CORPORATE NEWS

The new Fiscal Compact Treaty was agreed upon by European leaders in Brussels, except for the Czech Republic and the UK, with the aim to reinforce « fiscal discipline » through a balanced budget rule known as the « golden rule » whereby national budgets are required to be in balance or in surplus « if the annual structural government deficit does not exceed 0.5% of nominal GDP« according to the European Council communication. The new Treaty will be signed in March 1st and 2nd and will enter into force once ratified by at least 12 Euro area countries. Previous deadlocks faced due to a unanimous voting requirement are eliminated. First adopted under the form of a set of rules during the December Summit  to go beyond the October Six Pack on deficit detection,  the Fiscal Compact Treaty retains most of the principles agreed upon at the last meeting : transposition into national laws known must be effective  within one year, « at constitutional level or equivalent » and an automatic correction mechanism will be triggered in case of deviation. The mechanism will be proposed by principles produced by the European Commission but defined by each member state. The European Court of Justice will dispose of a right to verify deficit detection rules transposition into national laws and to impose fines of up to 0.1% of GDP to Euro area offenders, payable to the European Stability Mechanism (ESM) successor from July 2012 of the current bail-out fund, the European Financial Stability Facility (EFSF). In addition, Euro Summits will take place twice a year and Euro area member states will dispose of a qualified majority voting « on whether to place a country in excessive deficit procedure«. A similar qualified majority voting right process will apply regarding sanctions to impose on a given state offender.  The latest legislation is open to member states that are not currently part of the single currency region.

France's nuclear installations are of a « sufficient security level » and none of the 58 nuclear reactors and 20 sites are to be immediately closed down  according to the Nuclear Safety Authority (ASN) recommendations following evaluations carried upon the European Commission's nuclear stress tests safety checks following the Fukushima accident last March. The Authority excludes a zero risk scenario and recommends to reinforce nuclear installations « robustness » to face extreme situations as well as the creation of « hard core » organizational and material measures for each installation, at the latest by June 2012, to be presented to the Authority. The ASN report also calls for the progressive introduction of Business Continuity Planning (BCP), effective from this year and operational by 2014, under the name of Rapid Nuclear Action Force (FARN), to intervene in less than 24 hours in case of an accident on site. Proposed by Electricité de France (EDF), the national electricity provider, the new measures are estimated at a cost of € 10 billion for EDF.

ACCOR Group reported « sustained » revenue growth in 2011, +5.2% like-for-like to € 6.1 billion and set a new record for room openings, 38 700 during the year, above Group‘s target. At year end, Revenues for Upscale and Mid scale hotels rose +5% to €3.5 billion,  and +6.3% for Economy hotels to €1.9 billion. Economy hotels in the US recorded +4.3% revenue increase to € 532 million.
Occupancy rates per region rated the highest in France at 66.8% with 27 490 rooms in the Upscale and Mid scale hotels sector, and equally in Economy hotels, 72.1% with 37 364 rooms. The UK and Belgium posted occupancy rates above 70% in Upscale and Mid scale hotels, followed by the Netherlands, Italy, Germany, and Spain. 

Agence France Trésor (AFT) issued € 7.963 billion long-term government bonds
 (five business days settlement) and maturing on October 2021, 2023, and on April 2035 and 2041. The 2023 issue at 4.25% coupon was oversubscribed three times and the 2021 placement at 3.25% nearly twofold. The April 2035 issue, at 4.75% coupon also met strong investors demand while the April 2041 issuance at 4.50% coupon was subscribed in lesser volume.

Réseau Ferré de France (RFF), the national rail infrastructure manager, awarded   
Bouygues Construction the lead position and DTP Terrassement following a public private partnership bid (PPP) for the construction of a railway bypass around France's southern cities of Nîmes and Montpellier. Along with Colas (Colas Rail and Colas Midi-Méditerranée), Alstom Transport, Spie batignolles, and financial investors (Meridiam and Fideppp) the PPP will conclude a 25-year term contract for the design, financing, construction, operation, servicing and the maintenance of a new shared-track rail infrastructure for freight and passenger trains. The total track, 80 km long, will include 60 km main line and a 20 km connecting track. The PPP is expected to be operational from mid 2012 pending financial closing arrangements.

