Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
As much as I feel sympathy for the effect of energy bill rises on my poor Brits, I simply can't accept the premise of a windfall tax on "excess profits". Profit is by definition an excess! Surely they would be better served by saying unless you guarantee a large investment in the UK then we will tax you more. Windfall taxes have the opposite effect of disincentivising investment and driving it overseas. IMO SSE should now focus more on its EU, US and Japan expansions until UK PLC becomes a sane place to do business.
Jeremy Hunt is preparing a raid on electricity generators with a new tax on their “excess returns” as he tries to find money to pay for an inflation-linked rise in benefits and pensions while extending help for households with energy bills.
The chancellor will also use Thursday’s Autumn Statement to lift the existing windfall tax on oil and gas companies, known as the “energy profits levy”, from 25 per cent to 35 per cent — while extending it for another two years until 2028.
The government had been considering a “revenue cap” on electricity generators in line with a similar move by the European Union.
However, Hunt is now preparing a tax of 40 per cent on the “excess returns” produced by the sector above a certain price per megawatt hour, according to people close to the discussions. That threshold has not yet been decided.
The combination of the two windfall taxes is expected to generate more than £45bn over six years, although the final figure will depend on energy prices.
That is much more than previous Treasury forecasts of £28bn over four years for the energy profits levy. The Treasury declined to comment.
LMAO read this BBC article the clowns can just reclassify BOE debt off balance sheet and then "hey presto" we now have a £60 Billion surplus! Can't make this **** up https://www.bbc.co.uk/news/business-63573989
I suppose the reason I posted the article is because it's quite an interesting narrative that “BT looks likes a badly-run hedge fund which just happens to own a phone network”. Is the pension overhang going to forever have a hold over BT?
Only the tax break on debt interest payments creates shareholder value. Equally, leverage in the pension fund through leveraged swaps does not create first-order value for shareholders. And there is no tax break for pension fund leverage.
Because pension fund leverage reduces the company’s capacity to borrow, and debt creates shareholder value through the tax break on interest payments, pension fund leverage isn’t neutral, but destroys shareholder value.
Although BT plans to pay off its £4bn actuarial deficit by 2030, in practice, being “100 per cent funded” is a moving target for any pension scheme. As they become better funded a tighter discount rate applies, increasing the present value of liabilities.
New UK rules on funding and investment strategy will also require mature schemes to have a “Long Term Objective”, using a tight discount rate, adding several billion to BT’s deficit.
BT was privatised with great fanfare in 1984, and unlike other privatised European telcos, pensions were not left with taxpayers. But over the last two decades BT has suffered a long-term “double squeeze” — its market cap has shrunk, while lower real interest rates have increased pension liabilities. Furthermore, it has £20bn of debt and lease liabilities, and a credit rating of just BBB.
Now with a market cap of just £12bn, and £40bn of pension liabilities, BT is a small business supporting a huge pension scheme. BT continues trying to reinvent itself for the 21st century, but like Samuel Coleridge’s Ancient Mariner, it has a very 20th century pension albatross hanging around its neck.
There has been plenty of digital ink spent on last month’s “LDI meltdown”, but little exploring the impact on specific companies. But BT has now offered some insight into how it coped with recent extraordinary events.
The UK telecoms company published its half-year results and its June pension scheme accounts last week, and they bear close reading. BT isn’t just any old company — it has the largest IAS19(opens a new window) accounting pension liabilities of any UK company, calculated using a AA corporate bond rate — and has been in the pensions spotlight for two decades.
So what happened to BT?
The good news is that the much higher AA corporate bond yields from March to September shrank BT’s IAS19 liabilities by a quarter from £54.3bn to £40.6bn. And because it has hedged all of its interest and inflation exposure pretty well through matching bonds and long-dated interest rate swaps, assets fell by a similar amount — £53.5bn to £39bn — leaving the IAS19 deficit virtually unchanged at £1.6bn.
Crucially, even though BT’s pension scheme has a whopping £50bn of interest rate swaps with maturities over 40 years, it had no liquidity or collateral problems. BT’s actuarial deficit — calculated on a tougher basis than IAS19 — which fixes deficit contributions, remained at about £4bn at September, which it plans to pay off by 2030. The next three-year actuarial valuation is at June 2023.
BT’s interest and inflation hedges have certainly done what they were designed to do, but this doesn’t mean shareholders can stop worrying about pensions.
Although 60 per cent of pension assets were in matching bonds, cash and “secure income”, 40 per cent of assets at June 2022 (about £19bn) were in what BT describes as “equity-like assets” — public stocks, private equity, property, hedge funds, infrastructure and “non-core credit”.
The £19bn in “equity-like assets” is much larger than BT’s £12bn market capitalisation. BT is on the hook for all pension deficits, so in economic terms, holding £19bn of “equity-like assets” in its pension scheme is identical to BT borrowing £19bn long term, and then buying those assets directly.
Quoting the adage, “BT looks likes a badly-run hedge fund which just happens to own a phone network”. BT’s market cap is therefore sensitive to movements in the value of “equity-like” pension assets — as a matter of arithmetic, a 10 per cent fall in their value hits BT’s market cap by about 10 per cent after tax.
About £15bn of these assets are unquoted, and BT’s auditors list “the valuation of unquoted plan assets” as their first “key audit matter”. Much of BT’s £50bn book of interest rate swaps are leveraged swaps — effectively borrowing — allowing it to continue betting on equities, and run a huge asset and liability mismatch.
We all know from corporate finance 101 — the Modigliani-Miller theorem — that increasing leverage through borrowing does not create any first-order value for shareholders. Only the tax break on debt interest payment
How it could the SP go to 250 when results where this bad? deluded
As others have postulated, net debt increase was because capex increase can be offset against the super deduction tax waiver, so actually makes sense for them to increase debt in short run as faster rollout of FTTP means larger market share in the long run. Debt is definitely important, but looking at BT Groups debt profile its relatively long duration with average YtM of sub 4%. So yes £14 Billion less leases is a lot, but eminently manageable in the long run :)
yeah but you put that on a backdrop of stagnant revenues, falling earnings due to inflation and wage rises, strikes from the union members and a massive debt pile and you get a value trap in secular decline that has suddenly announced its going to find another £500 Million of cost saving "efficiencies", not exactly a rosy picture, therefore current P/E definitely justified
Commenting on the vagaries of a SP, especially CHRT given the liquidity, is frankly useless, better to look at annual report, if you think management know what their doing just trust them, and come back in a year :)
you can't just say the SP should be "X" and the "Market" is punishing you, thats not how it works. More people are selling HBR stock than buying, simple as that. The current price is the "real price" , if you can't accept that then maybe you shouldn't be investing
Honestly whatever happened to the old I'm going to buy the share and not panic if it goes below the original price I paid. This board seems to rage every red day, against the HBR Board, against the government, against climate change people, against anyone who might threaten the SP. Some people need to accept that if they are constantly worrying about the SP they overinvested, simple as. If you can't afford to lose its simple, sell some of your HBR shares and stop worriny. Have a beer and watch the footie :D
As a neutral when it comes to politics, I don't understand why people are attached to a political party regardless of incompetency? E.G. "As I've said before on here, God help us if the next government turns out to be Labour."
Is it like a football team? Surely we should not be waving red or blue flags, but the British Flag, as cringe as that sounds :D
Vote for the people not the party, maybe I'm just deluded but you can't have a stable society when people instantly fight someone they have never met simply for saying I support "X" party...
BBC article today about all of the LNG ships waiting off the coast of Portugal. Seems to back up the idea that gas oversupply in Europe is real
https://www.bbc.co.uk/news/business-63331709