumer demand was down and overall investments were disappointing. Most European corporations seem very reluctant to undertake any investments. This can be derived from, for instance, the annual and quarterly reports of Dell and Hewlett Packard, two world-wide operating companies. Both IT giants observe that demand in the United States and Asia has significantly risen while Europe is staying behind.
Dell remarked also that most of the demand comes from multinationals upgrading their ‘outdated IT infrastructure’. Mid- and small caps have not yet started this process.
It can be inferred that even American entrepreneurs still haven’t been convinced by the economic recovery and that credit facilities are not yet fully in place.
However, one can also conclude that 2010 will be a profitable year for Dell and Hewlett Packard. If the US economy gets more flesh on its bones and if Microsoft Windows 7 stands all tests the economy might grow surprisingly fast in the second part of the year.
Greek tragedy
Whether Europe will experience the same level of growth as the United States remains to be seen. In the first place, economic growth is traditionally lower in Europe. Secondly, the PIIGS countries pose a real threat to the economic recovery in Europe. Companies like the Swedish/Swiss ABB clearly doubt the power of the European economy. In 2010, this company will drastically cut back $ 3 billion instead of $ 2 billion. The company clearly doubts whether private investments will actually rise after all economic incentives will have ended. In order to beat its competitors, the company wants to lower its costs significantly.
But there is another problem. In order to join the European Union and enjoy the benefits of the Euro, Greece falsified its official statistics, which is a deadly sin. As a result, Greece was able to borrow money on the same terms as Germany. And borrowing it did. A lot and with a great deal of verve. The country now faces a deficit of 12, 7%.
For years, the ECB, the European Central Bank tolerated this and even lended Greece all the money it needed. All good things come to an end, and now the international financial markets are turning against this country. Greece has become the symbol of undisciplined financial and fiscal policies of many EU Member States. Greece itself does not cause a huge problem. The country represents less than 3% of the European GDP. The danger of infection is what really matters. After Greece, the financial market may turn against the other PIIGS countries and maybe even against Belgium and Austria. That can seriously damage the Euro.
Because it is unclear how the EU will combat the crisis, many investors are already getting rid of their Euros. It also affects the policies of the European Central Bank. The ECB will not be able to raise interest rates in the short run. The combination of higher European interest rates and strict austerity policies in the PIIGS countries will burden these countries only even more. But at the same time, the PIIGS countries are keeping the rest of the EU hostage.
The current crisis has shown the weaknesses of the monetary union. A monetary union cannot function without a political union, but that process is far from finished.
woensdag 17 februari 2010
Who is going to pick up the check?
According Mastiaux Frank, head of the Division Renewables of the German energy company E. on, wind energy, but also other forms of alternative energy, has finally outgrown the experimental phase and is now on the brink of industrial production. This is a good thing, because Europe is on the verge of massive and sustained investments in energy.
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Who is going to pick up the check?
According Mastiaux Frank, head of the Division Renewables of the German energy company E. on, wind energy, but also other forms of alternative energy, has finally outgrown the experimental phase and is now on the brink of industrial production. This is a good thing, because Europe is on the verge of massive and sustained investments in energy.
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
maandag 25 januari 2010
Cool clean water
It could be Copenhagens saddest outcome! The predominant interest in reducing
the emission of CO2 in order to combat climate change has, for no obvious reason, drawn the attention away from an more urgent and growing problem: the shortage of clean water.
Nowadays we face a real and a growing shortage of clean water world-wide.
It could be Copenhagens saddest outcome! The predominant interest in reducing
the emission of CO2 in order to combat climate change has, for no obvious reason, drawn the attention away from an more urgent and growing problem: the shortage of clean water.
Nowadays we face a real and a growing shortage of clean water world-wide.
Todays and tomorrows scarcity
For the average inhabitant of a country full of water, like the Netherlands, it is hard to imagine water supplies running dry, but for corporations, water is fast becoming part of their strategy. In 2004 Coca-Cola and Pepsi had to close a number of plants in India. Local agriculture, but also people in cities, claimed that the local branches of both companies used too much water.