AIRBUS www.airbus.com topped its 2010 record commercial aircraft deliveries last year, 534 to 88 customers, and made 2011 the most successful year in the company's history, with a 10th consecutive production increase. Deliveries include a new record for 421 single aisle aircraft (against 401 in 2010), 87 A330 Family (87 in 2010) and 26 A380s (18 in 2010). December was also a record month for the A380, with four deliveries in a single month. Airbus Military delivered a historical high 29 aircrafts (20 light and medium military and transport aircraft - C212, CN235 and C295, three P-3 conversion aircraft and 6 A330 MRTTs) and won five new orders for its light and medium aircraft (CN235 and C295).  The Group's record order intake was 1 608 commercial aircrafts valued at US$140 billion net at list prices or in surplus of 267 net aircrafts compared with the year 2007 record. Airbus plans the hiring of 4000 skilled workers due to the continuous ramp-up and upcoming deliveries. 

China's export restrictions of raw materials for environmental protection or conservation policy were ruled illegal by the World Trade Organization (WTO) Appellate Body, in breach of WTO rules, according to the European Commission who welcomed the final ruling in its communication. The restrictions include mainly export quotas  which create « serious disadvantages for foreign producers by artificially increasing China's export prices and driving up world prices«. The WTO dispute settlement case was initiated on 23 June 2009 by the European Union (EU) and the USA, followed by Mexico. Consultations were held with China « but no amicable solution was found«. Following the latest WTO decision, the EU (and the co-complainants) will request its adoption by the WTO Dispute Settlement Body within 30 days. China will then have to « bring its measures in compliance with the rulings within a reasonable period of time« .

ALSTOM was awarded a contract by ADIF, the Spanish railway infrastructure manager, valued at around €280 million in a Public Private Partnership (PPP) consortium led by the Group to build and maintain for 20 years the signaling and telecommunications systems for the high speed line Albacete-Alicante. For the first time in Spain, ERTMS Level 2, based on a GSM communication system dedicated for railways (GSM-R), will be installed without the back up of Level 1 equipment. Alstom‘s share of the contract, around €110 million, includes the global project coordination, the system architecture and the supply, installation and maintenance of the signaling system and ERTMS. Partners include Grupo Comsa-Emte, Isolux Concesiones and CAF. Alstom, the world leader in ERTMS Level 2 technology, has equipped six out of a total ten existing lines and was also the first to equip a very high speed line in Italy, (from Rome to Naples), a cross-border high speed line in Belgium (from Liege to the German border), a high traffic density line in Switzerland (the Mattstetten-Rothrist line in ) and a freight-only line in in the Netherlands (Havenspoorlijn line ). In Sweden, Asltom Grid won a contract worth approximately €240 million by the Swedish utility SVENDKA Kraftnät for the 1440 MW South-West Link scheduled for completion at the end of 2014. The project will connect Barkeryd in central Sweden to Hurva in southern Sweden, using High Voltage Direct Current (HVDC) technology.

AREVA signed a contract worth about USD 500 million with Xcel Energy in the United States to supply the Monticello nuclear power plant, Minnesota, with a  unique integrated fuel and related services contract with deliveries scheduled to begin in 2015.  Under the terms of the agreement, AREVA will provide six fuel reloads, the equivalent of a decade of fuel supply. The contract includes the transition of the Monticello plant to use AREVA's innovative ATRIUMTM 10XM boiling water reactor fuel and covers uranium, conversion, enrichment, fuel design and fabrication, and related engineering services. 

PETROPLUS announced that the Petite-Couronne SAS Refinery, Seine -Maritime north-west France, Petroplus Holdings France SAS, Petroplus Marketing France SAS, and Petroplus Raffinage Reichstett SAS its subsidiaries in France,  filed for rehabilitation proceedings according to the Group‘s communiqué. The Court appointed FHB Administrateurs Judiciaires as administrator for the assets of some of the above companies. The Group refuted all allegations « of fraudulent bankruptcy in France following press reports of over €122 million missing from the company's cash flow. The Group specified that Deutsche Bank, one of the lenders under the Revolving Credit Facility (“RCF”), « transferred €122 million and $59 million of this cash that was held on accounts pledged under the RCF out of these accounts. No Petroplus legal entity provided any instructions or took any actions to transfer these funds from these French accounts«. Petroplus added that a formal investigation has been opened by the public prosecutor in France. A total 550 job losses at the Petite Couronne Refinery are at stake. 

