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  • Diverse new supply of LNG could challenge pricing status quo - EY - Global
    implies growing supply side competition and upward pressures on development costs and downward pressures on natural gas prices Nevertheless the very positive longer term outlook for natural gas is driving investment decisions both in terms of buyers willingness to sign long term contracts and sellers willingness to commit capital to develop the needed projects Over the industry s last five decades there has been a progressive broadening of the LNG supply base with three waves of suppliers The first wave was dominated by Algeria Malaysia and Indonesia while the second wave has been dominated by Qatar and Australia The third wave could come from as many as 25 other countries many of which currently have little or no capacity but by 2020 these countries could provide as much as 30 of the world s LNG capacity LNG project proposals are growing faster than industry s capabilities to develop them Generally at the high end of the cost curve with development bottlenecks and spiraling construction costs Australian projects are typically under the most pressure Sanctioned projects are generally less significantly impacted but projects still seeking contracted off take are at substantial risk In contrast brownfield projects which include expansions to existing operations and those that will build on existing LNG import infrastructure such as in the US will have distinct cost advantages Similarly merchant LNG projects that don t include the upstream costs of gas supply development again as is the case for most of the proposed US LNG export projects will enjoy distinct cost advantages over the integrated projects But the supply demand magnitudes and dynamics aside the biggest potential impacts are on LNG pricing namely will oil price linkages continue to dominate global LNG contract pricing will there be room for spot gas price linkages and will divergent regional gas prices show signs of convergence The advent of diverse new supply sources is challenging the LNG status quo with Asian buyers presumably looking to modify or possibly replace their long standing and relatively expensive pricing model of gas prices tied explicitly to oil prices High LNG development costs will require iron clad long term off take agreements However more recently the market is witnessing the inherent conflict of increasingly more expensive projects trying to sell to increasingly more price sensitive buyers From the global supply side oil is becoming somewhat scarcer while gas is more plentiful As a result there is the inherent conflict of persistently high oil prices and a growing surplus of natural gas with strict oil indexation becoming less tenable Oil indexation of gas contracts will become more difficult with greater competition between sellers more price sensitive buyers increasing energy deregulation increasing gas on gas competition from new pipeline infrastructure increasing spot market liquidity and most importantly increasing availability of spot price based LNG exports In short high cost projects will find it harder to find shelter in bi lateral contracts and high cost sellers will struggle to preserve pricing power Among the new wave of

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_Diverse-new-supply-of-LNG-could-challenge-pricing-status-quo (2016-02-10)
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  • A fragile return to confidence in the eurozone - EY - Global
    pace of contraction in the periphery to slow from 1 9 in 2012 to 1 4 in 2013 before a return to growth in 2014 This is primarily due to painful work being undertaken by certain countries in the periphery to reform their economies which is already yielding results in the form of improving international competitiveness Since 2008 employment in the periphery has fallen by 9 or 5 million people In the case of Spain Ireland and Portugal employment has fallen further than output thereby providing a boost to productivity The falls in relative unit labor costs have made the goods and services produced in these peripheral economies more competitive than they were five years ago By 2014 EEF expects the peripheral eurozone countries with the fastest export growth to be Greece Ireland and Spain 9 3 4 4 and 4 1 respectively These are the three countries that have seen the largest improvement in their relative unit labor costs and hence competitiveness since 2008 This will help these countries exit recession and allow gains in economic activity to accompany job creation Marie comments The return to very modest growth that we expect to see in the peripheral countries in 2014 will initially be driven by business investments and exports and subsequently once the labor market starts to improve by consumer spending A slow decline in unemployment expected from 2014 A further rise in unemployment in the short term and only a slow decline from 2014 is likely to be an impediment to growth EEF predict that unemployment in the eurozone will reach a record high of 12 4 by the end of 2013 with the jobless rates in Spain and Greece at more than 26 5 Even with recovery the number of people out of work across Europe will remain stubbornly high By the end of 2017 EEF estimates the unemployment rate will remain above 11 and the number of unemployed will be around 6 5 million higher than a decade before Consumers willingness to make new purchases will be hampered by further increases in unemployment in 2013 Ongoing fiscal tightening and