Tuesday, September 4, 2007

Millions hit by London Tube strike (Times Online)

Sophie Tedmanson

London commuters faced chaos this morning as a Tube strike by maintenance workers over pensions and jobs left millions forced to find alternative ways to get to work. But there was a glimmer of hope for passengers after the Rail, Maritime and Transport (RMT) union, whose members began a 72-hour strike yesterday evening, announced that talks to resolve the dispute would be held later today. Only two of the 12 Tube lines – which service the main parts of central London – were operating in full, causing travel chaos for most of the three million people who use the underground network. During the morning peak hour, massive queues formed outside bus stops, including at Victoria Station where the mood among commuters turned from frustration to anger at having to wait for packed buses. Police handed out street maps and encouraged people to begin walking or face lengthy delays for a bus.

“I’ve no idea why they’re striking or what this is all about - all I know is that they’re making life a misery for millions of people,” said Caroline Dyer, 33, an accounting assistant from Kent.

Transport for London (TfL), which has put on extra staff to cope with the demand and help people find alternative routes to work, said the disruption was “severe and unacceptable”.

“We share Londoners’ view that this disruption is intolerable, as it serves no purpose,” a TfL spokesman said.

About 2,300 workers from the Rail, Maritime and Transport Workers’ union (RMT) began 72 hours of industrial action at 6pm on Monday over fears of job losses and pension cuts by the collapsed tube maintenance firm Metronet. Metronet, a privately-owned group that maintains most of the London Underground train network, went into administration in July after running out of funds. The union said it will meet Metronet, Transport for London and the company’s administrator later today to try to resolve the dispute. The RMT general secretary, Bob Crow, said: “As a result of discussions last night with London Transport Commissioner Peter Hendy, talks will now take place.

“This is a positive development and we hope that Metronet and its administrator will now take our members’ legitimate concerns seriously.”

Trains ground to a halt on the following lines: Bakerloo, Central, Circle, District, East London, Hammersmith & City, Metropolitan, Victoria and Waterloo & City. The central part of the Piccadilly line was also suspended. There is a good service on the Northern and Jubilee lines, which are maintained by a different company. Passengers have been encouraged to use the Docklands Light Railway, which links Canary Wharf and east London with the City, National Rail services or buses. Advertising executive Chris Boys, who was waiting for a bus at Victoria station this morning, has only been working in London for a year but he already realised travel chaos was part of life in the capital.

“This is just what you go through, isn’t it?” he said. “It’s a pain in the a***, but I’m told it happens every year and you get used to it.”

“Even if I walk I’m going to be late, but I think my boss will be understanding. Everyone’s bosses should give them a bit of leeway this week.”

French lessons for UK's energy market

Nils Pratley (The Guardian)

French presidents come and go, but old-style state capitalism remains a fixture in Paris. Nicolas Sarkozy's personal intervention seems to have been the critical factor in forcing through the merger of Suez and state-controlled Gaz de France.

Suez chairman Gerard Mestrallet was protesting as late as last week that his company couldn't live without its water and waste division. Sarkozy disagreed, and Sarkozy prevailed.

In slightly shrunken form, Suez is just the right size for a merger with GDF, meaning it is just the right size for the French state's shareholding in the new €70bn (£47bn) entity to emerge at 35-40%.

Nominally, GDF is being privatised and a liberalising agenda is being pursued. In reality, the French state is gaining effective control of GDF-Suez, which will be the world's third-largest listed power company. It's a triumph for French nationalism and a defeat for the European commission, which would prefer energy markets in Europe to be freer and less dominated by corporate titans.

Sarkozy and the commission are on a collision course, but the French president will not be trembling. He is swimming with the tide in implying that free markets in energy don't work. This is an age when Russia, and specifically Gazprom, loom. Security of supply, not ensuring a good deal for consumers, is the worry in most European capitals and bigger is deemed to be safer. Sarkozy is doing what others would love to copy in creating a second national champion to operate alongside EDF, the electricity group.

The odd man out, of course, is Britain, which has long been in the commission's camp on liberalisation. Our regulators can produce a zillion statistics on how free competition has benefited UK consumers, but it's also a fact that our would-be corporate champions are lower-league players on the European stage. National Grid is obliged to shop in the US; Centrica has managed to acquire only unconnected bits and pieces on the continent.

In fact, the Suez-GDF deal illustrates very well how different leagues operate. As a condition of the deal, GDF has to sell its 25.5% stake in SPE, Belgium's second largest integrated energy business, because Suez owns the number one player. Centrica, which has 25.5% of SPE already, has the right to buy out GDF, so control should follow easily. But the value of SPE? About £515m, at the last count in 2005 - mere crumbs.

Political shenanigans in the French energy market may seem like a distant world when viewed from Britain. For most of the past decade, when North Sea oil and gas revenues were strong, that's been a fair stance. Now that imported energy is a greater part of the UK mix, we will see the other side of liberal markets. The balance sheets of companies in France, Germany and Spain will be needed to fund the next generation of energy investment in Britain.

Korean credentials

A fortnight ago, HSBC was said to be planning to pay $5bn-$5.5bn (£2.5bn) for 51% of Korea Exchange Bank (KEB). When the terms actually emerged yesterday, the price had risen to $6.3bn. What has happened in the interim?

Maybe only HSBC's greater desire to seal the deal. The bank has been eyeing South Korea, Asia's third largest economy, for eight years, and has been thwarted twice, most painfully when Standard Chartered snatched Korea First Bank two years ago. It doesn't want counter-bidders for KEB to emerge now.

HSBC could claim the price for control of KEB - about 1.8 times book value - is in line with other banking takeovers in Korea, but in this case the seller would seem to be desperate for any clean exit.

Lone Star, a US private equity outfit, has already seen two potential sales collapse because of an ongoing investigation into the legality of its original takeover of KEB in 2003. The key question is whether HSBC has a better chance than the others of persuading the Korean government to drop its demand that legal disputes must be settled before any takeover can happen.

HSBC's strategy seems to be to put its reputation as a top-notch international institution on the line and dare the Koreans to say no. "We believe we have the credentials to put ourselves in a very favourable light," said finance director Douglas Flint.

To concentrate minds, HSBC has set a deadline: if the deal is not done by the end of next April, it's off.

It's ballsy stuff, but HSBC shareholders will not be complaining. Almost any deal in Asia, even an expensive-looking one with a legal wrangle, will be welcomed after the bank's adventure into the US sub-prime market with Household in 2002. Market-savvy Korean politicians look a better bet than American junk borrowers.