Power generator FirstEnergy Solutions files for Chapter 11

BY Fraser Tennant

In a move designed to improve the viability of its operations and restructure more than $1bn of debt, power generator FirstEnergy Solutions (FES) has filed for voluntary petitions under Chapter 11 of the Federal Bankruptcy Code.

The filing by FES with the US Bankruptcy Court in the Northern District of Ohio also includes FirstEnergy Nuclear Operating Company (FENOC) which, like FES, is a subsidiary of parent company FirstEnergy Corp. However, FirstEnergy Corp. and its other subsidiaries are not part of the Chapter 11 process.

"The six million customers of our regulated utilities will continue to receive the same reliable service, while our regulated generation facilities will continue normal operations, with the same longstanding commitment to safety and the environment,” said Charles E. Jones, president and chief executive of FirstEnergy Corp. “We will remain focused on creating long-term value for customers, employees and shareholders."

Collectively, Chapter 11 filers FES and FENOC own and operate two coal-fired plants, one dual fuel gas/oil plant, one pet-coke fired plant and three nuclear power plants in the competitive, or non-regulated, power-generation industry. Furthermore, FES and FENOC believe that the $550m-plus they have is sufficient liquidity to continue normal operations and meet post-petition obligations to employees, suppliers and customers.

In addition, FES has stated that it will continue seeking legislative and regulatory relief at the state and federal level. The relief is being sought under Section 202(c) of the Federal Power Act, which gives the secretary extraordinary powers to address emergencies.

"Given the prospective timing of federal and state review and our ongoing cash needs and debt service obligations, the FES and FENOC boards of directors determined that the Chapter 11 filing represents our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief,” said Donald R. Schneider, President of FES.

Serving as legal counsel to FES and FENOC is Akin Gump Strauss Hauer & Feld LLP. Lazard Freres & Co. is serving as investment banker and Alvarez & Marsal North America, LLC is serving as restructuring adviser. Chief restructuring officer for both entities is Charles Moore.  

Mr Schneider concluded: “We believe that the decision to facilitate an orderly financial restructuring under Chapter 11 will best serve our customers, employees and business partners."

News: Coal Generator That Trump Tried to Save Files for Bankruptcy

Oil giants Concho and RSP merge in $9.5bn deal

BY Fraser Tennant

In a deal which creates the largest crude oil and natural gas producer from unconventional shale in the Permian Basin, Concho Resources Inc. is to acquire RSP Permian, Inc. in a transaction valued at approximately $9.5bn.

Under the terms of the definitive merger agreement, shareholders of RSP will receive 0.320 shares of Concho common stock in exchange for each share of RSP common stock. Upon closing of the transaction, Concho shareholders will own approximately 74.5 percent of the combined company and RSP shareholders will own approximately 25.5 percent.

The deal is also expected to: (i) expand Concho’s strategic portfolio in the Permian Basin to approximately 640,000 net acres; (ii) drive significant operational synergies through development optimisation, shared infrastructure and capital efficiencies, with a present value of more than $2bn; (iii) realise over $60m in annual corporate level savings; (iv) enhance Concho’s three-year annualised production growth outlook within cash flow from operations; and (v) reinforce Concho’s leadership position as the premier Permian pure-play company.

The transaction has been unanimously approved by the board of directors of each company.

“I am extremely proud of the RSP team and the high-quality position we built in the Permian Basin,” said Steve Gray, chief executive of RSP. “As RSP has grown and we have seen the resource play develop in the Permian, we have come to recognise that combining with a company with the scale, investment grade balance sheet and operational excellence of Concho will unlock even more value for shareholders. The combined company will have the vision and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”

Expected to be completed in the third quarter of 2018, the transaction is subject to the approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions. Upon closing, Concho’s board will be expanded to 11 directors and will include one independent member of the RSP board.

Concho will continue to be headquartered in Midland, Texas.

Tim Leach, chairman and chief executive of Concho, said: “This combination allows us to consolidate premier assets that seamlessly fold into our drilling programme, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns.”

News: Oil producer Concho to buy rival RSP in Permian push

Rise of the cryptojackers

BY Richard Summerfield

2017 saw the emergence of cryptojacking as the latest cyber security challenge to be overcome, according to Symantec’s 2018 Internet Security Threat Report.

The report analyses data from the Symantec Global Intelligence Network, the largest civilian threat collection network in the world, which tracks over 700,000 global adversaries, records events from 126.5 million attack sensors worldwide, and monitors threat activities in over 157 countries and territories.

Cryptojacking, where computers are unknowingly co-opted for the use of mining cryptocurrencies, increased 8500 percent in 2017, with 1.7 million attacks registered in December alone.

Cyber criminals are increasingly turning to cryptojacking due to its low barriers to entry; indeed, only a few lines of code are required to infiltrate a machine. Cryptojackers are able to use coinminers to steal a device’s processing power and cloud CPU usage in order to mine cryptocurrency. Once a device has been hijacked, it will slow down, overheat and in some cases, be rendered unusable.

On an organisational level there are additional issues caused by cryptojacking. According to the report, “Corporate networks are at risk of shutdown from coinminers aggressively propagated across their environment. There may also be financial implications for organisations who find themselves billed for cloud CPU usage by coinminers.”

“Cryptojacking is a rising threat to cyber and personal security,” said Mike Fey, president and chief operating officer of Symantec. “The massive profit incentive puts people, devices and organisations at risk of unauthorised coinminers siphoning resources from their systems, further motivating criminals to infiltrate everything from home PCs to giant data centres.”

