Archive for July, 2010

Dexia, KBC have passed bank stress tests: paper (Reuters)

Sunday, July 18th, 2010 | Finance News

BRUSSELS (Reuters) – Belgian financial services group KBC (KBC.BR) and Franco-Belgian banking group Dexia (DEXI.BR) have passed tests designed to assess their health in the event of a downturn, two Belgian newspapers said over the weekend.

Business dailies De Tijd and L'Echo, which are sister papers, said they understood from sources that the Belgian government would not be called upon again to bail out either group.

No one at either KBC or Dexia was immediately available for comment.

Europe is testing banks across 20 countries on how they would cope with another economic downturn and losses on Greek and some other government bonds.

The aim is to restore investor confidence by pinpointing any weak spots and forcing vulnerable banks to raise cash.

Some 91 banks being tested will publish results at 1600 GMT on July 23, and the London-based Committee of European Banking Supervisors (CEBS) will issue a statement summing up the outcome a minute later, sources told Reuters last week.

Simulated tests carried out by analysts have shown KBC, Dexia, National Bank of Greece (NBGr.AT), Commerzbank (CBKG.DE) and Credit Agricole (CAGR.PA) screen more poorly than big rivals, but without falling to danger levels.

KBC received 7 billion euros ($9.1 billion) of state aid during the financial crisis, and Dexia, a large lender to municipalities in France and Belgium, a 6.4 billion euro bailout by France, Belgium, Luxembourg and key shareholders in September 2008.

(Writing by Philip Blenkinsop; Editing by Steve Orlofsky)

($1=.7706 Euro)

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Temporary cap in place — now what for the Gulf? (AP)

Sunday, July 18th, 2010 | Finance News

NEW ORLEANS – After three long months, the bleeding from the bottom of the Gulf of Mexico has been finally, mercifully stanched. But in so many ways, the prognosis remains uncertain.

Which species will rebound, and which have been pushed beyond the brink? Has the oil accelerated the die-off of marshlands that protect one of America's great cities and make this the nation's second most-productive fishing region? What effect will the BP spill have on the future of deep-sea drilling — at once boon and bane — in the Gulf?

And, of more immediate concern to people along the nation's southern coast, where will the millions of as-yet uncollected, unburned, unseen gallons of oil from the blown-out Deepwater Horizon well end up?

Second-generation Plaquemines Parish resident Sandy Reno isn't sure she wants to wait around to find out the answers.

"I'm ready to pack up and leave," says Reno, 43, whose shrimper husband, like so many others along this coast, is now dependent on cleanup work from the company held responsible for the disaster. "When you've had enough, you've had enough. I've had enough already."

Just as the stumbling federal response to Hurricane Katrina five years ago exposed not just chinks, but spider web networks of fissures in our national armor, the failure to prevent and then quickly stop the spill has shaken many people's faith in American might.

"We're a superpower — the United States," New Orleans chef and sometime fishing guide Eric Schutzman said recently as he took a break from carving up a batch of black drum and redfish caught in an unclosed section of Black Bay. "We put a man on the moon. You'd think we'd have enough brilliant minds to get it all cleaned up and get on with it."

Since the Deepwater Horizon exploded on April 20 and sank 50 miles off the tip of Louisiana, as much as 184 million gallons of crude have hemorrhaged into the gulf.

To get an idea of what Gulf Coast residents might be facing, many have looked back to the region's last worst drilling accident — the 1979 Ixtoc spill. It took Pemex, Mexico's state-owned oil company, 10 months to contain the spill. By then, 140 million gallons of crude had bled into the gulf.

Wes Tunnell, associate director of the Harte Research Institute for Gulf of Mexico Studies at Texas A&M University-Corpus Christi, is traveling the region, looking for traces of the spill and speaking to people who lived through it. His blog is plastered with photos of red mangrove roots clogged with thin, weathered tar mats — possibly from Ixtoc.

Tunnell and his colleagues interviewed 74-year-old Jose Chay, a longtime fisherman in Celestun, Yucatan. Chay told Tunnell that the spill forced locals to switch to jobs like salt mining, crabbing in the lagoon or making charcoal from the region's lush forests.

"They did these things for varying periods of time," Tunnell writes, noting that some started back fishing in about two years, but with poor results. "Others got back to fishing in 4-5 years when things seemed to be back to usual for the fin fish but not shellfish."

