Unions file lawsuit against Puerto Rico over worker pensions

Two unions have filed a lawsuit against Puerto Rico’s government accusing it of mismanaging employee retirement accounts.

The announcement was made Thursday by the American Federation of Teachers and the American Federation of State, County and Municipal Employees.

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The unions allege the government has not created defined-contribution accounts as promised and instead invested hundreds of millions of dollars in pension contributions in accounts that earn very little interest.

A spokesman for Gov. Ricardo Rossello did not immediately return a message for comment.

The lawsuit comes as Puerto Rico faces nearly $50 billion in unfunded pension liabilities and prepares to implement pension cuts sought by a federal control board overseeing the island’s finances amid a 12-year recession. The suit in part asks that the government create individualized retirement accounts for teachers.

iShares Launches a Green Bond ETF

This article was originally published on ETFTrends.com.

BlackRock’s iShares expanded on its socially responsible exchange traded fund theme with the introduction of its first green bond strategy that cover fixed-income securities tied to projects designed to combat climate change or support a sustainable environment. On Thursday, BlackRock rolled out the iShares Global Green Bond ETF (NasdaqGM: BGRN), which has a 0.20% expense […]

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Utility asked last month to hike bills over California fires

Smoke hangs over the scorched remains of Old Town Plaza following the wildfire in Paradise, Calif., on Thursday, Nov. 15, 2018. The shopping center housed a Safeway and other businesses. (AP Photo/Noah Berger)

A utility facing severe financial pressure amid speculation its equipment may have sparked a deadly Northern California wildfire asked U.S. energy regulators last month for permission to raise its customers’ monthly bills to harden its system against wildfires and deliver a sizable increase in profits to shareholders.

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In an October filing with the Federal Energy Regulatory Commission, Pacific Gas Electric Co. laid out a variety of dangers confronting its transmission lines running through Northern California, saying its system faced a higher risk of wildfires than any other utility.

“The implications of PGE’s exposure to potential liabilities associated with wildfires are dramatically magnified,” the filing said. “Overcoming the negative financial impact of any significant damages that might ultimately be attributed to PGE will require an ongoing commitment of capital from investors.”

San Francisco-based PGE — one of the nation’s largest electric utilities serving most of Northern and central California — made the request a month before the Camp Fire broke out Nov. 8 and quickly ballooned into the deadliest U.S. wildfire in a century. No cause has been determined, but speculation has centered on PGE, which reported an outage around when and where the fire ignited.

The company has lost $15 billion in market value, its shares plummeting 60 percent in a week.

PGE already faced financial pressure from its suspected role in a series of deadly fires in California wine country last year. The company’s filing last month said it needed to boost revenue to keep investors from fleeing, noting that its credit rating was downgraded and its shares had plummeted since the 2017 fires.

Wildfires threaten PGE’s ability to attract and maintain the investment necessary to support its system and meet California’s clean energy goals, company spokeswoman Lynsey Paulo said.

“PGE’s electrical system is not immune from the impact of increases in the frequency and severity of extreme weather,” Paulo said.

The company said in its rate-hike request that the extreme wildfire risk justified a higher profit than an average utility is allowed to earn. It cites a California legal standard holding utilities entirely liable for damage caused by their equipment regardless of whether the company was negligent.

A state law approved this year makes it easier for the company to raise rates to pay off lawsuits, but the company says it still faces high risk and got no relief for fires that start this year.

The precipitous drop in the stock price shows investors are taking into account not just the fires but also the risk of future wildfires for which the utility could be responsible, analysts said.

“It’s going to be very difficult for PGE to finance its needs in the short run, so we think at this point, regulators need to step in and give the market some reassurance,” said Travis Miller, a strategist at Morningstar.

PGE is asking for a 9.5 percent increase in transmission charges — the cost of high-voltage lines that move power across large distances. That amounts to about $1.50 more per month for the average residential customer, Paulo said.

Advocates for utility customers have balked at PGE’s contention that it needs to raise rates because of wildfires. They say its problems are the result of poor management decisions.

“We don’t pay electric bills in order to keep bailing PGE out from its own negligence and incompetence, and we can’t afford it,” said Mindy Spatt, communications director for The Utility Reform Network.

PGE reported to the Securities and Exchange Commission this week that it had renewed its insurance coverage for wildfires to about $1.4 billion for the year covering this fire season. But an analyst at Citi Investment Research estimated damages could exceed $15 billion. And the company’s potential liability for last year’s fires has been pegged at upward of $10 billion.

Some analysts believe PGE will be able to survive financially as long as there isn’t another major catastrophe. But wildfires are getting bigger, deadlier and more destructive as housing pushes into rural areas and drought and high temperatures tied to climate change become the norm.

“The business doesn’t earn enough money to pay for that in any kind of regular way,” said Michael Wara, director of the Climate and Energy Policy Program at Stanford University. “These have to be extreme, once-in-a-generation events.”

PGE’s ability to raise capital will be constrained, so it will probably be forced to cut back on expenses such as replacing aging equipment, analysts said. California utilities also need to invest in the type of upgrades that will allow the state to meet its aggressive renewable energy and carbon reduction goals.

