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– That is not what the industry has asked for.
STAVANGER (Nettavisen Økonomi 🙂 On Wednesday, the Minister of Oil and Energy, Tina Bru (H) and the Minister of Trade and Industry, Iselin Nybø (V), held a press conference regarding the state budget.
The press conference was held at the Lyse energy group in Stavanger, and many were probably expecting good news for the energy industry.
Specifically, the industry expected a relief in the scheme that, for example, gives them a gigantic tax bill on loss-making projects.
But it was a relief that power companies had to look far back.
Bru and Nybø served what the government believes should be an encouraging message for the energy industry:
The government will ease the tax on new hydroelectric projects and improvements to existing power plants. The proposal means that utilities get more money on the books, because they pay less taxes when they invest.
The government’s solution was not what the industry wanted: They would pay less than what they think is a disproportionately high tax.
Today, power companies have to pay what the industry believes to be an extraordinarily high land income tax, making it less attractive to invest in improvements or new hydroelectric plants.
NEW SCHEME: Here, the Minister of Oil and Energy, Tina Bru (H), presents the scheme, with which she hopes the electricity companies will be happy. The reception was quite tepid.
Photo: Magnus Ekeli Mullis
Read more: Extreme fiscal repression of hydroelectric energy: must pay more than 100 percent taxes on deficit projects
Not satisfied
Lyse Executive Vice President Eimund Nygaard tells Nettavisen Økonomi that he is not satisfied with the government’s proposal.
– This is not what the industry has asked for, says Nygaard and continues:
– What we need is the protection of the normal return, so that when we pay the land income tax, we pay it on what was intended, that is, the super benefit and not on all returns. It will continue to be the case that Sør-Rogaland municipalities pay land income tax to the state on a project running a deficit. This is not how we can have it.
NOT SATISFIED: Oil and Energy Minister Tina Bru (H) approached Lyse and CEO Eimund Nygaard with what she thought was good news for the industry. However, the energy group was not satisfied with the solution proposed by the government.
Photo: Magnus Ekeli Mullis
NHO Rogaland Director Tone Grindland believes it is positive that the government is addressing the challenges associated with developing and investing in hydropower.
– Unfortunately, the land income tax challenge is not resolved in the current proposal. Hydropower is still being taxed very heavily, Grindland told Nettavisen Økonomi shortly after the ministers’ message.
Lyse director Eimund Nygaard cannot say for sure that the energy giant will invest in more projects due to the government’s tax shift.
– We have to calculate the consequences of the government’s proposal, so it is too early to say, says Nygaard.
In a statement, Energy Norway director Knut Kroepelien says the government only solves half of the problem.
– The proposal for a cash flow tax for new projects will make it more profitable to modernize and expand older power plants. But hydropower will remain Norway’s most taxed industry, and some power plants will pay more than all of the profits in taxes. This weakens companies’ ability to finance new projects, Kroepelien says.
DEMAND MORE: – We hope that the negotiations in the Storting will contribute to an improvement of the government’s proposal, says director Knut Kroepelien at Energi Norge.
Photo: Magnus Ekeli Mullis (Nettavisen)
Also read: Economists put to bed by the government: – Much better than expected
Believes the government is responding to the industry challenge
The Minister of Oil and Energy, Tina Bru (H), believes that the government’s proposal responds to what the energy industry and political circles have asked for.
– Now it will be easier for companies to have profitability on new investments in the future, and I think this will trigger many new projects. The proposal is estimated to result in a loss of revenue in 2021 of NOK 800 million. That’s significant, says Bru.
– Lyse says it is too early to say if there will be new investments as a result of the proposal.
– I understand that now is the first day and that you must have time to think. But Lyse and others have been concerned that we should activate new investments, and I think we are responding to that now, Bru says.
HYDROELECTRIC: Today, about 94 percent of Norwegian energy production comes from hydroelectric power. The energy source is renewable, green and flexible. Here from Bossvatn by Bykle in Setesdal
Photo: Tor Erik Schrøder (NTB)
Also read: Cut the net salary scheme: – A betrayal
Several surprising examples
Around 130 hydroelectric plants in Norway have been flagged by power companies as too mature to modernize. If companies invest in the development of existing hydroelectric plants, they can obtain electricity equivalent to more than half of Oslo’s annual electricity consumption, according to the industry itself.
On Tuesday, Nettavisen Økonomi wrote about how Stavanger’s Lyse company and several others in the energy industry are fighting the land income tax, a tax on free natural resources like oil or running water.
The tax is 59 percent and is in addition to the natural resources tax, property tax, and license fees, which means that many companies simply do not consider it worth investing more in hydroelectric plants.
The taxation of hydroelectric companies has been the subject of debate for several years, and in June the Labor Party, the Center Party and the Progress Party came together and agreed that they want to change the land income tax. Therefore, there has been a majority in the Storting for a tax change for several months, according to Frps Terje Halleland.
– Changing the tax system here is an easy fruit to come by that contributes significantly to electrifying society, making us attractive to new industries and keeping energy prices low. This is necessary if we want to produce more green electricity, Halleland told Nettavisen Økonomi on Tuesday.
Lyse has shown several examples of strict tax requirements that have kept the group away from new improvements and excavations of old hydroelectric plants:
- In 2018, the Jøssang Power Station in Rogaland posted a deficit of approximately NOK 9 million after a year of low energy prices. Despite the deficit: Lyse has had to pay a land income tax of NOK 2.2 million, in addition to the natural resource tax, property tax and license fees. In total, the group paid taxes and fees of approximately NOK 6 million on a power plant that had a loss of NOK 9 million.
- Another example comes from Gjesdal in Rogaland, where Lyse has wondered for several years what to do with the Maudal power plant. It has been around 90 years since the power plant started producing, and the group is considering upgrading it for the third time. Another option is to tear it down to build a new one. A third alternative is to build two smaller power plants to avoid land income tax requirements, according to Lyse.
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News Study: State Budget 2021
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