But, Chay told Tunnell, "it permanently killed all of the oysters and clams, the same thing we heard in Isla Arenas yesterday."

Large sections of the U.S. Gulf Coast — which accounts for 60 percent to 70 percent of the oysters eaten in the U.S. — have been closed to harvesting. It remains to be seen what effect the spill will have on the fishery.

Some watermen have been pulling up gape-shelled, dead oysters. But that is likely a byproduct of the state's efforts to keep the oil out of inland waters by diverting thousands of gallons of fresh water into the estuaries, says Mike Voisin, a member of the Louisiana Oyster Task Force.

A meeting is scheduled in early August to determine the next harvest season. But Voisin says it could be years before the spill's effects on the industry will be known.

"We always have three crops of oysters on the bottom, or three-year classes," says Voisin, owner of Motivatit Seafoods in Houma. "So when you're thinking about mortality, you're not just thinking about this year's harvest. You're thinking about 2010, '11 and '12's harvest."

Oysters, shrimp and other valuable commercial fisheries depend on the continued health of the marshlands that nurse and nurture the species upon which the industry rests.

Louisiana, home to 40 percent of the nation's coastal wetlands, has been losing 35 to 50 square miles of marsh a year for decades — much of it from the ditching and canal digging activities connected to the oil industry. In places where oil has intruded, marsh grasses have turned brown and brittle, but it is unclear yet how deep the death goes.

When talking about the marshes to laypeople, chemical oceanographer Thomas Bianchi likes to use the analogy of a giant tea bag.

"When you put a tea bag in water, the tea that you see are organic compounds, that's coming from the tea leaves," says Bianchi, a professor at Texas A&M University. "So you get that kind of release from the normal healthy marshes as they grow and die."

With funding from the National Science Foundation, Bianchi is leading a team that will soon gather thousands of liters of water from Barataria Bay.

Through a process called reverse osmosis/electrodialysis, they will distill that down to hundreds of milliliters. That concentrate will be subjected to nuclear magnetic resonance spectroscopy and other processes to determine whether the marsh is dying at the roots, not just above the water line, and how much of the petroleum — and the 1.8 million gallons of chemical dispersants dumped on it — has gotten into the food chain.

Bianchi, who fled New Orleans and his job at Tulane University after losing his home to Hurricane Katrina, says his "gut feeling" is that the marshes have died below the water. If that is the case, he's concerned that this die-off could have a "cascading effect."

"It just makes the whole estuary more vulnerable."

Bianchi expects to have some preliminary test results in a matter of days or weeks. But it may well be two or three years before the spill's impact on the deep-sea environment, says Jeffrey Baguley, a marine biologist at the University of Nevada.

These communities of organisms are big players in the processing and recycling of organic carbon, says Baguley, who specializes in the study of marine invertebrates. There is still a lot of oil floating beneath the water's surface, and Baguley is concerned about how much of it will end up on the seafloor.

"We have organisms that live there in the deep sea that we're not sure of their overall function, their overall impact," he says. "So it's always prudent to err on the side of caution when you're impacting organisms you don't fully understand."

Another industry whose future is uncertain is deep-sea oil drilling.

The federal courts have blocked one Obama administration drilling moratorium, but the Interior Department issued a new one this week. Florida Gov. Charlie Crist is asking for a special legislative session to consider putting a constitutional amendment on the November ballot that would ban drilling within 10 miles of the state's beaches.

The notion of halting all deepwater drilling until we know what happened here might seem a no-brainer to many people in other parts of the country. But here, where many families have feet in both industries, people are seriously conflicted.

Even those who have been damaged most by the spill are now wholly dependent on the industry. Compensation payments and cleanup contracts from BP have put many in the region on a kind of artificial life support, forestalling what could be major life decisions.

When the fishing is good, Wayne and Lisa Ledet, owners of Doris Seafood in Hopedale, make $500 to $1,000 a day packing crabs, oysters and shrimp for the Baltimore market. Now, their $80,000 ice machine is churning for just one customer: BP.

The Ledets won a contract to provide ice to three camps where BP is housing workers. Gypsy Gordon, 40, and boyfriend Shawn Platt, 45, were on the verge of pulling up stakes and heading to Florida when the Ledets hired them to fill plastic bags with ice.

