London Stock Exchange becomes takeover target

The London Stock Exchange has become a takeover target after its proposed merger with Canadian rival TMX was ditched. The Toronto-based group indicated it was unlikely to win the necessary two-thirds support from its shareholders.

The collapse of the deal is a major setback for LSE chief Xavier Rolet. At a time of rapid consolidation of world exchanges – for example, Deutsche Börse has swooped on NYSE Euronext – analysts believe London is now vulnerable to a bid from a player such as Nasdaq, the US technology bourse that tried to acquire the LSE in 2007. Other possible suitors include the Hong Kong and Singapore exchanges.

The LSE’s bid for TMX was trumped late on Wednesday by rival Canadian consortium Maple, playing the nationalist card, and was supported by large Canadian banks such as Toronto-Dominion. At the end of last year, British mining group BHP was forced to scrap a takeover of another Canadian company, Potash Corporation, after the government in Ottawa ruled the deal provided no “net benefit” to Canada.

Although Maple’s offer for TMX was worth more than the LSE’s and offered a “Canadian solution”, its merger plan could be blocked on competition grounds.

TMX said a majority of shareholder proxy votes supported the LSE merger resolution. “However, it is clear that the two-thirds threshold required to approve the merger would not have been achieved.”
Rolet said: “We are clearly disappointed that, despite a majority of both LSE and TMX Group shareholders voting for our recommended merger, the two-thirds approval threshold for TMX Group shareholders was not met and hence the merger will now not proceed.”

He added: “Our group is in good shape and financially robust. Whilst the merger with TMX Group was an exciting opportunity for LSE, we continue to see other significant growth opportunities.”

In terminating the merger agreement, TMX has agreed to pay a $10m (£6.3m) break fee to the LSE, and a further $29m if, within 12 months, it merges with Maple.

Simon Maughan, an analyst at broker MF Global, said: “The failure of the TMX deal will leave the LSE a target as investors have bought into the stock recently in the belief the TMX bid will fail and the LSE will end up on the block.”

Arnaud Giblat at UBS said there was an obvious candidate waiting for the London exchange should the LSE’s offer for TMX fail: “Nasdaq seems to want to bulk up and the LSE fits the bill.”
Canada’s main opposition party argued the LSE/TMX deal was not in the public interest and demanded the government hold a public inquiry. The left-leaning New Democratic Party said the arrangement, as structured, “was flawed and would lead to a foreign takeover of Canada’s capital markets”. It urged the federal government, which has a majority of seats in the legislature, to refrain from giving the deal its “rubber-stamp” approval.
Under Canadian law, any foreign acquisition or investment over C$312m (£200m) requires federal government approval and must pass a test ensuring it provides a net benefit to the country.

TMX operates cash and derivative markets for equities, fixed income and energy and owns both the Toronto and Montreal exchanges.

UK factory PMI surges to 16-month high, exports recover

Growth at British factories surged unexpectedly to a 16-month high in October, helped by a recovery in export orders, according to a survey that will temper some of the concern that the economy is losing steam after two years of gains.

The Markit/CIPS purchasing managers’ index (PMI), published on Monday, was a rare bright spot for British manufacturing, which has lagged the wider economic recovery.

Bank of England policymakers, meeting this week to set out a new outlook on the economy, will be encouraged by new manufacturing orders from home and abroad and faster hiring. But most are expected to wait for further improvement before deciding to raise record-low interest rates.
The PMI jumped to 55.5 in October from 51.8 in September, well above even the highest forecast in a Reuters poll.

Taken in isolation, the survey suggested a doubling of economic growth in the final months of the year, after it slowed to 0.5 percent on the quarter in the July-September period, survey compiler Markit said.

Britain was the fastest-growing big, developed economy last year, but other business surveys have suggested the pace of expansion has moderated, dented by an uncertain global outlook.

Economists warned Monday’s strong PMI could be a one-off.

The Confederation of British Industry said last week that factory orders suffered their biggest fall in three years in the three months to October.
“It is not obvious why UK manufacturing would be surging right now against a moderate global background and with sterling having appreciated over the year,” said David Tinsley, an economist at UBS. “Still, it’s an interesting spanner in the narrative of a weak manufacturing outlook for now.”
Sterling shot to a 10-week high on a trade-weighted basis and British government bond prices rose to a six-week high.

The survey showed export orders grew at the fastest pace since August 2014 and jobs growth hit a 16-month high.

“Scratching further beneath the surface of the data reveals that the upturn is largely confined to the biggest manufacturers, who also benefitted most from the better export sales,” said Rob Dobson, a Markit economist.

