Wednesday, May 15, 2013

WTO rules on one solar dispute, bigger lurk

Reprinted from this morning's Thomson Reuters Morning news Call...

Rejection by the world's trade body last week of preferential support for domestic solar panel makers in Canadian province Ontario brings helpful but limited guidance in a growing number of other disputes.

The case involved domestic content requirements, which block foreign companies from participating in national support programmes, and which are intended to suckle local manufacturers. The World Trade Organisation's rejection of Canada's appeal, in a complaint brought by Japan and the European Union, should clarify similar cases, where China claims discrimination in certain EU countries and the United States has opened a dispute with India.

It does not, however, address a growing, separate set of more complicated trade complaints regarding perceived dumping (which means selling at a loss to gain market share) where China, India, the European Union and the United States are all considering or have imposed import duties.

The global industry needs similar clarity on dumping, to avoid a solar trade war where Germany's preference for an amicable resolution with China is encouraging.

Both types of dispute expose a tension in the goals of renewable energy programmes between jobs and low-cost clean power.

One aim is to boost "green jobs", where countries are keen to grab a foothold in a growing clean technology sector, which clashes with another to cut costs.

Rules preferring domestic content make little sense right now, if the aim is to ramp up domestic solar manufacturing when the global industry is embroiled in a savage shakeout of over-capacity where some distressed companies are selling photovoltaic (PV) modules at fire sale prices.

Action against dumping, meanwhile, may directly raise the price of solar modules through the use of import duties.

The Ontario case was based on the Canadian province's "Green Energy Act" of 2009. The Act allowed developers to earn a price premium, or feed-in tariff, for renewable power if they met local content rules.

Those minimum domestic content requirements were 50 percent for wind projects and 60 percent for solar, as published in an Ontario Power Authority "programme overview".

Japan's complaint was partly based on Article 3.4 of the 1994 General Agreement on Tariffs and Trade (GATT). The paragraph states: "The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use."

Japan's complaint - subsequently joined by the European Union - was supported by a WTO resolution panel in December, and upheld last week against Canada's appeal.

The finding is likely to clarify similar complaints.

For example, India has announced a goal to install 22 gigawatts of grid-connected and off-grid solar power by 2022, under its Jawaharlal Nehru National Solar Mission (NSM). Under phase 1, which ends this year, developers could only use solar modules made in India. Phase 2 may relax the requirement that all projects meet domestic content requirement (DCR) rules.

"Some capacity will be kept for bidding with domestic content requirement," says a phase 2 consultancy document published on the ministry's website, suggesting other capacity will be available for foreign firms.

India has proposed to widen DCR to cover more advanced thin film technologies where U.S.-based First Solar is a world leader.

The Ontario case may not bode well for the Indian programme.

The United States formally initiated a dispute at the WTO on Feb. 11, by requesting consultations with India in the same manner as Japan had with Canada in September 2010.

"India's measures appear to be inconsistent with Article 3.4 of the GATT 1994 because the measures appear to provide less favourable treatment to imported solar cells and solar modules than that accorded to like products originating in India," it said, referencing identical articles and trade measures to Japan's complaint.

Similarly, last November China requested consultations with the European Union, Greece and Italy, "relating to the feed-in tariff programs of EU member states including but not limited to Italy and Greece". Italian energy laws have provided a premium on the feed-in tariff of up to 10 percent for solar PV systems containing a minimum 60 percent European content by value, various solar companies report.

The latest WTO ruling will probably benefit the industry if it motivates countries to source solar modules on the basis of lowest price rather than origin.

But public pressure remains to do the opposite, as illustrated by a letter in March from an influential group of U.S. environmental and development non-government organisations to the U.S. chief trade negotiator. The letter, signed by, ActionAid USA, Friends of the Earth U.S., Greenpeace USA, Sierra Club, among others, expressed "deep concern" about the country's solar dispute with India.

They argued that India should be encouraged to develop a domestic solar industry for three reasons: to increase the share of solar in the Indian energy market; increase political support for clean energy programmes by creating local jobs; and to avoid catastrophic climate change.

It did not mention an impact on costs.

India presently has manufacturing capacity of 848 MW for the production of solar cells and 1,932 MW for solar modules, the Ministry of New and Renewable Energy reported last December in its "Phase II – Policy Document". It is targeting by 2020 manufacturing capacity for 4,000-5,000 MW of solar technologies (this appears to refer to finished modules) and 2,000 MW of solar cells, according to an overview published on the ministry website.