With Platt shoveling, they fill 500 bags a day, at 35 cents apiece. They're making about $100 less than they're used to, says Platt, "but it's a paycheck."

"And it's air conditioned," quips Gordon.

BP employees tell them the company plans to be in Hopedale for two to three years.

"I'd rather be here bagging ice than anywhere else," says Gordon.

But for some, this spill, coming on the heels of so many devastating hurricanes, has stretched the bonds of place.

If Sandy Reno could take her 13-year-old son and leave right now, she would.

"There was nothing down here for women after Katrina, anyway," she says, emerging from a pharmacy in the town of Port Sulphur, a 20-mile drive from her home in Boothville. "We used to have shops and a fitness center and a pool at the YMCA. We don't even have that anymore. This a man's place. Just look around."

But she knows there aren't many places where a man like her husband, George, 52, with a seventh-grade education, could run his own business and thrive.

"If he was to take a crew boat job or be a tug boat driver, I think he could do it," says Sandy Reno, who kept the books for the family's two shrimp boats — the Captain Bubby and Little Dipper. "But that's not what he's done. He's always worked for hisself."

Only now, he's working for BP — and still waiting to be paid for more than a month's labor.

Work on the two relief wells intended to kill the well once and for all is expected to be completed next month. But experts say tar balls and oil mats will continue to wash ashore from Texas to Florida — and perhaps beyond — for years to come.

As Louisiana's poet laureate, Darrell Bourque might be expected to have written something about the spill. But he's still too overwhelmed.

"I don't know how yet to translate that into the language of a poem," the 68-year-old writer said from the family farm where he grew up near Opelousas in rural St. Landry Parish.

To a large extent, Bourque's poetry is grounded in his belief that humans are just extensions of the landscape.

"One of the great lies and the great myths we've told ourselves is that there's a division between the natural world and the human world," he says. "And I think we're as much an extension of the natural world as the plankton and the pelican."

As sympathetic as he is about the plight of fishermen, oil workers and others who are hurting, Bourque has tired of hearing people talk about losing their "way of life." As far as he is concerned, it's that "way of life" that brought the gulf to the edge of the abyss.

___

Vicki Smith reported from Hopedale, La.; Associated Press Writer Holbrook Mohr reported from Port Sulphur, La.

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Farnborough tests health of ailing aircraft market (AP)

Sunday, July 18th, 2010 | Finance News

FARNBOROUGH, England – Boeing Co.'s long-anticipated 787 jet touched down on British soil Sunday, tipping its wings to the crowd and building buzz at the Farnborough International Airshow, the industry's premier event.

The arrival of the blue-and-white 787 after years of delay underlined hopes that the two-year downturn in the aviation and defense industry is nearing a bottom. Boeing Chief Executive Jim McNerney claimed that the 787 would be "the way planes are going to be built for the next 80 years."

But he acknowledged that delivery of the aircraft — already more than two years overdue because of production problems — could slip into 2011. He blamed administrative delays.

"End of the year is the plan," McNerney said. "There could be some paperwork that pushes it into next year."

Concerns remain about the slow global economic recovery and sharp cuts to national defense budgets.

New orders for commercial aircraft are likely to be restrained and restricted to buyers from strong emerging markets in the Middle East and Asia, while activity on the defense side of the show is expected to be muted.

Boeing and its archrival Airbus, meanwhile, head into the event facing growing challenges to their duopoly in the mid-sized civilian jet market from smaller manufacturers, including Canada's Bombardier and Brazil's Embraer.

Analysts, who are looking to Farnborough to take the pulse of the industry's health, expect the event to be more upbeat than last year's sister show in Le Bourget outside Paris, but they aren't holding their breath for commercial plane orders anywhere near the record-breaking $88.7 billion worth announced in Farnborough in 2008.

"A lot depends on if the economic recovery continues, if there is a double dip in the recession, then all bets are off," Forecast International analyst Raymond Jaworowski. "We should start to see orders accelerate late this year."

The Geneva-based International Air Transport Association has forecast that global industry profits will reach $2.5 billion this year, an upturn from the huge $9.4 billion loss in 2009.

Analysts expect Asia and North America to lead the recovery, with Europe lagging behind. Strikes at some airlines, the debt crisis and the volcanic ash cloud that caused major disruptions this spring are all hurting Europe's recovery.

