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First Move with Julia Chatterley

Evergrande Says it Will Meet a Bond Repayment, but More are Due; Investors Hoping for Clarity from the Fed; The U.S., China, and U.K. All call for Climate Action at the United Nations. Aired 9-10a ET

Aired September 22, 2021 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[09:00:33]

ALISON KOSIK, CNN BUSINESS ANCHOR: Live from New York. I'm Alison Kosik, in for Julia Chatterley. This is FIRST MOVE, and here is your need-to-know.

Debt deadline. Evergrande says it will meet a bond repayment, but more are due.

Taper tensions. Investors hoping for clarity from the Fed.

And climate concerns. The U.S., China, and U.K. all call for action at the United Nations.

It's Wednesday. Let's make a move.

Welcome to FIRST MOVE. Great to have you with us this Wednesday. Let's get right to the markets and we've got a positive tone in the premarket on Wall

Street with all the major averages set for solid gains in early trading.

Europe is higher as well. This follows a roller coaster session on Tuesday when U.S. stocks tried and failed to regain some of Monday's sharp losses.

News that the Chinese Central Bank is injecting billions worth of liquidity into the financial system and assurances from deeply indebted Chinese

property developer Evergrande that it will make a key domestic bond payment, all of that looks like it is boosting sentiment, at least for the

moment. That helped push Chinese stocks higher on their first day of trading this week.

Japanese stocks pulled back. The Central Bank there announcing that it will keep pumping billions worth of stimulus into the economy as it monitors

ongoing supply chain disruptions that are pressuring exports.

The Federal Reserve updates investors on the future of its massive stimulus programs happening. That is happening later today. All this as crucial

budget and debt ceiling battles, all of that still heating up in Washington. That story coming in just a minute.

But first, let's get to our top driver and the latest on the Evergrande crisis. The Chinese property giant saying it reached a deal with

bondholders to settle an interest payment on a domestic bond that is due on Thursday, but the debt ridden company hasn't said anything about its bigger

international bond payment that is also due tomorrow.

Clare Sebastian joins us now with the details. So, we've got one down, one to go and an even bigger one to go. Walk us through if the interest payment

on the one bond that was put in already, does it put Evergrande in better shape -- in any better shape at all? Or is a default still likely?

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: I mean, it's a tiny fraction, Alison of their overall debt pile, $36 million, according to data from

Refinitiv is the interest on that loan that they have now reached a deal to repay that, the domestic one, denominated bond. It was settled through

negotiations according to a filing with the Shenzhen Stock Exchange. But that is less than a third of the interest -- the total interest that was

due on Thursday. The other dollar denominated bond is worth -- the interest on that worth more than $80 million dollars.

And overall, their debt pile of course, some $300 billion. So this is a tiny fraction. It does show a willingness to pay possibly some avenues to

pay. So it has improved sentiment a little bit. But overall it does not remove the specter of default from the table. It is still hanging over this

company with these deadlines this week and we still don't know, no official word from Beijing on what they plan to do, if anything, to stabilize the

situation.

They did, as you say, inject billions into the financial system, some $120 billion today. That's on top of $100 billion on Saturday, another $100

billion last Friday, way more than usual. So that sort of smacks of an effort to improve liquidity, make sure that banks have cash on hand, if

there is going to be some kind of default event, but we don't know yet.

The consensus among analysts is that Beijing will not bail out this company, but will help manage some kind of orderly restructuring.

KOSIK: It's sort of night and day what we saw happen Monday and now, we're seeing solid green arrows today. So, things have changed a bit, but should

U.S. investors kind of relax now about this or should they remain on guard?

SEBASTIAN: Yes, you know, it's interesting, JPMorgan actually polled investors this week on this issue, 48 percent of them don't think that

Evergrande will spiral into a macro crisis, but of the 52 percent that do think it has the potential to do that, most of those, the vast majority

think the impact will be limited to China and Asia.

So overall, you know, this could present a potential shock. This is an enormous, like it's hard to overstate $300 billion in debt that the company

could default on. But most people think that either it will be limited to China because of Beijing's tools to deal with it, or that if it is

disorderly in some way, it will be mostly limited to that region, because of the way the company is less interconnected than, say, Lehman Brothers,

which it has been compared to, to the global financial system.

