KUALA LUMPUR: Tenaga Nasional Bhd's (TNB) earnings per share could be lowered by six sen, should the group be required to pay in full the Inland Revenue Board's (IRB) assessment on the group's jointly owned unit with Malakoff Corp Bhd, Public Investment Bank Bhd (PublicInvest) said.
On Friday, TNB and Malakoff announced that a unit of theirs, Kapar Energy Ventures Sdn Bhd (KEV), had received notices of assessment from the IRB amounting to RM596 million.
KEV is a 60 per cent-owned subsidiary of TNB.
"We understand that the IRB took the position that the redeemable unsecured loan stock (RULS) granted to KEV by TNB and Malakoff to finance the acquisition and operation of Stesen Janaelektrik Sultan Salahuddin Abdul Aziz in Kapar should be treated as an equity transaction.
"Thus, capital in nature and as such the interest expenses incurred by KEV in relation to the RULS are not allowed by the IRB as expenses deductible under Section 33(1)(a) of the Income Tax Act 1967."
PublicInvest said TNB believed that KEV had a good basis to contend that the assessments were incorrectly raised by the IRB.
"We understand that based on the legal advice obtained from its tax solicitors, TNB is of the view that it has a good basis in law to contend that the assessments were incorrectly raised by the IRB," it said in a note today.
PublicInvest said separately, it had adjusted TNB's financial year 2022 net profit downwards by 11 per cent to factor in higher tax from the recently-announced Cukai Makmur.
PublicInvest has maintained its "Outperform" call on TNB with an unchanged target price of RM12.42.