Friday, October 26, 2007

New Canadian Oil Sands Royalties Who Cares!

Alberta's premier announced yesterday a new royalty regime. For those of you who do not know Alberta is a Canadian province that has a great deal of petroleum. Much of this petroleum is gladly sold into the US. Many people still do not realize that there may be more oil in Alberta than the Saudi's have.

The Canadian Oil is primarily in the oil sands and the extraction process is unique onto itself. This means it is expensive and unconventional. The industry has been threatening the end of the world if these royalties are enacted. Of course who wants to pay more taxes.

In true political style the politicians have slipped in the increase gradually. Now everyone who has seen the numbers is yawning because the increase is incrementally small. Major participants Suncor (SU)and Canadian Oil Sands Trust (TSE:COS.UN) all appear to be unaffected.

So do we go back to business as usual? We have all forgotten about the federal government. If the province increases its royalties it bumps the Federal government down in their revenue take. Federal governments probably will not take this lying down. (Even if the same political party is in power federally and provincially) Its not about the money its about being marginalized as a power player.

The current provincial premier is about to go to the polls and run an election campaign. If he is perceived to be weak watch for the Fed's coming in to re-assert themselves with a new revised royalty regime.

Oil is a political commodity.

Thursday, October 25, 2007

Did GE Stub Its China Toe?

GE (GE) recently pulled out of its proposed acquisition of Shenzhen Development Bank. The termination was announced by Shenzhen and not GE. I cannot find any comment of it on GE web sites or press releases attributed to GE relating to the deal.

The deal tanked because of concerns it would have to pay more than the price set in a 2005 agreement, as per a rule released by the securities regulator last year. The rule stipulates that private share sales be priced at 90 percent or more of the recent average trading price of a listed company's tradable shares. The share price has increased dramatically since the offer and GE is unwilling to increase the price offered.

Jeff Immelt GE Chairman and CEO is not happy as this quote was attributed to him "GE was not satisfied with the cooperation with Shenzhen Development Bank. China's financial sector is still in an early development stage, and GE has been continually looking for better opportunities in cooperating with other banks." The quote could be found on and

An analyst from CITIC She Minhua, said Companies now have to reset the value of listed companies' shares so that they're fair and find better opportunities to purchase stakes. But She said GE's withdrawal from the deal will not affect Shenzhen Development Bank as it has raised enough money on the market to fund its capital adequacy ratio. CITIC of course is the newbie on the Bear Stearns (BSC)scene.

The Chinese market has risen tremendously. GE is not a buy high sell low investor. GE may have been able to help out Shenzhen. But Shenzhen managed without them. There would be great honour in fighting off the great American Devil. Immelt is clearly annoyed that matters did not unfold according to the GE playbook.

GE was outfoxed. The Monday morning quarterbacks are asking if GE had this properly figured out. Is GE reviewing their strategy or are they just going to blame someone else? While China has many early stage elements it also has accumulated enormous amounts of capital. Viewing China exclusively as an early stage situation begs to many other questions.

Wednesday, October 24, 2007

Google & Nielsen What Does It Mean?

Google (GOOG) is trumpeting a new deal with Nielsen to acquire television viewing data. The initial headlines are heralding this as a continuation of the Google advertising juggernaut that will eat up the TV world very soon.

Google needs the data to allow them to learn how to target TV ads. Unlike text ads which are search driven and the metrics that You Tube spins out, in the TV space Google is on the outside looking in. It has no natural advantages. It must spend serious cash to acquire advantage. Other players have also identified the TV market as critical in this context.

Naturally more traditional media is watching closely. Nielsen has been providing critical data and is the real play here. They seem to be held by private equity at the present time. Given that private equity eventually desires to sell off acquisitions and make a big fat buck watch for someone to make an offer for Nielsen.
Forget about the partnership deals this is just another data sale.

Tuesday, October 23, 2007

LDK's Bold Announcement

LDK Solar (LDK) said Monday it signed a contract worth about $534 million to supply solar wafers to solar cell maker Canadian Solar Inc. (CSIQ) The three year deal calls for LDK to begin delivery of the multicrystalline wafers in 2008, with 50 megawatts worth of capacity scheduled in the first year. $534 million that's a lot of money isn't it?

LDK currently has a positive working capital position of approximately $60 million. We are as yet unsure of the impact of the inventory valuation controversy. In any event $534 million is huge in relation to the working capital position.

Canadian Solar, whose market cap is one third the size of LDK, has a positive working capital ratio of approximately $95 million. Current cash on hand is approximately $23 million. How do you run a $534 million dollar deal through those numbers?

Also Canadian Solar has not issued their own press release about the deal.

At the same time the market place is clearly having well publicized problems with silicon supply.

LDK and associated entities need to communicate more clearly and connect all the dots or else face a huge credibility problem. Class action lawsuits have already been filed. This would be a good place for regulators to start making some inquiries and clear the air.

Sunday, October 21, 2007

Yahoo Executive Shake Up

Yahoo (YHOO) announced on Friday that their Chief Marketing Officer will join the management exodus. Allen Olivo, Yahoo's vice president of global brand marketing, will take over Cammie Dunaway's duties until a permanent replacement is found.

We all know that Yahoo is trying to change and that means some executives are going to go. But when senior people like this leave without any obvious replacement in sight you have to wonder about how well Yahoo is executing the internal changes it needs. The press release obviously says little to nothing.

I suspect that there were some heavy discussions preceding the departure. Cammie Dunaway did not see eye to eye with whatever was requested and had to get out of the boat. Just because an employee has to leave does not mean that the employee was necessarily wrong.

Now that the previous Chief Marketing Officer is no longer an obstacle Yahoo needs to articulate what the marketing plan will be. Hiring someone new to figure it out will not do. The new position is now similar to the old school nitro glycerin delivery person that used to service mining projects. We think there is value in the mine but one wrong step on delivery and all is lost. Wonder what the job will pay?

Seeking Alpha

Kudos to Kiplinger's Personal Finance, has named Seeking Alpha the most informative investment web site in its 2007 Best List. Kiplinger said the following about Seeking Alpha

"The site's large roster of contributors includes traders, bloggers and money managers. Nifty extras: a comprehensive section on exchange-traded funds and Q&As with CEOs."