Tax dispute puts the squeeze on SP Ausnet profit
The planned sale of a large stake in the company, along with other group assets, to China's State Grid, is also up in the air.
The deal could collapse if government approvals are not received by November 16.
Earlier this year, State Grid agreed to pay about $3 billion for equity in Singapore Power's assets in Australia, including a 19.9 per cent shareholding in SP Ausnet.
On Tuesday, SP Ausnet said the Tax Office dispute, warmer weather and the rising use of solar energy systems combined to squeeze its September half net profit to $97.7 million, from $166.2 million a year earlier.
This was despite the energy distributor reporting buoyant revenue growth, thanks to increases in regulated prices.
Gross profit, as measured by earnings before interest, tax, depreciation and amortisation, surged 11.3 per cent to $581.8 million on revenue growth of 8.7 per cent to $961.2 million.
The Tax Office has hit the company with two claims with a potential liability of $151.3 million - one for $87.7 million plus interest relating to the purchase of transmission assets, and $44 million plus interest relating to intellectual property deductions.
SP Ausnet has brought the $87.7 million liability to account after it lost a recent court ruling.
The company is also being audited by the Tax Office over the handling of intra-group loans, which carry a 9 per cent interest rate at present.
The group is also battling legal action following the 2009 Victorian bushfires. This is expected to extend well into next year, securities analysts were told.
In the September half, electricity demand fell 3.9 per cent and gas volumes 7.4 per cent. This was attributed to the warmer weather and the increasing use of solar panel systems.
The company also said it was negotiating to buy back the management rights from Singapore Power, its controlling shareholder, which could cost $24.6 million.
The agreement is expected to be terminated before September 2015.
The interim dividend was raised to 4.18¢ from 4.1¢, with the full-year distribution guidance of 8.36¢.
Frequently Asked Questions about this Article…
SP Ausnet is currently involved in a tax dispute with the Tax Office, which has resulted in a potential liability of $151.3 million. This includes $87.7 million plus interest related to the purchase of transmission assets and $44 million plus interest related to intellectual property deductions.
The tax dispute is contributing to a monthly interest bill of $350,000 for SP Ausnet. Despite buoyant revenue growth, the dispute, along with other factors like warmer weather and increased solar energy use, has squeezed SP Ausnet's net profit to $97.7 million for the September half, down from $166.2 million a year earlier.
Warmer weather and the rising use of solar energy systems have led to a decrease in electricity demand by 3.9% and gas volumes by 7.4% for SP Ausnet during the September half.
The planned sale of a large stake in SP Ausnet to China's State Grid is uncertain and could collapse if government approvals are not received by November 16. State Grid had agreed to pay about $3 billion for equity in Singapore Power's assets in Australia, including a 19.9% shareholding in SP Ausnet.
SP Ausnet reported an 8.7% increase in revenue to $961.2 million, and its gross profit, measured by earnings before interest, tax, depreciation, and amortization, surged 11.3% to $581.8 million.
In addition to the tax dispute, SP Ausnet is facing legal action related to the 2009 Victorian bushfires, which is expected to continue into next year. The company is also being audited by the Tax Office over the handling of intra-group loans.
SP Ausnet has raised its interim dividend to 4.18 cents from 4.1 cents, with a full-year distribution guidance of 8.36 cents.
SP Ausnet is negotiating to buy back the management rights from Singapore Power, its controlling shareholder, which could cost $24.6 million. The agreement is expected to be terminated before September 2015.
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