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BP shares slide as dividend discussed
Shares of BP PLC plunged again today as the energy giant's board met to discuss the fate of its coveted dividend. BP shareholders have now lost an estimated $90-billion (U.S.) in value since the explosion on the Deepwater Horizon drilling rig in April and subsequent environmental disaster in the Gulf of Mexico.
Today's board meeting comes amid mounting pressure in the United States to set aside money that would enable BP to meet its commitments related to the massive spill. BP has said it will meet those commitments, and is working to contain the disaster, though it has not yet said whether it will suspend the quarterly payout. President Barack Obama, who meets Wednesday with officials of the energy giant, wants money put into a special fund.
A White House official also said today that BP has tabled a new plan to the government that would speed up containment of the spill in the Gulf of Mexico, potentially capturing 50,000 barrels a day by the end of this month.
Separately, Bloomberg News noted this morning that the Gulf spill has shaved some $19-billion (U.S.) from the value of the bonds of energy companies. Their debt, the news agency said, has lost almost 4 per cent from their April 27 peak as costs in the Gulf mount and investors grow increasingly concerned that new regulations stemming from the crisis will eat into profits. Read the story
Canada among least exposed to fiscal shocks
The global economy will be rocked by "rolling fiscal shocks" over an extended period, but Canada stands "far apart" from other countries in terms of external debt exposure, Scotia Capital says. Economists Derek Holt and Gorica Djeric used World Bank data for measurements in five areas, including outstanding gross external debt as a share of GDP, foreign reserves as a share of the economy relative to total external debt, share of external debt owning to markets, and the "rough" maturity profile of external debt outstanding. Also studied were "future oriented views," given the increasing sensitivity to interest rate hikes among countries that need constant access to markets.
Canada, the economists found, is among the least exposed to shocks among the major industrialized nations: "Its external debt to GDP ratio stands at 70 per cent and toward the bottom of the list of the diverse set of countries for which we have data. The sovereign share of Canada's external debt position is also tiny at 15 per cent of GDP and among the lowest in the sample of countries. Canada also ranks favourably in terms of a low share of bank financing of external debt, a modest share of short-term external debt, and relatively high foreign reserves relative to the size of its economy."
Who holds what in European debt
A lengthy report by the Bank for International Settlements today notes that French and German banks are the most heavily exposed to the troubled economies of Portugal, Ireland, Greece and Spain. Among the findings of the international banking group:
- Banks headquartered in the euro zone, which include the 16 countries that share the currency, account for 62 per cent of all global bank exposure to those countries, collectively holding $727-billion (U.S.) in exposure to Spain, $402-billion to Ireland, $244-billion Portugal and $206-billion to Greece.
- French and German banks held $493-billion and $465-billion, respectively, in exposure to those economies, or 61 per cent of all exposure among banks in the euro zone. "French and German banks were not the only ones with large exposures to residents of euro countries facing market pressures," the report said. "Banks headquartered in the United Kingdom had larger exposures to Ireland ($230-billion) than did banks based in any other country."
- Government debt accounted for a smaller portion of the exposure among euro zone banks than did claims on the private sector.
Group sees lower telecom profits
Profits among Canada's telecommunications companies are expected to fall modestly this year before recovering in 2011, hampered by heightened competition and weak pricing in the sector, the Conference Board of Canada forecast today.
"Over the next few years, most of the [revenue]growth is expected to come from rising unit sales, as prices will continue to grow well below the rate of inflation," the organization said in a report. "The ongoing fight between wired, wireless, and cable companies for market share will continue to limit price appreciation over the forecast period, as will the arrival of new wireless competitors in major markets." Among its findings:
- Mobile phones are increasing being sold with data and text packages, along with voice services, which leads to higher revenue per unit.
- New entrants in the wireless industry are forcing companies to lower prices, and make their offers more flexibile.
- More homes are giving up their landlines.
- Selling strategies among the incumbent companies were focused on bundling services. Some new entrants will follow the same model but others will push only wireless services, trying to entice consumers to abandon their landlines.
- The "wireless only" option can be attractive, which can hurt the incumbents who risk losing customers.
UBS sees phased-in approach to telecom rules
UBS Securities Canada believes the federal government will opt for a gradual approach to changing foreign ownership rules governing the telecommunications sector. On Friday, Industry Canada released a consultation paper that lays out three options: Raising the direct limit for both telecom and broadcasting companies to 49 per cent, scrapping restrictions for companies whose market share is less than 10 per cent, and then following up for larger players, and killing all foreign ownership rules outright.
"Although the consultation process has only just begun, based on the government's objectives for telecom, we believe option 2 will most likely be favoured because it appears to achieve the mandate of providing greater access to capital for growth to those most in need (e.g. new entrants) and increasing choice/competition, while minimizing the risks of allowing foreigners to gain control over Canadian strategic infrastructure (e.g. incumbents)," said UBS analyst Phillip Huang.
Suncor sells more Petro-Canada assets
Suncor Energy Inc. unveiled a deal today to sell its shares in Petro-Canada Netherlands B.V. for $582-million, which includes hedging gains. The operation, which Suncor acquired as part of its takeover of Petro-Canada, is involved in eight offshore projects in the North Sea. Suncor has now reached deals to sell more than $2-billion in non-core assets. "As part of its strategic business alignment, Suncor is continuing with plans to divest of a number of non-core assets," the company said. "... Remaining proposed divestments include certain natural gas assets in western Canada and non-core North Sea assets."
U.S. identifies $1-trillion in Afghanistan resources
Afghanistan is sitting on almost $1-trillion (U.S.) in mineral wealth, including gold, iron copper, cobalt and lithium, The New York Times reports. U.S. officials have discovered huge deposits that could turn the embattled country into a rich mining centre, the newspaper said. "There is stunning potential here," the chief of the U.S. Central Command, Gen. David Petraeus, told the newspaper. "There are a lot of ifs, of course but I think potentially it is hugely significant." Read the story
Torstar's Harlequin signs Russian deal
The Harlequin Enterprises Ltd. unit of Torstar Corp. is learning a new word: сексуальный, Russian for "sexy." Harlequin announced today it has signed a licensing deal in Russia with Izdatelstvo Centreplygraph, which will publish novels by international authors in hardcover and paperback, and in mass-market paperback format for romance series. The Russian publisher plans to release more than 170 titles in the first year, most under the Harlequin logo.
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