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Toss-up: Microsoft Office 2013

Microsoft Office 365 Home Premium.Microsoft is all but forcing you to rent the latest version of Microsoft Office, rather than buy it.
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For $12 a month or $119 a year, Office 365 lets you install Microsoft Office 2013 on up to five home computers, which can be a combination of PCs and Macs. As well as productivity stalwarts Word, Excel, PowerPoint and OneNote, Office 365 subscribers get Outlook for checking email, Publisher for desktop publishing and Access for working with databases. Keep paying your subscription and you can upgrade to each new version of Office for nothing. Stop paying and the applications revert to read-only so you can’t create or edit documents.

Home users still have the option to buy a retail copy of Office Home & Student 2013, which works out cheaper than Office 365 if you only need one copy that you will replace every three years (assuming Office isn’t subscription-only by 2016). Microsoft has ditched the three-user family pack, so if you need more than two copies of Office at home, then Office 365 Home Premium probably makes sense.

While you save money opting for a single copy Office Home & Student 2013, you miss out on Outlook, Publisher and Access. You might not care about these business-focused applications, but it’s also worth reading the fine print. Unlike previous versions, your copy of Office Home & Student 2013 is locked to the first computer you install it on. If you upgrade to a new computer in 2014, or your old computer dies and needs replacing, you can’t transfer your copy of Office Home & Student 2013 to your new computer; you need to buy a new copy of Office. If you’re using Office 365, you can transfer one of your five licences to your new computer.

The verdict

Microsoft’s harsh licensing conditions make Office 365 the most sensible option for people who need more than one copy of Office 2013. If you don’t like the subscription model, it presents a good excuse to evaluate free open-source alternatives such as Apache OpenOffice.

Office 365 Home Premium$119 a yearmicrosoft苏州美甲美睫培训.au

Office Home & Student 2013$169microsoft苏州美甲美睫培训.au

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Test ump back to roots

Queanbeyan Cricket Club veterans Col Berry, Mel Johnson and Steve Bailey ahead of the club’s 150th birthday celebrations.He’s stared down Dennis Lillee and always has a laugh with West Indies legend Clive Lloyd.
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But the Queanbeyan cricket club holds a special place in the heart of former Test umpire Mel Johnson.

A who’s who of past players and officials will reunite for the club’s 150th anniversary celebrations this weekend.

Before he officiated in 21 Test matches from 1980-87, Johnson was the captain-coach of Queanbeyan from 1967 to 1970.

It would be the final club he would play for before a freak back injury provided the catalyst to enter the umpiring ranks.

”I bent over to pick up a packet of cigarettes and couldn’t feel anything from my waist down,” Johnson recalled.

”When I got out of hospital the doctors said you can bat, but can’t bowl, can’t move quickly and can’t field, so there wasn’t a lot left.”

After two years out of the game, he quickly rose up the pecking order and became one of the leading umpires in the country during a golden period of Australian cricket featuring Ian and Greg Chappell, Rod Marsh and Dennis Lillee. Johnson said his favourite memories involved mingling with players in a more casual setting to the more sterile environment of the modern game.

”Everyone sat around and had a beer and you got to know the players,” he said.

”The Chappells, Marshes, Lillees … I still have a drink with them whenever they’re in town.

”I think the players these days will leave the game not having any friends.”

More than 230 guests, including former Australian batsman Doug Walters, are expected for Saturday night’s gala dinner at the Queanbeyan cricket club.

That will be followed by a Twenty20 match between the Mark Thornton XI and the Peter Solway XI on Sunday.

But before that, players of the past will be on hand to see if the current crop can defeat Wests/UC in the second day of their Douglas Cup match at Freebody Oval on Saturday.

Queanbeyan will resume at 4-84 in reply to Wests/UC’s 178.

Games in all grades this weekend will support Pink Stumps Day, an initiative of the McGrath Foundation.

SATURDAY

Douglas Cup: Queanbeyan v West’s UC at Freebody No 1, 10am; Eastlake v ANU at Kingston, 11am; Ginninderra v Tuggeranong at Kippax 2, 11am; North Canberra Gungahlin v Weston Creek at Keith Tournier Memorial, 11am.

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Small generators in power struggle

Momentum Energy managing director Nigel Clark is driving the push into the mainland electricity market.ONE of the biggest beneficiaries of the price on carbon, Hydro Tasmania, has dramatically scaled back its ambitions. This follows the federal government’s decision to pave the way for the local carbon market to be integrated with Europe’s, while cutting the floor price.
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This has put it under greater pressure to carve out a large presence in the national electricity market as it seeks to expand beyond its home base.

The national electricity market is steadily moving towards a structure similar to banking, aviation and retail – a couple of dominant players and a rump of small operators fighting over the balance.

Last year, AGL bought the Loy Yang A power station and is a keen bidder for a big part of the New South Wales government’s generation assets that are up for sale. If it succeeds, this will leave energy retailing and generation dominated by Origin Energy, EnergyAustralia (the former TRUenergy) and AGL.

