By Ron Bousso and Shadia Nasralla
LONDON (Reuters) – The North Sea’s largest oil and fuel producer, Harbour Power, has instructed the British authorities that Britain’s deliberate windfall tax on the power sector will shrink the corporate’s funding within the nation.
With oil and fuel costs hovering and households feeling the hit from greater costs throughout the board, Britain final month introduced plans to introduce a 25% windfall tax on oil and fuel producers’ income, with a view to elevating $5 billion.
A gathering between representatives of oil and fuel producers within the British North Sea, together with Harbour, and Treasury officers is scheduled to happen on Thursday in Aberdeen, Scotland, a Harbour spokesperson and two trade sources mentioned.
Graphic: Britain’s largest oil and fuel producers – https://graphics.reuters.com/BRITAIN-OIL/movanzyeopa/chart_eikon.jpg
“We should reassess our technique and plans within the UK which is able to, I’m afraid, result in decrease funding, no more,” Chief Government Linda Prepare dinner mentioned in an undated letter seen by Reuters to British finance minister Rishi Sunak.
Britain is permitting the affect of the levy to be offset in opposition to contemporary investments in oil and fuel tasks.
However Prepare dinner mentioned the motivation doesn’t assist corporations like Harbour which have invested in new tasks such because the Tolmount fuel discipline, which will increase UK fuel output by 5%.
Prepare dinner mentioned the levy harm so-called impartial producers equivalent to Harbour disproportionately greater than oil majors lively within the British North Sea, equivalent to BP (NYSE:) or Shell (LON:).
A Harbour Power spokesperson mentioned: “we do envisage a major affect on our enterprise, our technique, and our skill to spend money on our present and future tasks within the UK.”
Oil and fuel producers equivalent to Harbour sometimes hedge greater than half of the volumes they promote prematurely to lock in a worth flooring, typically to fulfill covenants with lenders. Which means that they’ll miss out on worth spikes within the open market.
Prepare dinner requested Sunak to alter the tax plan to mirror previous investments, decommissioning spending in addition to to scrap the levy by the tip of subsequent yr and put in a better revenue threshold for corporations affected by the tax.
Harbour’s share worth has slumped round 19% for the reason that plan was introduced on Could 26.
“Our present and potential shareholders … at the moment are actively questioning the way forward for our property within the UK and wrestle to guage their remaining potential given the unsure and unpredictable fiscal atmosphere,” Prepare dinner mentioned.
“They’re additionally, rightly, questioning our technique to stay a big UK oil and fuel producer and persevering with to spend money on the nation.”
Graphic: UK authorities income from oil and fuel sector UK authorities income from oil and fuel sector – https://graphics.reuters.com/BRITAIN-OIL/TAX/akpezrnzavr/chart.png
Harbour’s largest shareholders embrace non-public fairness agency EIG, which holds a 36% stake, and Singapore sovereign wealth fund GIC and Constancy, which maintain round 5% every, in accordance with Refinitiv Eikon knowledge.
The Treasury had no fast reply to a request for remark.