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Brazil Could Lead Surge in Biofuel Export Availability to US
Corporate Social Responsibility On The Rise
Ambac Capital Plan:Too Little,Too Late?
Real Estate Group Says Manhattan Rental Market Soft
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Brazil Could Lead Surge in Biofuel Export Availability to US
Brazil coud play a dominant role in a potential tripling of biofuel feedstock output among major exporting countries over the next decade and help the US reduce its dependence on imported oil.
That’s one of the conclusions to be drawn from a new model developed by the
Oak Ridge National Laboratory.
The ORNL study, Biofuel Feedstock Assessment for Selected Countries, assembles historic data on feedstock production for multiple countries and crops and calculates future production and the potential supplies available for export. The report identifies Argentina, Brazil, Canada, China, Colombia, India, Mexico, and the Caribbean Basin Initiative (CBI) region as likely to be important players in future feedstock supply to the US.
It foresees a dramatic increase in ethanol production from sugar cane and bagasse (the solid residue after juices are pressed from the sugarcane stalk), especially in Brazil.
The analysis identified capacity to potentially double or triple feedstock production by 2017 in some cases. A majority of supply growth is derived from increasing the area cultivated (especially sugarcane in Brazil). This is complemented by improving yields and farming practices.
Other key points:
With the exception of Brazil, land availability represents a growing constraint to the expansion of feedstock supplies in most countries studied. Land is a more important constraint to sugarcane (outside of Brazil) than for other feedstocks due to its more demanding site requirements for competitive production.
A transition to cellulosic feedstock would substantially alleviate the land constraint in most nations, but Brazil would still be best-positioned for low-cost supply due to the size of its sugarcane-ethanol industry and corresponding availability of bagasse as feedstock in the mills and distilleries.
Most future supplies of corn and wheat are projected to be used to meet domestic food and feed demand in the nations studied. Larger shares of future supplies of sugarcane, soybean and palm oil production will be available for export and/or biofuel.
If all of the 2017 projected feedstock supply ‘available” were converted to biofuel, it would represent the equivalent of 38 billion gallons of gasoline.
Sugarcane and bagasse combined dominate the total ‘available’ supply, representing 64% of the gasoline equivalent. Among the nations studied, Brazil is the source of 64% of total ‘available’ supplies, followed distantly by Argentina (12%), India and CBI.
While social and environmental concerns associated with rapid expansion of feedstock production are recognized, the sugarcane sector poses lower risks than other feedstocks studied and offers the possibility for sustained expansion over the coming decade.
Policies in countries such as China and India reflect a strategy where feedstock crops that compete with food are expected to transition to alternative crops that can grow on more marginal lands than food crops and, eventually, to a cellulosic-based biofuel industry.
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Corporate Social Responsibility On The Rise
Canadian companies expanded their socially responsible initiatives last year, but real results remain weak, according to a new report by the The University of Western Ontario’s Ivey School of Business and Jantzi Research.
The report found that Canadian firms are investing significant resources into programs with a positive impact on society, and are increasing that investment. However, the actual outcome of these worthy initiatives remains lacking.
Some of this lack of program efficacy can be attributed simply to the lengthy amount of time it takes policy to create significant change. That being said, the study’s authors place significant blame on ineffective management of the programs.
Other major findings of the study:
On the whole, the improvement in socially responsible initiatives was widespread - driven by many firms making positive changes, not just a few firms making large leaps.
65% of firms improved their CSR score between 2006 and 2007, and only 1% made no change at all.
At the industry level, positive changes were seen in key sectors such as banking and oil & gas. However, the retail, telecommunications and insurance industries appear to be lagging.
Canadian firms showed little improvement in the category of natural environment. Just over 40% of firms improved their performance, 27% went backwards and 32% of firms maintained the same score in 2007 versus 2006.
Taking a more long term view, the authors conclude that corporate awareness is “significantly different” than when data began to be kept a decade and a half ago.
Canadian (and other) firms may want to take note of the latest report from the Social Investing Forum. The report found that, from 2005 to 2007, Socially Responsible Investment assets increased more than 18 percent while all investment assets under management edged up by less than 3 percent. The group cites such factors as rising institutional investor interest, growing demand for climate-related renewable energy alternatives, concerns about the Sudan humanitarian crisis, and the emergence of new products.