Smaller groups such as Hydro Tasmania, which has about 5 per cent of the national electricity market, will be increasingly exposed to the market power of the bigger companies.

To protect its position, Hydro Tasmania bought retailer Momentum Energy a few years ago for more than $40 million. Other generators such as ERM are also pushing to expand sales.

Momentum generated revenue of more than $500 million in the year to June. This is expected to rise by as much as 50 per cent this financial year, as the company attempts to lift annual revenue to $1 billion by 2014-15.

Mainland sales already make up half of Hydro Tasmania’s revenue, helped by Momentum, as well as sales into the national market via the undersea Basslink cable.

The government’s carbon pricing decision put Hydro Tasmania in the strongest position of any generator nationally, giving it an immediate lift in wholesale prices while – unlike all other generators, barring Snowy Hydro – it does not have to pay a carbon tax.

The shift in market economics has been evidenced by Victoria’s brown coal generators cutting capacity because of weak electricity demand and a poor competitive position.

Hydroelectricity apart, Hydro Tasmania has boosted its exposure to wind energy, which gives it flexibility in supplies if mainland sales exceed its hydro-generation capacity.

As critics lament the reduction in competition, the concentration of the power industry – as generators and retailers merge into so-called ”gentailers” – has helped revive margins, which had fallen steadily in the national electricity market.

”It de-risks our core business – it gives us vertical integration,” says the Hydro Tasmania managing director, Roy Adair, who has previously ran large power groups in Britain, Victoria and Singapore.

”If you’re going to cover your risk, you can’t be long on generation with no retail capability, and similarly you can’t afford, if you’re a retailer, to be always looking for generation to back your load. It is absolutely imperative to have that ‘gentailer’ capability, which does de-risk the business.”

That risk was underscored by AGL when its New Zealand operations collapsed a decade ago after inadequate risk controls left it with hundreds of millions of dollars in losses, forcing it to close shop after just four days of market movements.

Similarly, poor risk assessment on the part of Fred Hilmer effectively destroyed Pacific Power, the former NSW government entity that held all the state’s generation assets.

And putting a price on carbon has fundamentally changed the industry’s dynamics, giving Tasmania the lowest wholesale electricity costs in the national market.

”It enables us to get a degree of certainty for the sales we make across Basslink,” Adair says. ”Once Basslink was constructed in 2006, we naturally had a significant risk [from imports], and [Momentum] has enabled us to address that, and also provide us with the opportunity to establish a brand image for Hydro Tasmania.

”There is no cap on Momentum’s growth. We are Australia’s largest clean energy producer, in terms of the number of gigawatts of energy produced with zero emissions.”

This gives the company flexibility if it needs to cover any part of its electricity market exposure by buying output from thermal generators given that generators using gas have a carbon intensity of 0.45. This is half that of black coal generators in Queensland and NSW, which at 0.9 is still much lower than brown coal at 1.3.

It will be some time before the [zero emissions] position is emulated, Adair says.

The strong dollar has wiped out the cheap energy advantage of local industry, forcing shutdowns that have led to falling power demand. In Tasmania, a few large industrial users account for as much as 40 per cent of Hydro Tasmania’s output, leaving it vulnerable to shutdowns. ”If we lost a major industrial customer, that would be more load to go across the link” to the mainland, Adair says.

But while a price on carbon has handed Hydro Tasmania a clear competitive advantage, the move to link Australia’s carbon price with that of Europe is a threat. Consequently, Hydro Tasmania has slashed forward profit estimates, and the chances of a second link to the mainland have dimmed.

”There is significant uncertainty … as to what will happen to a future carbon price,” Adair says. ”There is certainly significant potential for renewable energy capability in Tasmania. It is a question of whether you can economically transfer that across to the mainland so that you can compete with the prices that pertain in that marketplace to renewable energy sources.”

The greatest uncertainty may come from any change in government, given the Coalition intends to abolish the price on carbon.

Before that, the national electricity market is to be reshaped again with the looming sale of generation assets in NSW and talk of Queensland following suit, and with the pending reorganisation of the Tasmanian power sector.

”The concentration of the market with a limited number of players is one we are keeping a very close eye on because we need the ability to back our load and, in addition to Basslink, we need the ability of other generators apart from those that belong to the big three to be able to do that,” Adair says.

”We’re looking for a liquid market, so obviously our strategy will always look to ensure we have certainty of supply.”

The push into the mainland electricity market is being driven by Momentum’s managing director, Nigel Clark, a former commodity trader, who spent time with TRUenergy before joining Momentum.

”We’ve built a very competitive retail model, ensuring our cost to serve is low, that we are very responsive to the marketplace, that we have a very strong brand image and we’re able to capitalise on the brand value that we have here, particularly the clean energy of our electricity,” he says.

”Some retailers have gone to the wall because they didn’t manage the issue of billing customers promptly. Cash is king and you need to ensure your liquidity is well served, because you have to pay on a regular basis on terms clearly agreed within the national electricity market for generation. And therefore you need to ensure you’ve got

your money coming in to pay those bills.”

