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Odey steps up bet on fracking after UK government lifts ban

Odey Asset Management and a number of top funds committed to reducing greenhouse gas emissions have invested in British fracking company IGas Energy, as they take advantage of the UK government’s decision to lift the ban on the controversial process.

London-based Odey, whose founder Crispin Odey has previously appeared to be sceptical of the extraction method blamed for increasing emissions, has been rapidly raising its stake in the AIM-quoted onshore oil and gas company with significant shale interests.

The hedge fund has increased its position in IGas since at least early August, from the less than 3 per cent disclosure threshold to just over 7 per cent by mid-September, according to filings. The stake is held in the Odey Special Situations fund, which is run by fund manager Adrian Courtenay.

Other investors holding stakes in the company include Royal London Asset Management, which in April said: “Reopening the focus on North Sea oil supplies and fracking gas doesn’t alleviate short-term lack of supply and does not fit in with the government’s net zero aims.” The UK government wants to reduce net carbon emissions to zero by 2050.

The University of East Anglia, which claims to be a “pioneer” in climate change research and is raising £8mn to launch a climate change action plan, has a small shareholding in IGas. Australian fund manager Pendal Group, which last year won an award for its sustainable and responsible investments, also holds a stake.

IGas shares have soared by as much as 700 per cent this year and remain up around 300 per cent, as expectations grew of a policy change by the UK government towards fracking, which involves pumping water, sand and chemicals at high pressure to release gas from rock formations.

In early September, Prime Minister Liz Truss said the government would lift the fracking ban as a way of increasing the UK’s domestic energy supplies and eventually helping reduce soaring energy bills.

However, the process is highly controversial, not only because it produces a fossil fuel, but also because of the risk of methane leaks and seismic activity. But business secretary Jacob Rees-Mogg said last month that opposing shale gas extraction was “sheer Ludditery”

Odey Asset Management’s accumulation of the stock comes after founder Odey said in 2019 that “the world will start to see the effects of years of depleting resources on the cheap — fracking being the latest example” in an investor letter seen by the Financial Times.

Odey Asset Management declined to comment.

Odey himself has previously donated £22,000 to the Conservative party in Rees-Mogg’s North East Somerset constituency, while chancellor Kwasi Kwarteng once worked as a consultant to Odey.

The University of East Anglia said it holds IGas shares through the Low Carbon Innovation fund, a venture capital fund that is part-financed by the EU. The fund bought a stake in a geothermal company in 2013, which IGas then acquired in 2020. The acquisition was made by giving the fund shares in IGas.

“We never intended to own IGas shares, it was not something we made a conscious decision about,” said Saffron Myhill, innovation funding manager at the university. “We have no interest in continuing to own IGas shares,” she added.

Myhill said the university had been subject to a moratorium on selling the shares, but declined to say if it had expired.

Royal London, which has committed to reducing carbon emissions from its investment holdings by half by 2030, said “the holding [in IGas] results from the equitisation of a holding of debt in the company a number of years ago”.

“The focus and cash flow of the business from our perspective has been on UK onshore oil production, rather than the prospect of fracking,” it said. “In more recent times, the company has developed potential in carbon storage and ground source heating.”

Pendal, which owns fund firm JO Hambro Capital Management in the UK, did not respond to a request for comment.

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