[09:05:36]

KOSIK: Well, I assure you, $300 billion is no small debt in my book. Clare Sebastian, thanks so much.

In the coming hours, the U.S. Federal Reserve will state its intentions and tapering is the word investors are looking for. They want to know whether

the delta variant means the foot will remain on this stimulus gas pedal.

Let's bring in Christine Romans with all of what you're expecting from the Fed. You know, what enters my mind is a lot has changed since the last Fed

meeting up until this one, you know, obviously, the delta variant still hanging around, but you know, the gridlock on Capitol Hill, the latest weak

jobs report and expected weak economic data to come. Do you think the conversations among the Fed are changing?

CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Absolutely. And you've laid it all out perfectly here. You know, you've got deep

uncertainty on the fiscal front here, even to the tune of funding the government and raising the debt ceiling critical, critical to avoid some

kind of a financial crisis. So the Fed has to have its eye on that. And then deep uncertainty regarding the recovery because of the delta variant

and some of the data that we've seen, even a lot of real time data where we saw jobless claims increased a little bit, again, the pace of job creation

slowing, and these concerns about inflation.

So the Fed has to very carefully walk this line between not having so much stimulus in the system that inflation gets out of control, and at the same

time, recognizing that the pace of the advance, the recovery, maybe it is slowing a little bit, and so, you don't want to take away the support to

the economy at exactly the wrong time.

So this is the exactly what the Fed Chief is going to be grilled about, I'm sure from these savvy financial journalists later today, when he has a

press conference after the Fed makes this -- makes the results of its meeting known -- Alison.

KOSIK: How do you think the market will react, though, if the Fed goes ahead and delays pulling back on that tapering? I mean, that's -- the

tapering is what many are saying maybe the economy doesn't need at this point, that it is causing more inflation, and that it is really not

filtering into the economy and helping let's say the jobs market, that it is time to go ahead and taper. What do you see happening there?

ROMANS: Well, when you're looking at an economy this year, even with these latest concerns about the delta variant, this economy will probably log its

best growth since, you know, at least the 90s, if not, the Reagan administration six percent growth, five percent growth in the economy this

year. That's very, very good.

You could see how some people could argue why is the Fed buying $120 billion in securities -- $120 billion in direct injection into the economy

when you've got an economic growth that is already, you know, going so briskly. So they have to measure between, you know, inflation and

inflationary policies, but also not killing or crimping the recovery and that's going to be the fine line to walk.

And that's why I think it's unclear how the market is going to respond. I think there's a conventional wisdom, that there will be an announcement in

November about taper, and then the tapering will begin before the end of the year. That is the thinking -- you know, the thinking, the smart money

is on that on Wall Street right now.

But again, conditions can still change. So that's why we watch these meetings so carefully.

KOSIK: And I know you touched on this, we touched on the gridlock on Capitol Hill, but the debt ceiling, I can feel it hanging over the market,

kind of buzzing in the background. We're not seeing it obviously today with the solid green arrows. Are we going to see a freak out in the market at

some point? Is there a deadline that we should be watching for?

ROMANS: I think a freak out is very, very likely, especially since you've had 54 to 55 record highs for the S&P 500 so far this year, you have the

delta variant, you have this Evergrande uncertainty about if there could be any spillover right now. I'm mostly hearing people don't think will be

spillover into the broader U.S. market.

But look, you have finally all of these uncertainties at what has been a very calm, slow, consistent record highs in the stock market. So that would

suggest to me that the risk is always on the downside, right, when you have these uncertainties that filter through in the market.

The market has done so well really, during COVID and that is what has been so kind of interesting, right, maddening for some that the real world costs

of COVID have been just so devastating. But the financial markets have done very, very well because by and large, especially in the U.S., the policy

responses were fast and big and appropriate. And they, you know, they saved a meltdown.

KOSIK: Yes, well, you know, and we say it all the time, the stock market does not necessarily reflect what's going on in the economy.

ROMANS: Exactly.

[09:10:02]

KOSIK: Christine Romans, thanks for breaking all that down for us.

ROMANS: Nice to see you.

KOSIK: Good to see you, too.

The climate crisis is dominating the United Nations General Assembly in New York. The U.K. Prime Minister will reportedly deliver a message that the

world must grow up and tackle the problem when he speaks later today. Already, the U.S. has pledged to double the value of its climate aid to

developing nations, and China says it will no longer build coal plants abroad.