The other potential addition to Hydro Tasmania’s armoury is access to gas-fired generation from the Tamar Valley power station near Launceston in northern Tasmania, and in particular any gas supply contracts.

”Dual fuel is an issue we are keeping under review,” Clark says.

For electricity retailers, an offering of gas and electricity is a handy marketing pitch while sustaining margins.

”The issue of dual fuel could be addressed as part of the market review process, and if Tamar Valley came to us there would be appropriate contracts,” Clark says.

The reform process also involves privatising power retailing in Tasmania.

Caution over the carbon price outlook has prompted the Tasmanian government to cut its forecast receipts from Hydro Tasmania to $200.8 million in 2015-16, well below the $257 million it expects to receive in 2014-15.

The company, which generates all its electricity from renewable energy sources – hydro and wind – is one of the prime beneficiaries of putting a price on carbon, which has helped push up wholesale electricity prices and boosted its bottom line.

The carbon price is expected to push Hydro Tasmania’s profit to as high as $289 million in 2013-14, before dropping to $169 million two years later, which makes the push by the group to carve out a significant slice of the mainland electricity market even more imperative.

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Bust of the boom won’t stop sector from growing

‘This boom is actually as much structural as cyclical.’THE biggest thing that worries many people about the resources boom is that word ”boom”. Booms are cyclical, and thus temporary. So it’s not surprising so many people worry about what we’ll be left with when the boom’s over.
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This week, two economists at the Reserve Bank, Vanessa Rayner and James Bishop, published a research paper neatly answering that concern. In short, what we’ll be left with is a very much bigger mining sector.

The trick is that this boom is actually as much structural (lasting) as cyclical. Australia has had commodity booms in the past, and almost all of those were transitory.

From about 2004, the prices of coal and iron ore began rising strongly until they’d taken Australia’s terms of trade – the prices we receive for our exports relative to the prices we pay for our imports – to their most favourable level in 200 years.

The main thing making this price boom so different (apart from it lasting a lot longer) is that it precipitated a second boom: investment in the expansion of existing mines and the building of new mines and natural gas facilities.

Now, the boom in prices ended more than a year ago and it seems the boom in mining investment is close to its peak. That is, the amount of money being spent on expanding our mining production capacity will stop growing each quarter and start declining.

Even so, we’ll still be investing a lot more on mining each quarter than we usually do. So we’re far from reaching the point where our mining production capacity stops expanding.

And that still leaves this play with a third act that’s only just started: a huge increase in our production and export of minerals and energy as we take up the newly expanded capacity.

Thus you see why this ”boom” is as much structural as cyclical. It represents a historic and lasting change in the industry structure of our economy, achieved over a relatively short period.

But just how big is mining after all this expansion? The miners’ critics – particularly the Greens – make it seem the industry is pathetically small, whereas the industry itself tries to exaggerate its size and importance.

The Reserve Bank researchers adopt a wider definition of mining than that used by the Bureau of Statistics, partly because they’re trying to get a more realistic estimate of the size of the part of the economy that’s been the primary beneficiary of the boom and the size of the ”fast lane” of the two-speed economy.

They establish the size of the ”resource extraction sector”, starting with the standard six components: coal, oil and gas, iron ore, non-ferrous metals, non-metallic minerals, and exploration and mining services.

But then they add those industries involved in smelting and refining the minerals before export – iron smelting, oil refining and liquefying of natural gas, and the refining of bauxite to form alumina and the smelting of other non-ferrous metals, including copper, lead and zinc – which the bureau class as part of manufacturing.

According to the researchers’ estimates, in the eight years between 2003-04 and 2011-12, the resource extraction sector’s share of nominal ”gross value-added” (essentially, gross domestic product) grew from less than 7 per cent to 11.5 per cent. Of this 11.5 percentage points, the narrowly defined mining industry accounts for 9.75 points, with the processing and refining part of manufacturing accounting for 1.75 points.

Most of this growth is explained by the higher export prices being received. That’s mainly because the strong growth in the volume of iron ore production to date has been offset by a fall in the production of some other minerals, particularly oil.

Next the researchers estimate the size of ”resource-related activity”. This includes the investment spending on expanding the future production of minerals, as well as the provision of ”intermediate inputs” used in the present production of minerals.

”In other words,” they say, ”it captures activities that are directly connected to resource extraction, such as constructing mines and associated infrastructure, and transporting inputs to, and taking extracted resources away from, mines. It also captures some activities less obviously connected to resource extraction, such as engineering and other professional services (legal and accounting work, for example).”

Over the eight years to 2011-12, this resource-related activity has more than doubled as a share of GDP, from less than 3 per cent to 6.5 per cent. Within that 6.5 percentage points, business services account for 2.25 points, construction for 1.25 points, manufacturing for 1 point and transport for 0.75 points.

Note, this inclusion of the inputs provided to the mining industry isn’t the same thing as the usual shonky attempts to put a figure on an industry’s ”multiplier effect”. For one thing, it takes no account of the effect on other industries of the spending of income earned by mining employees or shareholders. For another, the researchers take care that the inclusion of inputs provided by other industries involves no double counting.

