UNIVERSAL CITY, Calif. — In the bungalow offices here that house Steven Spielberg’s newly formed DreamWorks Studios, the swagger is suddenly being dialed back a notch or two.
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Clockwise from top right,are the Hollywood executives John Fogelman of the William Morris Agency, Stacey Snider of DreamWorks Studios, Jeffrey Robinov of the Warner Brothers Pictures Group, Chris Silbermann of International Creative Management, Richard Lovett of the Creative Artists Agency, Mary Parent of the MGM Motion Picture Group, Rob Moore of Paramount Pictures and Donald De Line of De Line Pictures.
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When the company reorganized itself as an independent operation a few months ago, Stacey Snider, a co-owner of DreamWorks and its chief executive, envisioned herself presiding over a grand new empire. It was a nice fantasy while it lasted.
“You’re not presiding over anything,” Ms. Snider, 47, said that she had quickly realized. “You’re back in the trenches.”
After riding two decades of almost nonstop growth from the cable and video revolutions, a new generation of Hollywood power players is finally being forced to test its mettle.
These executives — consummate insiders who enlisted when young and worked their way up — now find themselves pushing 50 just as some brutal problems are pushing back: a collapse in DVD sales, a credit crisis that has curtailed financing for new movies, a group of corporate owners determined to pull more profits from studios to compensate for hard-hit publishing and broadcast television divisions.
“These folks were born from a place where they knew no failure — all they could ever see was up, both for the business and their careers,” said Peter Guber, a former chairman of Sony Pictures who is now a producer and industry elder statesman. “Now they must confront the unsettling truth that failure is close at hand and that it’s on their backs to make sure that doesn’t happen.”
To date, the current leaders have had to focus more intently on becoming masters of organizational behavior than rebooting businesses. “Consensus management is what they know,” said Mr. Guber. But as studios trim staff and producer deals, many are now hoping to emulate some of the entrepreneurial cowboys — David Geffen, Barry Diller and Michael Eisner come to mind — from the generation of moguls that preceded them.
Inevitably, the sudden shift has set off soul-searching among the loose network of allies and adversaries who must rewire the industry in the short span before a next Hollywood generation comes along to replace them. They are tightening belts, lowering expectations and becoming occasionally more cutthroat, but also grappling with some unusually philosophic thoughts about a business for which they now have to fight.
Rough and tumble is not in this generation’s DNA. Most hail from elite universities, in contrast to predecessors like Mr. Geffen or Mr. Diller, who had no college degrees. The co-chairmen of Universal Pictures, Marc Shmuger and David Linde, respectively attended Wesleyan and Swarthmore. Ms. Snider has degrees from the University of Pennsylvania and the University of California, Los Angeles, school of law.
“You’re looking at a business that is recalibrating itself,” said Mr. Linde. The 49-year-old executive, who clambered into show business in the 1980s by way of Paramount’s New York-based legal department, added, “I don’t think we today know precisely how it’s changing.”
Uncertainty breeds stress, even among friends. Last month, for instance, once-close relations between Universal and DreamWorks became strained after Ms. Snider’s company initiated talks, without giving Mr. Shmuger’s studio an expected heads up, about a distribution arrangement with Walt Disney Studios.
“People are living in fear, and sometimes it manifests itself in bad behavior,” said Mr. Shmuger, 50, who started in the business during college as a freelance copywriter for movie posters, and who spoke recently of the general climate, not of a specific incident.
“Darwinian” is one word Patrick Whitesell, a partner at the Endeavor talent agency, uses to describe the current landscape, while Chris Silbermann, president of International Creative Management, calls it “disorganized.” Both agreed that people who were formerly able to succeed by clinging to mediocrity suddenly find themselves without cover.
“Everybody has to dig deeper than they ever have,” said Mr. Whitesell, who came up in television and now represents such stars as Christian Bale and Shia LaBeouf. “That means more creative deal-making, more complete understanding of the economics of the industry, more hard-edged business decisions.”
Mr. Silbermann said: “The only way to survive is to get beyond the knee-jerk resistance to change. What’s scary is that a lot of people in the movie business aren’t admitting that to themselves yet.”
A number of executives and agents declined to be interviewed for this article, citing concerns about competitors or corporate overseers. Among those who preferred not to speak were Richard Lovett, 48, and Bryan Lourd, 49, both of whom are managing partners at the Creative Artists Agency; Rob Moore, 46, the vice chairman of the Viacom-owned Paramount under Brad Grey, who turns 52 this year; and Jeffrey Robinov, the 50-year-old president of the Warner Brothers Pictures Group, which is owned by Time Warner.
They follow a generation of heavyweights who, having come of age with less to lose in the tough economic climate of the 1970s, were more willing to speak openly about their dilemmas. Mr. Lourd and Mr. Lovett were understudies to Michael Ovitz, a highly public superagent who helped to found Creative Artists. Mr. Robinov has climbed rungs under Barry M. Meyer, the eloquent chairman of Warner Brothers who has more than 40 years of show business experience on his résumé.
