Tag Archives: alternative
Farm manager looks east in search of fertile investment
Britain’s biggest farm management company is branching out into agricultural investment in Romania, believing eastern Europe offers far more fertile opportunities than those at home. The privately owned Velcourt, which manages 50,400 hectares of arable and dairy farms in the UK for 81 clients, has set up a joint-venture with Mintridge International, a farmland acquisition company focused on Poland and Romania. The pair plan to tap into resurgent demand for farming investment, boosted by rising food prices, that cannot be met by opportunities in Britain. “The UK farmland market is very mature and illiquid,” said Velcourt chief executive James Townshend. “Less than 0.5pc of UK farmland is sold in any one year, so opportunities are very limited and yields are only 1pc-2pc.” Mr Townshend, who has been with Velcourt for 35 years, is married to Charlotte Townshend – one of the UK’s wealthiest landowners, whose estate includes 40 acres around London’s Holland Park and Chesil Beach in Dorset. She has an estimated fortune of about £300m, and is the only person in Britain apart from the Queen who is entitled to own swans. Mr Townshend said he saw “double digit” returns in Romania both from the farming operations and the uplift in land prices. “We’ll get the returns in two ways,” he said. “We’ll ramp up productivity and reduce costs and there’s potential for very profitable agricultural operations with good soil quality. “Then there’s the land arbitrage. Consolidating a large number of indigenous landowners with small plots into one larger block with proper irrigation and crop storage will increase land values, which will rise anyway over time.” He believed that “over six or seven years”, the value of Romanian farmland could rise from the current €2,700 (£2.365) per hectare to Poland’s average of €6,500 to €7,000. “In East Anglia it’s €30,000 a hectare,” said Mr Townshend, noting UK farmland was “fully priced”. The new Bucharest-based joint-venture company, Velcourt SRL, has modelled an initial €14m investment that is targeting an 18.7pc return. It envisages buying 4,450 hectares, each at €2,700 or less, and improving irrigation and storage. By the time an investor exits eight years later, Velcourt envisages land values will have risen to €9,500 per hectare. The model assumes drought in years two and five. Mr Townshend said land had been identified, with a typical investor likely to be “family offices or private equity”. Velcourt is also the UK’s largest manager of dairy farms, spanning 10 businesses and 5,000 cows. But it will focus on arable farming in Romania, notably maize, wheat, sunflowers and oilseed rape. Velcourt was formed in 1967 and made pre-tax profits of £4.56m in 2011 – its latest accounts – on sales of £35.3m. It takes a share of the profits of the farms it manages, whose collective turnover would be close to £100m. Mr Townshend owns more than 20pc of the business. The company has previously invested in Russia, though returns were hit by the collapse of Lehman Brothers in 2008, which knocked asset values everywhere. “Demand for farm investment is not back to 2008 levels but it is getting there,” Mr Townshend said, noting that “there are a number of vehicles in the offing” aimed at agricultural investors. That is on top of established ventures such as Rabo Farm – a subsidiary of Rabobank. He said Velcourt could “take a 10pc stake in the initial investment” in Romania but would not be drawn on whether his wife would invest. “That would be a decision for her,” he said. Continue reading
Cap and Trade Collapses
EVIEW & OUTLOOK EUROPE April 17, 2013 Cap and Trade Collapses Even the European Parliament rejects carbon price-fixing. One of the great policy bubbles of our times has been cap and trade for carbon emissions, and on Tuesday it may have popped for good. The European Parliament refused to save the EU’s failing program, which is the true-believer equivalent of the pope renouncing celibacy. The Parliament in Strasbourg voted 334-315 (with 63 abstentions) against propping up the price of carbon credits in the EU Emissions Trading System. The failed proposal would have delayed the scheduled sale of 900 million ETS permits over the next seven years, thereby suppressing supply. After carbon traders realized they weren’t getting more artificial scarcity, they drove the price of emissions permits down by 40% at one point on Tuesday. EU carbon permit prices have collapsed as the Continent’s economic crisis curbs energy demand. Utilities and industrial firms have less need to emit CO2 above their statutory limits. Total emissions in the EU fell by nearly 10% between 2007-2011, according the most recent data. The low price of carbon allowances is good for consumers who don’t have to absorb the extra regulatory cost in what they pay for energy. Anticarbon crusaders never give up, however, so they wanted the Parliament to intervene to prop up permit prices. They want higher-than-market prices for fossil fuels because they know that is only way they can force the production of renewable energy that is otherwise uncompetitive. The Parliament majority rightly judged that raising energy prices for companies and households is ludicrous when Europe is barely growing as it is. This failed political intervention also gives the lie to the claim that cap and trade is a “market solution” to climate change. Proponents only like the market in permits when it keeps carbon emissions prices high. Cap and trade is an attempt to use brute political force to limit the supply of carbon energy. All of which vindicates the Bush Administration and others who opposed cap and trade in the Kyoto Protocol. Aided by Al Gore, Europe tried to turn cap and trade into a global policy. The hot air started to go out of Kyoto after its early backers refused to implement job-killing legislation to meet emissions targets. It lost further support when it became clear that financial firms were gaming the system. With the U.S. shale fracking revolution, it’s now clear that the fastest way to reduce greenhouse gases is to let private drillers expand natural gas production. When even Europe recognizes the folly of artificially raising energy prices, the anticarbon obsessives have lost in their own climate-change temple. Continue reading
A Fix For Europe’s Emissions Problem
http://www.ft.com/cms/s/0/329f0798-a762-11e2-9fbe-00144feabdc0.html#ixzz2QpKvqtJe The EU carbon trading scheme needs a serious overhaul The EU’s emissions trading scheme was supposed to bestow global leadership in tackling climate change. In practice, it has long been an embarrassment. A combination of industry lobbying and recession has so swamped the market with permits to emit carbon that prices have slumped and no longer impose any constraint on behaviour. Brussels has tried to bolster the market with half measures. But its bluff was called this week when the European parliament rejected a quick fix that would have propped up prices by postponing the auction of a big tranche of new permits. MEPs rightly refused to court personal unpopularity to no environmental purpose. Much deeper reforms are needed to rid the ETS of its flaws. One is the way that it imposes costs on the production, not consumption, of carbon. This creates bizarre incentives, resulting in the closure of industrial plants in Europe to make way for more polluting ones in Asia. Not only does this seem unforgivably self-defeating at a time when Europe is struggling for competitiveness; it is not even much good for the environment. European nations may be cutting carbon production, but consumption, when imports are counted, has been shooting up – something that spells more pollution, not less. In addition, the focus on production actually thwarts the development of the ETS into a global system – a vital necessity if companies are to be able to compete on equal terms. So first, a mechanism must be found to tax imports from countries outside the system. Second, European leaders need to agree longer-term targets for cutting emissions. Recession has made it easy for the EU to meet its current 2020 targets. A 2030 or 2050 target would help to convince businesses of the need for investment in “green” technologies. Third, the EU needs to deal with the overhang of permits, and find a mechanism to prevent it accumulating again. One idea is to set a time limit, say of three years, after which an unused permit would expire. Another would be to create an independent body with a mandate to achieve cuts of a certain level, taking account of the economic cycle. Whatever it does, the EU must find a way to end the system’s absurdities. If politicians cannot build a system that commands public confidence and creates a credible market, the risk of Europe moving to more coercive measures, or abandoning effective climate policies, will only increase. Continue reading
