Big Oil laggard Exxon faces a new climate threat from Wall Street

SHAREShare Article via FacebookShare Article via TwitterShare Article via LinkedInShare Article via Email
KEY POINTS
  • Exxon Mobil has been a laggard in the oil and gas sector and has seen its market value decline by hundreds of billions of dollars.
  • Pension giant CalSTRS is supporting a new activist fund effort to replace Exxon board members.
  • Activists see this as a perfect time to seek short-term value creation in a better run company as well as more long-term support from investors if the company becomes clearer about its climate plan.

In this article

VIDEO05:41
CalSTRS’s Chris Ailman on calling for company overhaul at Exxon Mobil

Exxon Mobil is poised for a new role in a changing world it doesn’t want: target and test case for a new form of combined attack from activist hedge funds and long-term impact investors focused on sustainability and climate change. A newly formed activist investor group, Engine No. 1, announced plans on Monday to seek four board seats at the oil and gas giant, and underlying the effort are both short-term and long-term goals to change the way Exxon approaches the energy business at a time of rapid transition forced by fears about carbon emissions.

The activist firm — which includes founders from successful activist hedge funds including Partner Fund Management and JANA Partners — thinks the time is ripe for an overhaul of Exxon’s management. The market stats cited in its letter to Exxon’s board highlight a significant drop in operating performance and “dramatic” decline in Exxon’s stock value in recent years as many investors have lost faith in the company.

Source: Big Oil laggard Exxon faces a new climate threat from Wall Street

Exxon faces proxy fight launched by new activist firm Engine No. 1 | Reuters

“(Reuters) -A new investment firm is taking aim at one of corporate America’s most iconic brands, pressing energy giant Exxon Mobil Corp to overhaul itself by focusing more on clean energy to improve its financial performance.

Engine No. 1 is being supported by pension fund California State Teachers’ Retirement System (CalSTRS) as it pushes the battered energy company, valued at $176 billion, to spend its cash better, preserve its dividend, and refresh its board.

“The industry and the world it operates in are changing and … Exxon Mobil must change as well,” Engine No. 1 wrote to Exxon’s board, adding “given the company’s long-running underperformance and the challenges it faces, it is time for shareholders to weigh in.”

Exxon is reviewing the hedge fund’s letter, an Exxon spokesman said.

The U.S. oil company this year reversed course on a massive oil and gas expansion program, cutting 30% from its spending plan and proposing a budget next year that is $4 billion to $7 billion below its outlays this year. It also plans to reduce its workforce by 14,000 people over the next two years as losses this year reached $2.37 billion.

Engine No. 1 faces a tough road. Exxon has beaten back past activist efforts to change its climate stance and to split the roles of chairman and chief executive.

But industry analysts also said the time may be right for traditional activists’ interest to overlap with climate activists’ interest and force Exxon to act. “There is a need for a fairly active reset right now,” said Andrew Logan, senior director of oil and gas at Ceres, a non profit organization that works with institutional investors and companies. “Everyone starts at the bottom of the hill with Exxon but Engine No. 1’s director nominees is not a list of flaky people.”

The activist investment firm, launched last week by two hedge fund industry veterans, said it plans to nominate four directors to Exxon’s 10-person board who have expertise in clean technology and running energy companies: Gregory Goff, Kaisa Hietala, Alexander Karsner, and Anders Runevad.

“Exxon’s refusal to adequately address climate risk is of serious concern to many shareholders and is a sign of significant governance issues. The company’s board needs overhauling. We’re looking forward to reviewing the slate of new directors,” said New York State Comptroller Thomas P. DiNapoli, whose fund owns a roughly $300 million stake, according to Refinitiv data.” . . .

Source: Exxon faces proxy fight launched by new activist firm Engine No. 1 | Reuters

Electric Cars Are Coming. How Long Until They Rule the Road? – The New York Times

“Around the world, governments and automakers are focused on selling newer, cleaner electric vehicles as a key solution to climate change. Yet it could take years, if not decades, before the technology has a drastic effect on greenhouse gas emissions.

One reason for that? It will take a long time for all the existing gasoline-powered vehicles on the road to reach the end of their life spans.

This “fleet turnover” can be slow, analysts said, because conventional gasoline-powered cars and trucks are becoming more reliable, breaking down less often and lasting longer on the road. The average light-duty vehicle operating in the United States today is 12 years old, according to IHS Markit, an economic forecasting firm. That’s up from 9.6 years old in 2002.”