Fire investigators have blamed PGE equipment for 12 of last year’s wildfires, including two that killed 15 people combined. In eight of those fires, investigators said they found evidence of violations of state law and forwarded the findings to prosecutors.

The company is facing dozens of lawsuits from insurers and people who lost their homes in last year. And a lawsuit this week blames PGE for the latest fire, accusing the company failing to effectively maintain power lines.

California regulators generally allow utilities to pass on the costs of those lawsuits to their customers, but only if the company can show it prudently managed its equipment. The new state law makes it easier for utilities to bill customers if they can show a fire got worse from things outside their control, like severe weather. But lawmakers didn’t drop the standard that puts all the liability on the utility, which is unique to two states.

“Very large damage payments of the size faced by California utilities are very unusual in other states,” said Hugh Wynne of Sector and Sovereign Research, an investment research firm.

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Bussewitz reported from New York.

Mexico’s president elect reaches out to business elite

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Mexico’s President-elect Andres Manuel Lopez Obrador has reached out to the country’s business elite, announcing the formation of a business advisory council including big names, especially in media.

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Lopez Obrador said in a pre-recorded video circulated Thursday that he would meet with the council every couple months.

Lopez Obrador, who takes office Dec. 1, says Mexico needs the private sector’s support to generate jobs and grow the economy.

The leftist politician quickly moved to meet with business leaders to calm markets after his victory in July. Last month, Lopez Obrador roiled markets again by announcing the cancellation of the capital’s $13 billion airport project.

Ricardo Salinas Pliego, the founder of Grupo Salinas, which owns TV Azteca network, and Bernardo Gomez, the co-CEO of Televisa network, are among the council’s members.

China woos Pacific islands with loans, showcase projects

In this Nov. 15, 2018, photo, a woman crosses the street near a billboard commemorating the state visit of Chinese President Xi Jinping in Port Moresby, Papua New Guinea. As world leaders arrive in Papua New Guinea for a Pacific Rim summit, the welcome mat is especially big for China’s President Xi Jinping. With both actions and words, Xi has a compelling message for the South Pacific’s fragile island states, long both propped up and pushed around by U.S. ally Australia: they now have a choice of benefactors. (AP Photo/Mark Schiefelbein)

As world leaders land in Papua New Guinea for a Pacific Rim summit, the welcome mat is especially big for China’s president.

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A huge sign in the capital, Port Moresby, welcomes Xi Jinping, picturing him gazing beneficently at Papua New Guinea’s leader, and his hotel is decked out with red Chinese lanterns. China’s footprint is everywhere, from a showpiece boulevard and international convention center built with Chinese help to bus stop shelters that announce their origins with “China Aid” plaques.

On the eve of Xi’s arrival for a state visit and the Asia-Pacific Economic Cooperation meeting, newspapers in the country ran a full-page statement from the Chinese leader. It exhorted Pacific island nations to “set sail on a new voyage” of relations with China, which in the space of a generation has transformed from the world’s most populous backwater into a major economic power.

With both actions and words, Xi has a compelling message for the South Pacific’s fragile island states, long both propped up and pushed around by U.S. ally Australia: they now have a choice of benefactors. With the exception of Papua New Guinea, those island nations are not part of APEC, but the leaders of many of them have traveled to Port Moresby and will meet with Xi.

The APEC meeting, meanwhile, is Xi’s to dominate. Headline-hogging leaders such as Russia’s Vladimir Putin and U.S. President Donald Trump are not attending. Trump’s stand-in, Vice President Mike Pence, is staying in Cairns in Australia’s north and flying into Papua New Guinea each day. Australia’s new prime minister, Scott Morrison, the country’s fifth leader in five years, is barely known abroad.

“President Xi Jinping is a good friend of Papua New Guinea,” its prime minister, Peter O’Neill, told reporters. “He has had a lot of engagement with Papua New Guinea and I’ve visited China 12 times in the last seven years.”

Pacific island nations, mostly tiny, remote and poor, rarely figure prominently on the world stage but have for several years been diligently courted by Beijing as part of its global effort to finance infrastructure that advances its economic and diplomatic interests. Papua New Guinea with about 8 million people is by far the most populous, and with its extensive tropical forests and oil and gas reserves is an obvious target for economic exploitation.

Six of the 16 Pacific island states still have diplomatic relations with Taiwan, a sizeable bloc within the rapidly dwindling number of nations that recognize the island regarded as a renegade province by Beijing. Chinese aid and loans could flip those six into its camp. A military foothold in the region would be an important geostrategic boost for China, though its purported desire for a base has so far been thwarted.

Beijing’s assistance comes without the oversight and conditions that Western nations and organizations such as the World Bank or International Monetary Fund impose. It is promising $4 billion of finance to build the first national road network in Papua New Guinea, which could be transformative for the mountainous nation. But experts warn there could also be big costs later on: unsustainable debt, white elephant showpieces and social tensions from a growing Chinese diaspora.

