Category: Economics

Categories
Economics Environment

[1119] Of India to sell Malaysia 220MW nuclear reactor?

Now this is a news that we do not get to hear everything. Over at Bloomberg, there is a report that India is planning to sell a 220-MW reactor to Malaysia:

Feb. 27 (Bloomberg) — Nuclear Power Corp. of India Ltd. said it’s in talks to sell small nuclear reactors to Malaysia and other Asian nations once an international embargo on India’s atomic technology ends. [India Seeks to Sell Reactors to Malaysia, Indonesia, Bloomberg, Feb 27 2007]

Now, that would soften the what-the-fuck reaction I made after reading a news report that Uncle Sam would be alright with a nuclear-powered Malaysia, and even support:

KUALA LUMPUR, Feb 27 (Bernama) — The United States said today that it would not oppose if Malaysia were to pursue a nuclear energy programme for peaceful purposes. [US Has No Objection To M’sia Pursuing Nuclear Energy Programme, Bernama, Feb 27 2007]

In recent times, the notion of nuclear-powered Malaysia was probably first mooted in 2006 by Dr. Jamaluddin Jarjis. Therefore, this development in some way should not come as a surprise.

As for me, I am still undecided about nuclear power. The fact that nuclear power could help reduce greenhouse gases emissions greatly attracts many greens to it. It may be an exaggeration but currently as far as the nuclear option is concerned, there is a great schism within environmentalism. I personally am slightly leaning towards acceptance of nuclear power as a piecemeal answer to anthropogenic climate change.

There are two things that still prevent me from fully embracing nuclear as energy.

One is waste management. There is technology out there that could safely store the waste but it is very expensive to say the least.

Second is production cost. On cost, it is quite confusing. Some say nuclear-derived electricity is cheaper than coal or gas. Some say otherwise; if the cost of construction is considered, the price of nuclear-derived electricity is higher than coal or gas. In the US, opponents of nuclear power often cite that nuclear power only become viable after heavy govenrment subsidy. If the deal goes through through, perhaps we could compare the planned roughly RM 1.3 billion 300MV coal power plant in Sabah with a power plant that would utilize the 220MW nuclear reactor.

Further, if the deal goes through, the location of the reactor would be of great controversy.

Categories
Economics

[1117] Of Friday morning starts with free trade

Protectionists always argue that free trade hurts the poor. Professor Mankiw quotes the US Treasury Secretary Paulson as the US battles its own rising sentiment of protectionism:

Thus trade helps Americans provide for their families. When special interests seek protection in the name of low-wage workers, we should acknowledge that limitations on imports do not benefit the vast majority of Americans. They deny people the freedom to choose from a broader array of goods and services, and impose a cruel tax on people who rely on low prices to stretch their family budgets. The cost of protectionism falls most heavily on those who are least able to afford it — the poor and the elderly.

It should be noted that free trade means absence of trade-distorting policies which include tariffs and subsidies.

Categories
Economics Politics & government

[1115] Of it is best for BN-led government to dissolve the Parliament soon

I thought yesterday was scary when Shanghai’s benchmark fell about 9%. Yet, I thought it was a mere blip, some sort of a random walk that usually occurs for no good reason. The Dow Jones followed suit later but I thought it was a reaction to the Chinese performance. As of noon, today, the KL Composite Index has fallen nearly 6%. As a whole, it is not pretty for the region either. This might be the start of a vicious cycle and I am beginning to change my mind about the random walk.

I would like to see data on consumer spending to find out what is really happening though. If we truly are in trouble, consumer spending should start falling. It is only unfortunate that there is a lag in reporting.

Meanwhile, talks of recession are yet again running amok:

Still, traders’ dwindling confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, just a day after former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession. [Stocks Have Worst Day Since 9/11 Attacks, AP via Yahoo!, Feb 27 2007]

Alarms have been sounded earlier. That is why I am somewhat skeptical of the feel good atmosphere the Barisan Nasional-led government is trying to paint currently. The economy was relatively good last year — I am willing to accept that much — but between the future and the past, we should concern ourselves with the former, first and foremost.