In 2007, the Tenessee Valley Authority had to reduce the power of its hydro-electric power station by 30%, because of a continuous drought affecting the water level.
The above examples are neither isolated nor incidents. This is especially true if we assume that the economic and demographic growth will continue the next decades. At todays standing, existing supplies will only be able to meet 60% of the world-wide demand in 2030.
The situation is even worse for some regions in the emerging markets. Countries such as China and India will face enormous shortages by 2030. Those shortages are partly the consequence of the economic growth and the accompanying growth in prosperity. At the same time, these shortages pose at treat to the same economic growth and prosperity.
Looking for solutions
Increasing shortages in large parts of the world will increase the price of water. At the same time it will also intensify the struggle between parties concerned to gain access to water supplies, thus leading to more regulation. Companies in most industries should develop (production) processes that require less water. This is a challenge and at the same time an opportunity. It is an opportunity for companies that develop products and services that increase waters productivity. I am talking about new techniques and services for large-scale consumers like agriculture, mining, utility companies and the IT-sector, just to name a few.
In order the close the ever widening gap between supply and demand, regions and sectors will have to invest an estimated annual $ 50 to $ 60 billion. Fortunately, until now these investments have proven to bear fruit within three years.
From product to solution
So far, experience has taught us that the mere supply of a product or service with a higher water-efficiency does not automatically lead to success. It is just not enough. Especially in the professional markets, the demand for so-called ‘total solutions’ is rising.
This means that suppliers will not only have to reduce the use of water but also the power consumption along with it. Successful suppliers will have to figure out first what products and services add most value to the Total change of water control and water productivity. Subsequently, they will have to be able to market those products. But for all marketing efforts to bear for fruit, suppliers will also have to study (future) regulations.
Big players, such as ABB, GE and Siemens have already obtained a position in the water market. A company like IBM sees opportunities and even the oil companies expect to market their drilling techniques in the young water market.
No univocal market
The water market isn’t a univocal one. The problems countries like Brazil or South-Africa will be facing, differ considerably from those China and India will be (or are already) encountering. The solutions for the latter two will be different and more radical than those that will have to be adopted by the former two.
Roughly speaking, there are three submarkets in the water sector:
a. Treatment (purification) and distribution. This segment focuses on the purification and distribution of drinking- and waste water. In most countries – including the Netherlands – the quality of drinking water is no longer a given. This requires large investments in new technologies like membrane technology But also the quality of waste water will have to rise in order for it to be reused in industry.
Quality improvements and infrastructure that safeguard the distribution of drinking-water will require the investment of hundreds of billions of dollars in the next couple of decades. Those investments will mostly be made in the known/existing emerging markets
b. Industrial efficiency. Nowadays, the energy and industrial sectors account for 16% of the world-wide demand for water. By 2030, that percentage will have risen to 22%. China (off course) needs most water. Increases in prices and regulation will encourage both sectors to develop technologies that guzzle less water.
C. Agriculture. This sector accounts for 70% of the total demand for water. A lot can be gained in this segment. This requires large efforts in multiple areas, such as better irrigation techniques, different kinds of fertilizer, a better infrastructure in the countryside in large parts of the world. It also requires new ways of finance that enable the farming sector to make the necessary investments. Withouth a doubt the farming sector poses the largest challenge and fast improvements of the water productivity are the least likely.
To conclude
Without a doubt, the water market is a growing market. However, it is a market with growing pains and problems. Often the market is fragmented and very local.
It is also a market where regulation is still premature. Current and future players
have a long way to go before all problems will have been solved and the market will indeed prove to be the growing market it potentially is
the emission of CO2 in order to combat climate change has, for no obvious reason, drawn the attention away from an more urgent and growing problem: the shortage of clean water.
Nowadays we face a real and a growing shortage of clean water world-wide.
It could be Copenhagens saddest outcome! The predominant interest in reducing
the emission of CO2 in order to combat climate change has, for no obvious reason, drawn the attention away from an more urgent and growing problem: the shortage of clean water.