“Now you could be fighting for resources on your phone, computer or IoT device as attackers use them for profit,” said Kevin Haley, director of Symantec Security Response. “People need to expand their defences or they will pay for the price for someone else using their device.”

Software supply chain attacks also boomed in 2017. An increasing number of attackers are injecting malware into supply chains. Last year saw a 200 percent increase in such attacks – the equivalent of one attack every month, up from the four attacks a year recorded previously.

Mobile malware is also continuing to grow. The number of new mobile malware variants increased by 54 percent last year. ‘Grayware’ applications are also affected mobile users, though grayware is not entirely malicious, it can be problematic and it is becoming increasingly common. Grayware use increased by 20 percent in 2017.

Report: 2018 Internet Security Threat Report

Digital doubts for CPOs

BY Richard Summerfield

Procurement has continued to deliver solid savings and manage risk, according to the eighth annual 'Global Chief Procurement Officer Survey' from Deloitte.

While most procurement leaders feel supported by their executives, they are, however, unsure about whether they are contributing significant strategic value, the report suggests.

However, more procurement leaders believe that their teams have sufficient capabilities to deliver on their procurement strategy – 49 percent of those surveyed, compared to 40 percent in 2017. The survey also indicates that while many CPOs have high hopes for the potential of analytics to transform their profession, only a third of them are utilising such technology.

Though many organisations have identified digital skills as a major area of focus, the majority of companies are neglecting to prioritise digital functions. Just 3 percent of CPOs believe that their teams possess the skills required to maximise digital capabilities. Only 16 percent of procurement leaders surveyed were focused on enhancing these skills. Seventy-two percent of procurement leaders are spending less than 2 percent of their budget on training, compared to 66 percent in 2017. Furthermore, 17 percent of procurement leaders do not have a digital procurement strategy.

“With today's global supply chains, risk exists across geopolitical and economic disruptions," said Brian Umbenhauer, principal and global head of sourcing and procurement at Deloitte Consulting LLP. "There are demonstrated techniques to help drive value, reduce risk and meet goals – from digital transformation to increasing visibility and properly training teams – but CPOs right now are struggling to make the most of them. Major benefits and competitive advantage await those who do.” 

Despite uncertainty around issues such as Brexit, NAFTA, weakness and volatility in emerging markets, rising geopolitical risks in the Middle East and Asia, as well as the spillover effects of a slowdown of China, many procurement leaders remain cautiously optimistic about the future.

“Lack of visibility is a major concern for CPOs as they look to navigate global headwinds and prepare their teams for the future of procurement and innovative technologies,” said Mr Umbenhauer. “Visibility throughout the supply chain is a key tool for meeting regulatory and corporate social responsibility requirements while mitigating risk.”

For most respondents, cost reduction, product and market development and managing risk are the top business priorities. Despite concerns, 61 percent of CPOs delivered better year-over-year savings performance than last year, with the highest-performing leaders excelling in executive advocacy, leadership, talent and digital.

Report: The Global Chief Procurement Officer Survey 2018

Third-party offences top 2018 ABC risks, says new report

BY Fraser Tennant

Third-party violations of anti-bribery and corruption (ABC) laws are top of the list of perceived risks for compliance professionals in 2018, according to a new report by Kroll and the Ethisphere Institute.

The ‘2018 Anti-Bribery and Corruption Benchmarking’ report reveals compliance teams are having to deal with the convergence of regulatory mandates, critical reputational factors and data security issues as they try to protect their organisations from substantial financial and reputational harm, as well as regulatory and legal exposure.

Furthermore, 93 percent of 448 study respondents said ABC risks will remain the same or worsen in 2018. Those who expect a greater level of ABC risks attribute the rise to increased enforcement of existing regulations, followed closely by new regulations.

“The report brightly illuminates the challenges facing today’s compliance experts, including the likelihood that third-party risks will grow in relevance and impact,” said Erica Salmon Byrne, executive vice president and executive director of the business ethics leadership alliance at Ethisphere. “We are encouraged, however, that partnerships across organisations continue to grow as company leaders assign greater priority to the adoption of best-in-class ABC programmes that protect not only individual organisations, but also the integrity of the global business ecosystem.”

Reputational and integrity concerns remain the number-one reason why a third-party fails to meet an organisation’s standards, with organisations stating they were “concerned” or “very concerned” with beneficial ownership risks associated with their third parties.

“The stakes are high and so is the risk level, which is likely causing some sleepless nights for the average compliance professional,” said Steven J. Bock, global head of operations with Kroll’s compliance practice. “In today’s hypersensitive business environment where a company’s hard-earned reputation can be easily lost through a lapse of judgment by a third-party, the job of a conscientious compliance professional has never been tougher or more central to the success or failure of a business.”

On a positive note, 36 percent of respondents indicated that their organisation dedicated more resources to ABC issues in 2017 than in 2016. Executive leadership support also remains strong, as 92 percent of all survey respondents said that their leadership team is “highly engaged” or “somewhat engaged” in their ABC efforts.

Mr Bock concluded: “Ongoing monitoring that includes a regular refresh of the underlying third-party data emerged among the report findings as a key strategy for maintaining the effectiveness of ABC programmes overall, and especially for keeping up with potential ownership changes.”

Report: 2018 Anti-Bribery and Corruption Benchmarking