CalEnergy allows for windfall tax

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The Independent Online
CalEnergy, the US company that took over Northern Electric last December after a bitter takeover battle, has made a provision against paying Labour's windfall tax which is thought to be in the region of pounds 90m-pounds 100m.

The company's 1996 report, released yesterday, shows CalEnergy, one of six US companies to have snapped up a British regional electricity company, has established a liability against the levy in its latest accounts.

CalEnergy would not disclose the size of the provision but its chief financial officer, John Sylvia, said it was in the middle of a range of estimates by UK analysts. Goldman Sachs estimates that Northern Electric's windfall tax bill will be between pounds 80m and pounds 120m while NatWest Markets puts it at between pounds 85m and pounds 125m.

The CalEnergy reports also show that it will make losses for the next 10 years on a contract Northern Electric entered into to buy supplies from Teesside Power, in which it has a 15.4 per cent stake. The 15-year contract set out "escalating purchase prices" which are above the level it pays in the electricity pool. CalEnergy has a similar provision to cover the estimated losses which will result from the contract which was signed in 1993 and runs until 2008.

In a report published last night, NatWest Markets put the size of the windfall tax at pounds 5bn but says that at that level it would not derail dividend growth or future plans of the utilities.

The analysis shows that by calculating the levy on the basis of shareholder returns up to 1996, Labour could shift almost one-third of the tax burden to foreign companies that have taken over British utilities in the past three years.

If the cut-off point was 1996 then overseas owners of electricity and water companies would pay pounds 1.545bn of the levy. If the tax liability was calculated up to 1995, this sum falls to pounds 884m.