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High energy prices: most businesses don’t deserve a bailout – here’s why

The government is preparing to offer some kind of limited bailout to businesses that are struggling because of high electricity and gas prices.

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Glassmakers are among the industries seeking bailouts. FreeProd

Soaring energy prices in the UK are squeezing many businesses, with “household names” reportedly only days away from going bust. Energy-intensive sectors like steel, paper, glass and fertilisers are leading calls for government support to subsidise operations.

Meanwhile, the British Chambers of Commerce is warning that thousands of smaller businesses may not survive the winter, with the energy price crunch coming on top of labour shortages, supply-chain problems and other rising prices.

The government is reportedly in internal conflict over how to respond. Boris Johnson and Business Secretary Kwasi Kwarteng appear to be more keen to offer support, while the Treasury has been more reluctant. It comes only several weeks ahead of Chancellor Rishi Sunak’s autumn budget, which is being trailed as a set of tough measures to get the public finances in order after the pandemic.

The latest reports suggest that the government will nevertheless offer some support, but perhaps only for major energy-intensive firms on the verge of going out of business, and only then as loans not grants. So to what extent should the government support companies when the price of resources changes?

The case for not doing much

The starting point in a market economy is that businesses are free to choose which markets to enter and the business models they use. They do this at their own risk, and they profit if they are successful. That’s the nature of enterprise.

It’s also worth pointing out that the rising energy prices in the UK refer to the “spot” markets, meaning buying and selling a commodity like natural gas or coal for immediate use. The alternative is to enter into longer-term supply contracts that fix prices into the future. Many bigger businesses enter into such contracts, typically paying a premium for price certainty over months or years. Therefore, headline “spot” prices don’t necessarily reflect the average price being paid by companies.

As for those businesses who are buying energy at “spot” prices, a good analogy is the UK’s small energy retailers. Many of them have been victims of the rising market, having relied on making money from buying energy in the “spot” market and selling it at a higher price to consumers. They are going out of business because they didn’t anticipate the risk of rising prices, which has been a strategic failure on their part.

I would argue that the same is true of businesses in other sectors who are struggling with the high energy prices. Many financial instruments are available that can be used to “hedge” against the risk of price fluctuations. Industries such as airlines do this all the time. Even smaller businesses should be able to get fixed tariffs from suppliers for up to three years.

Such risk-reductions expire after a given period, so they don’t protect a business if energy prices permanently shift upwards, but do give them time to adjust. If it is felt that these tariffs have not been available at sufficiently competitive prices, there might of course be an argument for the government to make that a requirement of energy retailers in future.

Another dimension to this is climate change, particularly as the UK prepares to host the UN’s COP26 climate conference in November. The current price shock is in part a signal about the need to develop strategies for a low-carbon economy. Businesses should already have been trying to make themselves more energy efficient. Any government intervention is arguably subsidising their failure or inability to do so.

We are seeing a similar situation playing out in China, where I am based. A combination of a strong economic recovery post-COVID, rising coal prices, and tougher carbon emissions targets have led to power cuts, at least temporarily. With many factories cutting back their operations or shutting down, the government has ended up loosening its restrictions on importing and mining coal, even offering financial support to coal miners to ramp up operations.

The exceptions

But if these are reasons for not giving businesses support, there are times when it does make sense for government to intervene. There is a strong case where a situation is likely to cause significant disruption to either the wider economy or society. Examples might be where vulnerable consumers would be hurt or where multiple businesses might end up failing because a struggling customer is defaulting on their debt.

A recent example of what I would consider a justified bailout was the government’s decision in September to financially support fertiliser-maker CF Industries. This was after the company announced it would be shutting two UK plants in response to rising energy prices. The plants produce carbon dioxide as a by-product for industries like food and nuclear power, so the knock-on effects of the closures were likely to be considerable.

Another example is where bigger energy retailers have taken over the customers from retailers who have failed. The government is compensating the bigger retailers for the cost of maintaining supply to these customers via an industry levy, and this is justified to maintain confidence in energy supply as a whole and to avoid major disruption to businesses. Others might argue that a windfall tax on, say, gas producers might be a better option.

In short, it is not the role of a government to protect businesses from the consequences of their own strategic shortcomings. Governments do need to intervene occasionally when the alternative is significant disruption, but the UK should not stretch its support beyond this basic test. Generally speaking, businesses should be aware of the risks of rising prices and have systems in place to avoid bearing the brunt.

Martin Lockett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Modified mRNA Demonstrates 10-Fold Protein Production

Scientists at Hong Kong University of Science and Technology came up with a technique to increase the efficiency and potentially the efficacy of mRNA therapeutics….

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Scientists at Hong Kong University of Science and Technology came up with a technique to increase the efficiency and potentially the efficacy of mRNA therapeutics. mRNA molecules have what is called a poly-A tail, which is basically a string of adenine nucleotides at one end. These researchers discovered that by replacing some of these nucleotides in the mRNA tail with cytidine, a cytosine base with a ribose sugar attached, that they could enhance the resulting protein production of the mRNA and increase its stability and life-span. The technique could lead to more effective mRNA therapies and vaccines, potentially enabling clinicians to achieve similar or better effects with smaller doses.

mRNA therapies have come a long way in just the last few years. The COVID-19 pandemic has propelled this approach from an emerging technology to a mainstay of our vaccine response. The concept is elegant – deliver mRNA strands to the patient, and allow their own cellular machinery to produce the relevant protein that the strands code for. So far, so good – the approach, once considered unrealistic because of the fragility of mRNA, has proven to work very well, at least for COVID-19 vaccines.  

