French finance roundup: disgraced ex-trader to lecture at University of Chicago; interview with CEO of GDF Suez

28 Feb

‘Fabulous Fab’, from trader to condemned to lecture Economics (translated from Le Monde)

Fabrice Tourre, found guilty of securities fraud while he was a trader with Goldman Sachs, will teach economics at the prestigious University of Chicago.

fabulous fabAccording to ‘The Chicago Maroon’, the institution’s student paper and origin of the information, the Frenchman, aged 34 years and with a doctorate in economics, will give in the second semester several courses pertaining to “the elements of economic analysis”.

Nicknamed ‘Fabulous Fab’ – it was thus that he signed his emails – Fabrice Tourre was found guilty in August 2013 of securities fraud, over derivatives on ‘subprime’ property loans sold to investors just before the financial crisis in 2008.

“Guilty” for the 2008 Crisis

Accused by the American market rule-enforcers (the Securities and Exchange Commission) of having tricked investors and made illicit gains through the creation and the sale of complex financial products dependent on risky real estate investments, Fabrice Tourre had been judged “responsible” on six accusations out of seven, over the course of a widely publicised trial in New York.

At the time, the magazine The New Yorker wrote that M. Tourre was the “only Wall Street banker to have been declared guilty for the financial crisis” of 2008. Goldman Sachs was also pursued over the same affair, but it succeeded in negotiating a pay-off agreement of $0.5 billion

Record loss at GDF Suez, its CEO explains to the Monde (translated)

Gérard Mestralle, CEO of GDF Suez, announced on Tuesday 27 February the company’s 2013 results, heavily penalised by €14.9 billion depreciation of assets in the power stations and their gas storage facilities in Europe. The net result reached €3.4 billion, but with these depreciations factored in, the 2013 accounting period ended in a loss of €9.7billion.

gerard mestralletQ: The energy sector in Europe is undergoing an unprecedented crisis. How was that reflected in your results?

The 2013 accounts reflected my desire for a rapid and radical transformation of the group. Four branches acquitted themselves well or very well, but the fifth, Energie Europe, was struck by a fall in demand, the combination of low-price American coal and significant over-production in power generators.

Supported unanimously by the management board and the major shareholders like the state and Albert Frère, I have decided to pass all the toll onto the steel wool. And first to depreciate massively, to the height of €14.9 billion, the accounting value of certain of our assets in Europe, essentially the thermic power stations and the gas storage facilities. This action will not have any impact on the central funds of the group, which are in any case very solid.

Q: Do you believe that the sector’s crisis in Europe will endure?

Yes, these changes are enduring and profound. The overcapacity will continue. Even if the wild growth in renewable energy – above all in Germany, Spain and in Italy, – starts to sag, the new production capacity will come into action so consumption will stagnate or fall.

These last few years, we have closed or put into hibernation 11.5 gigawatts in gas power stations, the equivalent of 12 nuclear reactors! At the heart of 11 enterprises of the ‘groupe Magritte’, which has warned Brussells of the situation, there are more than 50 GW which were closed or frozen.

Q: Have you not discovered the problem a bit late?

No one, among all the countless politicians or from the Commission, had anticipated it. I was the first, in May 2013, to alert them and to say that they had moved too fast and too far into renewables. Honestly, France could not influence much: it had just 7GW of wind and of solar, while Germany had 70GW. That is to say, renewables will continue to develop. The energy transition is irreversible, and is anyway desirable.

Q: Has Brussells really responded to your demands?

On several big points, yes. The Commission intends to propose to the European Council a drop in greenhouse gas emissions of 40% by 2030. The German Chancellor Angela Merkel and François Holland have already declared themselves in favour of this objective. Brussells also wants to end the system of subsidies for renewable energy to create a level playing field.

Finally, the Commission has put back on track the market in carbon trading. It should arrive at a CO2 price level consistent with the 40% objective and give a signal to engineers to invest in production machinery which has low carbon emissions.

Q: What positive points emerge from the 2013 report?

There are many, despite these difficulties. Our turnover has reached 81.3 billion and EBITDA of €13.4 billion. The bare net result of €3.4 billion is near the top of the margin we had set. Our liquidity stands at €17.5 billion, of which €8.8billion is in our company account, our raw investments at €7.5billion.

The year was also marked by major commercial and industrial successes, with the rise in electricity production by the non-electricians, breaking into attractive markets (South Africa, Mongolia, India, Morocco..) and the strengthening of our positions in the gas supply chain (contracts and infrastructure) in Azerbaijan, the United States, in Mexico, in Brazil or in Uruguay, where GDF Suez is going to operate the largest offshore oilrig in the world.

Q: What is in store for 2014?

We have revised upwards all our financial targets. We completed our programme of debt payoffs at the end of 2013, more than a year ahead of time, leaving our net debt level at €30billion, 2.2 times lower than Ebitda, one of the most impressive ratios in the sector. We are determined to reward our shareholders. For 2013, we propose a dividend of €1.5 per share, some €3.6billion, the most significant leap in renumeration since Total. But in the years to come, we will distribute between 65% and 75% – rather than 100% – resulting in a minimum of € 1 per share, a total of €2.4billion.

Q: What are you going to do with your financial margins?

Finance the group’s development, hinged around our two strategic objectives defined by the management board in November 2013: be the leader in the energy transition in Europe and the energy provider of choice in strong growth countries. Over 2014 to 2016, our raw investments will sit between €9billion and €10billion on average per year. We will recruit 15,000 employees per year,  of which 9,000 will come from France.

Q: The energy transition, is it well underway in Europe?

It is on the march. We want to grow in all renewable methods producing heat or electricity: biomass, biogas, wind, solar, geothermic, marine energy… But also in energy services, where we retain the top position in France, in Belgium, in Italy and in the Netherlands. In Europe, where growth is stagnating, energy consumption is declining by 1% to 2% per annum, while the demand for energy services is expanding by 2.5%. And it’s that which we are targeting the most.

These service activities which deploy a network of 90,000 operators, we want to develop them strongly in regions of strong growth where we have already set down entrenched positions in electricity production, like in Asia, the Middle East and in South America. These countries have a powerful demand, either because they consume lots of energy, or they have dilapidated infrastructure. You have to integrate this market which is today fragmentary: with “only” €16billion in turnover, GDF Suez is the world number one in energy services.

Q: New horizons are emerging. In which other sectors will you invest?

The depression in Europe is more than offset by the rest of the world. Other than our energy services, GDF Suez will reinforce its independent electricity production, and gas infrastructure (terminals, pipes, storage), that we want to develop, merging the historic expertise of ex-Gaz in France with the know-how of Suez on an international scale. One last example, our Cameron project, a gas liquefaction plant in the US, which is going to receive the green light from the Obama administration.

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