Asahi buys Independent Liquor for $1.3bn



Japan’s Asahi Group Holdings said Thursday it has come to an agreement to buy New Zealand’s leading ready-to-drink cocktail company, Independent Liquor, for $1.31bn from Pacific Equity Partners and Unitas Capital Pte.
 


The brewer hopes to grow a stronger position in New Zealand and Australia, and aims to increase its overseas sales between 20 percent and 30 percent, the group said.
 
Asahi’s oversees sales currently account for 6.6 percent compared to the 23 percent of its competitor, Kirin Holdings. 
 


The transaction, which is the largest ever by a Japanese company targeting the New Zealand market, is due to be completed by the end of September, according to a statement.
 
Japanese firms have been on a spending spree in foreign markets as domestic consumption decreases due to the nation’s shrinking and ageing public.

Food and beverage company, Suntory Holdings, announced on Wednesday it is to launch a new company to help drive Southeast Asian M&A’s.
 
The acquisition comes amid increased movement in the beverage sector which saw Australian brewer Foster’s ward off a $10bn hostile takeover bid SABMiller on Thursday.

Available in abundance

People talk as if we can only use energy and materials one way: we take fossil fuels from the ground, use them up, and when they are gone our world will end. We mine metals and other essential substances, and when they are finished, so are we.

Science says something else. Energy is simply the ability to do work – move an object, heat it, or create light – and the universe is awash with it. Every year our sun releases 20 trillion times the energy our economy uses. Raw materials, meanwhile, are just the hundred or so chemical elements that everything is made of. Anything we need can be assembled from these.

Fossil fuels have become too problematic, but there are other sources of energy we can tap into. Most obvious is the heat and light from the sun, but there is also the tidal energy produced as the gravity of the sun and moon moves the oceans, and the geothermal heat leaking slowly from the Earth’s core.

Finally, there is nuclear energy, which can be obtained by fission (splitting) of elements such as uranium, or fusion of elements such as hydrogen.

The question is: would it be practical, with current or reasonably expected knowledge, to get all the energy we need from such sources? To analyse this, we must introduce a very large unit of energy – the exajoule. One exajoule is equal to five times the energy of the biggest nuclear weapon ever detonated, and the world economy uses roughly 500 exajoules every year.

Alternative resources
Tidal power resources are quite limited, being practical at only a few locations where tides are forced between islands, through straits or up into inlets. They are estimated at five exajoules per year, around one percent of current needs. Tidal power is, however, completely predictable – being linked to the cycles of the sun and moon.

Geothermal power is most abundant where there are volcanoes, but by drilling kilometres down can be harnessed anywhere. Rocks can be fractured at depth and water pumped in and out to extract natural heat, and from this electricity. Roughly 1,500 exajoules of geothermal energy flow out of the Earth each year, but it is only be practical to extract a small portion of this – a few percent of current energy use.

Bioenergy – solar energy trapped in plants – is also limited. Turning crops into fuels competes with food production and drives up prices, threatening the world’s poor. But we can grow algae in lakes, seawater or desert greenhouses, producing from them oils very like diesel. Fuel crops can also be grown on marginal land. And we can use biological wastes like wheat chaff and sawdust as fuel.

The carbon dioxide produced merely returns to the atmosphere what the plants removed, and solid waste can be returned to the soil. Using biological waste that is already produced could sustainably yield 50 exajoules a year – 10 percent of current energy needs. Energy crops that don’t compete with food could double this, but might disrupt certain habitats.

Accessible wave energy resources are estimated at 70 exajoules per year (14 percent of current energy use), concentrated mainly on west-facing coasts in the temperate zones. However, wave power estimates cannot be added to estimates for offshore wind because locations suitable for wind turbines are often also the ones we would use for wave harvesters.

Wind power is very promising: offshore wind alone represents a vast resource. There are 360 million sq. km of ocean, but perhaps just one percent of this is shallow and breezy enough for turbines. Assuming we could put 15 turbines of five megawatt capacity on each square kilometre, operating at an average 25 percent of that capacity, we get an average output of nearly 20 megawatts per square kilometre. This scales up to 2,000 exajoules a year – four times current energy needs.