The report identifies $2.71 trillion in total assets under management using one or more of the three core SRI strategies — screening, shareholder advocacy, and community investing. In the past two years, social investing has enjoyed healthy growth from $2.29 trillion in the 2005 report.
Today, nearly one out of every nine dollars under professional management in the United States today is involved in socially responsible investing.
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Ambac Capital Plan:Too Little,Too Late?
Ambac Financial better be hoping the saying “he who hesitates is lost” does not apply in its case. But the monoline bond insurer’s long-awaited plan to raise new capital to cover mounting subprime-related insurance losses may be a case of too little and too late.
Reuters reports Goldman Sachs and JP Morgan analysts as saying Ambac will need to go back to the well again.
Our analysis of expected losses suggests that Ambac needs to raise $2.5 billion instead of the $1.5 billion announced - Goldman analyst James Fotheringham.
Lex in the Financial Times wonders if Ambac has done enough: “It may seem extraordinary to ask this, given it is raising more than 1.5 times its market value. But these are extraordinary times. True, this move, coupled with Ambac’s other efforts effectively means the insurer hangs on to its top-notch credit rating, which is essential to its business.”
“But it does not mean Ambac is out of the woods. Indeed to read its regulatory filing makes clear just how brutal the markets continue to be. ”
One of the many lessons from this mess is: do not wait too long to raise capital.
CreditSights says that while the new capital is a welcome development, “the amount falls significantly short of the $2 billion to $3 billion we had been expecting. Furthermore the offering is not even backstopped by the consortium of banks that had supposedly been furiously working to hammer out a bailout of the company.”
In our opinion, the failure of the banks to backstop the offering indicates a lack of confidence in Ambac’s projected loss estimates.
CreditSights points out that under its most current stress test, Standard & Poors estimates that the present value of cumulative losses could total more than $4 billion on an after-tax basis,. Yet according to Ambac’s offering: “We have been informed by certain of the underwriters in this offering and the concurrent Equity Units Offering that their estimates of our losses and mark-to-market losses, which include estimates of our credit impairment, materially exceed the corresponding amounts shown in the stress cases of S&P.”
While the plan may be able to stave off a ratings downgrade by Moody’s and S&P in the near term, we think it is going to do little to regain the markets confidence in Ambac’s ability to survive as an ongoing entity.
S&P said that its ratings on Ambac Financial Group, the holding company, and Ambac Assurance will remain on CreditWatch with negative implications.
Moody’s said the new equity and equity linked capital offering is an important component in the company’s capital strengthening plan although it is still on review for a possible downgrade.
Fitch maintained its Rating Watch Negative.
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Real Estate Group Says Manhattan Rental Market Soft
Not sure if this is a reliable indicator of Wall Street employment, but rents for serviced apartments in Manhattan have been trending down since last September.
According to the Real Estate Group’s February Manhattan Rental Market Report, “the rebound in rents typically seen at the beginning of a new year bypassed January altogether in 2008 and instead held out for February. This month, the citywide price declines of the past few months finally slowed and, in the case of non-doorman buildings, even reversed, though slightly. On the other hand, citywide doorman rents continued to creep downward through February.”
It seems that many renters have opted to forgo the luxury of doorman buildings for more reasonably-priced apartments, keeping demand healthy and inventory low, and nudging prices upward for non-doorman units.
“In general, however, we’re seeing more inventory on the market than we have in a long time, and landlords struggling with excessive vacancies continue to offer concessions to support existing prices or attract new tenants quickly,” Real Estate Group said.
Battery Park City doorman rents fell by 6% for studios, almost 4% for one-bedrooms and about 6% for two-bedrooms. “It appears that New Yorkers who require proximity to downtown and Wall Street may be slowly spreading out into Battery Park City’s up-and-coming neighbor to the east: The Financial District. A tide of new development has left the Financial District overflowing with reasonably-priced, amenity-rich doorman units (and landlords who offer concessions to fill them), making this area an attractive alternative to Battery Park City.
With layoffs looming at Citi and other Wall Street firms, landlords may have to look elsewhere for tenants.
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