Markit data show such a jump in the manufacturing reading has always been followed by an increase in the closely watched PMI for services, due on Wednesday.

Services, which account for more than three-quarters of the private sector economy, was the sole industry driving economic growth in the third quarter, according to preliminary official data released last month.

Europe Calls for Tougher Rules on Global Markets

Sometimes it’s not just what is said that counts, but the way it is said. And if tone is anything to go by, the leaders of the European Union’s largest economies are dead serious about cleaning up global finance markets. On Sunday, officials from eight E.U. countries wound up an economic summit in Berlin calling for tougher regulations on international financial markets—including secretive hedge funds and the tax havens they often rely on to do business. The question is: will the U.S., the biggest financial player in the world, ever agree to the binding international regulation the Europeans seek?

The way they’re talking, it sounds as if many European leaders don’t want to give their American peers much choice in the matter. German host Chancellor Angela Merkel said the group—France, Italy, Britain, Luxembourg, Spain, the Netherlands and Czech Republic—had agreed to measures they will insist be adopted at the G20 meeting in London in early April. “All financial markets, products and participants including hedge funds and other private pools of capital which may pose a systematic risk must be subjected to appropriate oversight or regulation,” Merkel said in a summit statement. “A clear message and concrete action are necessary to engender new confidence in the markets and to put the world back on a path toward more growth and employment.” (See 25 people to blame for the financial crisis.)

French President Nicolas Sarkozy was just as adamant. “We can’t afford failure in London,” he said after Sunday’s meeting. “We have to succeed and we can’t accept that anyone or anything will get in the way of this summit, which will be a historic summit. We will be successful [because] if we fail there will be no safety net.”

There’s just one problem with Europe’s position: it’s far from certain Washington is going to accept strict new regulations imposed on the U.S. economy by outsiders. President Barack Obama wooed the world with talk of change, but resistance to regulation remains strong in the U.S, where the ability of companies and markets to invent, innovate, and take risks remains fundamental to the American dream. “There’s an enduring view in the U.S. that the national economy is a powerful machine that crashes every now and again, but which eventually fixes itself and roars back to the front of the pack,” says Mark Duckenfield, a professor of politics in the world economy at the London School of Economics. “The European leaders proposing this international regulation are generally conservative, not wild-eyed socialists. Still, any effort to come up with international rules applicable to the U.S. usually raises fears about American businesses finding themselves hog-tied as a result—which gets Joe the Plumber types shouting bloody murder.” (See pictures of the global financial crisis.)

Duckenfield notes that political conservatives such as Sarkozy and Merkel have a significant ally to their cause inBritish Prime Minister Gordon Brown, who, in spite of his nominally leftist Labour Party affiliation, has always been a market liberal. As recently as 2007, Brown opposed European calls for better regulation of hedge funds—investment schemes that had helped made London Europe’s finance capital. But on Sunday, Brown wrote in Britain’s Observer newspaper that finance markets and banks should be obliged to factor the collective interest of long-term economic gain into their activities, an effort he said should serve as “the foundation on which a new system must be based”.

Sarkozy went even further, demanding new regulations that would impose responsibility and moderation where excess once reigned. After the meeting, Sarkozy said that “the violence of the [economic] crisis, its depth, call for really profound changes.” He also claimed the European objective going into the G20 meeting is to ” to start capitalism again from scratch, [and] make it more moral”.

Dramatic stuff—but will it ever fly in Washington? Or even everywhere in Europe? “If I put it very tenderly, the divergence in opinions was rather big,” said Czech Prime Minister Mirek Topolanek, whose country currently holds the E.U.’s rotating presidency. In Sunday’s meeting, Topolanek defended the liberal market orthodoxy of many central European members and the U.S. is likely to look to countries like the Czech Republic for support in defining some “lowest-common-denominator rules” that everyone can accept, says Duckenfield. Which may leave other European leaders talking tough but unable to get their way.

Petrol Politics: How Much Should an Oil Spill Cost?

How serious should the penalties for an oil spill be? In early November, Chevron and its drilling partner Transocean accidentally spilled some 3,000 barrels of oil into the ocean off the coast of Rio de Janeiro in Brazil. As oil spill go, it was relatively minor—although it is a sign of how hard offshore drilling is. After about a week of work, Chevron managed to stop the spill—it helped that the damaged well was only about 3,900 ft. below the surface of the ocean. (BP’s Macondo well—which spilled 4 million barrelsinto the Gulf of Mexico last year after a blowout—was more than 5,000 ft. beneath the ocean surface.)