David Lindsay Jr.
Hamden, CT | NYT comment:
Great piece of writing. Thank you. Yes, and, there is a story to review on how the Japanese upgrades their auto fleet in the 1950’s and 60’s. They wanted to develop their auto manufacturing, and so they passed laws of some kind that made it almost impossible for an older car to pass inspection, forcing the entire population of car drivers to get new cars, which because of tariffs or restrictions, had to be Japanese. They forced their people to buy new cars if I recall correctly.

What Caused the Blackouts in Texas? – The New York Times

“The outages and the cold weather touched off an avalanche of failures, but there had been warnings long before last week’s storm.

After a heavy snowstorm in February 2011 caused statewide rolling blackouts and left millions of Texans in the dark, federal authorities warned the state that its power infrastructure had inadequate “winterization” protection. But 10 years later, pipelines remained inadequately insulated and heaters that might have kept instruments from freezing were never installed.

During heat waves, when demand has soared during several recent summers, the system in Texas has also strained to keep up, raising questions about lack of reserve capacity on the unregulated grid.

And aside from the weather, there have been periodic signs that the system can run into trouble delivering sufficient energy, in some cases because of equipment failures, in others because of what critics called an attempt to drive up prices, according to Mr. Hirs of the University of Houston, as well as several energy consultants.

Another potential safeguard might have been far stronger connections to the two interstate power-sharing networks, East and West, that allow states to link their electrical grids and obtain power from thousands of miles away when needed to hold down costs and offset their own shortfalls.

But Texas, reluctant to submit to the federal regulation that is part of the regional power grids, made decisions as far back as the early 20th century to become the only state in the continental United States to operate its own grid — a plan that leaves it able to borrow only from a few close neighbors.

The border city of El Paso survived the freeze much better than Dallas or Houston because it was not part of the Texas grid but connected to the much larger grid covering many Western states.” . . .

7 Tips for Operating Your Mini-Split Heat Pump in the Summer

“If you own a mini-split heat pump system, you probably already know about the benefits of efficient heating and cooling, zone temperature control, and quiet operation. Mini-splits require little maintenance and are easy to operate. To get the most out of your mini-split heat pump system, check out these seven tips to maximize it’s efficiency, lower energy costs, and enhance your comfort during the summer months.

 

Choose your comfort level.
Don’t get hung up on the number. When choosing the temperature setting on the remote for your mini-splits, you may discover you need to set it higher or lower than you would expect. Part of this is due to the fact that the temperature is measured at the level of the indoor air handler unit, which is typically 7-8 feet off the ground. Find a setting your most comfortable with and stick with that.

 

Let your system run continuously.
Set it and forget it. A mini-split system uses less energy and keeps temperatures most consistent when it runs continuously, as in, 24/7. You also don’t need to turn the units on and off or adjust temperature settings when you’re away like you might with a central heating and cooling system controlled with a thermostat.”

Source: 7 Tips for Operating Your Mini-Split Heat Pump in the Summer

GM to Curb Economic Ties With Trump: Live Business Updates – GM Quits Trump lawsuit against CA

“Over the past four years, General Motors has emerged as one of President Trump’s favorite corporate targets. He attacked the company repeatedly for closing a plant in Ohio and lashed out at it even when the automaker offered to make ventilators this spring in response to the coronavirus pandemic.

And Mr. Trump ridiculed the company’s chief executive, Mary T. Barra, one of the few women to lead a large U.S. corporation. “Always a mess with Mary B,” he wrote on Twitter in March.

The company and Ms. Barra have not responded to the presidential wrath, but on Monday G.M. broke ranks with the White House on the one major issue where they were aligned. The automaker said it would no longer back the Trump administration in a fight with California over clean-air standards.

California has sought tougher standards on tailpipe emissions to battle climate change. The Trump administration loosened Obama-era standards and revoked the authority of California and other states to set their own rules, which led to a lawsuit from several states. G.M., Toyota Motor and Fiat Chrysler intervened in the lawsuit on behalf of the administration. A few other automakers, including Ford Motor, BMW and Volkswagen, sided with California.