With a recession expected to hit the US, and — by virtue that the country is Malaysia’s largest trading partner and that Malaysia is hugely dependent on trade — Malaysia, strategically, I feel it is best for the BN-led government to dissolve the Parliament soon. Therefore, I am agreeing with the executive director of MIER, Ariff Abdul Kareem’s opinion.

The later the general election is held, the worse the economy would perform and the worse BN would perform in the election.

Nevertheless, of course, that does not prevent us from savoring the expected Bank Negara’s announcement on last year’s GDP.

Categories
Economics

[1114] Of KKR at the gate

After the euphoria, the important question comes up: how the hell KKR manages to convince other people to pay for their fun ride?

At the NYT today:

In an unusual twist that may soon become common, the banks are going one step further than simply providing the debt financing involved in the deal, in this case a daunting $24 billion of debt.

The banks are also lending $1 billion to TXU’s buyers, Kohlberg Kravis Roberts & Company and the Texas Pacific Group — not as secured debt, but in the form of equity using the bank’s own cash.

[…]

The risk to the banks is that the value of TXU could fall sharply below the $69.25 being offered. Yesterday, TXU shareholders welcomed the deal, driving up the shares 13 percent, to $67.93. [Private Equity Buyout of TXU Is Enormous in Size and in Its Complexity, Feb 27 2007]

Also, humor:

The deal still must undergo months of scrutiny from state and federal regulators. And while the deal has won support through pledges to cut electric rates and scale back a plan to build coal-fired power plants, the private equity firms must still overcome a perception that buyout buyers are temporary owners who are not beholden to shareholders or customers.

Talk about building bridges. [Private Equity Buyout of TXU Is Enormous in Size and in Its Complexity, Feb 27 2007]

If KKR sounds familiar to you and you are unfamiliar with modern economics or finance history, you might be thinking of Barbarians At The Gate, based on the book that goes by the same title. Heh. I bet somebody is going to write a book on this, just like what happened the last time KKR had fun at RJR.

Categories
Economics Environment Politics & government

[1112] Of all hail to Environmental Defense

When KKR, a coal power plants operator and the Environmental Defense are mentioned in one article in the same paragraph, one would expect a report on vicious political skirmish. Quite to the contrary and to my surprise, the three groups are working together!

The buzz first came up a couple hours ago but it is only just now that I accepted it. I was like running into a think see-through glass door — it takes a moment to realize what is going on after a pang in the face. This might signal the greatest cooperation between the greens and the grays yet:

Early Monday, after several weeks of marathon negotiations that brought together both environmentalists and Wall Street bankers, TXU announced that its board of directors had approved the bid from Kohlberg Kravis and Texas Pacific for about $45 billion, which would be the largest buyout in history.

[…]

The deal was noteworthy not just for its size, but for the confluence of business decisions and environmental concerns that drove the ultimate transaction. Because private equity firms are unregulated and historically have valued their privacy, neither Kohlberg Kravis nor Texas Pacific were eager to become an “enemy combatant” of the environmental groups, people involved in the talks said. Reducing the coal plant initiative will also free up billions of dollars in planned spending that the firms will be able to use for other projects or to help finance the transaction. [NYT, Feb 26 2007]

I have a newly found respect for the Environmental Defense! That whole lot spams I received through email, tons of snail mail I received in my mailbox and that couple of bucks I donated to them while I was at Michigan worth every single bit!

This is the crux of the deal, as far as the environment is concerned, as stated in an email I received from Environmental Defense:

As part of the sale agreement, Environmental Defense helped negotiate an aggressive environmental platform that will, among other things:

  • Terminate plans for the construction of 8 of 11 coal-fired power plants TXU had hoped to build;
  • Stop TXU’s plans to expand coal operations in other states;
  • Endorse the U.S. Climate Action Partnership (USCAP) platform, including the call for a mandatory federal cap on carbon emissions; and
  • Reduce the company’s carbon dioxide emissions to 1990 levels by 2020.

Way to go!

w00t! w00t!

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — and Al Gore won the Oscar for An Inconvenient Truth!