austerity measures will also have an impact on household spending Consumer spending is expected to fall again in 2013 by 0 6 before starting to grow slowly by an average of just 1 a year in 2014 17 Banking sector deleveraging will also continue to constrain growth over the forecast horizon Although the banking system is now much less of a systemic threat to the broader economy than a year ago it is not yet in a position to drive an economic upswing through rapid lending growth Generally tight credit conditions will weigh on investment and consumer spending Strong euro unlikely to pose threat to growth Although the economic climate remains difficult confidence among businesses and consumers should return gradually as some of last year s major threats recede But business investment is still expected to shrink by 2 in 2013 before recovering slowly to post average

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_A-fragile-return-to-confidence-in-the-eurozone (2016-02-10)
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  • Global corporates question the stability of their core banking teams - EY - Global
    keeping core banks but only 43 are completely confident their banks are operating within their companies risk parameters 69 of executives indicate their bank s position and transparency on risk liquidity and capital and portfolio concentration are important but only 27 say their banks are willing to share this information Steven Lewis Lead Global Banking Analyst at EY says The lingering after effects of the 2008 financial crisis and the ongoing challenges in the Eurozone have forced corporations to focus on the stability of their core banking teams Counterparty risk and exposure from banks have become heightened concerns for large corporates and as a result we predict that banks will have to be more transparent about their risk profiles This year s corporate banking survey contains data from CFOs treasurers and senior financial executives from 20 of the largest global corporations across 9 industries and 11 countries Corporates want to understand banks risk profiles but lack key information Less than half of respondents 43 are confident that their banks are stable and operating securely within their companies risk parameters While 69 think their bank s position and transparency on risk liquidity and capital and portfolio concentration are important only 27 say their banks are willing to share this information Niamh Prendergast Partner in Banking and Capital Markets Europe Middle East India and Africa at EY says The single biggest disparity between client expectation and bank performance is around the lack of transparency on key risk parameters For years banks have been evaluating the credit worthiness of the large corporates they work with but the shoe is now on the other foot In Europe in particular the overwhelming sense from large corporates is that they would like more information about the risk profiles and portfolio concentrations of the banks they work with A move toward European capital markets While 63 of corporate executives said that the more rigorous financial services regulations environment has not to date seriously affected their relationships with banks there was a pervasive concern that change could be forced upon them as banks assess profitability of certain business lines In response corporate clients are taking a few actions relying less on senior bank facilities for future funding sources turning towards European capital markets more frequently and judiciously spreading their business across a core group of SIFIs large banks that are not systemically important and strong regional players As evidence 70 of corporate clients interviewed use more than five banks The art of relationship management It may seem counterintuitive in the context of job cuts and belt tightening but corporate banking clients overwhelmingly recommend that banks concentrate on the intangible aspects of relationship management over tangible factors like cost products and technologies to improve their service delivery In fact a vast majority 89 of respondents voted service quality as the most important criterion for selecting and continuing their core banking relationships According to Steven A key takeaway here is listening If you truly understand a client s needs and

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_Global-corporates-question-the-stability-of-their-core-banking-teams (2016-02-10)
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  • Impairment proposals will likely result in earlier recognition of credit losses and may increase credit loss provisions - EY - Global
    VAT GST and Other Sales Taxes Transfer Pricing and Operating Model Effectiveness Strategic Growth Markets How we help Entrepreneurship EY SGM Initial public offering Venture capital Family business services Transactions About Transaction Advisory Services Corporate Development Divestiture Advisory Services Lead Advisory Operational Transaction Services Restructuring Strategy Services Transaction Support Transaction Tax Valuation Business Modelling Specialty Services Climate Change and Sustainability Services CertifyPoint China Overseas Investment Network Family Business Services French Business Network Global Business Network Japan Business Services Careers Students The EY difference Your role here Your development Life at EY Joining EY Global Delivery Network Experienced Advisory Assurance Tax Transactions Industries The EY difference Your development Life at EY Joining EY Global Delivery Network Alumni