“China’s engagement in infrastructure in PNG shouldn’t be discounted. It should be encouraged but it needs to be closely monitored by the PNG government to make sure it’s effective over the long term,” said Jonathan Pryke, a Papua New Guinea expert at the Lowy Institute, a think tank in Sydney.

“The benefits of these projects, because a lot of them are financed by loans, only come from enhanced economic output over a long time to be able to justify paying back these loans,” he said.

“The history of infrastructure investment in PNG shows that too often there is not enough maintenance going on,” Pryke said. “There’s a build, neglect, rebuild paradigm in PNG as opposed to build and maintain which is far more efficient.”

Some high-profile Chinese projects in Papua New Guinea have already run into problems. A promised fish cannery hasn’t materialized after several years and expansion of a port in Lae, the major commercial center, was botched and required significant rectification work. Two of the Chinese state companies working in the country, including the company responsible for the port expansion, were until recently blacklisted from World Bank-financed projects because of fraud or corruption.

Xi’s newspaper column asserted China is the biggest foreign investor in Papua New Guinea, a statement more aspirational than actual. Its involvement is currently dwarfed by the investment of a single company— ExxonMobil’s $19 billion natural gas extraction and processing facility.

Australia, the former colonial power in Papua New Guinea, remains its largest donor of conventional foreign aid. Its assistance, spread across the country and aimed at improving bare bones public services and the capacity of government, is less visible.

But its approach is shifting in response to China’s moves.

In September, the Australian government announced it would pay for what is typically a commercial venture — a high-speed undersea cable linking Australia, Papua New Guinea and the Solomon Islands that promises to make the internet and telecommunications in the two island countries faster, more reliable and less expensive.

Earlier this month, Australia announced more than $2 billion of funding for infrastructure and trade finance aimed at Pacific island nations and also agreed to joint development of a naval base in Papua New Guinea, heading off feared Chinese involvement. It is also boosting its diplomatic presence, opening more embassies to be represented in every Pacific island state.

“The APEC meeting is shaping up to be a faceoff between China and Australia for influence in the Pacific,” said Elaine Pearson, the Australia director of Human Rights Watch.

That might seem a positive development for the region, but Pearson cautioned that competition for Papua New Guinea’s vast natural resources has in the past had little positive impact on the lives of its people.

“Sadly exploitation of resources in PNG has fueled violent conflict, abuse and environmental devastation,” she said.

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Associated Press writer Jim Gomez contributed to this report.

Federal utility’s CEO announces plans for retirement

The chief executive officer of the nation’s largest public utility has announced his plans to retire.

Bill Johnson of the Tennessee Valley Authority revealed his plans during a board meeting Wednesday in Tupelo, Mississippi.

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Johnson joined the federal utility in 2013. He turns 65 in January.

TVA says it could take months while the board searches through internal or external candidates. Johnson will remain CEO while his successor is picked and trained to lead.

Johnson is the nation’s highest-paid federal employee. He was paid nearly $5 million in fiscal 2016, with a reported base salary of roughly $995,000. The board has said Johnson’s pay is still low compared to salaries of utility companies not in public service.

TVA powers nearly 10 million people in parts of seven southeastern states.

Apple Shares: More Analyst Downgrades Take a Bite Out

This article was originally published on ETFTrends.com.

It’s been a case of kick Apple shares while they’re down as more analyst downgrades hurt the stock on Wednesday when Guggenheim Partners lowered its rating on the tech giant from “buy” to “neutral,” citing that a 5% decline in iPhone units will occur in 2019. Guggenheim forecasted that a subsequent increase in prices would […]

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A Look Inside a Prominent Low Vol ETF

This article was originally published on ETFTrends.com.

Among smart beta exchange traded funds dedicated to individual investment factors, low volatility products have been popular with conservative investors based on the premise that emphasizing a low volatility strategy can help reduce a portfolio’s downside potential. The trade-off with ETFs such as the PowerShares SP 500 Low Volatility Portfolio (NYSEArca: SPLV) is that these […]

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Slow Burn for Marijuana ETF After Post-Midterm Election High

This article was originally published on ETFTrends.com.

It’s been a slow burn for ETFMG Alternative Harvest ETF (NYSEArca: MJ) as it has fallen 16% in the last five days after it rallied to a November high last week following the U.S. midterm elections. MJ was down about 5% on Tuesday as of 12:15 p.m. ET as U.S. equities have been put through another […]

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US adds new sanctions on Cuba tourist attractions

The Trump Administration is adding new names to a list of Cuban tourist attractions that Americans are barred from visiting.

The 26 names range from the new five-star Iberostar Grand Packard and Paseo del Prado hotels in Old Havana to modest shopping centers in beachside resorts far from the capital. All are barred because they are owned by Cuba’s military business conglomerate, GAESA.

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Travel to Cuba remains legal. Hundreds of US commercial flights and cruise ships deliver hundreds of thousands of Americans to the island each year. And nothing prevents the government from funding its security apparatus with money spent at facilities that aren’t owned by GAESA and banned by the U.S. But the sanctions appear to have dampened interest in travel to Cuba, which has dropped dramatically this year.