Saturday, 19 August 2017

Weekend Yarn: An Almighty Fail

Yesterday I poked fun at the non-existent proof-reading skills of my roofer.  But it isn't only humble tradesmen that can come unstuck: it can happen to exalted professionals as well.  Harken to one of Old Drew's war-stories  - and mark well ... 

 *  *  *  *  *

Twenty-five years ago during the first 'Dash for Gas', a sellers' market prevailed for a while in natural gas.  One of the very largest oil-and-gas producers who shall remain nameless, let's call it *xx**,  interpreted this cyclical state of affairs as a licence for unbridled commercial arrogance, and had a juicy chunk of gas for sale.  They put it out to market, telling prospective buyers that the sale would be under the terms of a long-term contract they'd drafted themselves, and the only matter for negotiation was the price:  all other contractual aspects would be per the *xx** diktat.  

This was not the norm: such contracts are very long and generally bespoke, and the details would ordinarily be up for genuine bilateral negotiation.  Several potential buyers read the uncompromising *xx** document and politely observed that the text wasn't beyond improvement, for the benefit of all parties.  They were shown the door.  The winning bidder accordingly sent its negotiators and lawyers simply to check the agreed price had been correctly entered in the space provided, and to conduct the usual round-table proof-reading of the 250-page document.  (Half a dozen people sit there reading one page each in turn, out loud, and it is hoped that typos and other cock-ups will thereby be nailed.)

At one point during proof-reading, progress was momentarily halted when the reader of the page in question read out the phrase "... the either Party ...".  Hoho!, everyone said - that's not English, it's a cock-up!  So they solemnly eradicated the otiose "the" and completed their monotonous task.

A few years later the inevitable happened: the sellers' market became a buyers' market and this particular gas contract became horribly out-of-the-money for the buyer - so much so, the buyer got into financial difficulties and was taken over.  The acquirer of said company set the lawyers to work on the dire contract ... and what did they find?
"Change of Control:  In the event of a change of control of a Party, either Party may terminate this Agreement."
Gotcha!  And the acquirer solemnly served a termination notice.  

Of course, *xx** rushed to the courts claiming Manifest Error: obviously it should have read "the other Party".  Well, usually it would.  But, consistent with the glories of the Common Law, since both buyer and seller were big companies well able to look after themselves, the words of the contract said what they said and the court rightly threw out their case.

And indeed, that was that: with one bound, the acquirer was free of the burdensome deal.  Back at *xx** - a firm well-known for control-freakery - the very senior head of the gas division was rather publicly moved to post that (how shall we put it?) didn't represent a promotion.

There but for the Grace of God ..?  Hard to suppress a chuckle, though, in the circumstances.  Read the bloody small print!  Carefully!!


Friday, 18 August 2017

Always Read The Small Print

One day when I was newly-minted one-pip in the army, one of my soldiers came to me with a form that needed initialling by an officer.  Since this happened at least twenty times a day, it was no big deal.  I could see it wasn't the usual permit for a military vehicle journey or weekend out of barracks - it was something to do with an application for a car loan - but I signed it anyway, without reading the finer details.

It came back to bite me on the bum in less than 48 hours.  I'd inadventently claimed to be "assistant paymaster or equivalent" and was in for a bollocking at Regimental HQ.  Needless to say I made a vow ... 

When, many years later, I found myself dealing ginormous energy contracts, I carried this resolution through by being the annoying negotiator who'd actually read the two-thirds of the 250-page contract that is 'legal boilerplate'.  There'd always be something being passed across in there.  It always makes me snort when advertisers and salespeople people wave airily at the "T's & C's" as if they are some quaint and meaningless decorative runes that appear by convention on ceremonial bits of paper that are scattered around like confetti to celebrate the closing of the deal.  FFS - the "T's & C's" are the deal ! 

Anyhow, to get to the point:  we are having some roofing works done at Schloss Drew, and our shortlisted contractor handed over the usual duplicating-paper sheet with illegible small-print in 6-point (grey) on the back.   Fortunately, my scanner and OCR software are up to the job, and this is just one example of what I found.

Sic !  Suffice to say, the works will be carried out under a contract of my own devising.   I imagine the said contractor (who self-evidently has no more read his own documents than any of his previous clients) will be using my version in the future - and he'll not suffer too much in the event of dispute, since I am nothing if not a reasonable person ...


Wednesday, 16 August 2017

No change in Ireland for Brexit - or is there?

In a week where some demented person having a breakdown is merrily providing the press with all sorts of nonsense stories, reality is slow to creep back to the table.