The people who did speak acknowledged that many outside the glamour industry have it much worse. Hollywood is manufacturing one of the only products consumers are still lining up to buy, evidenced by a surge in box office revenue since December. That uptick is not nearly enough to offset the decline in DVD sales, but other businesses — online streaming, mobile, video-on-demand — are expanding and could pick up the slack.
“I look at it as growing pains,” said Donald De Line, 50, a Disney and Paramount executive who is one of the industry’s leading producers. “We’re going to figure it out, and the revenue streams will get healthy again. That’s the history of Hollywood.”
Enduring financial pain is not why Kevin Misher, a 44-year-old producer who studied finance at the University of Pennsylvania, came to Hollywood. After making his mark as an executive at Universal and Sony, however, Mr. Misher last year lost the comfort of a Paramount producing deal when it was bought out by the studio during widespread cost-cutting.
“You’re ultimately fending for yourself here,” said Mr. Misher. Like more than a few similarly aged “studio babies,” he now operates from an office far removed from the company lots, but is still feeding the system films like “Public Enemies,” a gangster drama directed by Michael Mann scheduled for release by Universal in July.
But he, too, sees an upside: The tough operating environment has forced producers like himself and Ms. Snider deeper into the moviemaking process.
“This is what you love to do, get on with it,” Ms. Snider recalls telling herself lately, even as DreamWorks was scrambling to complete financing arrangements that would let it get another round of films in production.
Ms. Snider added that she and the rest of her generation — having figured out that the real prize is being in the game — might stay in it a bit longer than intended, instead of clearing the way for thirtysomethings awaiting their turn at the top.
“They’re going to have to kick me out,” she said.
nytimes.com/2009/03/23/business/media/23moguls.html?ref=business
Saturday, March 28, 2009
Dylan Ratigan of CNBC’s ‘Fast Money’ Leaves Network
Dylan Ratigan, the longtime host of the CNBC program “Fast Money,” abruptly left the cable channel and the show on Friday, after a discussion with the network’s president, Mark Hoffman.
Dylan Ratigan hosted “Fast Money” for the last five years and helped make the show a success.
The move came after contract negotiations between CNBC and Mr. Ratigan ended with just a week left until the end of his current deal.
Mr. Ratigan said in a telephone interview Friday that despite rumors that he had an offer to move to ABC News, he had not made an agreement with any other network. “No deal is pending with anybody,” Mr. Ratigan said. “All options are being considered.”
ABC could certainly be one of them, he said. Asked why he would walk away from a successful program where he had built a reputation for fast and funny delivery of the day’s financial news, Mr. Ratigan said, “I had the benefit of my contract coming to an end. This is an opportunity to take a pause and evaluate all my options.”
Mr. Ratigan said he decided not to appear on Friday’s show after he and Mr. Hoffman agreed it would be “a distraction.” He said he was grateful to CNBC for the opportunity “to create and host a show like this.”
Brian Steel, a spokesman for CNBC, said: “Dylan told us he was leaving effective today. We thank him for his quality work.” Mr. Ratigan, 36, who has been at CNBC for five years, has hosted “Fast Money” since 2006.
Several CNBC colleagues suggested Friday that Mr. Ratigan, while talented, was easy to anger and difficult to work with and that he had told people that at some point he envisioned himself heading an entertainment show like David Letterman’s.
Mr. Ratigan dismissed the comments about his personality as the kind of thing that always gets leaked when someone leaves a television job. As for wanting to emulate Mr. Letterman, he said, “That’s an idea from two years ago.” He said he was now dedicated to covering the economy, “the story that is affecting every American in every setting.”
An executive from a network that has interest in Mr. Ratigan said the reason no other deal was in place with ABC or anyone else was that his CNBC contract — though it ends March 31 — contains a clause that will prevent Mr. Ratigan from working elsewhere for some period of time. The executive requested anonymity so as not to tip the network’s hand in negotiations.
Mr. Ratigan would not comment on whether such a clause existed, but he said, “You may next see me in six months, or it may be three months.”
Dylan Ratigan hosted “Fast Money” for the last five years and helped make the show a success.
The move came after contract negotiations between CNBC and Mr. Ratigan ended with just a week left until the end of his current deal.
Mr. Ratigan said in a telephone interview Friday that despite rumors that he had an offer to move to ABC News, he had not made an agreement with any other network. “No deal is pending with anybody,” Mr. Ratigan said. “All options are being considered.”
ABC could certainly be one of them, he said. Asked why he would walk away from a successful program where he had built a reputation for fast and funny delivery of the day’s financial news, Mr. Ratigan said, “I had the benefit of my contract coming to an end. This is an opportunity to take a pause and evaluate all my options.”
Mr. Ratigan said he decided not to appear on Friday’s show after he and Mr. Hoffman agreed it would be “a distraction.” He said he was grateful to CNBC for the opportunity “to create and host a show like this.”
