Tax will reduce IPPs’ cash reserves


  • Business
  • Saturday, 12 Jul 2008

PETALING JAYA: The 30% windfall tax on independent power producers (IPPs), effective July 1, will result in lower cash reserves following the obligations of servicing senior debt and meeting the requirements of reserve accounts.

RAM Rating Services Bhd managing director and chief executive officer Wong Fook Wah said in a statement yesterday that the tax would have an impact on the junior bonds and those issued by the IPPs' shareholders, which were dependent on equity distributions from their respective project companies.

He said the effect of the tax would vary depending on the specific project company's profitability and the seniority of the rated debt issues.

“Under the circumstances, the ratings of these subordinated debt issues will be among the first to be negatively affected,” Wong said.

Related Stories:Windfall tax seen hitting fund raising Govt needs a re-look at windfall levy for IPPs

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