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Germany triggers gas alarm stage, accuses Russia of ‘economic attack’

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© Reuters. FILE PHOTO: Pipes at the landfall facilities of the ‘Nord Stream 1’ gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke//File Photo

By Holger Hansen

BERLIN (Reuters) -Germany triggered the “alarm stage” of its emergency gas plan on Thursday in response to falling Russian supplies but stopped short of allowing utilities to pass on soaring energy costs to customers in Europe’s largest economy.

The measure is the latest escalation in a standoff between Europe and Moscow since the Russian invasion of Ukraine that has exposed the bloc’s dependence on Russian gas supplies and sparked a frantic search for alternative energy sources.

The decision, announced by the economy minister, marks a stark shift especially for Germany, which has cultivated strong energy ties with Moscow stretching back to the Cold War.

Lower gas flows sparked warnings this week that Germany could fall into recession if Russia supplies halted altogether. S&P Global (NYSE:SPGI)’s flash Purchasing Managers’ Index (PMI) on Thursday showed the economy losing momentum in the second quarter.

“We must not fool ourselves: The cut in gas supplies is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said in a statement, adding Germans would have to reduce consumption.

“It is obviously Putin’s strategy to create insecurity, drive up prices and divide us as a society,” he added. “This is what we are fighting against.”

Gas rationing would hopefully be avoided but cannot be ruled out, Habeck said.

Russia has denied the gas supply reductions were premeditated, with state supplier Gazprom (MCX:GAZP) blaming a delay in return of serviced equipment caused by Western sanctions.

Under its Phase 2 plan, Berlin will provide a credit line of 15 billion euros ($15.76 billion) to fill gas storage facilities. In addition, a gas auction model will be launched this summer to encourage industrial gas consumers to save gas.

The government activates the second “alarm stage” of a three-stage emergency plan when it sees a high risk of long-term supply shortages. It theoretically allows utilities to pass on high prices to industry and households and thereby help to lower demand.

A move to the next phase has been the subject of speculation since Gazprom cut flows via the Nord Stream 1 pipeline across the Baltic Sea to just 40% of capacity last week.

Facing dwindling gas flows from main supplier Russia, Germany has since late March been at Phase 1 of its emergency plan, which includes stricter monitoring of daily flows and a focus on filling gas storage facilities.

RISK OF FULL DISRUPTION

In the second stage, the market is still able to function without the need for state intervention that would kick in the final emergency stage.

“We have seen some serious cuts already,” a gas trader in Europe said. “The system is still coping, but there’s not much left,” he said.

The benchmark Dutch wholesale gas contract for July delivery rose as much as 4%, to 131.50 euros per Megawatt/hour (MWh) before settling at 128 euros/MWh by 0835 GMT, still up for the day.

Nord Stream 1 is due to undergo maintenance on July 11-21 when flows will stop.

Russia may cut off gas to Europe entirely to bolster its political leverage, the head of the International Energy Agency (IEA) said on Wednesday, adding Europe needed to prepare now.

Russian gas flows to Europe via Nord Stream 1 and through Ukraine were stable on Thursday, while reverse flows on the Yamal pipeline edged up, operator data showed.

Several European countries have outlined measures to withstand a supply squeeze and avert winter energy shortages and an inflation spike that could test the continent’s resolve to maintain sanctions on Russia.

The supply cuts have also driven German companies to contemplate painful production cuts and resorting to polluting forms of energy previously considered unthinkable as they adjust to the prospect of running out of Russian gas.

The European Union on Wednesday signalled it would temporarily turn to coal to plug energy shortfalls, while describing Moscow’s gas supply cuts as “rogue moves.”

The bloc’s climate policy chief Frans Timmermans said on Thursday that 10 of the EU’s 27 member countries have issued an “early warning” on gas supply – the first and least severe of three crisis levels identified in EU energy security regulations.

“The risk of full gas disruption is now more real than ever before,” he said.

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Easing chip shortages to help Volkswagen in H2 – CEO

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© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo

BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.

“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.

This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.

“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.

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Reliance Chairman Mukesh Ambani steps down as director of telecom arm

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© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas

BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.

Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.

India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.

Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.

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UBS Downgrades Ebay, Farfetch to Neutral on Guidance Risks

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© Reuters. UBS Downgrades Ebay (EBAY), Farfetch (FTCH) to Neutral on Guidance Risks

By Senad Karaahmetovic

UBS analyst Kunal Madhukar downgraded shares of Farfetch (NYSE:FTCH) and eBay (NASDAQ:EBAY) to Neutral from Buy.

EBAY shares are cut alongside the price target (to $48.00 from $60.00 per share) despite low expectations. Still, the analyst expects 2022 GMV to fall by 17%, which is worse than the guidance of 16%-14% and the Street’s consensus of 15%.

“We think the buy side may already be lower than the Street. YTD, the stock has been one of the better performers within the eCommerce space, benefiting from both a ~2% dividend yield and aggressive share repurchases. However, when the market rebounds, we think EBAY shares could lag smaller cap peers (which are likely to grow much faster in a recovery) until investors have better visibility into organic growth at eBay. Consequently, we think the shares likely will remain range-bound until visibility improves,” Madhukar told clients in a note.

The price target on Farfetch shares goes to $10.00 from the prior $13.00 as Madhukar sees too optimistic assumptions for growth from the side of the company’s management.

“In addition to slower growth, we think upside is limited by lack of visibility into key drivers of value, including FPS volumes and economics, as well as on China. Granted, the YNAP deal could be a positive catalyst (link), but if the disclosure is limited (like with the recent deal with Neiman Marcus Group or NMG), it may be challenging for investors to understand if it creates shareholder value or not. Last, FTCH remains a profitless-tech company in an environment where investors are acutely focused on profits, and thus, there is limited valuation support,” the analyst added.

Similar to eBay, Madhukar sees shares remaining “range-bound until we have better visibility into growth and/or the path to profitability.”

Shares of eBay and Farfetch are down 2.4% and 2.2%, respectively, in pre-market Tuesday.

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