However, there is always room for improvement. One of the issues with current mRNA therapies is that they can require multiple rounds of dosing to create enough of the therapeutic protein to achieve the desired effect. Think of the multiple injections required for the COVID-19 vaccines. Creating mRNA therapies that can induce our cells to produce more protein would certainly be beneficial.

To address this limitation, these researchers have found a way to modify the poly-A tail of synthetic mRNA strands. They found that by replacing some of the adenosine in the mRNA tail with cytidine, they could drastically increase the amount of protein the resulting strands ended up producing when applied to human cells and in mice. This translated to 3-10 times as much protein when compared with unmodified mRNA.

The researchers hope that the approach can enhance the effectiveness and required dosing schedules for mRNA therapies.

“Increasing the protein production of synthetic mRNA is generally beneficial to all mRNA drugs and vaccines,” said Becki Kuang, a researcher involved in the study. “In collaboration with Sun Yat-Sen University, our team is now exploring the use of optimized tails for mRNA cancer vaccines on animal. We are also looking forward to collaborating with pharmaceutical companies to transfer this invention onto mRNA therapeutics and vaccines’ development pipelines to benefit society.”

See a short animation about the technology below.

Study in journal Molecular Therapy – Nucleic Acids: Cytidine-containing tails robustly enhance and prolong protein production of synthetic mRNA in cell and in vivo

Via: Hong Kong University of Science and Technology

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LIV Golf Expands to Courses Used By PGA Tour

LIV Golf announced three new venues to its 2023 calendar.
The post LIV Golf Expands to Courses Used By PGA Tour appeared first on Front Office Sports.

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LIV Golf is pushing further into the PGA Tour’s turf.

The Saudi Arabia-backed league announced three new venues for its 2023 season, all of which are used regularly by the PGA Tour or DP World Tour.

  • In February, LIV Golf will come to El Camaleón in Mexico’s Mayakoba resort area. The course, designed by Greg Norman prior to his role as LIV Golf CEO, was the PGA Tour’s first course in Latin America.
  • In April, LIV will travel to Sentosa in Singapore, which has hosted the Singapore Open.
  • In June, the tour will make its trip to Spain’s Real Club Valderrama, whose history includes the Ryder Cup and DP World Tour events.

LIV is also adding The Grange Golf Club in Adelaide, Australia, as it grows to 14 events next year.

The PGA Tour, which is under investigation by the Justice Department over antitrust concerns, hired lobbyist and major Republican fundraiser Jeff Miller to improve its standing in Washington.

PGA Tour Hires Top Republican Strategist Amid LIV Golf Clash

The PGA Tour could be seeking help on the antitrust front.
December 1, 2022

Bank Shots

LIV golfers Phil Mickelson and Sergio Garcia responded to Tiger Woods after the latter called for Norman’s ouster due to his pugilistic stance toward the PGA Tour.

“Greg Norman is our CEO, and we support him,” said Garcia. “We all wish we could come to an agreement. There are people who could have done wrong in both places, but it seems that there are only bad guys on one side.”

Mickelson responded to a comment by Woods that the PGA Tour had to take out a huge loan to survive past the pandemic by tweeting out financial information from the Tour’s public documents.

The post LIV Golf Expands to Courses Used By PGA Tour appeared first on Front Office Sports.

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XPeng stock rises 48% from a double-bottom pattern. Should you buy it?

Shares of XPeng Inc. (NYSE:XPEV) rose 48% on Thursday premarket after promising delivery outlook. XPeng posted 5,811 electric vehicle deliveries in November….

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Shares of XPeng Inc. (NYSE:XPEV) rose 48% on Thursday premarket after promising delivery outlook. XPeng posted 5,811 electric vehicle deliveries in November. Despite the number falling 63% from the prior year, it increased 14% from October. The increase in deliveries reflected the easing of Covid-19 rules, which have hit EV makers in China this year.

XPeng said it expects the deliveries to rise significantly in December 2022. The deliveries will be boosted by a ramp-up in the production of G9s. Analysts project up to 10,000 deliveries in December. The delivery outlook overshadowed a reported Q3 loss of $0.39. XPeng’s revenue, however, rose 19.3% to $959.2 million or £786 million. The positive stock market news and outlook boosted the outlook for XPEV, which is already down 80% YTD.

XPEV recovers above the MA amid a bullish RSI divergence

XPEV Chart by TradingView

On the daily chart, XPEV recovered above the 20-day and 50-day moving averages. It is for the first time that the stock is recovering above the moving averages since July. 

XPEV is also recovering from a double bottom that formed close to $6.2. A bullish RSI divergence also occurred towards $6.2. The level could prove to be the bottom price if XPEV maintains the recovery. The RSI reading of 60 indicates that XPEV is yet to reach overbought levels.

How attractive is XPEV?

This article finds investing in XPEV favourable in the short term. With the deliveries and outlook, XPEV could continue to rise. The levels around $12 and $14 should be watched.

It should be noted that Chinese car sales tend to pick up towards the end of the year. So, it is possible for XPEV to maintain gains in the medium term, with the expectation.

However, we consider the greater stock market risks still high. China also still needs to ease its strict Covid-19 policy further, and it could weigh the automakers.

The post XPeng stock rises 48% from a double-bottom pattern. Should you buy it? appeared first on Invezz.

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