The nuclear options
Nuclear fission is a mixed picture. Known resources of uranium-235, which can be used directly in reactors once refined, contain a total of 2,000 exajoules of recoverable energy, only four years of current total energy use. However, resources of uranium-238, which must be converted in breeder reactors before use, are equivalent to over 200,000 exajoules of energy, or half a millennium of current needs. Resources of other suitable elements such as thorium-232 would extend this further. The downsides are that breeder technology can be used to produce highly enriched plutonium for nuclear weapons – potentially making weapons proliferation much worse; and that although the statistical death rate from nuclear power is far lower than other energy sources, one big accident can make a large part of a country uninhabitable.

Nuclear fusion would be better. The relevant forms of hydrogen – deuterium from seawater and tritium made from lithium using neutrons from the reactor itself – are sufficiently abundant to meet current energy needs for millenia. Only mildly radioactive waste is produced and the technology cannot be used to make nuclear weapons. However, progress with fusion has only inched forward over recent decades and will take decades more to reach fruition – if at all.

The most promising energy resource is solar. Covering one percent of all land area (itself one third of the Earth’s surface) in solar collectors that operate at 20 percent efficiency would yield more than 3,000 exajoules per year – seven times current energy usage. This could be done using solar photovoltaic panels, solar thermal facilities (where sunlight heats fluids that then generate electricity) or other methods. Solar panels could be placed in desert arrays or on the roofs of buildings, and hot fluids from solar thermal plants could be stored to smooth intermittency. By comparison, over one percent of land use today is urban – making the scale of construction needed for solar power seem feasible, especially when we remember that cities are more complex than solar parks.

Closed cycles
In short, we have enough energy to support an economy at least 10 times bigger than today’s.  But energy is just one aspect of sustainability. When it comes to raw materials and the environment, a key phrase is ‘closed cycles.’ Living things have used the same finite pool of essential elements (carbon, oxygen, hydrogen, nitrogen and others) for billions of years in an endless cycle of birth, death, decay and re-birth.

There is no reason the industrial economy cannot do the same: endlessly re-using a finite pool of iron, copper, nitrates, water, topsoil and other essential materials. Metals can be recycled. Water supplies can be maintained by using efficient industrial and agricultural processes that use it more slowly than aquifers are naturally replenished. Desalination of seawater may also be feasible. Topsoil depleted through successive harvests can be replenished through composting or by adding biochar. Fertiliser minerals lost through water runoff could be recaptured, or fertilisers could be bound to materials that prevent run-off.

Closed cycles intrinsically entail far less release of wastes, reducing pollution to levels lower than the rates at which natural processes eliminate pollutants.

The key question is what ‘rate of flux’ can be supported in a closed cycle. If the world has 50bn tons of some material, and the world economy needs to process five billion tons of it every year, is this feasible? At some point, there will be a limit where the percentage of a given resource that is processed in a year cannot be increased.

Closed cycles in water, topsoil and fertiliser minerals could all face such limits not far above current levels of use. But agricultural and water scientists have found efficient ways we could get much more sustenance from current fluxes of these, so we should be able to comfortably feed and water the 10bn or so people that world population is forecast to plateau at. Other materials, such as metals, could be recycled at a flux rate far higher than current use and be used much more efficiently – so sectors of the economy other than agriculture still have vast capacity for growth.

There are many technical hurdles to be overcome, and economics will decide exactly which technologies are adopted. But there are no physical limits to maintaining our way of life.

Sean Harkin is author of The 21st-Century Case for a Managed Economy

Franco-German talks fail to reassure markets

Stocks in Europe fell on Wednesday after a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel late on Tuesday to discuss the area’s rescue fund and borrowing.

The duo had been under pressure to re-establish market confidence after a bout of volatility and uncertainty.
 
Tokyo’s Nikkei and S&P 500 were 0.6 percent and 0.97 percent down respectively at close of trading. Frankfurt dropped 1.5 percent, while London’s FTSE and Paris CAC were both down 1 percent in early trading.
 
The leaders of Europe’s strongest economies revealed plans late on Tuesday for closer eurozone incorporation, including biannual summits and deficit boundaries but announced that euro bonds are an option only in the long-term. A president is also to be elected to represent the bloc. European Council President, Herman Van Rompuy, is a likely candidate according to reports.

German economy grounds to a halt

Germany, the EU’s biggest economy, saw a near stalling in 2Q11 as its GDP grew by just 0.1 percent between April and June, according to the country’s Federal Statistics Office.
 
The figure, which was below market expectations of 0.5 percent, marks a substantial drop from the downwardly amended 1Q11 increase of 1.3 percent and raises concerns over the wider eurozone and global economy.
 
A decrease in consumer spending and capital formation in construction were largely responsible for the slowdown while investments and exports were “positive contributors” over the last quarter, according to the statistics office.
 