Problem solved? Not according to the Brazilians. A couple of weeks after the spill, Brazil announced that it was fining Chevron $28 million—or more than two times the $4,000 per barrel spilled that the U.S. government can charge under the Oil Pollution Act—and had its drilling rights in Brazil suspended. For Chevron the fine would be bad enough, but a permanent expulsion from Brazil’s rich offshore oil market—estimated to be worth nearly $200 billion—would be disastrous for the company. As if that’s not bad enough, last week Brazilian prosecutors brought an $11 billion—yes, that’s the right letter—against Chevron and Transocean. And this week Brazil’s federal police asked prosecutors to indict as many as 17 Chevron and Transocean employees—including the director of Chevron Brazil—for their alleged roles in the oil spill.

Is this fair?

There’s a certain amount of political gamesmanship going on in Brazil’s reaction to the spill. It’s common for some oil-producing countries to punish foreign oil companies when things go wrong. That’s a fact of life in the oil business—especially in more authoritarian nations like Venezuela. Democratic Brazil has a better reputation than most, but it has a federal system—and in the Chevron case, it’s state authorities who seem particularly vengeful, as Fortune‘sCyrus Sanati writes:

The oil spill quickly became politicized in the state of Rio de Janeiro, home of Brazil’s burgeoning oil industry and the quasi-state-controlled oil giant Petrobras. The environmental secretary of Rio threatened to revoke Chevron’s operating license over the spill, sending shivers all the way up to Houston, home to the dozens of foreign oil companies that feed Brazil’s oil engine. The federal government in Brasilia quietly reassured the oil community that drilling permits were under federal jurisdiction and that they should simply ignore the howls of discontent from local officials.
The oil spill quickly became politicized in the state of Rio de Janeiro, home of Brazil’s burgeoning oil industry and the quasi-state-controlled oil giant Petrobras. The environmental secretary of Rio threatened to revoke Chevron’s operating license over the spill, sending shivers all the way up to Houston, home to the dozens of foreign oil companies that feed Brazil’s oil engine. The federal government in Brasilia quietly reassured the oil community that drilling permits were under federal jurisdiction and that they should simply ignore the howls of discontent from local officials.
But now those howls have turned into a stinging civil lawsuit. Prosecutors from Campos, a city near Rio de Janeiro, filed suit last Wednesday against Chevron and Transocean (RIG) for gross negligence in connection with the oil spill. They announced they were seeking 20 billion reals or around $11 billion in compensation for the spill. The fine was high, prosecutors say, in order to send a message that Rio was serious when it comes to environmental protection.

This is an internal Brazilian problem, with regions and cities like Rio—which needs money for the 2016 Olympics—angling to get a bigger share of offshore oil revenues from the federal government. Still, even if the $11 billion suit goes away—as many experts expect it to do—surely Chevron and other oil majors will have second thoughts before doing business in Brazil. And that could have major ramifications for a country that is set to become an oil major. Brazil’s national oil company, Petrobras, has had serious safety problems of its own—recent reports suggest that Petrobras spills more oil each year than Chevron with its accidents. If Brazil wants to move into the big leagues of crude oil, it will need help from the foreign majors—but Brazil’s valuable deepwater reserves and beautiful beaches may not be enough to overcome the threat of $11 billion lawsuits and criminal charges should anything go wrong. Not that Chevron was blameless, as the Financial Times writes:

But the whole incident should also serve as a warning to other foreign companies eyeing up Brazil’s oil industry. Although Chevron and Transocean have undoubtedly been caught up in a political power game, critics say both companies could have done more to prepare for such a disaster and done a better job of cleaning up afterwards.
Even simple things like having more executives at the companies who could speak Portuguese would have helped get rid of some of the bad feeling among the influential local press and government officials.
After all, if Chevron doesn’t get it right in Brazil, there will always be someone else around the corner waiting to take their place in one of the world’s most promising oil industries.

It’s not just about access to oil, however. Brazil’s offshore reserves are rich, but they’re also difficult to access. Some wells may be more than 20,000 ft. beneath the surface of the ocean. If there’s one thing we learned during the Deepwater Horizon oil spill—other than that Admiral Thad Allen kicks ass—it’s that repairing any blowouts or spills in very deep water is very difficult, akin to trying to operate on the surface of the moon. The early stumbles from companies like Chevron and Petrobras are not comforting as the oil industry prepares to go deeper and more dangerous, as we enter the age of extreme energy.