Put the resource extraction sector together with the resource-related activity and you find the size of the ”resource economy” doubled to 18 per cent of GDP over the eight years to 2011-12.

According to the researchers’ estimates, this 18 per cent of total production of goods and services includes well over 16 per cent of manufacturing’s output, 16 per cent of construction activity and 15 per cent of transport activity.

Since 2004-05, this fast-lane ”resource economy” has grown in real terms at an average rate of 7.5 per cent a year, whereas the rest of the economy has grown 2.25 per cent a year – a smaller gap than some imagine.

Because mining is so capital intensive, one way to denigrate it and minimise the significance of its expansion is to note that its share of total employment (as opposed to total production) is a mere 2.3 per cent. But according to the researchers’ estimates, when you include minerals processing with mining proper, its share of total employment rises to 3.25 per cent. And when you add the more labour-intensive resource-related sector, it accounts for about 6.75 per cent of total employment, taking the share of the ”resource economy” to just less than 10 per cent of total employment.

Don’t let anyone tell you the resources boom is no big deal.

Twitter: @1RossGittins

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Murdoch leads turnover tally

RUPERT Murdoch topped the turnovers table this week when he disposed of $39 million of News Corp stock.
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That was the bulk of the $57 million selling tally, which compared with about $2 million spent by directors doing a bit of buying.

Elsewhere, Andrew Abercrombie took some petty change off the table when he sold FlexiGroup shares at near-record levels.

FlexiGroup – a retail point-of-sale finance provider – went public in 2006 at $2 a share and saw its scrip hit $3.21 shortly thereafter.

It was panic stations in 2008 when punters sold the stock down to around 22¢. Those who gritted their teeth and bought are now looking at a share price of $4.10 – a near 20-bagger. Chairman Margaret Jackson collected $810,000 when she also sold.

Elsewhere on the money-lending front, Michael Smith, the ANZ chief, raised $2.9 million, selling shares at $28.41 apiece. The jolly Englishman said he had sold to pay tax.

John Dawkins, a former Labor federal treasurer, more than doubled his stake in Australian Bauxite, where he is chairman.

The company this week completed a $1.6 million placement and says it has the potential to create significant bauxite developments in three states.

John Bevan, chief of Alumina, made a rare appearance on the table, increasing his stake by 70 per cent. Last week, China’s state-owned Citic bought 13 per cent of Alumina and late this week Bevan bought some shares, as did Peter Wasow.

Alumina this week reported a $51 million loss compared with earnings of $124 million previously.

Elsewhere on the results front, Oakton, an IT services group, reported a 30 per cent earnings decline and the shares promptly fell from $1.45 to $1.26. Non-executive director Martin Adams promptly bought about 60,000 shares at $1.27 and is already ahead of the game as the scrip closed the week at $1.34.

The reporter owns AWC shares.

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Kloppers a casualty of a new era of austerity

A SENIOR BHP Billiton executive recounts a story about being ensconced in a meeting at the group’s head office tower in Melbourne when the chief executive, Marius Kloppers, strode in, removed the phone pod used for conference calls from the centre of the round table and put it in a cupboard. The participants were dumbfounded.
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Another staffer recalls Kloppers, who sits atop a staff of 40,000 in 25 countries, swooping down unannounced to tidy up the computer cords behind his desk.

The soon-to-retire head of the world’s largest mining company has a mantra: accountability and simplicity. He has been outed before for the militaristic-like neat freak obsession that trickled down to every layer of the organisation – no eating hot food at the desk and one framed photo per employee.

On May 10, Kloppers will work his last day at the helm of BHP Billiton, cruise home to his suburban home in Melbourne, kick off his black leather slip-ons and place them (neatly) in the assigned cupboard. He will then turn his attention to the Higher School Certificate.

The youngest of his three children is about to face this academic challenge. His contribution to his daughter Gabrielle’s performance may be more about time management than math. ”We manage by policy but not detail,” Kloppers says.

But this week was all about the management of his legacy. Since announcing he would vacate his position as one of the world’s most powerful executives, it’s been back-to-back briefings and meals with with analysts and investors, flanked by his successor, Andrew Mackenzie.

His scorecard has been picked over and compared with peers. His greatest achievements and worst moments have been trawled through. Jaws have hit tables at the $75 million value of his valedictory pay packet.

The one thing Kloppers, who is often described as the smartest person in the room regardless of the size and calibre of the crowd, didn’t have control over was the timing of his departure. He would rather have seen out the year but the board had different ideas. The heady era of the resources boom is over and BHP’s chairman, Jac Nasser, decided now was the time for fresh blood.

During his time Kloppers had attempted $200 billion of acquisitions and billions more investment in new projects. Mackenzie, a Scotsman, is tailor-made for the BHP’s new phase – consolidation, watching the pennies and working the assets harder. Importantly, he has operational experience in energy as well as minerals.

Rarely has the ground been so meticulously prepared for the departure of a chief executive, or a corporate machine worked so hard to prepare the ground for the changing of the guard.