The result comes just a week after the French and US economy posted similarly poor GDP growth for the same quarter.

Asian stocks rise as Japan beats GDP estimates

Japan’s economy contracted during 2Q11 at a slower than expected pace by an annualised rate of 0.3 percent in the three months to the end of June, the cabinet office said.

Real GDP was down 1.3 percent and showed stronger signs of recovery thanks to consumer spending in the wake of the March earthquake and tsunami disaster. Analysts had been expecting a drop of 2.6 percent for the quarter.

On the news the MSCI Asia Pacific Index climbed 1.9 percent in Tokyo and the Nikkei 225 was up 1.37 percent. The country’s largest car manufacturer by value, Toyota Motors, rose 2.9 percent.

European markets opened higher with the FTSE MIB Index up four percent, Euro Stoxx 50 up 0.87 percent and the Swiss index rising 2.15 percent.

EU imposes short selling ban

Amid heightened international market volatility, ESMA, the EU’s regulator, announced late on Thursday that France, Belgium, Spain and Italy have banned short selling in an attempt to curb rumours and halt the precipitous fall in value of troubled EU banks.
 
In Spain and France the ban will last 15 days and is only applicable to stocks in the financial sector. Financial institutions included BNP Paribas SA, Société Générale SA and Crédit Agricole SA in France, and Banco Santander and Bankia SA in Spain.
 
Belgium’s ban is restricted to four financials only and no concrete time duration was given. It was unclear which stocks would be affected and how long the ban would be in place for Italy.
 
The prohibition which begins on Friday was imposed by ESMA in an effort “to restrict the benefits that can be gained from disseminating rumours, false and misleading news,” the regulator said.

Shares drop on rumours of French credit downgrade

The Paris stock exchange lost over five percent of value and French financials were hammered late on Wednesday amid rumours that French banks were in serious difficulty.
 
France’s second-largest bank, Société Générale, which holds significant amounts in Greek and Italian debt, saw its shares drop by 21 percent before closing down 14.7 percent late on Wednesday.
 
The FTSE fell 3.05 percent, in New York the Dow was down just over three percent, the CAC in Paris plunged 5.45 percent and the pan European Stoxx dropped 3.75 percent.
 
European and Wall Street shares had resumed their fall after a rebound on Tuesday on fears France could follow the US and lose its coveted AAA credit rating. However, there had been no warnings issued by any of the credit rating agencies.

Stock markets higher after US Fed pledge



Asian stocks have rallied in early trading on Wednesday from their downward trend earlier in the week after the US Federal Reserve promised to keep interest rates near the zero level “at least through to mid-2013.”


Europe’s stock markets also opened higher after overnight increases on Wall Street and Asian markets, which saw the Hong Kong rebound with a rise of 3.27 percent while Tokyo climbed 1.11 percent.

Global stock markets have been plummeting since early August following an unprecedented US credit rating downgrade.
The FTSE 100 index gained 1.7 percent, Frankfurt’s DAX jumped 2.2 percent and Paris’s CAC-40 increased by 1.9 percent.

At close of trading on Tuesday the Dow Jones Industrial Average finished up 3.9 percent at 11,239 while S&P’s 500-stock index rose 4.7 percent to 1,172.

Global stocks plummet

European stock markets plummeted further on Tuesday following a sharp rise in Chinese inflation, adding to woes over debt contagion across the eurozone and fears of another US recession.

Market volatility reached its peak when Britain’s FTSE 100 index, which traded 20 percent below its February peak of 6091 points, plunged officially into bear territory as analysts watched global stocks plummet.

The Dow Jones Industrial Average lost 634.76 points, or 5.55 percent, to 10,809.85, while the Nasdaq composite slumped 174.72 points, or 6.90 percent, to 2,357.69.

Volatility commenced after the Dow dropped 634 points or 5.5 percent following Standard & Poor’s announcement late on Friday that it downgraded US credit from AAA to AA+.

US financial stocks, including that of Bank of America, which saw stocks fall 20.32 percent, were also hit as they suffered their worst one day share sell-off in over two years.
 
Gold surpassed the $1,700 barrier in trade and was seen to reach as high as $1,721 and as low as $1,681, while the gold spot price per ounce rose $53.60 to $1,717. Traders dug into the metal’s safety net as crude oil prices dipped over fears of a double dip recession.
 
The US Federal Reserve announced a policy meeting for later in the day as most UK news agencies reflected on overnight civil unrest leading to further market volatility.