Betting on Big Solar

It’s good news for solar advocates and bad news for competitors: General Electric is breaking into the solar business in a major way. In April, GE announced it had built a solar module with the highest publicly reported efficiency rate for cadmium telluride thin film — the most popular low-cost solar technology. The commercial module topped out at 12.8%, according to independent testers at the National Renewable Energy Laboratory — nearly 3 percentage points higher than the industry average. (The efficiency rate is the percentage of the sun’s energy a solar panel can convert to electricity.) Those record-breaking solar modules will eventually be manufactured at a U.S. facility set to open in 2013 that will be the biggest solar factory in the country. The news means GE — which already has a wind-energy business worth some $6 billion — could be ready to dominate solar much as it leads the way in wind. “This is the beginning of what we see as a global competition,” says Victor Abate, GE’s vice president of renewables.
Despite GE’s experience in the energy business — its founder did, after all, invent the lightbulb — the multinational behemoth will be entering the solar race behind its rivals. Those include Arizona-based First Solar, which began life as a small start-up before investments from John Walton of the Walmart family helped it become one of the most successful renewable-energy businesses in the world, with manufacturing facilities that produce 2,300 megawatts’ worth of cadmium telluride thin-film solar modules a year. For now, GE’s manufacturing capacity — including the planned new plant in Colorado, which is expected to employ 400 workers and create an additional 600 jobs — still makes it at best a medium-size player in the industry.

But GE is GE, and it can bring resources to bear on renewable energy that no other corporation can — as its competitors in the wind-turbine industry already know. In 2002, GE grabbed the wind-power assets of Enron after the energy-trading company went bankrupt. At the time, Enron was the only major U.S. wind-turbine manufacturer left standing. On-and-off U.S. federal support had ceded the lead to European firms like Vestas and Gamesa. Today, though, GE is the third largest turbine maker in the world. “Our wind business was just a couple of hundred million dollars in 2002,” says Abate. “Now it’s a $6 billion platform. GE knows how to scale.”

That’s exactly what the solar industry needs. Solar power had an excellent year in the U.S. in 2010, growing by a remarkable 67%, faster than any other energy source. The U.S. Energy Information Administration predicts that over the next decade solar generation will expand more than fourfold. But solar can grow so fast, in part, because the market is so tiny: less than 1% of U.S. electricity comes from the sun. For that to change — for solar to become a game changer, not just a rounding error — it has to get radically less expensive. That improvement must come from innovation. Earlier this month, GE announced that a new power-plant design will integrate natural-gas electricity generation with both wind and solar as complements. Though GE has yet to reveal its cost structure for solar manufacturing, the company is confident that its efficient panels — and turnkey manufacturing — will rapidly bring down the cost of solar energy. Mark Little, GE’s global-research director, has suggested that within five years solar could be cheaper than fossil-fuel power in regions with expensive electricity. “The leverage we have is our improving efficiency,” says Abate. “Once you have a leading technical position, you can scale up and drive down cost.”

That’s the hope, anyway. But the solar business in 2011 isn’t the same as the wind industry was a decade ago, when GE began churning out turbines. Chinese companies like Suntech Power and Trina Solar can undercut their American competitors, thanks both to rock-bottom labor costs and steady government assistance of the sort not likely to be coming from Washington. American manufacturers like GE will struggle to beat the Chinese on sheer cost, though the company expects to reduce expenses on solar development by 50% over the next several years, Abate says. GE will need to win instead on innovations that take advantage of the company’s scope and its experience at making the right bet at the right time. For all their usual preferences for the small and local, greens should hope for GE’s success. If they want solar power to win big, they need the biggest player in the game.

Can Silicon Valley and Detroit Reinvent the Car Business?

In the month of October, General Motors, Ford and Chrysler once again increased their share of cars and light trucks sold in America. In the third quarter of this year, the companies all reported solid profits. In fact, for the 12 months that just ended, their net income totaled $13 billion — compared to losses of that size and more just three years ago. None can dispute that this qualifies as one of the most remarkable turnarounds in corporate history.

But while we enjoy the glow of success, it is worth looking ahead and asking whether this good fortune has legs. A dozen years from now, will these companies still be moving forward or will they be swept away by the seemingly inexorable tide of globalization? The prize here is large — keeping America as a prime location for the millions of jobs associated with making cars.

It is a tall order. We need a combination of good government policy, including a level playing field with our global trading partners and visionary leadership from corporate executives and labor leaders. But if we have these and combine them with the natural assets America brings to this challenge, this is a game that we can win.

Here’s why. I believe that in next decade, the automobile industry will see more change than it has in the last 50 years — fundamental changes in how cars are powered, perform and are made.
For almost 100 years, the energy to power cars has come almost exclusively from oil and the amount of oil required to move a car a given distance has decreased at a very slow rate. In the next decade, substantial steps could be taken toward using electricity, bio-fuels and natural gas to power our cars, while those vehicles still using oil will consume far less of it.