The European Bank for reconstruction and Development (EBRD) http://www.ebrd.com announced record level investments in 2011 of over €9 billion across countries from south-eastern and central Europe to central Asia in all economic sectors and projects to « enter 2012 in robust form » according to the Bank's communication. The Bank's positive outlook stems from « solid earnings » and all major shareholders agreement to an increase in capital, including the G-8 nations « despite extremely challenging market conditions«.  The total number of individual loans and equity investments remained strong at 380. In addition, EBRD's triple-A rating and stable outlook was confirmed from all three major international rating agencies. Last year, 30% of investments were in the diversified corporate sectors, 32% in the financial sector, with a priority on the small and medium-sized enterprise (SME) sector, and 38% of total investments in the energy and infrastructure sectors. In 2012 and in response to a call from the international community to provide support for emerging Arab democracies, the EBRD will implement its expansion and initiate its investments into the southern and eastern Mediterranean (SEMED) region.

ARIANESPACE announced a new record backlog of orders of €4.5 billion, at the beginning of this month, including 21 Ariane 5 launches (30 geostationary satellites and six dedicated launches), 15 Soyuz launches (13 from CSG, two from Baikonur) and two Vega launches. This backlog guarantees the company over three years of business according to a communiqué. In 2011, the company will post total revenues of about €985 million  and expects to reach break-even. Its 2012 objectives include seven Ariane 5 launches and with the Edoardo Amaldi ATV3 scheduled for March 9. It also plans five Soyuz launches, three from the Guiana Space Center and two from Baikonur, via Starsem. Last October, Arianespace launched the first Soyuz rocket from the Guiana Space Center and performed four Soyuz launches in 2011, two from CSG and two from Baikonur, Kazakhstan, via the Starsem joint venture, orbiting a total of 20 payloads. Ariane 5 world champion heavy-lift launchers status is confirmed by its 46 successful launches in a row in nine years.

DASSAULT AVIATION was selected by the Indian Government to supply the Indian Army with 126 Air Force Rafale firefighter jets. The Elysée Palace's communication specified that the contract will include « substantial technology transfers » guaranteed by the French state. Government spoke person and Budget Minister Valérie PECRESSE announced that 18 Air Force Rafale will be manufactured in France. The contract is expected to be concluded within six to nine months.

RENAULT Group 2011 global sales increased +3.6% year-on-year to over 2.7 million vehicles with sales outside Europe accounting for 43% of total sales and up +19.2%. Per Group brand, Renault passenger car sales performed best and rose +6.1% to 1.918 212 million units, and Renault Light Commercial Vehicles (LCV) increased  +11.1% to over 382 000. Per region, Eurasia posted the fastest increase +60.1% to 170 808 vehicles sold, while in volume Europe including France remained in the lead with 1 549 376 million despite sales in decline by 5.7% due to slow markets in France, a -7.5% drop to 689 022 units, and in Europe, -4.3% to over 860 000 vehicles. In the Americas, sales were sustained, +25.2% increase to 396 933 units followed by the Euromed region, +13.2% to 308 631. In Asia-Africa, sales grew +3.2% to 296 314 vehicles.   

IN THE NEWS

The Elysée Palace announced the death of four soldiers in Afghanistan shot by a local army man while they were jogging, and unarmed. All political leaders condemned the killing. To date, a total 80 soldiers died while on duty in Afghanistan.  

Total initial nuclear investments amounted to € 242 billion (construction, nuclear combustibles, waste management, and electricity production) up to 2010 figures according to the National Auditors (Cour des Comptes) report on the Costs of the Nuclear Sector with an added € 55 billion spent on public and private research and development (an average € 1 billion a year) as well as € 12 billion for the Superphoniex program (investment, functioning and stoppage), taking total past investments to  € 188 billion up to 2010. Dismantling of all 58 nuclear reactors was evaluated at €18.4 billion, in gross figures, but the Court specified that the estimate, produced by Electricité de France (EDF) the national electricity provider, is « pertinent » but cannot be validated due to a lack of « technical specifics produced by experts«. Nuclear waste management was estimated in the Court's report at € 28.4 billion.  

Companies cash flow are expected to deteriorate in the first quarter of this year according to national statistics and operating profits are foreseen lower, down by half. Heavy players including the automobile industry, the food and agriculture industry, transport equipment and other manufacturing industries project negative cash flow figures due to current scarce financial reserves as feeble consumer demand and economic uncertainties have frozen order books. One exception to the rule, extractive industries, plan to remain in the black thanks to steady cash flow levels while operating profits are however expected to be one notch above normal, but withering by nearly fourfold compared with the previous semester.