Brian Steel, a spokesman for CNBC, said: “Dylan told us he was leaving effective today. We thank him for his quality work.” Mr. Ratigan, 36, who has been at CNBC for five years, has hosted “Fast Money” since 2006.
Several CNBC colleagues suggested Friday that Mr. Ratigan, while talented, was easy to anger and difficult to work with and that he had told people that at some point he envisioned himself heading an entertainment show like David Letterman’s.
Mr. Ratigan dismissed the comments about his personality as the kind of thing that always gets leaked when someone leaves a television job. As for wanting to emulate Mr. Letterman, he said, “That’s an idea from two years ago.” He said he was now dedicated to covering the economy, “the story that is affecting every American in every setting.”
An executive from a network that has interest in Mr. Ratigan said the reason no other deal was in place with ABC or anyone else was that his CNBC contract — though it ends March 31 — contains a clause that will prevent Mr. Ratigan from working elsewhere for some period of time. The executive requested anonymity so as not to tip the network’s hand in negotiations.
Mr. Ratigan would not comment on whether such a clause existed, but he said, “You may next see me in six months, or it may be three months.”
Friday, March 27, 2009
'Easy money' pitch is scam bait, police warn
'Work at home' involves reshipping of goods that were bought with stolen credit cards
You've seen the advertisements: Earn big bucks working at home! No experience necessary! No selling!
If you bite, you might find yourself at the center of an international scheme to defraud online retailers and ship the ill-gotten goods overseas.
The ads, in classified sections or on employment Web sites, draw in unsuspecting people nationwide.
They are paid initially but soon find that they themselves have been scammed, either receiving nothing or checks that turn out to be counterfeit.
Columbus police warned yesterday that the scam is showing up in central Ohio.
It has been around for years but seems to be picking up as the economy continues to sour, said detective Ronald Reese with the Division of Police Fraud and Forgery Unit.
Reese described the scheme this way: The scammer uses stolen credit-card numbers to buy merchandise online and have it sent to a reshipper. The reshipper relabels the packages with prepaid, online shipping labels provided by the scammer and reships the merchandise to a foreign country.
By the time the retailer realizes that the credit-card number is bogus, the merchandise is out of the country. And the retailer doesn't catch on right away because his merchandise is being sent to numerous reshippers, rather than one location.
Most of the scam's organizers are from Canada, the United Kingdom and Nigeria, Reese said. The merchandise can be anything -- diamonds, computers, clothing.
In one recent Columbus case, he said, a Xenia company sent remote-controlled race cars to a Downtown apartment. The company contacted Columbus police after becoming suspicious because the credit card used to buy the toys belonged to a woman in Illinois.
Police determined that the credit-card number had been stolen, confronted the man in the apartment and learned that he was a reshipper. The case is still being investigated.
"We intercepted computers from a student on campus doing it, and cameras from another residence," Reese said. "It's just whomever they can get to ship it to and reship it. They target everyone and anyone trying to make a fast buck."
Not all reshippers are victims, he said. If police can prove that the reshippers knew about the scam, they can charge them with fraud and receiving stolen property.
Scammers also find reshippers through on-line dating sites and social-networking sites, said Michael Mara, risk program manager for the nonprofit Merchant Risk Council in Seattle.
"They're the most desperate and lonely, but also people who are desperate financially."
http://dispatch.com/live/content/local_news/stories/2009/03/24/scammers.ART_ART_03-24-09_B1_Q5DB79S.html?sid=101
You've seen the advertisements: Earn big bucks working at home! No experience necessary! No selling!
If you bite, you might find yourself at the center of an international scheme to defraud online retailers and ship the ill-gotten goods overseas.
The ads, in classified sections or on employment Web sites, draw in unsuspecting people nationwide.
They are paid initially but soon find that they themselves have been scammed, either receiving nothing or checks that turn out to be counterfeit.
Columbus police warned yesterday that the scam is showing up in central Ohio.
It has been around for years but seems to be picking up as the economy continues to sour, said detective Ronald Reese with the Division of Police Fraud and Forgery Unit.
Reese described the scheme this way: The scammer uses stolen credit-card numbers to buy merchandise online and have it sent to a reshipper. The reshipper relabels the packages with prepaid, online shipping labels provided by the scammer and reships the merchandise to a foreign country.
By the time the retailer realizes that the credit-card number is bogus, the merchandise is out of the country. And the retailer doesn't catch on right away because his merchandise is being sent to numerous reshippers, rather than one location.
Most of the scam's organizers are from Canada, the United Kingdom and Nigeria, Reese said. The merchandise can be anything -- diamonds, computers, clothing.
In one recent Columbus case, he said, a Xenia company sent remote-controlled race cars to a Downtown apartment. The company contacted Columbus police after becoming suspicious because the credit card used to buy the toys belonged to a woman in Illinois.
Police determined that the credit-card number had been stolen, confronted the man in the apartment and learned that he was a reshipper. The case is still being investigated.