For the last 50 years, we have slowly been placing more technology into our cars. Cars today are far smarter than they were 50 or even five years ago. However, the next dozen years will likely see an exponential expansion of a car’s ability to interact with its driver and its environment.

Finally, we will see dramatic changes in the way that we manufacture cars. Our production methods today are still largely based on the methods developed by Henry Ford, but we are fast moving to a world of customized, on-demand manufacturing where the consumer can build their car from the ground up, sending their plans directly to the factory floor for rapid assembly.

Done right, these changes all play to our nation’s greatest strength — our inexhaustible supply of brains and skilled labor, of innovators, inventors, entrepreneurs and investors, that incredible brew of vision and drive that have made this the best place in the world to build a company that changes the world. The car industry is being reinvented. And inventing new things and reinventing old ones is what we do in America.

Most people think that spirit is best exemplified by Silicon Valley, where they seem to reinvent the entire world every 18 months. Gordon Moore, the visionary founder of Intel, once suggested that if the auto industry advanced at the rate of the semiconductor industry, cars would soon get 100,000 miles per gallon and it would cost more to park a Rolls Royce than to buy one. Yes, the price of a gigabyte of memory marches inexorably down. But we would be more than a little surprised if our car regularly told us that it had a “fatal error” and that “the system will now shut down.”

For while Silicon Valley brings us rapid innovation, Detroit brings us unflinching reliability. Whether it is 4° in Fargo or 107° in Phoenix, we expect our cars to run. We also expect our cars to last. In the past decade many people have purchased four, five or maybe six cell phones. But the overwhelming majority of cars manufactured a decade ago are today still on the road and still performing as expected.

There is no doubt that Detroit has much to learn from Silicon Valley, but Silicon Valley has much to learn from Detroit. The good news is that this combination is truly only available in America.

Sheet Metal Worker

Sheet metal workers make sure you stay warm in the winter and cool in the summer by servicing the heating and cooling equipment in buildings. These tradesmen and women may specialize in heating, ventilation and air-conditioning systems (also known as HVAC) or architectural, industrial and service sheet metal work. With HVAC work, workers fabricate and install fans and ducts or air handling units. Architectural sheet metal workers install panels and siding to protect and preserve a structure or building. Industrial sheet metal workers spend their days in paper or industrial mills working with heavier metals and welding or in commercial kitchens creating and installing countertops, vent hoods and handrails. Service sheet metal workers focus on testing, adjusting and balancing existing systems. Of all the sheet metal specialties, “service sheet metal workers are the least construction-related and more technical,” says Doug Haase, an instructor at the Sheet Metal Institute in Portland, Oregon, and former sheet metal worker. But generally, sheet metal workers fabricate and install metal products using saws, lasers, shears, presses and computers. This sort of rigorous labor includes a high risk of illness and injury. “There are hundreds of hours of safety training, including 30 hours of Occupational Safety and [Health] Administration training. Contractors don’t want to hurt people,” Haase says. Sheet metal workers must have a strong understanding of how to build things, such as air ducts, siding and panels, and install them. They should also have solid critical-thinking skills, math skills and a strong work ethic.

The continuous need to keep people comfortable, preserve infrastructure and make structures energy-efficient keeps this profession growing at a faster rate than the average for all occupations. The Bureau of Labor Statistics predicts 15.5 percent employment growth for this profession by 2022, which means 22,000 new jobs for sheet metal workers.

Salary

In the construction industry, sheet metal workers are paid well for their efforts. The average hourly wage for sheet metal workers was $22.81 in 2013, and the median salary was $43,890. The best-paid in the field earned $76,530. Meanwhile, the lowest-paid workers brought home $25,220. Sheet metal workers earned the highest salaries in the metropolitan areas of San Francisco; Atlantic City, New Jersey; and Yakima, Washington.

Training

Beyond the tools of the trade, sheet metal workers need good critical-thinking skills, coupled with a solid understanding of algebra and trigonometry. Training facilities like the Sheet Metal Institute provide apprenticeships that only require candidates to have a high school diploma or its equivalent, good math skills and hand-eye coordination. Apprenticeships are opportunities for those interested in sheet metal work to become more well-rounded. “A prospective sheet metal worker needs to be a learner, have good math skills, determination, possess an understanding of geometry and have good problem-solving skills,” Haase says. “Journeymen don’t expect apprentices to understand everything right away, but you eventually have to understand.” Apprenticeships, which are often offered by unions, can last four to five years and include 1,700 to 2,000 hours of paid on-the-job training and a minimum of 246 hours of related technical instruction. “The apprenticeships and training are collegiate-level,” Haase says. However, he adds that college coursework is not necessary for a rewarding career. “Journeymen and training facilities try to train people where they are at. Training facilities really do a great job of preparing workers for the broad stroke of work,” he says.

