Transcript: The ECB readies for rate cuts

This is an audio transcript of the FT News Briefing podcast episode: ‘The ECB readies for rate cuts’

Kasia Broussalian
Good morning from the Financial Times. Today is Monday, May 27th, and this is your FT News Briefing.

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Investors are expecting good news from the European Central Bank next week. And Chevron has hit a few snags in its bid to takeover Hess. Plus, nuclear power is making a comeback, but companies are struggling to recruit workers.

Sarah White
And that has immediate ramifications for global warming targets and attempts to bring down emissions by 2050.

Kasia Broussalian
I’m Kasia Broussalian and here’s the news you need to start your day.

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The ECB is ready to cut interest rates and it could happen as soon as next week. That’s what a chief economist from the bank told the FT. The ECB is scheduled to meet on June 6th. The move would kind of be a last in, first out situation. The ECB was one of the last major central banks to start raising rates three years ago, and now it would be one of the first to cut them. Still don’t get too excited. Wage growth in the Eurozone continues to put a lot of pressure on the price of services. So the ECB probably won’t be too heavy-handed in their cuts this year.

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Shareholders in the energy company Hess are voting this week on a takeover proposal from Chevron. The process has been chock full of corporate drama, and it all stems from a dispute over an offshore oil field in South America. Here to break it all down is the FT’s Myles McCormick. Hey, Myles.

Myles McCormick
Morning, Kasia.

Kasia Broussalian
So before we get into all that drama, tell me a little bit more about Chevron’s proposal for Hess.

Myles McCormick
So last October, Chevron came out to take over Hess. It was a 53bn deal, the most expensive deal in Chevron’s history. And it would subsume Hess, which is a company that has shale assets up in North Dakota. But more importantly for the conversation we’re having today, it’s got a stake in this massive oil field off the coast of Guyana in South America.

Kasia Broussalian
Yeah, tell me a little bit more about that. What’s the dispute over this oil field and how connected exactly is it to this takeover deal?

Myles McCormick
So the whole reason Chevron decided to buy Hess was to acquire its stake in this oil project off the coast of Guyana. It’s like the biggest oil finds of recent decades. And after Chevron announced the deal, Exxon, who is the biggest stakeholder in the project, came out and said that they had first dibs. They had the right of first refusal over any sale of Hess’s stake in the project, and they launched an arbitration process against Chevron to establish that they did, in fact, have first dibs. So that is kind of rattling on in the background here and has kind of spiralled this whole takeover bid into a clash between the two kind of biggest titans of corporate oil and gas in America.

Kasia Broussalian
OK. So then getting back to the shareholder vote that’s supposed to happen this week, what are the options for Hess shareholders when it comes to this Chevron deal?

Myles McCormick
So there’s three options effectively, they could vote in favour of it, they could vote against it or they could vote to abstain. And a vote to abstain is effectively the same as voting against it, because for the deal to pass, there needs to be more than 50 per cent of outstanding shareholders voting in favour. The vote is likely going to be quite tight this week. So it’s kind of become more complicated because ISS, which is one of the kind of leading proxy advisors that advises shareholders on how they should cast their votes in these matters, has called on shareholders to abstain and instead kind of urge a pause of the takeover until such a point as more information comes out about the arbitration process with Exxon. So even if the vote this week passes, the actual takeover is still subject to the outcome of this arbitration. Chevron say they expect to have it wrapped up by the end of the year. Exxon reckons it will drag on into 2025.

Kasia Broussalian
Wow. So quite a little bit before we actually get any sort of ending for this deal. And that makes me wonder, what does this whole drama, this debacle, tell us about M&As in the oil and gas industry right now?

Myles McCormick
I suppose the big takeaway is that there is a lot of appetite to snap up the best assets that are out there. And this project in Guyana is by far and away one of the leading oil projects that exist. So everyone wants to kind of get a slice of the pie. The kind of good oil projects are few and far between these days. So when there is an option to kind of get involved with one of the best oil projects on the planet, everyone’s gonna want to dive in. And it could lead to, yeah, corporate standoffs of this kind going forward.

