A LOWER income-tax rate for the two hydropower plants of SN Aboitiz Power (SNAP) Group may improve the latter’s earnings, according to COL Financial.
“The earnings of Magat and Ambuklao Binga hydroelectric plants [SNAP Magat and SNAP Binga] could surprise on the upside once the income-tax rates for the two plants are reduced to 10 percent [from the current 30 percent],” the country’s online stock broker said.
“Based on our estimates, the lower income-tax rate for Magat and Ambuklao-Biunga could increase AP’s 2017 net income by P560 million, or 2.5 percent.”
SNAP Group is the collective name of SNAP-Magat and SNAP-Benguet.
SN Aboitiz Power-Magat Inc.owns and operates the 360-megawatt (mW) Magat Hydroelectric Power Plant (HEPP) at the border of Ramon, Isabela, and Alfonso Lista, Ifugao.
SN Aboitiz Power-Benguet Inc. owns and operates the 105-mW Ambuklao HEPP in Bokod and the 140-mW Binga HEPP in Itogon, both in Benguet.
COL Financial said this is line with the Renewable Energy Act of 2008 (RE law), which grants renewable-energy power producers a preferential income-tax rate of 10 percent against the normal corporate-tax rate of 30 percent.
“However, management said the trade-off of obtaining the preferential income-tax treatment is that the ownership of the plants is transferred to the government after 50 years. Nevertheless, based on the Aboitiz Power internal estimate, choosing the 10-percent income-tax rate scenario is still more value accretive for the company in the long run,” it said in its September 23 report.
The 10-percent income-tax rate will be applicable for the two plants once the Energy Regulatory Commission awards the certificate of compliance for the two plants.
Earlier, the Aboitz group expressed interest to bid for Chevron’s 40-percent stake in the Philippine Geothermal Production Co. Inc., which develops and produces steam energy for the Tiwi-Makban geothermal-power plant.
The power company would have to set aside higher capital expenditure on the steam field to bring back the capacity of the geothermal complex back to the original 700 MW from 400 mW.