March 02, 2021
“It is with profound sadness and spirit of gratefulness that all of us in the JMP Securities family offer our heartfelt condolences to the family of Grand Chief Sir Michael Thomas Somare, the founding father of Our Great Nation!
His was a life filled with vision, commitment and enduring efforts in all that he touched.
As Papua New Guineans – whether naturally born or adopted – we are all beneficiaries of his sacrifices and hard work over a lifetime.
We are thankful to the Somare Family for having shared their Husband, Father, Grandfather and Great Grandfather with the nation and pray that they find comfort in the knowledge of the unrivalled impact Grand Chief Sir Michael had on all of our lives.”
Welcome to this week’s JMP Report
The POMX saw BSP and OSH do the trading for the week. BSP traded 67,885 shares unchanged at K12.00 whilst OSH traded 768 shares at K10.01, down 1t. Refer details below
WEEKLY MARKET REPORT 20.02.21 – 25.02.21
On the interest rate front, the 364 day TBill still trading at 7.20%. On the deposit rates, FIFL are offering 5.50% for 12 month money. The yield curve remains static with;
2yrs @ 7.54%
4yr @ 9.34%
8yr @ 10.72% and
10yr @ 11.92%
You may look to see what dividend your shares are paying and switch from a non-income generating stock into an dividend producing investment. You may consider 12 mths at 7.20% to 4yr paying 9.34% or 10yr paying 11.92%. Both 4yr and 10yr are both semi annual dividends (coupons) and therefore can be reinvested every 6mths.
Why are bond interest payments called coupons?
Good question and I am thrilled you asked. Some time ago when we didn’t have the automated and electronic systems we see today, a bond holder was issued a Promise To Pay the bearer (that is why they were once called bearer bonds) and a book of coupons. The number of coupons in the book reflected the total number of coupons to be paid over the life of the bearers bond (coupon rate) and the bearer would take the coupon book to the Central Bank and produce your coupon book for payment. Once the bond matured you would be paid your principal and the last coupon payment. Hence the terms we still use today but it is a lot easier as you don’t have to physically produce your coupon book for payment.
The monitoring of your coupon payments and dividends is a service JMP offers, please do not hesitate to contact us for further details… and what we have been reading?
Yields down – Bloombergs
Global bond markets are stabilizing after last week’s rout as central banks across the world reassure investors that they will continue their accommodative policy measures. While officials at the Federal Reserve and Bank of England have said they see little cause for concern in the rapid run up in yields last week, Australia’s monetary authority signalled it would stick with its yield target and the European Central Bank has said it will not tolerate higher yields that risk undermining the economy. Increasingly, investors are also reassessing the risk of a breakout in inflation, with some now thinking fears of a rapid increase in consumer prices are overblown
Infrastructure Australia adds world’s biggest PV project to priority list
Sun Cable’s ambitious 13 GW Australia-ASEAN Power Link, which is designed to export solar electricity from Australia’s Northern Territory to Singapore, continues to shine bright, with the Australian government including the mega-project on its Priority Initiative List.
Infrastructure Australia, the Australian government’s independent infrastructure adviser, has formally recognized the world’s biggest solar and storage project – a planned 13 GW solar farm and 27 GWh battery storage facility.
The proposed project, which will generate, store and transmit solar energy to domestic and international markets, was included on Infrastructure Australia’s annual Infrastructure Priority Initiative List last week. In announcing the project’s inclusion, Infrastructure Australia acknowledged the potential for large-scale solar generation to transform the energy landscape in northern Australia. It said the Northern Territory has a distinct advantage when it comes to utility-scale renewable energy projects, noting the territory’s large land mass, solar resource, and proximity to other Indo-Pacific energy markets.
“There is an opportunity to harness this advantage by developing large-scale, dispatchable renewable energy generation in the Northern Territory, with transmission infrastructure to supply domestic and export markets,” Infrastructure Australia said.