The process began in November with a leak to the Financial Times newspaper, citing headhunter sources, proclaiming with certainty that the search for a successor to Kloppers had begun.

Aghast as the company claimed to be at such a notion, there was no real attempt to deny it. There was equal finger-wagging by the BHP machine at suggestions this could be connected to the company’s $2.84 billion impairment charge in August over its recently acquired shale assets in the US. The board was well prepared for this barrage of criticism. Such was its desire to distance Kloppers from single-handed blame that Nasser took the unusual step of backing him up in a statement, saying he supported the actions of the chief executive and agreed it was the right investment decision for BHP.

The task ahead was to convince investors. In this endeavour there has been mixed success.

Nasser didn’t have to read the tea leaves to know how unpopular the $20 billion shale oil/gas asset was in the eyes of analysts and investors. It was a major factor in Kloppers’ declining score in last year’s Corporate Confidence Index – a confidential ratings report based on views of analysts and investors. The price of the gas these assets contain has experienced a minor improvement but some of BHP’s investors remain sceptical. This has been despite the fact that the media has been warming to the investment, taking the view that it could ultimately change the geopolitical landscape around the world supply of energy.

THE pressure to inject fresh managerial blood only increased towards the end of last year when the prices of its two major products, iron ore and coal, went into a downward spin.

Kloppers, like his peers, had promoted caution and warned of some price moderation. But none had seem the commodities rout coming. The pack had collectively gazed through the same rose-clouded crystal ball.

There has always been an intense rivalry between Australia’s two resource giants, BHP and Rio Tinto. Be it size, performance, the quality of assets, stock prices or shareholder returns, these two are forensically compared. They have now lined up on a new measurement – the replacement of their CEOs.

Kloppers’ resignation, coming hot on the heels of the departure of the Rio boss, Tom Albanese, is not just coincidental.

Nasser denies it had any bearing but fresh governance brings with it the opportunity to reposition priorities around everything from capital expenditure, exploration and balance sheets to dividend policy.

But the unceremonious ousting of Albanese gave Rio a fresh slate, in the same way as the removal of the heads of two other mining majors, Xstrata and Anglo American, had done a few months earlier.

But where Rio and Anglo sold the changes as an opportunity for an overhaul, BHP’s new boss Mackenzie is labelling his task as pursuing the same strategy but with extra vigilance.

The deference in approach between BHP and Rio is chalk and cheese.

Where Albanese was busy packing framed photos of his family in cardboard boxes while the announcement of his removal was being made, Kloppers was presenting the half-year results to the market with Mackenzie at his side.

The company had even produced a video of the outgoing and incoming chief executives together, all smiles and unity.

It was a BHP love-in full of effusive praise for Kloppers, humility from Mackenzie and backing vocals from Nasser.

Of Mackenzie, Kloppers talks personally: ”You showed faith in me … which was beyond anything, and you know I consider you in a very real sense – not just in theory but in practice – the guy I will go to if I’m asking advice for my kids.”

Nasser swooned: ”Under Marius’ leadership we’ve seen BHP grow to one of the most valuable companies in the world, and that isn’t an opinion, it’s there in the results.”

The chief financial officer, Graham Kerr, had the task of presenting the details of the half-year result, which included a 38 per cent fall in earnings before interest and tax, further exacerbated by $2.7 billion of impairments on BHP’s alumina and nickel assets.

CLEARING some of the underperforming assets out of the BHP portfolio at an acceptable price will be Mackenzie’s job.

But where Albanese had been turfed as a result of a $14 billion write-down in its aluminium division and the ill-fated coal purchase in Mozambique, Kloppers’ mistakes were, by comparison, negligible.

It will be years before an informed judgment can be made on BHP’s shale gas punt. The $40 billion attempt to acquire Potash Corp was not considered a cross on Kloppers’ scorecard but the inability to seal the deal attracted some criticism.

Far more controversial was Kloppers’ $147 billion attempt to buy Rio Tinto. ”What a fantastic deal that would have been for the time that it was launched, when I think from memory the iron ore price was about $40 [per tonne]. What a terrible deal that would have been in the global financial crisis. We engineered a way that we would have had a choice, and we exercised that choice,” Kloppers said.

As luck would have it, European competition regulators knocked it back. Kloppers says it was more a case of disarming the gun than dodging the bullet.

His near six-year reign is marked by this aggressive acquisition strategy, which for some of his time was enabled by riding on the wave of record commodity prices, while some was seizing the opportunity provided by a strong balance sheet and struggling competitors to try to add to the company’s stable of large tier one assets.

e world over the past six months has changed and BHP’s strategy has evolved.

Mackenzie and his new counterpart at Rio, Sam Walsh, have a new agenda – a new imperative. It’s not about spending, it’s about saving.

Neither BHP nor Rio talk about acquisitions now. Sam Walsh delivered a homily last week, when releasing Rio’s results, about getting back to basics, accountability and operating like a small business.

While expressed differently, Mackenzie delivered the same message this week. It’s about focused investment on the large established assets and cost reductions.