Phil Black joins me now. Phil, how significant is it that the U.S., China, and the U.K. all are talking about climate at the U.N. General Assembly?

PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Yes, Alison, they're all talking about it because making these announcements, because there is a

looming deadline. The COP 26 climate conference is due to begin in just over a month under Prime Minister Boris Johnson's leadership and as

significant as perhaps the announcements are by China and the U.S., it is - - they are still not enough in themselves to ensure that this conference will meet its determined goals.

And so there is a reason Boris Johnson is using pretty strong language whenever he gets the chance this week, essentially talking about how

history will judge us very, very harshly unless we really do act more boldly, very, very quickly. And that is because these talks are looming as

a potential failure on his watch, because they are looking unlikely to meet the two most significant goals or the two most -- the two key measures

here, the first being the individual commitments that countries are making in order to ensure that carbon emissions are reduced, and global climate

change is limited to 1.5 degrees above pre-industrial levels.

A recent U.N. report card suggested that under the existing commitments, the world is nowhere close to achieving that goal, the cataclysmic climate

change is still likely by the end of the century.

And the other key goal, and this is really important for building goodwill internationally, is the willingness of rich countries to give big amounts

of climate aid money to poor countries to help them deal with the consequences of climate change a problem that they are not responsible for

making. That's where President Biden is once again, doubling of U.S. aid comes into around $10 billion a year. And is significant as that is, that

still allows for a significant shortfall in what has been the long standing goal of $100 billion a year.

So for all of these reasons, there is a real urgency, a looming deadline, and a sense that these goals are simply too ambitious for leaders to meet

at this time -- Alison.

KOSIK: And, Phil, as you've been talking on the right of your screen, we've been looking at pictures taken just moments ago of Boris Johnson

meeting with Nancy Pelosi. Let me ask you this because as we look forward to what's going to happen today, what can we expect to hear from Boris

Johnson later?

BLACK: Yes, more tough talk on this more. More urgency, more pleading with the world to step up, show leadership, and take responsibility. And we

understand he is going to do this through an extended metaphor that very much compares the world's attitude towards climate to that of a teenager

with a misguided sense of their own mortality making very poor life decisions.

Boris Johnson is going to argue we understand that the world cannot afford to be adolescent-like in its approach to climate anymore. It is time to

grow up -- Alison.

KOSIK: Okay, Phil Black, thanks so much.

The British government has agreed to a deal with an American fertilizer manufacturer to resume production of carbon dioxide after soaring gas

prices had forced it to stop. CO2 is vital to Britain's food industry. Anna Stewart joins me now.

Anna, so what did the government say about this deal? And why is it even intervening here?

ANNA STEWART, CNN REPORTER: The U.K. government said it's going to give limited financial support to CF Fertilizer, a U.S. company's operational

costs for the next three weeks and the environment Secretary yesterday said this will cost many millions of pounds and this is at a time where the gas

price is high. It's threatening to put multiple energy providers in the U.K. out of business. And yet this fertilizer company poses a very real, a

very imminent, a very serious threat to the U.K.'s food security. So this is why they're stepping in.

CF Fertilizer as a byproduct produces CO2 and actually accounts around 60 percent of the U.K.'s food grade CO2. It is integral to all sorts of

processes. It is really quite extraordinary. It's used to stun livestock before slaughter, it is used for carbonating drinks, for food storage, for

food transportation, even for food packaging.

So this has become a really big issue and actually just added pressure onto food and drink supply chains which have been buckling as a result of the

pandemic and also Brexit. So they have stepped in.

I think it exposes the major fragility when you're looking at food security in the U.K., so much reliance on one American company here. And also it

sets a precedent, who else might the government step in to save here -- Alison.

[09:15:07]

KOSIK: Yes. Meantime energy prices as we see them soaring. The IEA, the International Energy Agency is calling on Russia to send more gas to Europe

before the winter comes. Russia has already declined to increase gas supply to Europe. So the question is, will the call from the IAEA change anything?

There's even some speculation that Russia is deliberately holding back gas supply.

