Looney’s melody about windfalls is not convincing | Nils Pratley

BP’s best bet to avoid a windfall might be to hide Bernard Looney on an offshore oil rig for a few months. Every time the chief executive ventures into the tax and investment field, he stirs up the politics surrounding the windfall debate.

Looney’s memorable remark last November – a remark he must regret – was the boast that BP is ‘an ATM for this kind of price’. Oil prices were $85 a barrel at the time, so the additional $105 profits would certainly lead to further investigation as they stem, in large part, from Russia’s war in Ukraine.

Then there was the admission a few weeks ago – repeated at Thursday’s shareholders’ meeting – that a windfall tax would not change BP’s plan to invest £18bn in the UK for the rest of the decade. That line invited outsiders to wonder if BP could do more than £2 billion a year on average. The UK’s need to invest in energy security has suddenly become more urgent, so it’s fair to ask if BP has also increased its ambition. If any element of the £18bn is a boost to previous plans, the company has not identified it.

In that context, another comment from Looney on Thursday read almost like an invitation to the government to have an arm wrestle. “By definition, windfall taxes are unpredictable and can put investments in homegrown energy to the test,” he said. Does this mean BP could invest more, but not if the government takes the windfall route? If that’s the field, Rishi Sunak, a chancellor who says he’s in a “pragmatic” mode, is almost obliged to emerge from this minor showdown with a win of any description.

The funny thing about the whole debate, as has been pointed out here more than once, is that we are not talking about huge sums. In BP’s case, an increase from 40% to 50% in the tax rate on North Sea profits this year would mean a payment of £250m on top of the projected £1bn at the normal rate. For a group that is currently spending £1 billion plus a quarter on share buybacks, a quarter of a billion is not a game changer.

Yes, you can call any one-time charge “unpredictable”, but come on, it’s not that extra taxes in exceptionally favorable trading conditions are unheard of. Other European countries are already doing it. As long as they only happen once a decade, the UK’s recent average, the local tax regime will still look stable. Looney’s melody is not convincing.

BT finally focuses on the main event

Amid falling stock markets and untethered “stable” currencies, BT offered a haven in a storm on Thursday: shares rose a bit on annual results and the final dividend was restored to previously advertised levels.

The group has even finally gotten a shot at BT Sport, a venture that, depending on your point of view, was either a vanity project on the part of its previous chief executive, Gavin Patterson, or a necessary Sky-jamming device to mitigate the loss of broadband customers. the mid-2010s.

Or rather, BT will be half out of the sport. Through the creation of a joint venture with Warner Bros Discovery, BT will receive just £93 million upfront. The real money – up to £540 million – will have to come through earn-out fees over four years as milestones are reached. In a company that relied heavily on the renewal of sports rights, especially football rights, the structure was probably inevitable. Equally important, perhaps, was the signing of an extension of a reciprocal supply of channels with Sky; it gives a little security.

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BT’s main game these days is fast fiber, where today’s boss Philip Jansen says Openreach is building “like fury”. In hard numbers, this means that 7.2 million properties have been passed, another 3 million this year and 4 million a year thereafter. Goldman Sachs analysts calculate the pace is three or four times that of competitors, so the proposition that BT should eventually come out of its £15 billion spending program with two-thirds of the high-speed fiber market remains intact.

A critical moving part in the mix is ​​how many customers are actually buying the souped-up broadband connections. The take-up rate is currently 25%, which BT “compares well” with the European rollout at its current early stage. The ratio will be one to watch over the coming quarters, but right now BT looks set to become the telecom equivalent of a slightly more exciting National Grid. There’s no shame in that: it’s pretty much what BT should have always been. The footie was always an afterthought.

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