"We intercepted computers from a student on campus doing it, and cameras from another residence," Reese said. "It's just whomever they can get to ship it to and reship it. They target everyone and anyone trying to make a fast buck."
Not all reshippers are victims, he said. If police can prove that the reshippers knew about the scam, they can charge them with fraud and receiving stolen property.
Scammers also find reshippers through on-line dating sites and social-networking sites, said Michael Mara, risk program manager for the nonprofit Merchant Risk Council in Seattle.
"They're the most desperate and lonely, but also people who are desperate financially."
http://dispatch.com/live/content/local_news/stories/2009/03/24/scammers.ART_ART_03-24-09_B1_Q5DB79S.html?sid=101
Clampdown on ‘Easy’ Chinese Carbon Deals Will Cost Companies
March 27 (Bloomberg) -- The European Union, frustrated that its 11,000 factories and power plants are failing to adequately reduce greenhouse-gas pollution, will seek tighter emission rules that may raise the price of burning fossil fuels.
The 27-nation bloc wants to curb access to a program run by the United Nations that rewards companies more for funding emission-reduction projects in China and India than for decreasing their own gas output in Europe. New limits are needed to force extra pollution cuts at home, the EU said in proposals for climate talks starting in two days in Bonn.
“I’m somewhat worried” about future projects, said Michael Fuebi, vice president of climate protection at RWE AG, which invested in 120 such ventures in Asia and South America.
The German power company, Europe’s biggest greenhouse-gas producer, had planned to earn “credits” from the investments abroad that will offset 11 percent of RWE’s total emissions in 2015. While the utility’s existing projects appear safe, new deals are now in jeopardy, Fuebi said.
Shrinking the supply of UN carbon offsets will force Europe’s coal-burning power plants, steelmakers and cement factories to buy more expensive EU pollution permits or install emission-control equipment at home. And opportunities will be crimped for project investors such as Morgan Stanley, Paris- based Electricite de France SA and Mitsubishi Corp. of Tokyo.
Carbon Offsets
The UN program, which co-financed $45.9 billion in carbon- offset ventures in 2007, is being studied in the U.S. for adoption in proposed cap-and-trade carbon-reduction programs.
UN carbon offsets should be phased out in “advanced developing countries,” such as China, the EU’s executive arm said in a January outline for talks among 192 nations in Bonn.
The shift already has undercut investor interest in funding new deals to trim carbon emissions in developing nations, UN data on Bloomberg show.
New projects proposed to the UN in the past three months are designed to cut 91 million tons of emissions over their lifespan, down from 153 million tons of gases in deals proposed a year earlier in the same period, according to Bloomberg data.
Under UN Clean Development Mechanism rules, companies in industrialized nations are invited to finance deals in poorer nations, from windmills and solar plants to devices that trap carbon dioxide, the main gas blamed for global warming. In return, they can receive credits for each ton of avoided air pollution. The credits can be traded or used in place of buying more-expensive pollution permits needed in the EU, operator of the world’s largest emissions-trading market.
Methane Waste
RWE, for example, paid for equipment to burn methane waste at a South Korean coal mine so the resulting gas traps less heat when entering the sky. The Essen-based utility also has projects in China and Chile that offset pollution from its 60 European power plants that burn coal.
The cost for RWE to avoid a ton of emissions was as little as 5 euros ($6.77) and averaged about 11 euros, data on its Web site show. Without UN credits, in the future RWE may be forced to make more expensive carbon cuts in Europe or buy EU permits, whose price averaged 13.10 euros a ton over the past two years.
Prices for EU permits and the interchangeable UN offset credits may climb on higher demand from polluters in Europe, analysts have said. UN credits will more than double through 2011 to 15 euros as supply shrinks amid more oversight and the recession, Trevor Sikorski, an analyst in London at Barclays Plc’s investment bank, forecast on March 6.
‘Easy’ Credits?
Europe, while promoting its carbon market at this month’s climate talks as an alternative to a straight tax, is retrenching in the face of criticism for fostering “easy” credits from the UN-supervised projects. Critics have said many ventures such as hydroelectric dams or factory upgrades should have been disqualified because they would have been built even without carbon finance.
“Only credits that are real, measurable and additional should be allowed into the market,” the European Commission said in an e-mail response to Bloomberg. No credits should come from deals that fail those criteria after 2012, the EU said.
“There seems to be an opinion among policy makers that carbon finance is easy money, that the market came from nothing and can adapt to anything,” Henry Derwent, president of the Geneva-based International Emissions Trading Association, said on March 5. “If hopes are dashed too many times, no one will put their money into carbon,” Derwent said by telephone.
Indian steelmaker JSW Steel Ltd., which uses factory waste gas to make power and reduce greenhouse gases, is one of several project owners that has drawn criticism for earning money from the carbon credits it generates.
‘Hugely Profitable’
“They were hugely profitable without carbon finance,” said Axel Michaelowa, who helps advise the UN on emissions trading and is a senior founding partner of Hamburg-based carbon consultants Perspectives GmbH.