Reviews and Advice

Getting a job with a union, like the Sheet Metal Workers’ International Association, is far less complicated than getting a job without union backing, Haase says. “In the union, you apply through a training facility or union hall, while nonunion prospective employees go from company to company in search of work. Unions are responsible for dispatching workers and are responsible for supplying trained and skilled workers to companies and contractors,” he says. As soon as the apprenticeship starts, sheet metal workers are thrown into a variety of tasks. “My first year was like drinking from a fire hose. It was a lot of learning and understanding concepts,” Haase says.

He offers this advice to aspiring sheet metal workers: “Be diligent in gaining an understanding of math, algebra and trigonometry. Be physically fit, and be ready to work hard.”

US and 11 other countries reach landmark Pacific trade pact

Trade ministers from 12 countries announced the largest trade-liberalizing pact in a generation on Monday. In a press conference in Atlanta, trade ministers from the US, Australia and Japan called the the Trans-Pacific Partnership an “ambitious” and “challenging” negotiation that will cut red tape globally and “set the rules for the 21st century for trade”.

The deal – in the works since 2008 – is a major victory for the US president, Barack Obama. “This partnership levels the playing field for our farmers, ranchers and manufacturers by eliminating more than 18,000 taxes that various countries put on our products,” the president said in a statement. “It includes the strongest commitments on labor and the environment of any trade agreement in history, and those commitments are enforceable, unlike in past agreements.”

While it still faces major hurdles, not least in Congress, the deal could reshape industries and influence everything from the price of cheese to the cost of cancer treatments. It is expected to set common standards for 40% of the world’s economy, become a new flashpoint for the 2016 presidential campaign, and could become a legacy-defining agreement for the Obama administration.

The deal is seen as a challenge to China’s growing dominance in the Pacific region. China had been invited to join the trade group but balked at restrictions that the deal would have placed on its financial sector and other areas.

“Long after the details of this negotiation like tons of butter have been regarded as a footnote in history, the bigger picture of what we have achieved today remains,” said New Zealand’s trade minister, Tim Groser. “It remains inconceivable that the TPP bus will stop at Atlanta.”

Lawmakers in TPP countries must also approve the deal, setting up potentially months of congressional wrangling on the deal.

The final round of negotiations in Atlanta, which began on Wednesday, had got stuck over the question of how long a monopoly period should be allowed on next-generation biotech drugs, until the United States and Australia negotiated a compromise. Negotiations went as late as 5am on Monday local time, the US trade representative, Michael Froman, said.

The TPP deal has been controversial because of the secret negotiations that have shaped it over the past five years and the perceived threat to an array of interest groups from Mexican auto workers to Canadian dairy farmers.

Although the complex deal sets tariff reduction schedules on hundreds of imported items from pork and beef in Japan to pickup trucks in the United States, one issue had threatened to derail talks until the end: the length of the monopolies awarded to the developers of new biological drugs.
Negotiating teams had been deadlocked over the question of the minimum period of protection of the rights to data used to make biological drugs, by companies including Pfizer Inc, Roche Group’s Genentech and Japan’s Takeda Pharmaceutical Co.

The United States had sought 12 years of protection to encourage pharmaceutical companies to invest in expensive biological treatments like Genentech’s cancer treatment Avastin. Australia, New Zealand and public health groups had sought a period of five years to bring down drug costs and the burden on state-subsidized medical programs.

Negotiators agreed on a compromise on minimum terms that was short of what US negotiators had sought, people involved in the closed-door talks said. The agreement would protect the data for between five and eight years, the New York Times reported.

“This is one of the most challenging issues in the negotiations,” Froman said about biologics. He said member countries believe the TPP “incentivizes the development of these new live-saving drugs while ensuring access to these medicines”.

The Biotechnology Industry Association, in Washington DC, said it was “very disappointed” by reports that US negotiators had not been able to convince Australia and other TPP members to adopt the 12-year standard approved by Congress.

“We will carefully review the entire TPP agreement once the text is released by the ministers,” the industry lobby said in a statement.

Final hours

A politically charged set of issues surrounding protections for dairy farmers was also addressed in the final hours of talks, officials said. New Zealand, home to the world’s biggest dairy exporter, Fonterra, wanted increased access to US, Canadian and Japanese markets.

Separately, the United States, Mexico, Canada and Japan also agreed rules governing the auto trade that dictate how much of a vehicle must be made within the TPP region in order to qualify for duty-free status.