STEWART: I'm not sure these words from the IEA will change anything at all. We have had comment from Gazprom, Russian state energy provider. They

said it's fulfilling its long contracts -- long term contracts. It also says it seeks to satisfy the request for additional supplies. It certainly

feels at odds there. The IEA says they can do more. They also say it's an opportunity for Russia to underscore its credentials as a reliable supplier

to Europe.

As you say, others have said much, much more. They've gone further. Analysts, some industry experts have suggested that actually Russia here is

exacerbating the situation, not exporting as much gas, keeping those prices very high to lend weight to their argument for the Nord Stream 2 pipeline.

That would run from the Baltic Sea down to Germany, critically and rather controversially, of course, bypassing Ukraine.

Now, Russia, of course denies this. It has said though, just in recent weeks that the gas price would balance out should this pipeline be

approved. Of course, regardless of the situation with Russia, there are a number of reasons why we are seeing gas prices so high in Europe. There's

the demand issue, the fact that so many economies post lockdown are simply needing more gas.

And then there's the supply issue. We had a really long winter last winter, so lots of gas was used then. Wind and solar output was being very, very

poor. And of course, the whole continent is just shifting away from coal and nuclear power plants, decommissioning them. So it's really a perfect

storm here.

But yes, increasingly a lot of attention on Russia and whether they could do more here -- Alison.

KOSIK: All right, Anna Stewart, thanks for all that great context.

And these are the stories making headlines around the world.

The Taliban have nominated their spokesman, Suhail Shaheen as Afghanistan's new representative to the United Nations. The group wants the U.N. to

recognize him, rather than the current envoy who was appointed by the government that was ousted by the Taliban. Both sides have requested to

attend the General Assembly this week, but it's still unclear who will represent Afghanistan.

Cleanup efforts are underway in Melbourne, Australia after an unusually powerful earthquake not far from the city. It was measured at magnitude

5.9, the strongest tremor to hit the area in decades. It caused some damage to buildings and was felt hundreds of miles away, but there were no reports

of serious injury.

Still to come on FIRST MOVE, from gas to hot air. The CEO of a major European energy company says green hydrogen is the solution to the climate

crisis. I will speak to the head of Snam.

(COMMERCIAL BREAK)

[09:20:43]

KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik. U.S. stocks remain on track for a higher open this Wednesday. The big question is whether early

session gains will stick or whether we'll see yet another turbulent session.

A lot is riding on today's Fed policy statement. Fed officials are set to update investors on when they hope to begin pulling back on stimulus. Some

Washington watchers suggests that the worsening fiscal gridlock in Washington may force the Fed to delay any tapering announcement.

The Fed surely watching the overseas economic picture as well. Nervousness over the future of indebted property developer, Evergrande could unsettle

the investment outlook for days and perhaps weeks.

Evergrande says it will make an interest payment on a domestic bond after negotiating with its bondholders. The deal offers some relief to investors,

but the company is due to make an even bigger interest payment on an overseas bond tomorrow.

Joining me now is Mark Williams, Chief Asia Economist at Capital Economics. Mark, great to see you.

MARK WILLIAMS, CHIEF ASIA ECONOMIST, CAPITAL ECONOMICS: Hi, Alison.

KOSIK: So break this down for me because we've got Evergrande already made an interest payment on one of its bonds, and it's got an even bigger one

that it has to make for tomorrow. Markets don't seem to care, U.S. markets at least as well don't seem to care. Is Evergrande still on the brink of

default? Can we all kind of breathe a sigh of relief yet?

WILLIAMS: No, definitely not. So Evergrande has already essentially defaulted on some of its obligations a few days ago. We were told that they

had not paid back some loan installments to Chinese banks. Some domestic Chinese investors, households that have bought what they call wealth

management products have also not been getting their money back and have been told it will take them a lot longer to get their money back.

So today's announcement that they have paid back some of the interest on one of their bonds is encouraging, but it certainly doesn't mean the

company is out of the woods.

KOSIK: Beyond China, who is exposed? I'm talking about American companies like Goldman Sachs, JPMorgan, HSBC, and what kind of exposure do they have?

WILLIAMS: Well, the global exposure to Evergrande should not be that big. The company does issue bonds in Hong Kong. There's about $20 billion worth

of bonds there, but that's a drop in the ocean of Evergrande's overall liabilities.