JSW Steel Finance Director Seshagiri Rao defended the waste-gas project. He said UN approvals and “lots of scrutiny” by the public proved that “additional” cuts were made that wouldn’t have come without carbon finance. “It amazes me now if someone comes and says there is no ‘additionality,’” Rao said in an interview.
Closing the door part-way on future projects will reduce financing and trading opportunities for banks, such as Morgan Stanley and Goldman Sachs Group Inc. in the U.S., to the power company Electricite de France and trading house Mitsubishi.
A lobby group for investors in the UN carbon market, including Morgan Stanley and Royal Dutch Shell Plc, complained this month that EU plans to “phase out” some projects.
Payback Periods
Some clean-power projects require a 15- to 20-year payback period and so longer-dated regulation is needed, said Imtiaz Ahmad, an executive director for fixed income at Morgan Stanley in London and an emissions trader.
The UN-led offset system has been a success in reducing CO2 output in Asia, Latin America, the Middle East and Africa. Some 1.5 billion tons of CO2 emissions will be avoided through 2012 by registered projects, the UN says.
ThyssenKrupp, Germany’s biggest steelmaker, plans no new investment because of economic woes and uncertainty about whether a new UN treaty will carry the UN program forward, spokesman Alexander Wilke said. The company has three CO2- reduction projects in Brazil.
Recession Effect
“It will be very difficult to contract new projects,” because of the lack of certainty, said Niels von Zweigbergk, chief executive officer of Stockholm-based Tricorona AB, the second-biggest developer of emission projects, including in India and China. And EcoSecurities Group Plc of Dublin, the biggest promoter, is trimming back proposals, Chief Financial Officer James Thompson said in an interview.
Also undercutting the appeal to build new projects is lower demand for offsets during a global slowdown that has slashed output and emissions at factories.
A prolonged investor pullback would undermine the very CO2 reductions scientists say are needed to help prevent the average world temperature from warming 2 degrees Celsius (3.6 degrees Fahrenheit) to avoid the worst effects of climate change. “Going beyond 2 degrees will mean increasing food and water scarcity and severe weather events,” the EU said in January.
James Cameron, executive vice chairman of Climate Change Capital, a London fund manager with more than $1 billion to invest in reducing CO2, doesn’t like the developments.
“What we don’t want to have happen is for investors to lose confidence in the carbon market,” Cameron said.
http://www.bloomberg.com/apps/news?pid=20601085&sid=a5lSDVnwdi7k&refer=europe
The 27-nation bloc wants to curb access to a program run by the United Nations that rewards companies more for funding emission-reduction projects in China and India than for decreasing their own gas output in Europe. New limits are needed to force extra pollution cuts at home, the EU said in proposals for climate talks starting in two days in Bonn.
“I’m somewhat worried” about future projects, said Michael Fuebi, vice president of climate protection at RWE AG, which invested in 120 such ventures in Asia and South America.
The German power company, Europe’s biggest greenhouse-gas producer, had planned to earn “credits” from the investments abroad that will offset 11 percent of RWE’s total emissions in 2015. While the utility’s existing projects appear safe, new deals are now in jeopardy, Fuebi said.
Shrinking the supply of UN carbon offsets will force Europe’s coal-burning power plants, steelmakers and cement factories to buy more expensive EU pollution permits or install emission-control equipment at home. And opportunities will be crimped for project investors such as Morgan Stanley, Paris- based Electricite de France SA and Mitsubishi Corp. of Tokyo.
Carbon Offsets
The UN program, which co-financed $45.9 billion in carbon- offset ventures in 2007, is being studied in the U.S. for adoption in proposed cap-and-trade carbon-reduction programs.
UN carbon offsets should be phased out in “advanced developing countries,” such as China, the EU’s executive arm said in a January outline for talks among 192 nations in Bonn.
The shift already has undercut investor interest in funding new deals to trim carbon emissions in developing nations, UN data on Bloomberg show.
New projects proposed to the UN in the past three months are designed to cut 91 million tons of emissions over their lifespan, down from 153 million tons of gases in deals proposed a year earlier in the same period, according to Bloomberg data.
Under UN Clean Development Mechanism rules, companies in industrialized nations are invited to finance deals in poorer nations, from windmills and solar plants to devices that trap carbon dioxide, the main gas blamed for global warming. In return, they can receive credits for each ton of avoided air pollution. The credits can be traded or used in place of buying more-expensive pollution permits needed in the EU, operator of the world’s largest emissions-trading market.
Methane Waste
RWE, for example, paid for equipment to burn methane waste at a South Korean coal mine so the resulting gas traps less heat when entering the sky. The Essen-based utility also has projects in China and Chile that offset pollution from its 60 European power plants that burn coal.
The cost for RWE to avoid a ton of emissions was as little as 5 euros ($6.77) and averaged about 11 euros, data on its Web site show. Without UN credits, in the future RWE may be forced to make more expensive carbon cuts in Europe or buy EU permits, whose price averaged 13.10 euros a ton over the past two years.