The North American Free Trade Agreement between Canada, the United States and Mexico mandates that vehicles have a local content of 62.5%. The way that rule is implemented means that just over half of a vehicle needs to be manufactured locally. It has been credited with driving a boom in auto-related investment in Mexico.

The TPP would give Japan’s automakers, led by Toyota Motor Corp, a freer hand to buy parts from Asia for vehicles sold in the United States but sets long phase-out periods for US tariffs on Japanese cars and light trucks.

The TPP deal announced on Monday also sets minimum standards on issues ranging from workers’ rights to environmental protection. It also sets up dispute settlement guidelines between governments and foreign investors separate from national courts.

Activist groups vowed to continue their protest against the deal. “The TPP is a wishlist for monopolistic corporations that inherently benefits giant multinational companies while undermining small businesses and startups,” said Evan Greer, campaign director of Fight For the Future. “US lawmakers are in the spotlight now, and they should know that the public is watching them closely and overwhelmingly expects them to vote down this terrible deal.”

The mixed fortunes of a fuel

IN A high-tech world, dirty black lumps of coal might seem like an anachronism. Yet coal is far from a thing of the past. However whizzy your iPad, your wall-mounted television or your electric car, the chances are that it is powered by the stuff. Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil.

The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a rise from two-thirds of the energy America gets from oil to twice that amount. China’s domestic coal industry produces more primary energy than Middle Eastern oil does.

Other developing economies are just as keen on coal, if not yet on such a grand scale. In India, producing 650 terawatt hours of electricity in 2010 took 311m tonnes of oil equivalent, and the power sector’s coal demand is growing at around 6% a year. The IEA reckons India could surpass America as the world’s second-largest coal consumer by 2017.

But if America no longer dominates the business as it once did, what is happening to the industry there is still able to trigger changes far away. And at the moment coal is falling from favour in America.

King no more

In developing economies coal’s advantages—being cheap and widely available—are deemed to outweigh the damage it inflicts both on people near the places where it is burned (burning it gives off particles that harm people’s health) and on the planet as a whole (burning coal produces carbon dioxide, the most important long-lived greenhouse gas). In rich countries you might expect the cost-benefit balance to tip the other way, and coal use to be dropping. But things are not quite that simple. In America coal is indeed being burned less and less—but not principally thanks to climate policy, of which America has relatively little. Meanwhile in Europe, which likes to see itself as a world leader on climate, they are using more and more of the stuff (see article).

America’s coal business, like the rest of the country’s energy industry, has been upended by the advent of shale gas, now available in unforeseen quantities at unforeseen prices. In April 2012 the price fell below $2 per million British thermal units, or Btus ($7 per megawatt hour). This has made gas increasingly attractive to power companies, which have been switching away from coal in increasing numbers.

At its peak, in 1988, coal provided 60% of America’s electricity. Even in 2010, when the shale-gas boom was well under way, it still accounted for 42%. By the middle of 2012, though, gas and coal were roughly neck-and-neck, each with around a third of power generation.

There are two reasons for thinking the shift from coal may be long-lasting. One is that new gas is continuing to come on stream, and getting cheaper to produce. Though prices have started to rise from their earlier rock-bottom levels (they are now $3.43 per mBtu), it is unlikely to cost more than coal for a good while. And it will be fairly easy to use more gas without having to build new power stations. Around half of America’s gas-fired capacity is made up of so-called combined-cycle gas turbines (CCGT) which generate power come what may (the rest is used in “peakers” which generate only when needed). Utilisation rates in CCGTs have risen, but are still only 50%; they can use more.

The other reason why coal’s decline as a fuel may continue is that gas plants meet environmental regulations more easily. In the second Obama administration these are likely to stay in place or be extended. The coal industry’s lobbying power looks weaker following the election. Mitt Romney, who regularly attacked the president’s “war on coal”, had its full support, but that support did not deliver him the swing states of Virginia and Ohio.
As things stand, power plants will have to comply with rules governing emissions of mercury and other toxic nasties by 2015. Court challenges to further rules to control emissions of sulphur dioxide and oxides of nitrogen may delay these new standards, but will not kill them. And environmental rules promulgated under the Clean Air Act do not require congressional approval. Should Mr Obama decide to make environmental policy by fiat, the coal industry will feel the pinch.

The Environmental Protection Agency has already proposed restrictions on carbon emissions which would in practice ban new coal-fired plants after 2013 unless fitted with carbon capture and storage (CCS)—a technology has not yet been made to work on a commercial basis, though facilities planned for California and Texas may change that. Even without CCS, modern coal-fired power plants, though more efficient than the old ones and capable of being made a lot cleaner, are more expensive than those using old technology. They are twice the price of gas-fired plants with the same capacity. A gas facility can also be built in two to four years, instead of four to eight, giving utilities more flexibility when adding capacity.