Just as James Chapman accuses David Davis of being a part-time layabout, he comes forward with all the proposals the EU has been asking for.

Interestingly, the UK Government has chosen the strategy that I find works really well. Admit defeat, agree to the enemy demands and then see what they do. On Ireland, the proposal is that nothing much changes with the exception of some agri-tariffs.

This meets perfectly what the EU wanted; but its a nightmare for Ireland - effectively it means in theory they could end up the "The Jungle" in Ireland, either at the NI border or in NI itself.

To me this is super idea - no immigrant is going to want to hang around forever in the hideous physical and social climate of Northern Ireland - it is like our own version of the successful, but much maligned, Australian strategy of holding immigrants in an off-shore processing centre. 

So we push most of the problems back to the EU by being broadly compliant with their demands. I like this strategy, there are many ways for it to fail - basically, the EU can always be unreasonable whatever we decide to do, given we are leaving and Article 50 is triggered, but this is nice approach.

Shame everyone is too busy slagging off the entire Government to notice or to give it any credit when it does get things right.

Tuesday, 15 August 2017

Power Play or Shell Game?

Eyebrows should be raised as Shell moves into the power market.  Why?  Because oil companies have been proven to be crap at electricity.  That includes Shell itself first time around when they - and BP, and Total, and Statoil, and Conoco, and Amerada Hess ... - tried, and screwed it up (this was in the '90s and early 00's).

It looked so logical, so easy.  They were (and are) big, big companies - energy specialists, no less, who had done OK in the gas markets when they got started around the globe in the 80's and 90's; they knew about trading and risk-management and marketing; they had ultra-credible brand names for the sector.

At least, that's what they thought.   But, to make a long story short, similarities notwithstanding it turns out trading electricity is an order of magnitude more difficult than gas.   There have only been two non-electricity companies to make a serious fist of the power market via organic development: Centrica / British Gas and the mighty Enron, both originally gas players.  (If someone points to Gaz de France - now 'Engie' - or Gazprom's European trading vehicle GM&T, the response is that neither of these moves into power were organic.  GdF simply bought Electrabel; and GM&T hired big teams of existing power specialists (and in any event haven't made waves in the power sector).)

So now Shell are trying again.  They are sticking to the easy segment of the market - sales to industrial customers - and can probably make a go of it if they hire enough of the right people (including at the top: will they make the mistake of assuming one of the old senior oil hands can manage this electricity stuff?).  They have certainly let fly with the PR: see that mighty FT puff-piece linked above, and this gullible nonsense:
"Shell becomes latest energy disruptor: the UK’s energy industry is braced for change as the world’s second-largest oil and gas company is to supply electricity"
The FT piece (Nick Butler, natch: they obviously gave him one of those really nice lunches) is just as sycophantic: 
"Shell’s decision to sell electricity direct to industrial customers is an intelligent and creative one ... Shell has been developing an extensive range of gas assets, with more to come. In what has become a buyer’s market it is logical to get closer to the customer — establishing long-term deals that can soak up the supply ... Shell is likely to be a supplier of choice for industrial and commercial consumers and potentially capable of shaping prices"
Ho hum, let's see how they do.  "Soaking up supply" is a crass business concept in a commodity market.  "Supplier of choice"?  In yer dreams, Shell.  "Shaping prices"?  Nope, just selling on price to buy market share, like any other new entrant in a commodity sector.  When Gazprom entered the industrial market they needed to take a massive haircut as buyers simply laughed and pocketed the windfall while it lasted - which in their case was several years.  Butler actually admits as much: "prices presumably set at a discount to the market". 

Yup. A short-lived price war.  Not so much a disruption as a harmless diversion.   


Sunday, 13 August 2017

Those Oh-So-Rational Germans

A primary go-to website for energy buffs is the excellent Energy Matters blog run by Euan Mearns and Roger Andrews, two first-rate analysts who somehow find time to keep their tremendous material pumping out for free.  Go and have a poke around, if you haven't been there before.  One of their regular features is a handy news round-up each week, from which we obtain this neat evidence of collective madness in Germany.

Yes, (a) the Germans are big fans of their ridiculous 'energy policy' (which sees them paying extravagant electricity prices), and at the same time (b) German CO2 emissions continue to rise.  Expensive and futile virtue-signalling by anyone's standards.

I am sure Greek citizens are equally delighted that their economy is in thrall to German bankers. 

(Meanwhile, in other news Cuadrilla et al are on the march and the shale drilling is underway in N.England ...)