Kasia Broussalian
Myles McCormick is the FT’s Houston correspondent. Thanks, Myles.

Myles McCormick
Thanks, Kasia.

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Kasia Broussalian
Now, apologies in advance for maybe ruining your breakfast. Thames Water pumped more than 14bn litres of sewage into the river around central London last year. The figures reveal for the first time just how much gross stuff has leaked into that section of the Thames. And the news comes after the UK’s chief medical officer said that sewage pollution has become a public health priority. Water companies have been facing a huge public backlash to the problem, and it’s now turning into a big political issue ahead of the general election on July 4th.

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Nuclear power is getting ready for its biggest wave of projects in decades. But the industry is struggling to build up the workforce it needs to do the job. So companies are trying to bring back retired workers to fill the gaps. They’re calling it a silver tsunami. The FT’s Sarah White has all the details. Hey, Sarah.

Sarah White
Hi, there. How are you doing?

Kasia Broussalian
Good, thanks. So lay out the landscape for me. Just how big of a skills gap is there in nuclear power and why does it actually exist?

Sarah White
If you take some of the very big nuclear power companies in the US or in European countries like France, they’ll tell you they need to hire tens of thousands of people over the next few years to get the industry back up to speed. The western world haven’t built new reactors for the past 25 years. This was an industry that was thriving. We had the Chernobyl accident. We had the Fukushima nuclear power plant meltdown in 2011, and that completely changed policymakers approach to the industry. Orders dried up. There was a lot less political backing for the sector, and it was as a result of that, it was just basically been a quarter of a century hiring freeze that we’re now rapidly trying to reverse.

Kasia Broussalian
And why is nuclear power coming back in vogue, I guess, now?

Sarah White
One of the big drivers is climate change concerns. One of its enormous assets is that it’s a low-emission technology. And the other big factor is energy security. So in Europe, you see that with Russia’s invasion of Ukraine, concerns about gas supplies and that’s just an additional incentive for some countries to turn back to the technology and create their own internal domestic source of reliable energy.

Kasia Broussalian
Got it. But like you mentioned, the industry hasn’t been hiring for quite a while now. So the people that would actually have the skills for these jobs, they’d mostly be of retirement age at this point. So what kinds of roles are they actually getting?

Sarah White
So I spoke to a few people for this story and they were careful to caution one thing, you know, they’re not here trying to take young people’s full time jobs, but often they’re coming into it with consulting roles. Nuclear plants lasts from about 40 years to around 60 years, and then they take several decades to decommission. So in order to build up experience in the sector, you need to have lived through it for a very long time. And like we were saying, there’s not many people, those who are really retiring now, who actually have several decades of experience of the nuclear cycle. So that’s why they’re vulnerable, because they’ve seen us through like an entire cycle of this before.

Kasia Broussalian
OK. So how is the industry looking to recruit younger workers then? Are they starting in universities?

Sarah White
I mean, what’s mad is that, you know, from the sort of early 2000s onwards, some universities actually cut their nuclear engineering courses. So part of the drive now is to put that option back on the table at university level. And one more thing I noticed this younger generation, they’ve a big issue with climate change. So that’s the big selling point for them. That’s why they might be interested in coming into this industry because they see it potentially as a solution. The issue is that people coming in to schools now are gonna take quite a few years to get up to speed, and we need these people already in the next few years.

Kasia Broussalian
Yeah, that’s actually what I was gonna ask next, you know, you’re talking about decades. Meanwhile, the need for this kind of power is basically now. So what’s at stake here if this industry can’t recruit more people to work on these projects and recruit them quickly?

Sarah White
If the industry can’t recruit, or if this recruitment drive just takes a lot longer than planned and takes another two decades to really develop, the consequence would be that these projects just take an extremely long time to come to fruition. And that has immediate ramifications for global warming targets and attempts to bring down emissions by 2050.

Kasia Broussalian
Sarah White covers energy for the FT. Thanks, Sarah.

Sarah White
Thank you.

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Kasia Broussalian
You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.