Home Newsroom Impairment proposals will likely result in earlier recognition of credit losses and may increase credit loss provisions Press release Impairment proposals will likely result in earlier recognition of credit losses and may increase credit loss provisions London 7 March 2013 Newsroom News releases PR contacts PR activities Analyst relations Fact and figures Share The International Accounting Standards Board IASB today issued a proposal as part of its IFRS 9 financial instruments project that would require entities to apply an expected credit loss model on their loans debt securities trade receivables lease receivables loan commitments and financial guarantee contracts The proposals will affect both financial institutions and corporates and will likely result in earlier recognition of credit losses compared to the current incurred loss model because entities would be required to recognize either a 12 month or lifetime expected credit loss allowance that includes losses that are expected in the future Tony Clifford EY s Global IFRS Financial Instruments Leader says We welcome the IASB s proposal for an expected credit loss model because it is more forward looking recognizing not only credit losses that have already occurred but also losses that are expected in the future The proposals provide enhanced transparency to an entity s credit risk and provisioning process and are likely to increase the credit loss provision recorded by many financial institutions However the increase in provision will vary by entity and entities with shorter term and higher quality financial assets are less likely to be affected The IASB s proposals grew out of a joint project with the US Financial Accounting Standards Board FASB However due to concerns raised by the FASB s constituents about the model s complexity the FASB has proposed an alternative model with a single measurement objective but which retains many of the jointly developed core principles The FASB s current expected credit loss model requires entities to recognize a credit loss allowance for its current estimate of the contractual cash flows it does not expect to collect Clifford concludes We expect that the Boards will jointly discuss comments on their respective proposals This will provide an opportunity to work towards a converged solution that will promote consistent accounting for credit loss allowances and increase comparability for stakeholders Where appropriate constituents should participate in the

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_Impairment-proposals-will-likely-result-in-earlier-recognition-of-credit-losses (2016-02-10)
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  • Report reveals key priorities on the global automotive C-suite agenda - EY - Global
    Tax Transactions Industries The EY difference Your development Life at EY Joining EY Global Delivery Network Alumni Home Newsroom Report reveals key priorities on the global automotive C suite agenda Press release Report reveals key priorities on the global automotive C suite agenda London 4 March 2013 Newsroom News releases PR contacts PR activities Analyst relations Fact and figures Share Five strategic themes will dominate automotive companies performance and capital agenda in 2013 and must be addressed for success according to Changing lanes the automotive C suite s agenda for 2013 14 a new report by EY s Global Automotive Center The five strategic themes are Winning companies pull ahead Market leaders have pulled ahead in recent years as evidenced by the widening financial performance gap They are finding the right balance across a wide range of value drivers including success in emerging markets the right product portfolio choices and collaborative relationships Of the drivers emphasis is being placed on managing the significant number of vehicle launch events flawlessly says Jeff Henning EY s Global Automotive Markets Leader Navigating volatility and low visibility There are clear signs of economic uncertainty and volatility ahead Automotive executives must not only cope with high variability and inability to predict demand but also intensifying competition in flat or contracting markets This environment necessitates marked improvement in the sector s business planning processes and organizational responsiveness to market conditions and consumer preference adds Henning To mitigate these difficult conditions leading companies today are shaping demand with pricing and option packaging where they can And where demand is unpredictable companies are proactively managing supply constraints Re inventing the value proposition Today s carmakers need to satisfy a world with high variability in consumer preferences across growth markets and rapid urbanization is challenging the traditional notion of vehicle ownership Leading companies are restructuring their product portfolios to meet vehicle function price and feature demands and are investing in connectivity and mobility solutions such as telematics and car sharing programs Remodeling the business for efficiency Automotive companies today are pushed to drive greater operational and financial efficiency than ever before Key focus areas include reducing time to market aligning capacity and demand and creating more variable cost structures Leading companies are recognizing that integrating data into decision making is key to achieving higher levels of efficiency Securing resources across the value chain Executives sense an urgency to have transparency across their organization and secure access to key resources Managing these key inputs from ensuring talent and credit availability to procuring supplies and scarce raw materials can make the difference between a red or black bottom line says Henning Mike Hanley EY s Global Automotive Leader adds Changing lanes offers a unique window into the boardrooms of the world s leading automotive companies As the automotive sector continues to evolve the urgency of these strategic and tactical moves could determine which companies gain a sustainable competitive advantage despite the tough market conditions Ends Notes to Editors About EY EY