This bodes ill for America’s coal plants. The combination of cheap gas and expensive regulation means that 50 gigawatts of coal-fired power capacity—a sixth of the total—could be shut down by 2017, according to Navigant, a consultancy. Others put the figure higher.

This means trouble for America’s coal miners. Coal production is likely to have fallen by roughly 100m tonnes in 2012, compared with 2011, or around 10% of the total. A surge in exports softened the blow: they rose by a quarter in the first half of 2012, to around 66m tonnes. The industry’s infrastructure is not geared to export—it is hard to get coal from Wyoming on to ships bound for China—but if that were rectified, analysts reckon, exports could reach 200m tonnes a year. In the meantime mining companies have been closing pits, shedding jobs and consolidating, especially in the least efficient mining areas of central Appalachia (West Virginia and Kentucky).

The decline of coal, though, will be protracted. Coal-fired power stations are built to last—the oldest plant currently operating was built in the 1930s—so unless new rules force them to close, they will be retired gradually. By 2017 or so, reckons Brattle Group, a consultancy, coal use will stabilise again, as gas demand finally makes gas prices dearer than coal. Coal may be down in America. But it is not yet out.

New DNA test for embryos could boost IVF success rates

A test that checks for abnormal amounts of DNA in IVF embryos has raised pregnancy rates at US fertility clinics that have started to offer the procedure.

Scientists in Oxford who helped develop the test claim it can boost the chances of an IVF pregnancy by 10 percentage points, leading to success rates of about 75% in 35-year-old women.

The test does not improve the quality of IVF embryos created at fertility clinics, but gives doctors a new way to identify the healthiest and most likely to produce a pregnancy.

Many IVF clinics already offer a procedure called pre-implantation genetic screening, or PGS, which is used to spot embryos that have the wrong number of chromosomes, the structures that carry the human genetic material.

Chromosome abnormalities are the single greatest cause of embryos failing to implant or miscarrying. But even with PGS, which costs from £2000 to £3000 in Britain, about a third of embryos do not go on to produce a successful pregnancy.

Researchers at the NIHR Oxford Biomedical Research Centre and genetics laboratory Reprogenetics in the US, noticed that many of the embryos that failed to implant after PGS had abnormally high levels of DNA from structures called mitochondria. Healthy cells often carry hundreds of mitochondria to provide them with energy.

“Based on our findings we have devised a test whereby a small number of cells, carefully removed from an embryo, can be measured for the amount of mitochondrial DNA present,” said Elpida Fragouli, who led the research at Reprogenetics. “This will help guide doctors to the IVF embryos with the greatest chance of producing a viable pregnancy.”

Several clinics in the US, including the New York University Fertility Center, have already begun to offer the test, called MitoGrade. Data from the first 100 couples suggest the test boosts pregnancy rates from about 65% to 75%, according to a presentation to be given at the American Society for Reproductive Medicine annual meeting in Baltimore on Tuesday.

“Anything that reduces the number of unsuccessful embryo transfers that patients have to endure will certainly be welcome. This important discovery indicates that mitochondria represent an important piece in the complex jigsaw puzzle that is infertility,” said Dagan Wells, who leads the UK arm of the project.

Scientists are not sure why some embryos experience a sudden rise in mitochondrial DNA, or how this affects their ability to implant. One possibility is that defective embryos make more mitochondria to give them enough energy to survive, but ultimately fail and stop growing.

“These tests don’t make the embryos any better than they were in the beginning. There will still be patients out there, and many of them, who don’t produce any viable embryos at all. So it’s not going to guarantee future pregnancy rates to every patient overnight, but it will help,” Wells said.
The research team is in the process of applying to the UK fertility regulator, the Human Fertilisation and Embryology Authority, for a licence to offer the procedure in Britain. Should they gain approval, the test could be offered in addition to PGS for an extra £200 from next year.

“There is a lot of interest in mitochondrial activity within eggs and developing embryos and this study presents a fascinating insight into the potential relationship between mitochondrial activity in genetically normal embryos and their potential for developing into a viable pregnancy,” said Adam Balen, consultant in reproductive medicine at Leeds Teaching Hospitals NHS Trust and chair of The British Fertility Society.

“It is still early days and the proposed test requires much more work and validation before application into clinical practice. There is no doubt this is a very important line of research and Dr Wells and his team are to be congratulated for what they have achieved to date.”