President Nicolas SARKOZY traveled to the French West Indies (FWI) and French Guiana for the New Year, a tour deemed, by the opponents of all political parties  that of a presidential candidate to the 2012 elections.  Off-the-record comments made by the president to the press hit the headlines and were interpreted to mean that he may not run for president. Critics saw the president's words as a « play hard to get » act while ruling UMP party members urged him to publicly announce that he will run for president. By month-end and in a televised interview seen by over 16 million viewers in which he detailed new measures aimed at boosting competitiveness and the labor market, the president declined to confirm his intention to run for a second term but his tone clearly indicated that he will run for president. 

François HOLLANDE, the Socialist Party presidential nominee and contender to the upcoming elections in May revealed his agenda made of 60 measures which include € 20 billion public spending to be financed through a new income tax bracket and the capping of tax exemptions. The program comprises the creation of 150 000 youth jobs, 500 000 apprentices-type youth contracts in addition to 60 000 teaching posts. Opponents (the ruling UMP Party as well as Sustainable Development candidates, the National Front, and Center-Right contenders) deemed his program « ruinous » as « figures do not add up ».

Customs seized illegal drugs ( synthetic drugs and narcotics) last year in record high volume estimated at € 425 million at street value, or +37% increase compared with 2010 according to data published by the Budget Minister and government spoke person Valérie PECRESSE. Cocaine accounted for the largest share of drug trafficking seizures, valued at a record  € 334.1 million or 8.3 tons (5.1 tons in 2010). Counterfeit goods confiscated recorded +42% increase on the same period, or nearly nine million goods led by paper products, clothing, textile and footwear, D-I-Y, consumer goods including food products, and fashion accessories, the largest in volume, ahead of counterfeit mobile phones and electronic goods. Prescription drugs sold on the Internet in France were also intercepted by customs last September, a total 110 000 products or +21% compared with 2010. In addition, 462 tons of  tobacco and cigarettes at black market  value estimated at € 109 million were seized at postal and express freights, a new record seizure for customs.

Diplomatic relations between France and Turkey, suspended  last month, worsened following the Upper House (Senate) vote of a bill to render the denial of  the 1915 Armenian Genocide a crime. A total 126 senators approved the bill and 86 voted against. Turkey had recalled its ambassador to France in December when the Lower House (National Assembly) had passed the white paper prior to the Senate vote.  Turkish Prime Minister Tayyip ERDOGAN called the new law « discriminatory and racist » and local press headlines who referred to  « Armenian allegations » called for a boycott of French products. A motion by the Senate Law Committee, ahead of the vote, to oppose the white paper on the basis that « Parliament's role is not that of a tribunal and does not include making history » failed to win a majority vote which would have blocked debates at the Senate and consequently the final vote.  

CROATIA « yes » vote to become the 28th member of the European Union (EU) on July 1st 2013, pending ratification by all current 27 member states, revealed that about 67% of voters approved EU membership  according to the European Parliament's communication on the country's preliminary referendum results.  Last month, Croatia signed up the EU Accession Treaty ahead of the vote as required by the membership application process. Croatia negotiated specific arrangements applicable from full accession ( certain restrictions on the acquisition of agricultural land by EU nationals for seven years from the date of accession and including the possibility for a three-year extension period, restrictions on the acquisition of real estate by citizens of third countries, capital requirement exemptions for Croatian Credit Unions, and partial internal border controls lifting). The application was originally submitted in February 2003 and the status of candidate country was obtained a year later. The European Commission and the European Parliament favorable opinions were granted in December 2011.

The European Council (EC) extended European Union (EU) restrictive measures against Iran in conjunction with the country's nuclear program, to include a ban on imports, purchases and transport of Iranian crude oil and petroleum products, according to the Council‘s communiqué while contracts already concluded « can still be executed until 1 July 2012«. Imports of goods from Iran to the EU, the country's main trading partner, totaled €14.5 billion in 2010 and EU exports €11.3 billion. A review of the measures relating to oil and petroleum products will take place before 1 May 2012. Restrictions apply to imports of petrochemical products as well as same-sector new investments and joint ventures in Iran,  and exports of key equipment and technology to Iran. According to the US Energy Information Administration data, www.eia.gov, up to the end of June 2011, Iran's refining capacity was 1.451 million barrels/day and in 2010, the country was the third largest global crude oil exporter in 2010 behind Saudi Arabia and Russia. Exports of Iranian crude oil and condensate to the EU, 18%, ranked second to China‘s 22% on the same January-June period.  The EU Council's restrictive measures include financial transfers above € 10 000 to and from Iran which must be notified to national authorities, and prior authorizations for those above € 40 000 « with humanitarian exceptions ». The Council also froze the assets of the Iranian central bank within the EU, « while ensuring that legitimate trade can continue under strict conditions«.