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_Report-reveals-key-priorities-on-the-global-automotive-C-suite-agenda (2016-02-10)
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  • Pricing pressure and cost cutting: top risks for business in 2013 - EY - Global
    profits is cited by respondents as the second biggest risk they face with companies needing to make tough decisions on how to cut costs without damaging product and service standards For multinational organizations trying to balance the desire for cost competitiveness in key markets as well as growth in new markets rethinking the cost and location of operations from a global perspective can create opportunities As a result operational agility is crucial to surviving and flourishing in a volatile world economy with executives in developed markets citing this as their second biggest opportunity The number one opportunity is innovation especially within the rapid growth markets both in terms of new products or services and within operations This is reflected in research and development spending in rapid growth markets growing four times as fast versus developed markets Steve Watson EY s Global Performance Improvement Leader says Innovative organizations drive a culture and set up policies to promote and reward innovation systematically Having a clear vision of what this means for your business is key External contributions such as commercial and academic partnerships can help too as innovation often occurs through networking and critical mass Customer reach in search of the new Companies are also embracing the emergence of new marketing channels such as social media which is ranked as the fourth greatest opportunity for business up from eighth overall in 2011 This was especially true of companies operating in rapid growth markets but inevitably there are risks too and emerging technologies are still considered a top 10 risk in ninth place although this is down from fifth place in 2011 Paul van Kessel EY Global IT Risk and Assurance Leader comments When companies are thinking about emerging technologies there s a danger that they will overlook the related risks For all the steps that companies have taken in virtualization cloud computing social media mobile and other emerging technologies they continue to fall behind with taking information security measures creating an information security gap that grows ever larger Stakeholder confidence broader considerations emerging Looking at a macro level the increasing role played by government in business is now cited as the sixth biggest risk faced by companies up from seventh place in 2011 This is driven in part by tightening regulation notably in the financial sector but it is also prevalent in rapid growth markets where governments are playing an increasingly active role This can reshape the nature of competition and in China for example some multinationals are required to work in partnership with local firms as the country seeks to support its local industrial base As a result government policy and maintaining good relations with government is increasingly important for businesses Following on from government involvement regulation and compliance is listed as the seventh biggest risk facing companies down from first place in 2011 However companies broader sense of accountability in the post crisis world is also reflected in the opportunity to leverage CSR and public confidence It is a new

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/Pricing-pressure-and-cost-cutting--top-risks-for-business-in-2013 (2016-02-10)
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  • Policy-makers deploy new tactics to create green growth globally - EY - Global
    which has overtaken Spain for 16th place after 2012 saw agreements for 28 renewables projects totaling 1 4GW being signed under the first round of the national procurement program This paves the way for construction to start in 2013 and reinforces the government s support for clean energy increasing the country s attractiveness to investors and developers globally As part of its target to install 4GW of wind and solar capacity by 2020 Morocco s government agreed to a US 1b power purchase agreement PPA for the first 160MW phase of its flagship Ouarzazate CSP plant in Q4 2012 It also announced plans for another 400MW 500MW solar tender in 2014 resulting in a two place jump up the rankings to 23rd in the ARI Chile moved up two places to 36th as the country seeks bids to build South America s largest solar plant in the Atacama Desert funded by a combination of government grants and loans totaling US 429m Q4 2012 also saw high profile international players receive approval for various wind and solar projects including a 108MW wind power project by Australia s Pacific Hydro and a 70MW solar farm by Ireland s Mainstream Renewable Power Ltd Divestments likely to continue driving sector deal activity in 2013 Global clean energy investment in 2012 fell by 11 