Just now may not be the optimum time for ramping up manufacturing capacity, however, either for established companies already bleeding cash, or for countries planning a new industry where they can buy more cheaply from companies with mothballed capacity selling at distressed prices.

--- Gerard Wynn, Reuters market analyst

--- The views expressed are his own

Thursday, May 9, 2013

Update: BCE facing resolution on gender diversity

At this morning’s Annual General Shareholders meeting, 5.5% of votes were cast in favour of a resolution brought by Vancity Investment Management to ‘undertake a review of BCE Inc.'s diversity policies and initiatives, using the UN Women’s Empowerment Principles as guidance, to identify and address gaps or inadequacies; and give due consideration to the value to the company of endorsing the CEO Statement of Support for the Principles.’ That’s enough to keep the resolution alive; it needed more than 3% in order to be brought back next year.

A jubilant Dermot Foley, in Toronto to present the resolution, said he met the CEO and some senior executives at the AGM. “Victory is not the percentage of votes we got for the resolution, but the opportunity we now have to continue the dialogue with BCE management”

At present, Mountain Equipment Co-op’s CEO is the only Canadian CEO to have signed the CEO Statement of Support for the Women’s’ Empowerment Principles. However, there are 559 CEO’s around the world who have made this commitment, including those of large American companies such as Microsoft and PepsiCo.

As a signatory to the UN Global Compact and a leader in diversity in Canada, BCE Inc. has an opportunity to bring greater visibility to this initiative, gain competitive advantage in the market for talent and further strengthen the company’s position as a socially responsible corporation.

The Global Gender Gap 2012 by the World Economic Forum states ‘Because women account for one-half of a country’s potential talent base, a nation’s competitiveness in the long term depends significantly on whether and how it educates and utilizes its women.’

Foley feels, “looking at the data from the WEF report, we can see a huge wave on the horizon. Change is coming to corporate Canada. Either you are going to be ahead of it, or you are going to be chasing it. Ultimately, it’s not about winning on a resolution. We want CEOs to sign on to the Principles.”

See details in our post of April 11th.

Thursday, May 2, 2013

Global Womens Equity Fund a first for Canada

In a first for the Canadian investment landscape, the Global Women’s Equity Fund announced today that it is almost ready to launch. “This fund is great for society, great for women and a unique concept that didn’t exist here in Canada” said Chief Marketing Officer Alexis Klein.

The fund will invest primarily in equity securities of companies that have demonstrated their support of women’s causes and are leaders in promoting gender equality in the workplace. The companies to be included in the portfolio must meet at least one of the following criteria:

Group A

• Companies that have signed and adhere to the Women’s Empowerment Principles-Equality Means Business, produced and disseminated by the United Nations Entity for Gender Equality and the Empowerment of Women and/or;

• Companies with 25% or more women directors and/or;

• Companies with 25% or more women executive officers and/or;

• Companies that have provided financial support and are members of CATALYST, the leading
non-profit membership organization expanding opportunities for women and actively
promoting the advancement of women in the workplace since 1962 and/or;

• Companies that have signed and adhere to the Women on the Board Pledge for Europe
produced and disseminated by the European Commission with a pledge to reach the target of 30% female board members by 2015 and 40% by 2020 by actively recruiting qualified women to replace outgoing male board members and/or;

Group B

• Companies that could potentially enhance overall portfolio diversification and/or maximize overall portfolio return

The portfolio advisor will maintain a minimum of 80% of its equity securities in Group A at all times and up to a maximum of 20% of its equity holdings in Group B.

“You can drill more holes in some SRI mandates than you find in Swiss cheese” added Klein, “The GWEF mandate is strict and measurable.”

The fund will be managed by Jarislowsky Fraser, a solid and well respected firm that has recently undergone a changing of the guard, although 87 year old Steven Jarislowsky remains as Chairman. With women in four of its top executive positions, JF is a natural fit for the GWEF.

While the fund has a global mandate in order to maximize potential candidates, there are a number of Canadian companies which would make the cut including Bank of Montreal, Loblaw and Sun Life Financial.

The GWEF will donate .5% of the MER to promoting opportunities for women in Canada. This may be through donations to existing women’s organizations, or through innovative financing options.

Klein anticipates making a further announcement soon on when the GWEF will be open for business. We can’t wait!