The proposed Australia-ASEAN Power Link includes a 13 GW solar farm to be developed on a 12,000-hectare site at Powell Creek, near Elliott in the Northern Territory. If built, it will be coupled with 27 GWh of battery storage. The project is expected to supply power to the Darwin region and to Singapore via a 4,500 km high-voltage direct-current transmission network, including a 750-kilometer overhead transmission line, from the solar farm to Darwin and a 3,800-km submarine cable from Darwin to Singapore, via Indonesia.
Sun Cable said it was “delighted” the project has been added to the priority list and said its inclusion is consistent with the 2019 Australian Infrastructure Audit, which found Australia could develop new industries based on renewable energy, including large-scale solar and wind.
“There is an opportunity to harness abundant renewable energy resources for domestic electricity supply, growing Australia’s capacity to contribute to the whole global value chain of renewable electricity, including zero emissions manufacturing, as well as creating an intercontinental renewable electricity transmission export industry for Australia,” said Sun Cable CEO David Griffin. “Sun Cable’s vision is to create a world-class renewable electricity grid across the Indo-Pacific region, which will decouple economic growth from global greenhouse gas emissions.”
Northern Territory Chief Minister Michael Gunner welcomed the inclusion of large-scale solar generation on the priority project list. “(It) will make the territory a renewable energy superpower,” Gunner said. “Renewable energy from Sun Cable delivered at scale into Darwin will be the catalyst for growth in existing and emerging industries, including low-emissions manufacturing and zero-emissions data centres and digital services.”
The announcement comes just weeks after Sun Cable signed a project development agreement (PDA) with the Northern Territory government. The Australia-ASEAN Power Link has also been afforded Major Project Status by the Australian and Northern Territory governments.
Sun Cable said it will now pursue the next stage of the process with Infrastructure Australia. The Singapore-based company said it is working on a Territory Benefits Plan and predicted that the 70-year project would create about 1,500 jobs during construction and 350 during operations. It said financial close is expected in late 2023, with the first electricity to Darwin by 2026 and Singapore from 2027.
The Sun Cable solar project is one of 44 initiatives included on Infrastructure Australia’s 2021 Infrastructure Priority List. The provision of dispatchable energy storage for firming capacity in the National Electricity Market (NEM) has been included among the High Priority Initiatives. Noting the transition to a new electricity mix in the grid, Infrastructure Australia said the NEM will require significant investments in dispatchable energy storage to support growing renewable energy generation and the future retirement of coal-fired generators.
Environmental collapse: It’s time economists put the planet on their balance sheets
A ‘ground-sparing’ economic report on biodiversity indicates that economic practice will have to change because the world is finite.
For decades many have been aware of this reality, but it is a giant leap forward for current economic thinking.
Climate change is but a symptom of a larger issue, the threat to our life support systems from the plunder and demise of our natural environment.
Society, some governments and industry are recognising that climate change can be controlled by replacing fossil fuels with renewable energy, electric cars and by reducing emissions from every means of production.
We can then live happily ever after in the glories of consumerism provided by an unchanged economy –or so they imagine.
To have to consider the more fundamental issue of environmental collapse is much more threatening to those imbued with the current market society for it spells the need for a complete change in economic thinking based on the realities of a finite world.
The Dasgupta Report
A landmark economic report raises this spectre and is important not only for its content but because it was commissioned by the UK Treasury to set the agenda for the UKs 25 year environmental development plan.
The report “Economics of Biodiversity” by Emeritus Professor Sir Partha Dasgupta from the Faculty of Economics, University of Cambridge is a crucial educational exercise for governments which without exception place current economic thinking at the forefront of policy.
The stated rationale is “Nature is a “blind spot” in economics. We can no longer afford for it to be absent from accounting systems that dictate national finances, or ignored by economic decision makers”.
In the Forward David Attenborough writes;-
“We are facing a global crisis. We are totally dependent upon the natural world. It supplies us with every oxygen-laden breath we take and every mouthful of food we eat. But we are currently damaging it so profoundly that many of its natural systems are now on the verge of breakdown. Every other animal living on this planet, of course, is similarly dependent”.