More than 1,000 exhibitors from 38 countries have signed up for Farnborough with delegations from Egpyt, Taiwan and Morocco will be attending for the first time. Organizers also cited stronger interest from major players China and Russia.

Among likely buyers at Farnborough are Emirates airline, the largest in the Gulf states and Qatar Airways, which is looking to equip a new low-cost carrier in the region. Emirates is preparing to announce a "substantial deal" at Farnborough as early as Monday, according to person familiar with the order who was not authorized to discuss the plan publicly. The person would neither confirm nor deny reports that the company, already the world's biggest Boeing 777 operator, was ordering as many as 30 more of the aircraft.

TUI Travel PLC, the parent company of Thomson Airways, said it would be the first British airline to take delivery of the 787 in January 2012, buying 13 aircraft across the group.

ATR, an Italian-French aircraft manufacturer based in Toulouse and owned by EADS parent Airbus and Finmeccanica, may announce some turboprop orders.

Boeing last week downplayed the likelihood of big deals at Farnborough, stressing it didn't save up orders for international shows — a dig at Airbus' tendency in recent years to announce a block of attention-grabbing announcements at Farnborough and Le Bourget.

"At the end of the day, what matters is where we are at the end of the year, or over the longer term," said Randy Tinseth, Commercial Airplanes vice president for marketing.

Airbus chief salesman John Leahy was more upbeat about the show, which runs July 19-25 at an airfield about 30 miles (50 kilometers) west of central London. He said Saturday that he had bet EADS head Louis Gallois "that we'll more than double" the 131 gross orders that Airbus has made to the end of June.

Potentially of more interest to industry watchers are the emerging signs that the old duopoly of Chicago-based Boeing and EADS-owned Airbus in the commercial plane making market is on the wane, particularly in the lucrative single-aisle, narrow-body sector.

Boeing and Airbus currently account for more than two thirds of output and 40 percent of sales in the sector, but smaller rivals are stepping up — Canada's Bombardier Inc. picked up a strong 80-plane order earlier this year from Republic Airways Holding Inc. for its C-Series.

"We have new competitors now," Gallois acknowledged, while adding that Bombardier and China's state-owned Comac are still years from making a dent in the markets for the Airbus A320 and Boeing 737.

Bombardier's C-Series is on track for its first delivery in 2013. Comac is readying for a 2016 first delivery date of its C919. Russia's Irkut and Brazil's Embraer are also rising contenders.

Boeing is hoping to retain some of the limelight with the international debut of its fuel-efficient 787.

The announcement that its first planned delivery of the aircraft — to Japan's ANA — might be delayed by inspections and instrument changes was a setback, but the sight of one of five of the test planes landing at Farnborough on Sunday — the first time one has left U.S. airspace — was a major draw.

Boeing officials took journalists and U.S. congressmen on a tour of the 787's cabin, where they chatted with pilots and engineers and played with the dimmer switch on the plane's windows.

Also on show at Farnborough will be another aircraft with a troubled and lengthy production history — Airbus' long-delayed A400M military transport plane.

Britain has already scaled down its order for the four-propeller military transport plane, which will take part in the daily flying display at Farnborough.

Airbus expects to start delivering A400Ms sometime after December 2012 — around four years behind schedule and 50 percent over budget because of technical glitches. The original seven customer nations for the aircraft — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey — agreed with Airbus' parent European Aeronautic Defense & Space Co. in March to spend an additional euro3.5 billion to save the project after months of bickering about who should pay for cost overruns.

The project is a high profile symbol of the problems facing the defense industry amid budget cutbacks.

In the U.S., the world's biggest single defense market, the Pentagon is looking to trim some $100 billion of savings from personnel and procurement over the next five years. In Britain, Europe's largest market, the government is considering cuts of up to 20 percent.

Analysts will also be watching for developments in the bitter Boeing-Airbus battle to win a $35 billion contest to provide aerial tankers to the U.S. Air Force — the World Trade Organization ruled earlier this month that European governments gave Airbus illegal subsidies for the project.

Gallois said Saturday that he is "enormously frustrated" with the World Trade Organization, which he claims is being "unfair" by delaying its report on complaints against Boeing.

"We are in an abnormal and increasingly unfair situation," Gallois said.

___

Associated Press writers Andrew Khouri, Emma Vandore in London, Adam Schreck in Dubai and George Tibbits in Seattle contributed to this report.

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