It’s about bleeding the assets harder and reducing the expenditure and using it more judiciously.

This is the new battle ground.

Exactly which of the BHP’s executives Mackenzie chooses to help him in this task is unknown. There will be a reshuffle and senior roles will go or change. Those in key management roles will be sweating on them over the weekend.

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Engaging Scot ready to confront future head on

Andrew Mackenzie says BHP has a ‘critical role to play in ensuring the supply of the basic commodities that the world needs to grow’.IF YOU want an insight to Andrew Mackenzie’s mind, the third floor of London’s Magdalen House is a good place to start.
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Here in the humble offices of British think tank Demos, the future chief executive of BHP Billiton laid out some of his boldest ideas for society, more than a decade before he would become one of its best paid and most influential citizens.

A flick through ambitious papers like Ethics and the Multinational Corporation reveal a version of Mackenzie that many in the mining industry would recognise today.

There’s a striving for social progress, a demand for companies to think beyond their bottom lines, and a clear belief that open markets are the only way to ensure the world’s population get the food and energy they need. There’s even a wish for business to occasionally win a place in peoples’ hearts: ”We love successful sports teams and entertainers; maybe we could learn to love successful companies too.”

Twelve years on, Mackenzie is about to take control of the world’s most valuable mining company, and with profits beginning to slide, you sense he will soon discover just how compatible ethics and multinationals can be.

There was no coverage of the BHP leadership transition in the Kirkintilloch local newspaper, despite the Scottish town having bragging rights as the childhood home of the world’s newest captain of industry. The 56-year-old Doctor of Chemistry was raised here amid a climate of coalmine closures – an experience that may prepare him for dealing with tough decisions facing BHP’s coal mines in Australia’s eastern states.

While his Scottish roots were paraded proudly this week, Mackenzie has often referred to himself as an ”internationalist”, in a mark of respect to the six nations he has lived in during a career in oil and gas, chemicals and, more recently, mining and resources.

Judging by the thoughts shared in Ethics and the Multinational Corp-oration – a manifesto jointly authored with then colleague David Rice for Demos in 2001 – the notion of an international community sits comfortably with Mackenzie. ”The world, we feel, would benefit from a more international political leadership to complement strong business leadership, creating a more plural society which increases the wellbeing of all the world’s citizens,” they wrote.

The article investigates the decline of nation states and the unplanned rise of corporations as ”the main vehicles for delivering social, environmental and economic progress”.

”Employment, social policy and the environment used to be regarded as the concern of government. Now as a result of globalisation, society appears to be taking some of this power from government and giving it to business.”

If those comments set a high bar for his tenure at BHP, consider these thoughts from the same publication, in the context of BHP being one of the world’s biggest producers of carbon intensive energy through coal, oil and gas. ”Multinational corporations should be happy to be seen as powerful advocates and exemplars for human rights and the environment,” wrote Mackenzie and Rice.

”The only hope for massive reductions in future greenhouse gas emissions to slow climate change may be unilateral action from companies on behalf of their customers, employees and other stakeholders.”

While opinions can change over the years, Mackenzie is known to still believe that companies like BHP are doing more for the world than merely making shareholders wealthy.

Mackenzie is known to believe the mining industry plays a significant role in maintaining peace and stability in the world’s developing nations, by ensuring the raw materials needed to improve living standards are made available in sufficient quantities to prevent tensions spilling over.

Those views were hinted at during this week’s press conference to announce his appointment.

”We have an absolute critical role to play in ensuring the supply of the basic commodities that the world needs to grow, both in population and in wealth,” said Mackenzie in his address to the Australian media.

”You can count on me to continue Marius’s success of using the best management techniques possible and the appropriate technology to develop those ore bodies sustainably for the world and for the shareholders, so that the world gets the resources that it needs to grow in a sort of harmonious way.”

The comments can be seen as a polite challenge to sections of the public – and perhaps the Chinese government – to reconsider the antipathy they hold toward big resource companies like BHP and Rio Tinto.

Mackenzie has spent the past five years at BHP after being poached by Kloppers from Rio. His CV also contains a PhD on the behaviour of hydrocarbon deposits underground and a 22-year stint at BP.

The latter was considered a crucial factor in him beating rivals to the top job, given BHP’s increasing focus on oil and gas. Those who have worked beneath Mackenzie in his role as chief executive of BHP’s non-ferrous division say his moral perspective is one of his nicer aspects.

While profits are the focus for any businessman, they report that Mackenzie has a prevailing desire for his work to achieve something good for the world. This principle comes through in much of his earlier writing with Demos. He was thanked for his role as a sounding board to Paul Miller and Paul Skidmore in their 2004 publication Why future organisations must loosen up, which explored the growing trend for people to want ”their work to be more aligned with their human values”.

Mackenzie explored the topic himself in Ethics and the Multinational Corporation, where he and Rice wrote: ”It is preferable for employees to be able to project their personal values through work rather than leave them at the door. Talented people may not work for companies whose ethics clash with their personal values: money is not everything.”

