It was not a red-letter week for Alex Chisholm. His swansong report at the Competition and Markets Authority into retail banking was greeted by raspberries all round. Still, never mind, he is shortly off to run the Department for Energy and Climate Change, and best of luck with that, with the magnificent money sink of the Hinkley Point nuclear power station to contemplate.
The day before urging us all to shop around for a bank, he popped up with an assessment of the decision by the CMA’s predecessor body, the Competition Commission, to force the break up of BAA. The assessment concludes that this was a fine decision, claiming that it was frightfully controversial at the time, because the owner of Heathrow, Gatwick and Stansted maintained that airports did not compete. How clever, then, of the CC to see through this, thanks to its “market investigation regime”.
This is first-class piffle. Five minutes’ analysis was enough to conclude that BAA was cynically privatised as a monopoly in order to maximise the proceeds. The argument that there was competition from Schiphol or Charles de Gaulle was risible, as many of us pointed out at the time. The takeover approach from Ferrovial finally concentrated bureaucrats’ minds to see the bleedin’ obvious, and they rushed to start a competition enquiry before a deal could be consummated. Persuading the bidders to pay up anyway was BAA chairman Marcus Agius’s finest hour.
Competition has clearly worked, and gains from the break-up will, in the bizarrely precise estimate in the latest assessment, be worth £870m by 2020. At Heathrow, staff now act as if they want to help passengers, rather than seeing them as obstacles to the smooth running of the airport.
Mr Chisholm is far too civil a servant to express a view on a new runway, except to say that we need one. He may be wrong about that, too. The Heathrow Hub proposal to extend an existing runway would reduce the early morning noise by having planes land further west, cost much less than Heathrow’s own plan, and allow the prime minister to keep his pledge not to build a third runway. Mr Chisholm has at least got one thing right: it is time to make the call.
A happy ending for POG the dog
They laughed at Peter Hambro last year when Petropavlovsk fell into the 99 per cent club, along with the inevitable cracks about going bust in a gold mine. The company nearly went under, thanks to a convertible bond his advisers had earlier urged him to launch “to make the balance sheet work harder”.
To keep the company going, he bet the family wealth on a rescue rights issue at 5p a share. You could have bought as many of the 3,102,922,510 new shares as you wanted at that price, but then a funny thing happened. The gold price recovered, the cash flow from POG’s low-cost, high grade mines in the Russian far east has melted the debt, the shares are now 8.5p, and the prospects look quite good.
Whether the shares are still cheap depends on your view of gold, but even if it slips, POG will see strong cash flow, boosted by the weak rouble. You may be sure that, whatever else the company plans, Mr Hambro will not be tempted into making the balance sheet work harder.
Goldman Sachs has decided that oil is going up from today’s $50 a barrel or so. This is quite a change of view because “the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected.” It is only a few months since its analysts concluded that the world’s tanks were so full of crude that the price might get down to $20. When oil was surging past $110 in 2011, Goldman’s top oilman feared a “super-spike” to take it towards $200. Elsewhere in the Goldman empire, its economists now recommend avoiding shares for the next year. To be fair, hardly anyone saw the collapse of the oil price coming, but can the squid really be so consistently wrong?