Overwhelmingly, the people owes money to or things to Chinese banks, Chinese bondholders, and particularly, there are also the suppliers that

it's been paying, you know, within China over the past year or two, and families who have put down deposits for properties that haven't yet been

built. They are the people that really stand to lose out if Evergrande defaults in a messy way.

KOSIK: Let's back up a bit. How did Evergrande get into this situation in the first place?

WILLIAMS: Well, China has been on a colossal boom in its real estate market for the past 25 years really. And Evergrande has been one of the

most aggressive of the Chinese developers, and has done very well in terms of you know, building out China's property stock. However, it's done that

by building up a huge amount of debt as well.

And policymakers in August of last year started to really worry that the amount of debt that some developers were carrying was potentially

destabilizing to the financial system. So they put in limits last August, telling overleveraged developers that they couldn't borrow any more. And

Evergrande was the biggest and the most debt ridden of the developers.

So it has, over the past year been desperately trying to find other sources of revenues to pay back its existing debts. It has been selling its

apartments at knockdown prices. It's been selling off the business arms, but it seems like it's running out of road.

Its debts are still huge, and it is finding it hard to draw out the cash. So Evergrande does, despite today's announcement, they've made one payment

really is looking a bad way. The good news from the perspective of investors whether in China or elsewhere is that Evergrande really is

amongst the really big developers out on a limb in terms of how indebted it is.

The other developer are in a much, let's say less unhealthy position and I think should be able to get through the next few months okay.

[09:25:10]

KOSIK: You know, you look at what's going on with China's economy, investors, you know, we've seen China cracking down on companies listed

here in the U.S. There's a tech crackdown. What is your sort of interpretation as to what's happening here? And what kind of impact in

totality would all of this have on the Chinese economy?

WILLIAMS: Well, as you say, there's a few things going on. Different crackdowns are happening. The property crackdown, if you like, preceded all

of those, because it was kicked off in August of last year when the government put these limits on developers' debts.

I think there's different motivations in different areas. But in each case, one common thread going between them is that we have a state that is trying

to impose its will on lots of different parts of the economy.

We can sort of argue as to whether those individual steps are sensible, are good, but in the long run this kind of centralization of control over key

sectors of the economy, I think has to be something that drags on craze. Certainly, the outlook for property developers is pretty weak anyway, given

the demographic trends that we've got in China.

A lot of people buy properties when they're getting married, and the number of marriages is tumbling as the cohort of younger people get smaller, the

whole population is going to be shrinking quite soon.

So certainly for property developers, the outlook isn't great. And of course, they have driven a significant chunk of Chinese growth over the

past decade, not just within China, property construction accounts for about a quarter of global demand for steel. So as this slowdown happens, it

will affect China's economic growth, but it will also affect other parts of the world.

KOSIK: Okay, Mark Williams, Chief Asia Economist at Capital Economics. Great perspective. Enjoyed the conversation. Thanks.

And you're watching FIRST MOVE. The market open is next.

(COMMERCIAL BREAK)

[09:30:06]

KOSIK: Welcome back to FIRST MOVE. U.S. stocks are up and running this Wednesday. Stocks we are happy to report are not falling on the first day

of fall. We're seeing solid gains across the board for the major averages.

That said an early session rally, it did fizzle yesterday and markets remain nervous over the Chinese debt crisis, fiscal dysfunction in

Washington, and the future of Fed stimulus.

The S&P 500 has closed lower in each of the past four trading sessions. It is currently down four percent from record highs. Stocks in the news today

include Uber. Shares are rising after the company says it may turn a profit this quarter as ridership returns. Uber closed up 11 percent on Tuesday.

And we are seeing shares of FedEx falling. It is cutting profit guidance. It says the lack of drivers is slowing package deliveries and driving up

costs.

Kristina Hooper joins me now. She is the Chief Global Market Strategist at Invesco. Great to see you.

KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: Great to see you too, Alison.

KOSIK: Let's start off with the Fed. What are you expecting to hear from the Federal Reserve today?

HOOPER: Well, the big question on everyone's mind is will they or won't they announce the start of tapering? I'm in the minority. But I do believe

they will announce that tapering is going to start soon. I just believe the economy is in a good place, and the Fed strongly believes that quantitative

easing, those large scale asset purchases hasn't been a big help to the economy. It's been a bigger help to markets.

