The ACCC is expected as soon as next week to provide interim clearance for Qatar Airways’ equity investment and lease deal with Virgin Airlines that will allow FIRB to proceed with its decision on the deal.
The move comes at a good time given the publicity over Qantas fare upgrades for politicians, but the formal process has a while to run after this week’s deadline for initial submissions.
Virgin is selling the deal as pro-competition, but the clear winner is Bain, which can use it as a floor for its planned float of the airline next year.
Qatar also gets its foot in the door for more international flights after the federal government inexplicably knocked back its application last year.
The ACCC is also expected next week to clear Chemist Warehouse’s backdoor listing through its $8.8bn deal with Sigma, subject to its undertaking on franchise agreements with Sigma pharmacies and ring-fencing of its wholesale supply deals with other chemists.
The wholesale supply will be covered by its commitment to Sigma’s community service obligation. The deal has attracted strong protests from EBOS and the Pharmacy Guild on the grounds it threatened arrangements with other pharmacies.
EBOS paid a $100m sign-on deal to take the Chemist Warehouse contract from Sigma in 2018, and Sigma took it back last year in an extraordinary deal for the Chemist Warehouse team with a $24m cash payment plus 10 per cent of Sigma gratis.
A draft decision on the Qatar deal is due in late January, with a final decision in March.
Qantas is keen for the regulator to impose a time limit on the proposed wet lease deal, which for the five-year duration of the authorisation decision gives Virgin the ability to use Qatar planes and staff to fly “its” customers on international flights.
Qantas argued this deal sidestepped the international treaties in place designed to protect Australian workers and industry.
The ACCC interim approval will not impose any conditions on the deal.
Virgin already has a code share arrangement with Qatar and the equity strategy is in line with Qatar’s recent activity, including the purchase of a stake in South Africa’s Airlink, and also mirrors John Borghetti’s strategy when he ran Virgin for a decade until 2020.
Outgoing Virgin chief Jayne Hrdlicka is close to Qatar and probably earned a bonus for securing the deal and, given the airline has been run for sale after Bain acquired the carrier in 2020, Qatar may well provide Virgin with a new chief executive and help fund necessary fleet renewal.
The Middle East carriers come to the table with a wheelbarrow of cash, which makes such deals no-brainers.
Separately, with three sitting weeks left, the government’s proposed merger law changes are edging towards potential clearance this year.
This week’s Senate hearings on the bills received little in the way of Coalition opposition as ACCC chief Gina Cass-Gottlieb, Kerry Schott, Rod Sims and the BCA gave evidence.
Carbon registry on way
The Clean Energy Regulator is aiming to have its new carbon market registry up and running by year’s end, providing the potential launch pad for the new exchange-traded market operated by the ASX in the new year.
The registry is being run by Trovio Group.
Ironically, given the ASX’s own issues with equity clearance, the registry and market will be blockchain-based, assuming it attracts minimal negative coverage in the consultation process due shortly. The aim of the registry is to give all traders open access for a fully informed market.
Bowen’s timetable
Climate Change Minister Chris Bowen this week provided a glimmer of hope to the carbon trading club as he laid down a timetable for new offset methods to help companies meet emission targets.
He was speaking at the Carbon Market Institute’s 11th annual forum in Melbourne to an audience of 900 practitioners, who while basing their business on the basis of the positive opportunities from the path to emission reduction are frustrated at the slow-moving reform agenda.
Compounded by the potential election of Donald Trump in the US next week and the likely negative stance he has on climate issues, the risk-averse nature of the government and its regulators has left many in the club gloomy.
The illogical stance taken by ANU’s Andrew Macintosh and his team and the Australia Institute has compounded the bureaucratic caution fearful of change, which might open them to attack.
It has also helped corporate naysayers opposing change.
Macintosh as noted previously is being paid by both the Queensland and federal governments to advise on method designs, which begs the question just what is behind his periodic media blitzes.
The former regulator insists on basing carbon production estimates based on changes to canopy (tree leaves) when new measurements are available to test bio mass accumulation independently from canopy cover.
The market is still awaiting the upgrades for the carbon measurement calculation tool known as the full carbon accounting model (FullCAM).
This delay is also slowing progress. As the latest climate studies show, Australia and the world have moved beyond a goal of net zero in 2050 to a need to be net negative as Carbon Growth Partners’ Rich Gilmore explained at the conference – emissions are rising and to get the necessary 50 billion tonnes of emissions out by 2050 means cutting 11 million tonnes a day.
We are not even close, in part because while there is plenty of talk, the world is still spending $US3.5 trillion subsidising oil and gas production, which is swamping any gains.
The good news from Bowen is that, all going to plan this quarter, Australia will see new methods approved, including the revived environmental planning method that should be out for consultation in the next couple of weeks.
This may allow orders to be placed for the new season starting next month.
Others targeted for next year include extending the Savannah fire method to the northern arid zone, avoided clearing of the native regrowth, reduced disturbance of coastal wet plains by managing hoofed animals, and improved forest management.
Landfill gas capture and managed savanna burning are identified for release by mid-next year.
CMI’s John Connor noted: “An expanded carbon market, in conjunction with the reformed Safeguard Mechanism, means that large emitters will be funding activities across the Australian economy that lower Australia’s greenhouse gas emissions.”
Connor is also waiting on promised reforms, including legislative changes to bolster method integrity.
One of Bowen’s reforms was to bolster the safeguards policy, which requires the top 200 emitters such as BHP, BlueScope, Qantas and Origin to cut emissions just under 5 per cent a year.
This can be done internally or through offsets, and unless the offsets are trusted they will be of little value and attract no investment.
The opportunity for Australia is through its ample solar, wind and land resources, and at an individual company level by disclosing a strong emissions reduction program attracting more capital.
The good news is that, as Arena’s Justin Punch noted, “technology is growing faster than people appreciate but the problem is also getting bigger, so progress is like an S curve.
Gilmore’s view is to start even if the system is not perfect and the naysayers like the Australia Institute and green movement are creating delays that give the big polluters permission to wait.
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