The softer side of Mackenzie may cheer BHP’s rank-and-file staff, who under Kloppers worked under a rigid set of rules governing office conduct, including bans on pungent food and a strict ”clean desk” policy.

”Compared to Marius, whose IQ is sky high but his EQ [emotional quotient] is not, Andrew has a much higher EQ,” said one source close to the leadership transition.

”He is very good with people, he has got a softer side to him than Marius. Really, these days you want in business someone who has got a good IQ and a good EQ, so they are good with people.”

Mackenzie and his wife Liz move to Melbourne at a time when BHP appears to be coming back to earth after the heady peaks of the mining boom. While Kloppers’ time as chief was punctuated by large acquisition attempts on Rio Tinto, Canada’s Potash Corp and a desire to build greenfield ”mega-projects”, Mackenzie’s era looks set to be more modest thanks to the recent cooling of commodity prices.

He has indicated that divestments are more likely than acquisitions. Growth will be incremental and typically generated through expansions and improvements at existing assets.

Mackenzie has promised a ”lazer-like focus” on keeping costs down and he has vowed to create synergies between BHP’s petroleum and mining divisions. The initial reaction suggests the investment community are willing to give him a fair go.

”In our view, the new appointment is positive as we view Mackenzie as highly capable, he appears to be more willing to listen to the market, and it removes the uncertainty around the succession plan,” wrote JPMorgan’s Lyndon Fagan this week.

Judging from his work with Demos, Mackenzie would expect nothing less: ”Public lynching of business leaders attempting to learn from honest failure, or trying to forge pathways into an unclear future, makes us all risk averse. A constructive outlook would allow us all to be much more optimistic about an ethical future by creating more space for politicians but also for industrialists, to lead.”

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Market recovers to end week higher

THE sharemarket reversed some of Thursday’s substantial losses, the biggest one-day fall since May, closing above 5000 points to end the week on a positive note.
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The S&P/ASX 200 Index rose 0.8 per cent on Friday, up 38 points to 5018.1, and the broader All Ords rose 38.1 points, 0.8 per cent, to 5036.7.

On the ASX 24, the March share price index futures contract reached 4996, 29 points higher with 39,902 contracts traded.

”Overall it [Thursday’s loss] seemed to be a slight hiccup,” CommSec analyst Steven Daghlian said. ”The market is back up and both the ASX and the All Ords have crept back up above the 5000-point mark and that is a good sign.”

Deutsche Bank’s head of research sales, Glenn Morgan, said Thursday’s heavy losses were an overreaction to what was said in the US Federal Reserve minutes about bond purchases.

”The outlook was probably more balanced than people thought on reflection,” Mr Morgan said.

A fairly optimistic tone set by Reserve Bank governor Glenn Stevens in a statement to the House of Representatives standing committee on economics on Friday also lifted sentiment, with some economists speculating that the interest rate easing cycle could be coming to an end.

Mr Stevens said the high Australian dollar had helped offset the surge in investment in the mining industry, which otherwise would have led to higher interest rates.

All sectors ended higher on Friday. Gold rose 3.5 per cent, financials 0.8 per cent and materials 0.2 per cent. The big four banks all had gains, with Westpac and NAB each closing 1.3 per cent higher.

Miners BHP Billiton and Rio Tinto finished 0.8 per cent and 0.9 per cent lower respectively but Newcrest Mining rose 1.55 per cent.

Mr Morgan said the reporting season had turned the mood on the markets more positive, after fears at the start of the year that the rally would not have been backed up by companies’ earnings.

”There have been a few disappointments but our analysts have been upgrading forecasts for the next two years during reporting season, something we haven’t seen for quite a while,” he said. ”There’s still be a bit of [price-earnings] expansion, but I think we’ve found a floor in earnings, companies have done a terrific job on costs and if we get a better macro-economic backdrop, the leverage to the upside could be quite large.”

Telstra added 6¢ on Friday to $4.56 and Woolworths jumped 42¢, 1.24 per cent, to $34.27.

Billabong shares tumbled 5¢, 5.5 per cent, to 86¢ after the troubled surfwear retailer announced a half-year loss of $536.6 million and downgraded its underlying earnings.

Oil and gas producer Santos impressed investors enough with a positive outlook for cash flow from new liquefied natural gas projects to overshadow a fall in net profit, closing up 15¢ at $12.05.

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Heavy claims, but profits still surge

After years of disappointment for investors, there are growing signs insurance companies are turning the corner. Despite 2013 beginning with more damage claims from ex-Tropical Cyclone Oswald and bushfires in many of the eastern states, share prices have shot out of the blocks, rising as much as 20 per cent this year after bumper profit results.
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Two of the biggest players this week underlined the rapidly improving conditions.

Suncorp shareholders, who have endured a wild ride in recent years after the Queensland firm was pummeled by claims for flooding, saw net profits jump by almost a half to $574 million.

Its arch rival, IAG, said profits had more than tripled to $461 million in the half, with dividends doubling.