And finally, we've had Jay Powell strenuously assert that there is no connection between tapering and rate hikes. The bar is a lot higher for

rate hikes. So, we don't have to worry about that happening right away.

And so I think that the Fed is going to announce the start of tapering soon.

KOSIK: Yes, I think that Jay Powell has separated the tapering versus the interest rate hikes to make it so we could -- so investors can take each

action kind of piecemeal, and not freak out everybody all at once.

But we did see a freak out on Monday. Do you think we are at the beginning of a correction, possibly? I realized that we are seeing solid green arrows

today, but there is a lot going on, you know, the dysfunction on Capitol Hill, COVID is still with us. We do have Evergrande. How do those things

factor into your outlook?

HOOPER: Let me add one other concern, because really, what is likely to overshadow the Fed's announcement or non-announcement on tapering today is

the dot plot and the potential that it looks more hawkish than the last time the dot plot was released.

So I think that's creating some anxiety and trepidation in markets, you know, for all the reasons you mentioned, and then some. And so my

expectation is that we will see volatility. We will see choppiness in the shorter term, but I am confident that stocks will end the year higher than

where they are today.

The economy is improving, and even if we see the start of tapering, this is an incredibly accommodative monetary policy environment.

KOSIK: What will exactly rattle investors when you talk about the dot plot?

HOOPER: Well, if there is an increase in the number of F.O.M.C. members that anticipate rate hikes sooner rather than later. So we had a number of

-- certainly, the minority, but a number of F.O.M.C. members suggest they would be in support of rate hikes as early as June of next year.

And so, if we have more of that, that is likely to give real jitters to markets. They've already come to accept that tapering is going to happen

soon, whether it's October, November, December, but markets have not yet digested the potential for rate hikes sooner.

Now, having said all of that, I think the dot plot is really irrelevant. It is just each individual member's policy prescription based on data they're

seeing today. Luckily, when they do make the decision, it's going to be based on data that they see at that time.

KOSIK: And given the uncertainty around the debt ceiling and the reconciliation package, do you think it is too soon to buy the dip?

HOOPER: Well, I think this is an opportunity to dollar cost average what is likely to be a series of dips. But I don't see resolution coming

tomorrow for sure. And so I would anticipate continued volatility for at least the next several weeks.

KOSIK: Oh, yes, as we usually expect at this time of the year, September and October. Thank you so much, Kristina Hooper, the Chief Global Market

Strategist at Invesco. Great talking with you.

HOOPER: Thank you.

[09:35:02]

KOSIK: Natural gas prices in Europe have surged to record highs. Millions across the region face cold homes or high bills this winter. Italian energy

utility, Snam is one of Europe's biggest gas pipeline operators. Its CEO says the situation could get very ugly unless we act quickly.

Joining me is Marco Alvera, he is the CEO of Snam. Great to see you.

MARCO ALVERA, CEO, SNAM: Good to see you. Thank you.

KOSIK: And I want to mention that you are also the author of a new book called "The Hydrogen Revolution." This is your second book in two years. So

congratulations.

ALVERA: That's right. The market is moving so fast. The books are coming out of date really quickly, we need to keep updating. Costs are coming down

really fast.

KOSIK: That's interesting. Let's first talk about what's going on in Europe, where there's an energy crisis. The U.K.'S Business Secretary is

quoted as saying the country has more than sufficient capacity to meet demand and that he doesn't expect supply emergencies to occur this winter.

Do you agree with him?

ALVERA: I think a lot will depend on the weather, Alison. So what we have right now is a situation where storages aren't full and winter is beginning

very soon and we will not be able to fill up all the storages unless we take immediate action.

And it's not a European issue, it is a kind of Asia and Europe. Really demand surprised everyone on the upside and surprise, surprise, everyone on

the downside and guess what, the elasticity here is such that prices really, really jump up as soon as there is an imbalance in the market.

So we really need to fill up the gas storage as we have them, we need to fill them up.

KOSIK: Right and with low supply, you know, high demand, skyrocketing prices of gas. What's the solution here, not just now but for the future?

ALVERA: Well, I think we're hearing some good news from Norway, whoever has availability of gas is going to produce more of it. And luckily, we

have abundant storage and abundant transport infrastructure, we simply need to create the incentives to fill up the storage.