The fundamental contention of the review is that Gross Domestic Product (GDP) is no longer fit for purpose when it comes to judging the economic health of nations.
It is “based on a faulty application of economics” that does not include “depreciation of assets” such as the degradation of the biosphere.
The biodiversity crisis is explained in simple economic terms. As we produce GDP, we extract resources from nature and dump waste back into it. When extraction and dumping exceeds nature’s capacity to repair itself, natural capital shrinks as do essential environmental services.
Dasgupta gives the simple example of the woodland destroyed to build a shopping centre or housing estate.
GDP records an increase in produced capital, but no depreciation of the “natural capital” that absorbs carbon, prevents soil erosion, creates a habitat for much-needed pollinators, and provides direct benefits to us – from recreation to purified air – that reduce burdens on health services.
Such environmental losses carry economic costs.
Such events are happening in NSW and Queensland at this very moment with development requiringthe destruction of “koala habitat”, but the loss is much greater than that of the koala.
In a commentary on the Dasupta report entitled “How should economists think about biodiversity?”
“The Economist” notes that between 1992 and 2014, the value of the world’s produced capital, for example such as machines and buildings, roughly doubled, that of human capital (workers and their skills) rose by 13%, while the estimated value of natural capital declined by nearly 40%.
To stop natural capital declining by 2030 while maintaining current growth trends would require growth in efficiency of an impossible 10% a year instead of the current 3.5% p.a.
In effect the report fits with the Global foot print finding that humanity’s consumption of natural resources requires 1.6 Earths to live on. For Australia this would be three Earths.
The implications for Australia
The implementation of such a report would require a revolution in economic thinking leading to a profound change in the way we live. Many working in environmental science have known this for decades but the barrier to change is economic and neo-liberal belief.
This report opens a window to breathe the fresh air of new thinking for economists to change the minds of governments they serve.
Dasgupta’s Review demands the transformation of our institutions and systems – particularly finance and education – to enable these changes and sustain them for future generations.
This includes increasing public and private “financial flows” that enhance natural assets, and decreasing those that degrade Nature.
These implications for Australia are massive.
In the present huge financial spend to save the nation from the economic impacts of Covid, it is doubtful if these sustainability issues have crossed the mind of Philip Lowe or the Treasurer as relevant to a post Covid economy .Currently the minds of most members of parliament should be focused on the review of the EPBC Act by Professor Samuel which confirms the rapidly diminishing capital of our natural environment.
The government’s response described eloquently by the late Mungo MacCallum has been to deny effective reform in favor of handing control to the states with a record of environmental malfeasance.
The inevitable outcome will be a further reduction of environmental capital.
Recently the EU, UK and G7 countries have initiated pressure on Australia to develop an effective climate policy or trade deals might be compromised.
Indeed a carbon border adjustment mechanism may be used which will impose a carbon price on imports from countries with poor climate polices.
It is perhaps surprising that a government so disorganised over Covid could entertain and then commission a revolutionary environmental report such as “Economics of Biodiversity’ but it suggests that it will be the basis for future government policy.
So in addition to climate policy there is likely to be additional pressure on Australia over its abysmal environmental policies. Bring it on.
Dr David Shearman AM PhD FRACP FRCPE, Emeritus Professor of Medicine, University of Adelaide and Co-founder of Doctors for the Environment Australia
Indian Wind Generator Plans $600 Million Green Bond
Indian wind energy generator Continuum Wind Energy is planning to issue its first green bond with backing from the International Finance Corporation.
According to media reports, Continuum will issue a green bond to raise $500-600 million. The bond will be listed at Singapore Exchange. IFC has announced that it will invest $75 million in the bond. Proceeds from the bond issue will be used by Continuum to refinance six operational wind energy projects with a capacity of 734 megawatts.
Continuum Wind Energy was founded in 2012 and has Singapore-based Clean Energy Investing Limited and New Heaven Infrastructure Partners (a Morgan Stanley-backed fund) as its investors.