The bumper results raised hopes among some analysts that the industry may be entering a sweet spot for profit growth, which should also benefit QBE’s when it hands down its results next week.

But with Suncorp and IAG each delivering total shareholder returns in excess of 50 per cent in the past year, the question on many minds is whether the growth is sustainable.

The rapid expansion in profit margins at IAG – the nation’s biggest car and home insurer – illustrated just how much money the sector is making.

Helped by its dominant position in what is essentially an oligopoly, its insurance margin surged from 7.7 per cent to 19.19 per cent, which brokers said was the highest in living memory.

”Profitability simply does not get any better than this, at least not sustainably,” an analyst at Bank of America Merrill Lynch, Andrew Kearnan, wrote in a note.

Kearnan argues IAG’s prospects look ”solid” for the next year or so, but it could be entering a period of ”peak earnings” and at current share price it is already priced at 2.5 times its book value.

RBS Morgans made a similar argument, saying that although IAG had hit a ”sweet spot,” much of the good news has been factored into its share price, its highest in more than five years.

Instead, RBS and Kearnan both have Suncorp as a preferred pick. For one, Suncorp has built up substantial excess capital from the profit rebound and is tipped by some to reward shareholders with a special dividend, as it did last year.

Deutsche Bank’s Kieren Chidgey said the company was unlikely to keep all its surplus capital and he expected a 31¢ final dividend plus a special dividend of 15¢ at the end of the year, compared with its interim dividend of 25¢.

Despite the rebound, things have not always been as positive for insurance firms. In recent years a horror run of natural disasters here and overseas has pushed up costs through billions in claims and global increases in the cost of reinsurance. At the same time, investment returns have been crimped by skittish sharemarkets.

Suncorp endured a double-whammy during the global financial crisis when its banking arm had a near-death experience after funding markets froze.

This year, however, recent flooding and bushfires are within insurance industry allowances, and profits are being bolstered by a buoyant sharemarket and hefty rises in premiums. IAG said home and car premiums could rise 5 to 10 per cent this year .

But just as some question how banks can continue to prop up profits by re-pricing mortgages, there are also doubts over how much insurance companies can continue to boost earnings through higher premiums.

An analyst at Nomura, Toby Langley, cautioned that if wage growth were to slow it could result in increased ”consumer activism” with individuals becoming more discerning about their insurance policy purchases.

Insurance chief executives are also keen to present an image of caution. And as always, it seems mother nature is the wildcard.

Asked if the industry was seeing the light at the end of the tunnel this week, IAG’s Mike Wilkins said he was pleased with the company’s results, but added: ”We are still open to the volatility and the vagaries of mother nature as well as investment markets and other extraneous factors.”

Or as Suncorp’s Patrick Snowball put it when asked by JP Morgan analyst Siddharth Parameswaran to update his view on the company’s allowances for natural disasters: ”Sid, would you like to tell me what’s going to happen with the rains for the next six weeks?”

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Expansion plans put Santos in the box seat

Santos chief executive David Knox.CONNECTING the east coast to overseas energy markets, and pushing up domestic gas prices, has transformed Santos by increasing the value of its oil and gas assets, its chief executive, David Knox, says.
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Santos reported a 31 per cent fall in its full-year net profit to $519 million on Friday. The 2011 result was boosted by $408 million in gains from the sale of assets, including the Evans Shoal offshore field in the Bonaparte Basin, and a stake in the Gladstone LNG project.

Almost everything else was up. Production rose 10 per cent last year to 52 million barrels of oil equivalent, and sales rose 18 per cent to $3.2 billion. Excluding one-offs, Santos’s underlying profit rose 34 per cent to $606 million. The shares rose 15¢ to close at $12.05.

Mr Knox said Santos was three years into its transformation from an Australian to a regional energy player, underpinned by its investment in the $US18.5 billion GLNG project, fuelled from Queensland’s coal seam gas fields.

Along with two other approved CSG-LNG projects in Queensland – Origin Energy’s APLNG and BG’s QCLNG – the effect would be to increase gas prices to between $6 and $9 per gigajoule or higher.

”Our strategy in getting involved [in Gladstone LNG] was to unlock the domestic gas market,” Mr Knox said, and the resulting increase in east coast gas prices had ”completely rebased Santos’s gas portfolio”.

Santos said the GLNG project was on budget and on schedule. Both Mr Knox and the chief financial officer, Andrew Seaton, stated unequivocally that the company would not need to raise equity – whether to fund the GLNG project, or to maintain the company’s credit rating – under any currency or oil price scenario. While construction activity would peak this year at GLNG, cash flow would soon kick in from the Fletcher Finucane and PNG LNG projects.

Mr Knox talked up the prospects for Santos’s exploration for shale gas in the Cooper Basin, saying ”we are optimising our [drilling] program to maximise the potential for unlocking this basin” and reiterating that if recent successful flows at its Moomba and Gaschnitz wells were replicated, ”the play could be multiple TCF [trillion cubic feet of gas]”.

The Santos remuneration report noted Mr Knox received total pay of $5.9 million last year, up 18 per cent from $5 million in 2011.

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