from the record level seen in 2011 to US 268 7b according to Bloomberg New Energy Finance with only China Australia and Mexico seeing an increase in total investment Despite the challenges of a weak global economy the outlook for 2013 is more positive with the trend of divestment and portfolio restructuring set to continue generating a robust transaction environment in 2013 Ben Warren EY Energy and Environmental Finance Leader comments As debt pressures still hang over many European utilities and US utilities seek to rebalance their holdings in favor of regulated businesses further divestments will continue to create transaction opportunities across the whole sector in 2013 It is anticipated that capital will continue to flow from Asia and from a wide range of institutional investors including pension funds sovereign wealth funds and even high profile corporations Solar represented the biggest proportion of new investment in 2012 reflecting a period of consolidation that is likely to continue in 2013 as the market adjusts to oversupply falling prices and trade protectionism measures across the global market While investment in the global wind sector fell during 2012 offshore wind is likely to be a key growth area for investment and transactions in 2013 The increasing maturity of the sector is attracting a diverse investor base including industrial conglomerates private equity groups pension funds and private sector corporations The end of 2012 also saw a particularly interesting development for offshore projects in the North Sea with Munich RE becoming the first insurance group to offer serial loss cover for the repair or replacement of defective turbines or components This is expected to reduce the perceived risk profile of the technology more broadly boosting investor

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/Policy-makers-deploy-new-tactics-to-create-green-growth-globally (2016-02-10)
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  • Global telecoms operators risk losing investors' confidence unless they overhaul their performance metrics - EY - Global
    are looking for new sector growth stories in the wake of the infrastructure upgrades yet institutional investors view of the telecoms sector remains fundamentally ambivalent reflecting uncertainty over the trade off between the costs and value of new growth opportunities in data Telecoms needs to move beyond its defensive positioning with investors Capex guidance for many operators remains conservative despite rising demand for new data services A subdued perception of growth potential has seen telecoms stocks characterized as a defensive play offering strong cash flows However even this view of the industry now under pressure in the wake of dividend cuts announced by leading players A comparison of major telcos share performance over the past five years highlights defensive qualities giving way to underperformance in 2012 Overall the industry s performance has been resilient but unexciting over this period Only 11 of respondents cited telecommunications as a top sector to invest in compared to technology 20 oil gas 26 and consumer products 27 according to the new EY s Institutional investors survey 2013 Comments Dharmapalan Metrics need to reflect take up of new services while also providing greater granularity in terms of profitability of data services For example smartphone take up has proved to be a double edged sword given the effect of device subsidies on margins At the same time new types of coverage and penetration metrics will be needed to communicate the socio economic benefits of new infrastructure Ultimately new performance metrics can do much to help investors evaluate the sector and its transformational qualities in the years to come Current metrics fail to capture growth and profitability Performance metrics commonly used across the industry such as net additions and Average Revenue Per User ARPU are no longer sufficient to provide management and investors with a compelling story Instead telecoms operators need to provide the evidence that the business model is performing well and that there is a solid track record of growth and an actionable plan to sustain profitability In addition many new connections are now being generated by multi SIM consumers and by enterprise and machine to machine connections blurring what a net addition means These new types of connectivity also have very different usage revenue and margin profiles compared with traditional customer base Adrian Baschnonga Lead Analyst Global Telecommunications at EY says Successful players in the future will differentiate through their ability to up sell new services to existing customers in both the consumer and enterprise markets Metrics such as revenue generating units RGU per subscription have already been successfully leveraged by cable companies operators should find new ways to communicate the benefits of a widening services portfolio A wider set of financial metrics is vital On the financial side operators should consider moving beyond earnings before interest tax depreciation and amortization EBITDA as a primary metric Core earnings do not factor in capital expenditure which is very much a key concern for investors as they consider the infrastructure upgrades required to support new demand

    Original URL path: http://www.ey.com/GL/en/Newsroom/News-releases/News_Global-telecoms-operators-risk-losing-investors-confidence-unless-they-overhaul-their-performance-metrics (2016-02-10)
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