ALEX BRUMMER: Glencore finally faces up to its past… but will it ever be willing to embrace a green future?
The shadow of corruption investigations has hung over the miner and commodity trader Glencore since 2018.
The decision by new-ish chief executive Gary Nagle to put aside £1.1billion to settle long-standing disputes with the US Department of Justice, and similar authorities here in the UK, Brazil, Switzerland and the Netherlands, represents a determination to come to terms with a buccaneering past.
The success of Glencore has long been based on its sense of adventure and its willingness to invest in difficult territories.
Corruption probes: The success of Glencore has long been based on its sense of adventure and its willingness to invest in difficult territories
It is not the first miner to find itself in treacherous territory in its dealings in emerging markets and frontier economies.
Rio Tinto has been caught up in bribery allegations in Guinea. It has suffered even more serious reputational damage over the destruction of the sacred Juukan Gorge and charges of misogyny in Australia.
Glencore is seeking to present a brave new and more environmentally responsible face to the world.
In the UK it has become an investor in Britishvolt. Access to valuable lithium, copper and other metals at the core of the electric vehicle revolution means it is in a good place.
Free cash flow of £9.6billion, after a payout of nearly £3billion in dividends, suggests there may never be a better time to come to terms with the past as legal fees rack up.
Glencore’s origins as an oil and commodities trading outfit suggest that whatever the outcome of events in Ukraine it is likely to be a winner. It makes no secret of the fact that market disruptions create great opportunities for arbitrage trades.
Under the stewardship of previous chief executive and key investor Ivan Glasenberg, it decided to stick with coal production, arguing it was better for it to be in the hands of a responsible owner that would deplete existing resources in plain sight.
This looks to have been extraordinarily smart because coal prices have soared in Asia to a record $250-a-ton as investment in new resources has come to a halt.
The decision to stick with coal for the next three decades, when its mines become unproductive, has been a point of dispute with activist investor Bluebell.
It recently has suggested hiving off thermal coal into a separate entity in which Glencore retains voting rights and much of the economic interest.
That, the hedge fund argues, would clarify Glencore as a miner and trader with a green agenda. For the moment, the coal production is an earnings gusher helping to pay for dividends, buybacks and bonuses.
There will almost certainly be a better moment to consider restructuring coal interests after more pressing legal and regulatory issues have been resolved.
When private equity barons Clayton, Dubilier & Rice (CD&R) snapped up Morrisons for £7.1billion last year, there were grand plans to develop the grocer before selling it on.
Among the most intriguing ideas was some kind of combination or long-term deal with another CD&R property, the 900-outlet Motor Fuel Group (MFG).
The idea was gradually to rip out the traditional fuel outlets, turn them into fast-charging stations for electric vehicles and replace the assorted retail outlets on the forecourts with Morrisons stores.
This would be value-enhancing for MFG because the forecourts would have a consistent quality offering – and terrific for Morrisons, which, unlike the other big supermarkets, had never assembled a promising convenience store because all the best sites were taken.
What CD&R seems to have reckoned without is a much more aggressive Competition & Markets Authority, which decided in October to look at what the impact might be of common ownership of MFG forecourts and those already operated by Morrisons.
It is against this background, and the possibility of a multi-billion profit, that there looks to have been a change of heart at CDR, which is planning to offload MFG.
The best-laid plans of mice and men…
Is BA finally turning over a new leaf after the unpopular stewardship of Alex Cruz?
Boss Sean Doyle is offering a one-off bonus to 20,000 pilots and crew as the carrier seeks to bounce back from Covid.
Passengers will be delighted if that means an end to stony-faced service.
But does it also mean an end to a bottle of water and packet of crisps in economy?
Asking for a friend.
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