Continuum has been an acquisition target by several entities multiple times over the last few years. In 2015, SunEdison expressed interest in buying the power generator. The deal fizzled out following SunEdison’s bankruptcy. In 2019, Shell, Statkraft, and CLP India expressed interest in buying Continuum but again the deal did not materialize.
The company currently operates 371 megawatts of wind energy and solar power capacity in the states of Tamil Nadu and Gujarat and supplies power to industrial consumers. An additional 28 megawatts of the wind power project is under construction in Gujarat. Additionally, the company also owns wind projects of 386 megawatts that have long-term power purchase agreements with distribution utilities in Gujarat, Madhya Pradesh, and Maharashtra. Continuum also secured rights to develop 400 megawatts of wind power capacity by Solar Energy Corporation of India in national-level competitive auctions.
Container shipping lines to cut free time, increase surcharges in 2021 contracts
Author: Greg Holt
Shorter timeline to return containers amid Asia equipment shortage
Peak season surcharges rolled out for more shippers
Spot market activity expected higher as hedge against higher contract rates
Companies negotiating annual container shipping contracts with shipping lines before the end of the first quarter can expect increases in peak season surcharges and decreases in allowable free time with the container, as shipowners gain leverage from increased demand, industry participants say.
The widespread shortage of empty containers in Asia will compel shipowners to use their greater bargaining power to finally slash free time, the number of days a beneficial cargo owner is given to return a container to the owner, Stephanie Loomis, Vanguard Logistics Services vice president, said during a panel discussion at the virtual TPM conference.
“I expect that to be across the board. For years they’ve always threatened that they are going to pull back on giving free time given to BCOs,” Loomis said. “I think they are so strongly in the drivers’ seat this year that this may finally be the breakthrough.”
Contracts that were settled early between some shippers and shipowners had their free time cut from around 10-14 days down to six-seven days, M&R Forwarding and Multi-Container Line General Manager James Caradonna said in the panel discussion.
“It’s about carriers having a greater ability now to control their assets,” Caradonna said. “The more turns they get on the equipment, the greater the return on the investment for them.”
But Loomis said this change is not unreasonable considering that equipment shortages and port congestion that have led to widespread delays on cargo delivery, particularly for trans-Pacific trade lanes.
“In order to put some pressure on rate levels not going too high, the best thing you can do is give something back to the carriers that will in turn help them,” Loomis said. “The days of having 14 or 21 free days on a container, you can do better.
Peak season surcharges back with full force
Shippers will also face the potential addition of peak season surcharges in their contracts with immediate effect, even for those BCOs that were never before subject to those surcharges, Caradonna said.
The peak season for container shipping is typically the August-October window before year-end holidays, but US imports volumes from Asia have hardly eased at all since that period.
“We see the return of the peak season surcharges in full force this year,” Caradonna said. “We believe many BCOs that never paid a peak season surcharge will have a peak season surcharge clause in their contract this year.”
With container spot rates at record levels, smaller- to medium-sized shippers are mitigating their cost risk by increasing their contract volumes this year with non-vessel owning common carriers rather than directly with shipping lines, said John Westwood, senior manager for transportation practice at Chainalytics.
Platts Container Index was assessed at $4,226.32/FEU on Feb. 26, an increase from more than 300% from the same date one year ago.
“I haven’t seen any push for longer term contracts,” Westwood said. “Maybe shorter-term contracts because long term contracts are only favorable to carriers right now.”
Shippers may also seek to procure a greater share of their freight requirements from the spot market if they expect rates to drop from multi-year high levels later this year as equipment shortages ease.
“The spot market is still going to play a very central part,” Caradonna said. “Even if it means getting $50, $100 or $200 below their contract rates, we’re probably going to see a lot more spot activity than we’ve seen before.”
If you would like to discuss your investment options, please do not hesitate to contact us. Have a great week from the JMP team,
Head, Fixed Interest and Superannuation
Level 1, Harbourside West, Stanley Esplanade
Port Moresby, Papua New Guinea
Mobile (PNG): +675 72319913
Mobile (Int): +61 414529814