G.M.’s support for the Trump administration surprised many auto experts given the president’s repeated attacks on the company and Ms. Barra. It also seemed to be an odd position for G.M. to take because the automaker has outlined ambitious plans to add nearly two dozen electric models to its lineup.

In a letter to the leaders of some of the nation’s largest environmental groups on Monday, Ms. Barra indicated G.M. was now backing President-elect Joseph R. Biden Jr. in his plan to cut emissions and support the use of electric vehicles.”

Opinion | When Will Electricity Companies Finally Quit Natural Gas? – By Justin Gillis and Michael O’Boyle – The New York Times

By Justin Gillis and 

Mr. Gillis is a contributing opinion writer. Mr. O’Boyle is director of electricity policy for the research firm Energy Innovation.

Credit…Jeffrey Greenberg/Universal Images Group, via Getty Images

“As Americans suffer through immense wildfires, rising coastal flooding and an epic hurricane season, the nation’s corporations want you to believe they are coming to grips with the climate crisis.

Among the companies pledging bold emissions cuts are those that generate America’s electricity, which emit more than a quarter of the nation’s global-warming pollution. Yet, that same industry is about to make a strategic error that could render meeting its own goals far more expensive, if not impossible.

As they shut down costly and dirty coal-burning power plants, the electrical companies are planning to build 235 gas-fired power stations across the country, according to our analysis of figures compiled from commercial databases by the Sierra Club. The companies claim these are needed to replace the coal plants, and to balance fluctuations in electricity generation from rising levels of wind and solar power. This investment in new gas plants would exceed $100 billion.

If the plants are built, along with the pipelines to support them, they are likely to run for 30 or 40 years — long past the point that emissions from the electrical grid need to approach zero if we are to have a reasonable climate future.”

California Is Trying to Jump-Start the Hydrogen Economy – The New York Times

“IRVINE, Calif. — Since President George W. Bush fueled a minivan with hydrogen 15 years ago, the promise of cars and trucks powered by the fuel has come up mostly empty.

That hydrogen pump, in Washington, closed long ago. But in California, the beginnings of a hydrogen economy may finally be dawning after many fits and starts.

Dozens of hydrogen buses are lumbering down city streets, while more and larger fueling stations are appearing from San Diego to San Francisco, financed by the state and federal governments. With the costs of producing and shipping hydrogen coming down, California is setting ambitious goals to phase out vehicles that run on fossil fuels in favor of batteries and hydrogen. Large auto and energy companies like Toyota Motor and Royal Dutch Shell have committed to supplying more cars and fueling stations.

“In past cycles, there was always something missing,” said Matthew Blieske, Shell’s global hydrogen product manager. “There was a policy missing, or the technology wasn’t quite ready, or people were not so serious about decarbonization. We don’t see those barriers anymore.” “

How Does Your State Make Electricity? – The New York Times

Overall, fossil fuels still dominate electricity generation in the United States. But the shift from coal to natural gas has helped to lower carbon dioxide emissions and other pollution. Last year, coal was the main source of electricity generation for 18 states, down from 32 states in 2001.

Top Source of Electricity Generation In Every State

How PG&E Overlooked Wildfire Risks in Favor of Its Bottom Line – The New York Times

By IVAN PENN, PETER EAVIS and JAMES GLANZ MARCH 18, 2019

“Tower 27/222 looms almost 100 feet tall in the Sierra Nevada foothills, a hunk of steel that has endured through 18 United States presidents. The transmission lines that it supports keep electricity flowing to much of California.

On the morning of Nov. 8, a live wire broke free of its grip. A power failure occurred on the line, affecting a single customer. But 15 minutes later, a fire was observed nearby. Within hours, flames engulfed the region, ultimately killing 85 and destroying the town of Paradise.

The equipment belonged to the state’s biggest utility, Pacific Gas and Electric. To the company’s critics, the tower and its vulnerability reflect a broken safety culture.

Five of the 10 most destructive fires in California since 2015 have been linked to PG&E’s electrical network. Regulators have found that in many fires, PG&E violated state law or could have done more to make its equipment safer.

Long before the failure suspected in the Paradise fire, a company email had noted that some of PG&E’s structures in the area, known for fierce winds, were at risk of collapse. It reported corrosion of one tower so severe that it endangered crews trying to repair the tower. The company’s own guidelines put Tower 27/222 a quarter-century beyond its useful life — but the tower remained.”