Prices for EU permits and the interchangeable UN offset credits may climb on higher demand from polluters in Europe, analysts have said. UN credits will more than double through 2011 to 15 euros as supply shrinks amid more oversight and the recession, Trevor Sikorski, an analyst in London at Barclays Plc’s investment bank, forecast on March 6.
‘Easy’ Credits?
Europe, while promoting its carbon market at this month’s climate talks as an alternative to a straight tax, is retrenching in the face of criticism for fostering “easy” credits from the UN-supervised projects. Critics have said many ventures such as hydroelectric dams or factory upgrades should have been disqualified because they would have been built even without carbon finance.
“Only credits that are real, measurable and additional should be allowed into the market,” the European Commission said in an e-mail response to Bloomberg. No credits should come from deals that fail those criteria after 2012, the EU said.
“There seems to be an opinion among policy makers that carbon finance is easy money, that the market came from nothing and can adapt to anything,” Henry Derwent, president of the Geneva-based International Emissions Trading Association, said on March 5. “If hopes are dashed too many times, no one will put their money into carbon,” Derwent said by telephone.
Indian steelmaker JSW Steel Ltd., which uses factory waste gas to make power and reduce greenhouse gases, is one of several project owners that has drawn criticism for earning money from the carbon credits it generates.
‘Hugely Profitable’
“They were hugely profitable without carbon finance,” said Axel Michaelowa, who helps advise the UN on emissions trading and is a senior founding partner of Hamburg-based carbon consultants Perspectives GmbH.
JSW Steel Finance Director Seshagiri Rao defended the waste-gas project. He said UN approvals and “lots of scrutiny” by the public proved that “additional” cuts were made that wouldn’t have come without carbon finance. “It amazes me now if someone comes and says there is no ‘additionality,’” Rao said in an interview.
Closing the door part-way on future projects will reduce financing and trading opportunities for banks, such as Morgan Stanley and Goldman Sachs Group Inc. in the U.S., to the power company Electricite de France and trading house Mitsubishi.
A lobby group for investors in the UN carbon market, including Morgan Stanley and Royal Dutch Shell Plc, complained this month that EU plans to “phase out” some projects.
Payback Periods
Some clean-power projects require a 15- to 20-year payback period and so longer-dated regulation is needed, said Imtiaz Ahmad, an executive director for fixed income at Morgan Stanley in London and an emissions trader.
The UN-led offset system has been a success in reducing CO2 output in Asia, Latin America, the Middle East and Africa. Some 1.5 billion tons of CO2 emissions will be avoided through 2012 by registered projects, the UN says.
ThyssenKrupp, Germany’s biggest steelmaker, plans no new investment because of economic woes and uncertainty about whether a new UN treaty will carry the UN program forward, spokesman Alexander Wilke said. The company has three CO2- reduction projects in Brazil.
Recession Effect
“It will be very difficult to contract new projects,” because of the lack of certainty, said Niels von Zweigbergk, chief executive officer of Stockholm-based Tricorona AB, the second-biggest developer of emission projects, including in India and China. And EcoSecurities Group Plc of Dublin, the biggest promoter, is trimming back proposals, Chief Financial Officer James Thompson said in an interview.
Also undercutting the appeal to build new projects is lower demand for offsets during a global slowdown that has slashed output and emissions at factories.
A prolonged investor pullback would undermine the very CO2 reductions scientists say are needed to help prevent the average world temperature from warming 2 degrees Celsius (3.6 degrees Fahrenheit) to avoid the worst effects of climate change. “Going beyond 2 degrees will mean increasing food and water scarcity and severe weather events,” the EU said in January.
James Cameron, executive vice chairman of Climate Change Capital, a London fund manager with more than $1 billion to invest in reducing CO2, doesn’t like the developments.
“What we don’t want to have happen is for investors to lose confidence in the carbon market,” Cameron said.
http://www.bloomberg.com/apps/news?pid=20601085&sid=a5lSDVnwdi7k&refer=europe
State guarantee signals end of easy money for banks
Whether the Australian government’s move to correct one of the unintended consequences of its guarantee of bank bonds, by offering a similar guarantee to the state governments, really solves any problems or will simply lead to more unintended consequences remains to be seen.
The problem that existed from the states’ perspective was that they couldn’t sell bonds at a credit margin they found acceptable, not that they couldn’t sell bonds.
It seems they were most reluctant to set a precedent in terms of pricing relativities with bank bonds. Now we will have an exercise in smoke and mirrors, in which pricing relativities will be seen to be maintained but the states will pay a guarantee fee over and above the credit margin on their bonds to the Commonwealth government.
In the meantime, the guarantee is open ended in respect to term to maturity of any bonds that might be covered. This is probably appropriate given that state governments can issue bonds for 10 years or more. Given that this guarantee is intended to facilitate infrastructure project financing it is likely that some bonds guaranteed will have terms to maturity that are even longer.
However, this will place significant very long-term contingent liabilities on the Commonwealth government that will remain well after the guarantees on bank bonds, with a maximum term to maturity of five years, have expired.
In this context the fee of 30 to 35 basis points that the states are being asked to pay for the guarantee to be applied to new bond issues can be questioned.
At the wide end, that is 35 basis points for AA+ rated states, the fee is half what AA rated banks (only one rating notch lower) are being asked to pay.
The Federal opposition has already questioned this disparity and threatened to block the legislation that is needed for the guarantee to be provided.
Clearly, the government is prepared to provide a relative subsidy to the states but this is unlikely to be the only cost. The Commonwealth may well increase the cost of its own debt, as potential investors factor in the extent of the contingent liabilities the Commonwealth is carrying.
To some degree this must also flow through to the cost of the debt that it guarantees for the states and the banks.
In addition, the Commonwealth has likely further diluted demand for its own bonds with an increased supply of bonds offering a higher yield for the same credit risk.
The provision of a Commonwealth guarantee to the states is likely to bring a literally golden period for the banks to an end, at least in the domestic market – foreign currency bond issues by the states will not be covered. As it is, the timing of this initiative is not too bad for this fiscal year, as the banks have just about completed their borrowing programs.
The banks may well find that their funding costs have increased when they undertake future bond issues in the domestic market.
The rush of state bond issuance that will now ensue (with estimates of up to $135 billion of bonds to be issued over the next four years) will absorb much of the demand that the banks had been seeing for their own bonds from AAA only buyers, such as offshore banks and bank liquidity books.
Even the real money buyers, the fund managers, will weigh the greater liquidity of state government bonds against their own liquidity requirements.
The likely outcome, once things have had a little time to settle down, is that the cost of bank funding should not show any significant increase but it is likely that the multi-billion dollar issues from the banks that have been seen in the domestic market recently, are over.
It is not clear why the Commonwealth has offered to guarantee existing state government bond issues. The states have been given 28 days to decide if they wish to avail themselves of this offer.
Hopefully, they will have the good sense to decline and save their taxpayers an unnecessary expense. The existing bonds have been sold and the funds obtained.
The Commonwealth guarantee is there to ensure the states can raise funds in the future, not to ensure a liquid secondary market for all state government bonds.
The arguments that have been made for guaranteeing existing state government bond issues are fallacious. There is absolutely no reason why a split state government bond market, between guaranteed and non-guaranteed bonds, cannot exist.
There will simply be two classes of bonds, as there are now for guaranteed and non-guaranteed bank bonds and just as there was when the Commonwealth government removed its guarantee on Commonwealth Bank debt in 2000. One class of bonds will be more liquid and trade at finer margins than the other.
To suggest that investors need to be kept on side so they will be happy to buy future bond issues is equally fallacious. Investors will buy the bonds anyway. As we pointed out last week there is a lot of money out there looking for a home. Both arguments come from a market that is simply talking its own book.
http://www.thesheet.com/nl05_news_selected.php?act=2&stream=1&selkey=8055&hlc=2&hlw=
The problem that existed from the states’ perspective was that they couldn’t sell bonds at a credit margin they found acceptable, not that they couldn’t sell bonds.
It seems they were most reluctant to set a precedent in terms of pricing relativities with bank bonds. Now we will have an exercise in smoke and mirrors, in which pricing relativities will be seen to be maintained but the states will pay a guarantee fee over and above the credit margin on their bonds to the Commonwealth government.
In the meantime, the guarantee is open ended in respect to term to maturity of any bonds that might be covered. This is probably appropriate given that state governments can issue bonds for 10 years or more. Given that this guarantee is intended to facilitate infrastructure project financing it is likely that some bonds guaranteed will have terms to maturity that are even longer.
However, this will place significant very long-term contingent liabilities on the Commonwealth government that will remain well after the guarantees on bank bonds, with a maximum term to maturity of five years, have expired.
In this context the fee of 30 to 35 basis points that the states are being asked to pay for the guarantee to be applied to new bond issues can be questioned.
At the wide end, that is 35 basis points for AA+ rated states, the fee is half what AA rated banks (only one rating notch lower) are being asked to pay.
The Federal opposition has already questioned this disparity and threatened to block the legislation that is needed for the guarantee to be provided.
Clearly, the government is prepared to provide a relative subsidy to the states but this is unlikely to be the only cost. The Commonwealth may well increase the cost of its own debt, as potential investors factor in the extent of the contingent liabilities the Commonwealth is carrying.
To some degree this must also flow through to the cost of the debt that it guarantees for the states and the banks.
In addition, the Commonwealth has likely further diluted demand for its own bonds with an increased supply of bonds offering a higher yield for the same credit risk.
The provision of a Commonwealth guarantee to the states is likely to bring a literally golden period for the banks to an end, at least in the domestic market – foreign currency bond issues by the states will not be covered. As it is, the timing of this initiative is not too bad for this fiscal year, as the banks have just about completed their borrowing programs.
The banks may well find that their funding costs have increased when they undertake future bond issues in the domestic market.
The rush of state bond issuance that will now ensue (with estimates of up to $135 billion of bonds to be issued over the next four years) will absorb much of the demand that the banks had been seeing for their own bonds from AAA only buyers, such as offshore banks and bank liquidity books.
Even the real money buyers, the fund managers, will weigh the greater liquidity of state government bonds against their own liquidity requirements.
The likely outcome, once things have had a little time to settle down, is that the cost of bank funding should not show any significant increase but it is likely that the multi-billion dollar issues from the banks that have been seen in the domestic market recently, are over.
It is not clear why the Commonwealth has offered to guarantee existing state government bond issues. The states have been given 28 days to decide if they wish to avail themselves of this offer.
Hopefully, they will have the good sense to decline and save their taxpayers an unnecessary expense. The existing bonds have been sold and the funds obtained.
The Commonwealth guarantee is there to ensure the states can raise funds in the future, not to ensure a liquid secondary market for all state government bonds.
The arguments that have been made for guaranteeing existing state government bond issues are fallacious. There is absolutely no reason why a split state government bond market, between guaranteed and non-guaranteed bonds, cannot exist.
There will simply be two classes of bonds, as there are now for guaranteed and non-guaranteed bank bonds and just as there was when the Commonwealth government removed its guarantee on Commonwealth Bank debt in 2000. One class of bonds will be more liquid and trade at finer margins than the other.
To suggest that investors need to be kept on side so they will be happy to buy future bond issues is equally fallacious. Investors will buy the bonds anyway. As we pointed out last week there is a lot of money out there looking for a home. Both arguments come from a market that is simply talking its own book.
http://www.thesheet.com/nl05_news_selected.php?act=2&stream=1&selkey=8055&hlc=2&hlw=
Forget about easy money
Forget about easy money
Stimulus scams: Beware of Web sites promising to get you federal cash; don’t give account information.
The sites certainly look official. President Barack Obama’s image and his campaign logo are displayed on some. One even resembles the design of the White House Web site.
But, consumer advocates say, Web sites suggesting people can get free cash from the federal stimulus program are trying to trick you.
“The locusts are spreading across the land with false promises that they have access to sources of funds from the stimulus bill,” said Atlanta-based syndicated consumer-affairs talk show host Clark Howard. “The real truth is these people are going to separate you from your money.”
Some of the sites charge small shipping fees for the information. Others purport to offer free information about stimulus and other government grants. Signing up for information triggers trial memberships for various services that quickly convert to paid memberships that can cost hundreds or even thousands of dollars, according to the Federal Trade Commission.
The FTC warns that some scammers are even asking for bank account information by e-mail to “deposit consumers’ share of the stimulus directly into their bank account.” Instead, they may try to drain the accounts, the agency warned.
So far, no metro Atlanta consumers have complained of being tricked, said Fran Mitchell, director of Howard’s Consumer Action Center, which takes calls from consumers seeking advice.
Unlike the 2008 stimulus program, in which many taxpayers got rebate checks, only Social Security recipients get a direct cash payment from the 2009 stimulus package.
Some employees also will get additional cash when reduced withholding rates take effect next month, Howard noted.
STIMULUS INFORMATION
Where to get information about the real stimulus plan
http://www.ajc.com/services/content/printedition/2009/03/25/stimscams0325.html
Stimulus scams: Beware of Web sites promising to get you federal cash; don’t give account information.
The sites certainly look official. President Barack Obama’s image and his campaign logo are displayed on some. One even resembles the design of the White House Web site.
But, consumer advocates say, Web sites suggesting people can get free cash from the federal stimulus program are trying to trick you.
“The locusts are spreading across the land with false promises that they have access to sources of funds from the stimulus bill,” said Atlanta-based syndicated consumer-affairs talk show host Clark Howard. “The real truth is these people are going to separate you from your money.”
Some of the sites charge small shipping fees for the information. Others purport to offer free information about stimulus and other government grants. Signing up for information triggers trial memberships for various services that quickly convert to paid memberships that can cost hundreds or even thousands of dollars, according to the Federal Trade Commission.
The FTC warns that some scammers are even asking for bank account information by e-mail to “deposit consumers’ share of the stimulus directly into their bank account.” Instead, they may try to drain the accounts, the agency warned.
So far, no metro Atlanta consumers have complained of being tricked, said Fran Mitchell, director of Howard’s Consumer Action Center, which takes calls from consumers seeking advice.
Unlike the 2008 stimulus program, in which many taxpayers got rebate checks, only Social Security recipients get a direct cash payment from the 2009 stimulus package.
Some employees also will get additional cash when reduced withholding rates take effect next month, Howard noted.
STIMULUS INFORMATION
Where to get information about the real stimulus plan
http://www.ajc.com/services/content/printedition/2009/03/25/stimscams0325.html
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