China inflation hits 6.5%

China’s PPI increased by 7.5 percent year-on-year while the inflation rate rose 6.5 percent to a 37-month high in July.

Inflation was driven by a14.8 percent spike in food costs, the country’s National Bureau of Statistics said on Tuesday.

The data comes amid European sovereign debt concerns and worries of a ‘double-dip’ US recession, and shows that China’s inflation continues to accelerate despite an 18-month monetary tightening effort.

The country’s inflation rate is now showing its highest year-on-year growth since June 2008, according to published figures.

China has been trying to curb its overheated economy with tougher home-buying rules, bank reserve ratio increases and interest rate hikes.

Producer purchase prices increased by 11 percent year-on-year in July, but rose just 0.1 percent on a month-on-month basis, the NBS said.

The cost of production materials for the same period climbed 8.4 percent year-on-year, but were flat on a month-on-month basis.

Adverse selection

In an extreme case, the poor risks will be the only purchasers of coverage, and the insurer can expect to lose money on each policy sold. This situation, referred to as adverse selection, occurs when the insurer cannot distinguish between members of good-and poor-risk categories in setting premiums.

An example of adverse selection
The assumption underlying adverse selection is that purchasers of insurance have an informational advantage over providers because they know their own true risk types. Insurers, on the other hand, must collect information to distinguish between risks.

Private information about risk types creates inefficiencies
Suppose some homes have a 10 percent probability of suffering damage (the “good” risks) and others have a 30 percent probability (the “poor” risks). If the loss in the event of damage is $100 for both groups and if there are an equal number of potentially insurable individuals in each risk class, then the expected loss for a random individual in the population is 0.5 × (0.1 × $00) + 0.5 × (0.3 × $100) = $20. If the insurer charges an actuarially fair premium across the entire population, then only the poor-risk class would normally purchase coverage, since their expected loss is $30 (= 0.3 × $100),and they would be pleased to pay only $20 for the insurance. The good risks have an expected loss of $10 (= 0.1 × $100), so they probably would not pay $20 for coverage. If only the poor risks purchase coverage, the insurer will suffer an expected loss of −$10, ($20−$30), on each policy it sells.

Managing adverse selection
There are two main ways for insurers to deal with adverse selection. If the company knows the probabilities associated with good and bad risks, it can raise the premium to at least $30 so that it will not lose money on any individual. This is likely to produce a partial market failure, as many individuals who might want to purchase coverage will not do so at this high rate. Alternatively, the insurer can design and offer a “separating contract”.

More specifically, it can offer two different price-coverage contracts that induce different risk “types” to separate themselves in their insurance-purchasing decisions. For example, contract 1 could offer price = $30 and coverage = $100, while contract 2 might offer price = $10 and coverage = $40. If the poor risks preferred contract 1 over contract 2, and the good risks preferred contract 2 over contract 1, then the insurer could offer coverage to both groups while still breaking even. A third approach is for the insurer to collect information to reduce uncertainty about true risks, but this may be expensive.

Conclusion
In summary, the problem of adverse selection only emerges if the persons considering the purchase of insurance have more accurate private information on the probability of a loss than do the firms selling coverage. If the policyholders have no better data than the insurers, coverage will be offered at a single premium based on the average risk, and both good and poor risks will want to purchase policies.

This article is an edited version of
an entry in the “Encyclopedia of Quantitative Risk Analysis and
Assessment”, Copyright © 2008 John Wiley & Sons Ltd. Used by
permission.

www.wiley.com

ECB to help Rome and Madrid with bond purchases

As European markets opened on Monday yields on Spanish and Italian bonds saw a sharp fall to 83 and 79 basis points respectively following an intervention by the European Central Bank. The ECB backed up its promise to expand its purchases of sovereign debt to support Madrid and Rome by entering into European bond markets to buy their respective bonds in an attempt to steady the markets.

“The ECB will actively implement its securities markets programme. This programme has been designed to help restore a better transmission of our monetary policy decisions, taking account of dysfunctional market segments, and therefore ensuring price stability in the euro area,” the ECB said in a statement late on Sunday.

Previous bond purchases had been restricted to countries that received a bailout including Portugal, Ireland and Greece but fears that rising bond yields could force Italy and Spain to seek a bailout triggered ECB involvement.

“The Governing Council welcomes the announcements made by the governments of Italy and Spain concerning new measures and reforms in the areas of fiscal and structural policies. It considers a decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits,” the ECB said.