When prices are so high and when you look at the forward curves, you look at the future prices that are lower than today, no one would be

incentivized really by expensive gas to then take it out of storage when it's cheaper.

So we need some policy efforts, and I think the U.K. is moving already in that direction when it comes to CO2 production. We need some support and

some incentives to make sure that given we're in such a particular year with a post COVID supply taking longer than expected to recover and demand

shooting up higher than expected, we need some slight policy interventions just for this winter to fill up the storages.

KOSIK: All right, we are expecting British Prime Minister Boris Johnson and President Biden to hold discussions on the need for nations to honor

their climate commitments and do more. It's a topic that, you know, we always talk about, but are we on this emissions reduction path -- as we're

on this emissions reduction path, are we even making a dent in climate change?

ALVERA: We aren't making a dent, which is the bad news. But the very good news is that we now have very cheap renewable energy. And I spent 20 years

in the fossil fuel industry working in electricity and then oil and gas, and I'm shocked to see how cheap solar and wind are getting.

So the whole issue of how do we finance this energy transition quickly will become an opposite issue, which is what a fantastic business opportunity to

invest in this energy transition. Hydrogen is going to play a big role in this because it's a means of -- it's a way of transporting solar and wind

energy from far away where it's cheap to produce them into our homes, into our trucks, into our factories.

So I think COP will be a success. A lot of countries are joining the net zero effort. And when you have an objective like that of getting to zero

CO2 emissions, first, you have a task and something measurable, which is always very good. But then it forces us to look at the whole system

solution.

So we now have 70 percent of emissions in countries that have pledged to get to net zero. Amazon and other companies are hoping this will happen by

2040, Europe by 2050, China is at 2060. I think we need an extra nudge to get people by the time we get to Milan in a few weeks for the pre COP and

in Glasgow for the full COP in November. We need some stronger pledges ideally against coal and moving forward this kind of net zero commitment

that we're willing to take, and the U.S. being back is great, great good news for the whole global effort.

KOSIK: Now speaking about hydrogen specifically, it's not widely adopted at this point, but your company is taking on the mentality that if we build

it, they will come. Your company is spending a lot of money getting infrastructure ready for the hydrogen era.

ALVERA: Well, the great news is that the gas pipelines we have are already suitable to transport a hundred percent of hydrogen, so we have a lot of

the infrastructure already in the ground. What we need to do is to scale up the manufacturing of the electrolyzer, which is what you need to transform

solar or wind energy from electricity into hydrogen.

It's very simple. You split water, which is H2O in its constituent parts. So oxygen, and hydrogen. So you take water, you take renewable electricity,

you produce hydrogen that behaves like a gas, but has no emissions. And what's going to make it possible and going to make it possible really

quickly at scale is that costs have been coming down very, very fast.

[09:40:31]

ALVERA: When I first started studying hydrogen, it would cost around $1,000.00 per megawatt hour. Today, it costs around $50.00. When I spoke to

Secretary Kerry recently in Rome on his visit, the DoE, he is now committed to making green hydrogen available at $1.00 a kilo or $25.00 per megawatt

hour by the end of the decade. This means producing a renewable fuel at the same cost as coal very, very soon.

So we're going to reach oil parity and five years and coal parity in 10 years. And so that's the only way we can really get India and China to stop

building new coal plants and to switch to entirely renewable sources. But because we have the pipelines there, because we have a lot of the storage

infrastructure already there, this is going to be a much cheaper transition than people expect.

In fact, it's going to be the biggest business opportunity that we've ever seen.

KOSIK: You see this shift to hydrogen happening within how many years?

ALVERA: I think it's going to happen within five years in some low hanging fruits, like trains. In the U.S., old trains are running on diesel.

Hydrogen today can be made cheaper than diesel.

So we're going to see some low hanging fruit and some early adopters moving within the next five years, and big larger scale applications within the

decade. So, it's a very short period of time, we need to get the manufacturing up so that the supply is there when demand ramps up.

But really the key message and the best message is that all of this is going to be cheaper than today's energy costs.

KOSIK: Okay, all right. Marco Alvera, CEO of Snam. Great talking with you.

ALVERA: Thank you. Good to see you.

KOSIK: And that's it for the show. Be sure to connect with me on Instagram and on Twitter @AlisonKosik.

"Marketplace Europe" is next.

I'll see you tomorrow.

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