Unless it wants gas prices to shoot up, and Australia’s monopoly pipeline operator to be controlled by a Hong Kong billionaire via the Cayman Islands who is not keen on paying tax, the government would be mad to give the green light to this $13 billion APA takeover.
Asian billionaire, Li Ka-shing, moved on Duet Group two years ago in a $7.4 billion play for even more of Australia’s energy assets. Via 51 per cent of Victoria power companies CitiPower and Powercor and South Australia’s ETSA Utilities, he already had his foot on a huge chunk of Australia’s energy distribution and his latest prey, APA, is already a monopoly pipeline operator on the East Coast.
This takeover bid should be dismissed as a joke. It ought to be strenuously opposed by ACCC and FIRB. Moreover the ATO commissioners must be shaking their heads in disbelief. CKI has a dismal record of paying tax in this country and elsewhere and when foreign predators take an asset offshore, it mostly results in plunging income tax contributions. Witness Australia’s biggest brewer:
Already, governments and regulators have shockingly failed every consumer and every company (except gas and electricity companies) in Australia thanks nosebleed energy prices.
APA is one of this country’s most fabulously profitable enterprises. It spits out $2 billion a year in revenue and almost half of that in earnings before interest and tax. Thanks to historical regulatory failure, it pays little tax as it was structured as a stapled security so shields its income via a trust.
Nonetheless, the tax impact would be enormous. It is incumbent on the members of a trust to pay tax at their marginal rates, in this case, APA members domiciled in Australia. If this thing goes to the Cayman Islands (the tax rate in Hong Kong was apparently too high for Li Ka-Shing so he moved corporate domicile), Australia’s tax base would be eroded once again.
To give an idea of profitability, last year APA’s revenue was $1.9 billion – being a monopoly infrastructure provider it can use a lot of debt – EBITDA was $1.5 billion and the distribution payout was 50 per cent.
If you need to know more, read this: