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Helping China cut carbon emissions isn’t a financial game every business can play

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A worker examines a sewage recycling pool in the coal liquefaction factory of CHN Energy in Ordos, north China’s Inner Mongolia Autonomous Region, April 11, 2019.

Xinhua | via Getty Images

BEIJING — China has a lot more to worry about at home than its foreign policy. Some energy-related companies in the country have found themselves caught in a business cycle that shows how difficult it can be for stimulus to help the economy in the form of bank loans.

The world’s second-largest economy contracted 6.8% in the first quarter at the height of the coronavirus pandemic. Among many measures to support growth, authorities have repeatedly emphasized how banks need to lend more to smaller, privately run businesses versus state-owned giants.

At the same time, Beijing has increased efforts to develop renewable energy, which can ultimately give China an edge in globally sought-after technology. But the coronavirus has made banks and investors more cautious about putting money into such unproven technologies, and history indicates the challenges run deep for any privately run company that might want to participate in this growth opportunity.

China is the world’s largest consumer of coal, and accounts for nearly half of global investment in renewable energy. When it comes to specific technologies such as waste-to-energy, solar and wind power or hydrogen fuel cells, scientists from the U.S. to Europe speak generally of rapid advancement in Chinese renewables, which has helped drive down costs. 

It’s less clear which technology will ultimately gain the scale needed for widespread use. But China is trying as many as possible. The government would like non-fossil fuels to account for at least a fifth of energy in ten years, and aims to increase national security by cutting energy imports.

“China’s installed renewable energy (RE) capacity is the highest in the world, but there are no guidelines for renewables utilisation in the nationwide energy framework, due to lack of planning and a largely rigid overall energy system,” Guido D. Giacconi, national chair, energy working group of the European Union Chamber of Commerce in China (EUCCC), said in a statement a few weeks ago.

He pointed out that China’s post-coronavirus infrastructure stimulus plan has been updated to include energy transfer and storage projects.

“Energy transition is no longer just a priority for decarbonisation and climate change,” he said. “It is now a way for China to meet long-term economic, political and technology leadership goals.”

Balancing looser policy with limiting risk

For privately run companies in China wanting to participate in that growth, just being in the right industry isn’t a guarantee. That’s due to a complex web of interests and underdeveloped systems for managing risk – and the transmission of capital.

First, there’s a question of cash flow.

“The (privately owned enterprises) POEs, they really have this disadvantage of refinancing cost(s) when compared to SOEs,” Apple Li, director at S&P Global Ratings, said in a phone interview. “Particularly in the utilities sector, capex is quite high and leverage is quite high. It really depends on how companies can secure funding from the banks and also settle the account receivables from their counterparties.”

Chinese banks prefer to lend to less risky state-owned enterprises, and need to earn profits themselves. Privately run companies with potentially innovative but largely unproven technologies can be too risky for the banks, the largest of which are state-owned. The major energy companies in China are state-owned.

Underdeveloped regulation allowed many companies to borrow and expand too quickly, until Chinese authorities began to tighten restrictions on leverage three years ago, according to Zhu Chunyang, executive director, environmental & public utilities chief analyst at the research and development center at China Merchants Securities.

“Energy transition is no longer just a priority for decarbonisation and climate change. It is now a way for China to meet long-term economic, political and technology leadership goals.”

Guido D. Giacconi

national chair, energy working group of the European Union Chamber of Commerce in China (EUCCC)

China’s Securities Times pointed out last week that 122 mainland stocks, known as A-shares, had a share price of less than 2 yuan, below the average 9.47 yuan a share. Several are in energy-related businesses, including two that are subsidiaries of Shenwu Group, which develops technologies for more efficient coal usage, waste-to-energy and hydrogen production from plants. The two subsidiaries alone once commanded a combined market valuation of about 61 billion yuan ($8.7 billion) at their peak in 2017, according to Wind Information data. In the last few weeks, that valuation stood at under 1 billion yuan.

Lack of capital has forced many of Shenwu’s projects to halt, Ruan Liming, assistant dean and director of scientific research at the Beijing-based company’s research institute, said in late April, just a few days after the company resumed work in the wake of the coronavirus outbreak.

The company took far longer than others to resume work since some of its operations are in Hubei, the province where the Covid-19 disease first emerged late last year. The disease has since infected more than 6.2 million people and killed more than 375,000 people globally.

The banks say we don’t meet the conditions for getting a loan, Ruan said. The company expects that if it can get 500 million to 1 billion yuan, then at least four projects can proceed, allowing for new orders to come in.

For now, the more than 20-year-old company is just trying to stay alive, cutting its workforce nationwide — which three years ago stood at 4,000 — to about 500 people and negotiating with potential investors, including those affiliated with the state.

Shenwu also faces many lawsuits in the wake of the financial strains, according to records accessed through Wind Information. That contrasts with high-profile recognition several years ago by key government ministries as an industry pioneer. The International Energy Agency also pointed to Shenwu’s growth in an article in 2016 describing the value of such “energy service companies (escos).”

A year earlier, a paper by researchers from the Pacific Northwest National Laboratory, Lawrence Berkeley National Laboratory and the ESCO Committee of China Energy Conservation Association pointed out that in order to get projects, these companies had to acquire capital themselves and share any energy savings with their industrial customers, putting “tremendous financial pressure” on the businesses.

More recently, as the industry has grown, some companies have been able to use a different model in which they don’t need to make any of the investment, and may be able to get financing from banks, Meredydd Evans, one of the Pacific Northwest senior scientists, said in a phone interview last month. Still, she noted, the industry relies mostly on private equity.

Financial management challenges

It’s not that the companies don’t have the technology, Junjie Zhang, director of the environmental research center at Duke Kunshan University located near Shanghai, said in a phone interview. “The challenge is that, can you find a good financial model that can make the project sustainable and manageable, and actually many environmental companies, they failed in the financial model when they are dealing with those (public-private partnership) projects.”

With the right incentive, state-owned conglomerates can be quite innovative since they don’t need to worry about short-term financial constraints, Zhang said.

His team’s research of environmental innovations based on patent filings found that the top three companies were all state-owned: PetroChina, China Metallurgical and China National Grid.

State-owned enterprises scale more easily

That state presence is another challenge privately owned environment technology companies can face. The one-party, authoritarian Chinese government has gradually peeled back state ownership over the last 40 years, although critics say the process has reversed in the last few years. Today, the majority of jobs and economic growth come from privately owned businesses.

But state-owned enterprises still dominate. Their share of corporate bond issuance rose in the first quarter to 91%, while that of privately owned enterprises fell to 9% of the total, down from 11% the prior quarter, according to Fitch Ratings.

Jenny Huang, director of China corporate research at Fitch, pointed out in a phone interview that the coronavirus has made investors more cautious, so they prefer state-affiliated holdings. Last year, she said many privately owned companies wanted to benefit from the identity of a state-owned entity and gave state-owned investors control of the business, even if they only had a minority stake.

The road ahead remains tough for many of these businesses.

For one privately owned environmental technology company, receiving a provincial-level energy group investment helped it gain a “positive” outlook from S&P Global Ratings in September. But in May, S&P lowered its outlook to “stable” on what’s now known as Zheneng Jinjiang Environment due to “weakened cash generation ability and increasing leverage on debt-funded waste-to-energy (WTE) products.”

Source: https://www.cnbc.com/2020/06/03/helping-china-cut-carbon-emissions-isnt-a-financial-game-for-everyone.html

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Pinterest is reportedly in talks to acquire VSCO

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So what can Pinterest do to jump higher up the list of social networking sites? According to a report by the New York Times, one possibility is acquiring the owner of VSCO, the app for editing / sharing photos and videos that has brought in-depth tools to mobile users for years. Neither side directly confirmed the negotiations, and there’s no word on a possible price, but maybe combining forces can bring some Instagram-like glow. 

As it is, Pinterest is still mostly known for planning and organizing, and as the NYT article points out, other than some recent acquisitions, VSCO is currently best known for the “VSCO girls” meme.

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Source: https://www.engadget.com/vsco-pinterest-014258107.html

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A sealed copy of ‘Super Mario Bros.’ just sold for $660,000

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A nearly perfect copy of Super Mario Bros. for the NES has sold for $660,000 at auction. In what turned out to be a 13-bidder contest, $550,000 went to the game’s original owner. The copy was one of the earliest shrink-wrapped versions of the games you could buy in the US (Super Mario Bros. eventually had 11 different box variants, according to WATA Games).

Heritage Auctions, the firm that oversaw the sale, told Ars Technica it dates back to late 1986. It was reportedly bought as a Christmas gift and sat unopened in a desk drawer for the better part of four decades. “I never thought anything about it,” the seller, who asked to remain anonymous, told the auction house.

The $660,000 this copy of Super Mario Bros. sold for is crazy when you consider the Nintendo PlayStation, a one-of-a-kind prototype representing a unique piece of gaming history, sold for $360,000 at auction last year. More recently, someone paid $156,000 to buy a pristine copy of Super Mario Bros. 3. It makes you wonder how much the owner would have walked away with had they simultaneously tried to cash in on the NFT craze somehow.

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Source: https://www.engadget.com/super-mario-bros-auction-000001095.html

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‘Lost Tapes of the 27 Club’ used Google AI to ‘write’ a new Nirvana song

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Were he still alive today, Nirvana frontman Kurt Cobain would be 52 years old. Every February 20th, on the day of his birthday, fans wonder what songs he would write if he hadn’t died of suicide nearly 30 years ago. While we’ll never know the answer to that question, an AI is attempting to fill the gap.

A mental health organization called Over the Bridge used Google’s Magenta AI and a generic neural network to examine more than two dozen songs by Nirvana to create a ‘new’ track from the band. “Drowned in the Sun” opens with reverb-soaked plucking before turning into an assault of distorted power chords. “I don’t care/I feel as one, drowned in the sun,” Nirvana tribute band frontman Eric Hogan sings in the chorus. In execution, it sounds not all that dissimilar from “You Know You’re Right,” one of the last songs Nirvana recorded before Cobain’s death in 1994.

Other than the voice of Hogan, everything you hear in the song was generated by the two AI programs Over the Bridge used. The organization first fed Magenta songs as MIDI files so that the software could learn the specific notes and harmonies that made the band’s tunes so iconic. Humorously, Cobain’s loose and aggressive guitar playing style gave Magenta some trouble, with the AI mostly outputting a wall of distortion instead of something akin to his signature melodies. “It was a lot of trial and error,” Over the Bridge board member Sean O’Connor told Rolling Stone. Once they had some musical and lyrical samples, the creative team picked the best bits to record. Most of the instrumentation you hear are MIDI tracks with different effects layered on top.

One thing neither AI gave direction on is how exactly Cobain would have sung the song. Outside of cadence and tone, Hogan had to interpret how the grunge star, who famously suffered from crippling stomach pain, would have channeled his anguish into the lyrics.

Over the Bridge isn’t the first group to use AI to emulate a dead artist. But the intent here is different from similar past projects. “Drowned in the Sun” is part of the organization’s Lost Tapes of the 27 Club initiative. They set out to record AI-generated songs by musicians who died at the age of 27 to raise awareness about mental health resources musicians, and people more generally, can turn to when they feel they need help. The Toronto-based non-profit has a Facebook page where it offers support. It also offers online sessions and workshops.

If you’re experiencing thoughts of suicide or self-harm, you can reach the National Suicide Prevention Hotline at 1-800-273-8255 or over an online chat.

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Source: https://www.engadget.com/over-the-bridge-lost-tapes-of-the-27-club-223000315.html

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Microsoft’s online-only Build conference starts on May 25th

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Spring is fully upon us, which means the calendar is starting to fill up with high-profile tech events. And the latest addition? Microsoft confirmed today that its online-only Build developer conference will run between May 25th and May 27th, though there’s still no word on when registration will open. (If last year is any indication, our money is on “the end of April.”)

“Microsoft Build is where developers, architects, start-ups, and students learn, connect, and code together, sharing knowledge and expanding their skillset, while exploring new ways of innovating for tomorrow,” the company’s events page explains. 

Unfortunately, Microsoft has yet to update its Build-specific webpage with information about this year’s priorities or schedule, but we’re almost certainly looking at another packed event. Last year, Microsoft went on (among other things) about improved collaboration tools for its suite of Office productivity apps, an AI-focused supercomputer running on its Azure cloud platform, and new cloud tools designed specifically for healthcare practitioners. 

Historically, spring and summer are been jam-packed with large, in-person events where app and software developers get their first glimpse at upcoming platform and strategy updates, attend workshops and code reviews, and generally mingle with their colleagues. Starting last year, though, the worldwide coronavirus pandemic has forced companies that stage these events to rapidly rethink their approaches.

Some, like Microsoft and Apple, quickly pivoted to informative online-only affairs that include full days worth of sessions, demos and fireside chats. (For what it’s worth, Apple announced this week that its own Worldwide Developer Conference will also proceed as an online-only event from June 7-11.) Meanwhile, Google has not yet confirmed whether it plans to stage its Google I/O developer conference at all this year — the company cancelled the show entirely in 2020, but said last month that it does plan to host some version of its annual Google Cloud Next event this October. 

Between a surge in COVID-19 vaccine production and news of relaxed restrictions for vaccinated travelers, Build 2021 may well be the last purely virtual developer conference Microsoft will ever need to put on. With any luck, devs will resume their pilgrimages to Seattle next year, and who knows — maybe those tiny emotional support horses from Build 2018 will show up again too.

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Source: https://www.engadget.com/microsoft-build-2021-may-25-to-27-developer-conference-official-212230206.html

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