Nowadays we face a real and a growing shortage of clean water world-wide.
Todays and tomorrows scarcity
For the average inhabitant of a country full of water, like the Netherlands, it is hard to imagine water supplies running dry, but for corporations, water is fast becoming part of their strategy. In 2004 Coca-Cola and Pepsi had to close a number of plants in India. Local agriculture, but also people in cities, claimed that the local branches of both companies used too much water.
In 2007, the Tenessee Valley Authority had to reduce the power of its hydro-electric power station by 30%, because of a continuous drought affecting the water level.
The above examples are neither isolated nor incidents. This is especially true if we assume that the economic and demographic growth will continue the next decades. At todays standing, existing supplies will only be able to meet 60% of the world-wide demand in 2030.
The situation is even worse for some regions in the emerging markets. Countries such as China and India will face enormous shortages by 2030. Those shortages are partly the consequence of the economic growth and the accompanying growth in prosperity. At the same time, these shortages pose at treat to the same economic growth and prosperity.
Looking for solutions
Increasing shortages in large parts of the world will increase the price of water. At the same time it will also intensify the struggle between parties concerned to gain access to water supplies, thus leading to more regulation. Companies in most industries should develop (production) processes that require less water. This is a challenge and at the same time an opportunity. It is an opportunity for companies that develop products and services that increase waters productivity. I am talking about new techniques and services for large-scale consumers like agriculture, mining, utility companies and the IT-sector, just to name a few.
In order the close the ever widening gap between supply and demand, regions and sectors will have to invest an estimated annual $ 50 to $ 60 billion. Fortunately, until now these investments have proven to bear fruit within three years.
From product to solution
So far, experience has taught us that the mere supply of a product or service with a higher water-efficiency does not automatically lead to success. It is just not enough. Especially in the professional markets, the demand for so-called ‘total solutions’ is rising.
This means that suppliers will not only have to reduce the use of water but also the power consumption along with it. Successful suppliers will have to figure out first what products and services add most value to the Total change of water control and water productivity. Subsequently, they will have to be able to market those products. But for all marketing efforts to bear for fruit, suppliers will also have to study (future) regulations.
Big players, such as ABB, GE and Siemens have already obtained a position in the water market. A company like IBM sees opportunities and even the oil companies expect to market their drilling techniques in the young water market.
No univocal market
The water market isn’t a univocal one. The problems countries like Brazil or South-Africa will be facing, differ considerably from those China and India will be (or are already) encountering. The solutions for the latter two will be different and more radical than those that will have to be adopted by the former two.
Roughly speaking, there are three submarkets in the water sector:
a. Treatment (purification) and distribution. This segment focuses on the purification and distribution of drinking- and waste water. In most countries – including the Netherlands – the quality of drinking water is no longer a given. This requires large investments in new technologies like membrane technology But also the quality of waste water will have to rise in order for it to be reused in industry.
Quality improvements and infrastructure that safeguard the distribution of drinking-water will require the investment of hundreds of billions of dollars in the next couple of decades. Those investments will mostly be made in the known/existing emerging markets
b. Industrial efficiency. Nowadays, the energy and industrial sectors account for 16% of the world-wide demand for water. By 2030, that percentage will have risen to 22%. China (off course) needs most water. Increases in prices and regulation will encourage both sectors to develop technologies that guzzle less water.
C. Agriculture. This sector accounts for 70% of the total demand for water. A lot can be gained in this segment. This requires large efforts in multiple areas, such as better irrigation techniques, different kinds of fertilizer, a better infrastructure in the countryside in large parts of the world. It also requires new ways of finance that enable the farming sector to make the necessary investments. Withouth a doubt the farming sector poses the largest challenge and fast improvements of the water productivity are the least likely.
To conclude
Without a doubt, the water market is a growing market. However, it is a market with growing pains and problems. Often the market is fragmented and very local.
It is also a market where regulation is still premature. Current and future players
have a long way to go before all problems will have been solved and the market will indeed prove to be the growing market it potentially is
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