SIMON BROWN: I’m chatting now with Izak Odendaal, Old Mutual Wealth investment strategist. Izak, I appreciate the early morning. In a note you put out last week you made the point up front that the surge in oil price that we’ve seen over the last year causes universal pain; no one escapes that. With oil back below $100/barrel, it is certainly helping many – we are going to see a nice petrol cut locally later this week. But Europe is still in a heap of pain in terms of energy.
There are also a whole bunch of other problems, one of which is that a lot of European utilities hedged some of their exposures. They are now facing increased margin calls on these hedges, so now it’s becoming a financial issue as well. There was talk over the weekend of governments having to step in and bail out some of those utilities to prevent problems escalating into the banking sector if the collateral posted on those hedges can’t be can’t be raised.
But also, interestingly, some of the nuclear plants have not been able to run at full capacity because they rely on rivers to cool them, especially sort of in the southern regions. There might be different kinds of opportunities, and maybe the obvious one is to say, well, you need to invest in electricity production. Maybe that’s not the best way to think about it. Maybe the best way to think about it is [about] one of those German industrial companies now being sold off heavily because Europe is facing a recession. But actually they are not as badly off as you might think at first glance.
But in the longer term also because of our hydrogen potential, [our] renewables, [our] platinum – and we might even be a big hydrocarbon producer.
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