38 Friday March 18 2022 | the times
Business
Cash bonanza at Harbour
fuels calls for windfall tax
The biggest oil and gas producer in
the UK North Sea has said it should
generate up to $1.7 billion in spare
cash this year if prices stay high,
prompting renewed calls for a wind-
fall tax.
Harbour Energy said that the
potential cash bonanza, even after
paying taxes and a $200 million
dividend, should allow it to make
acquisitions and return even more
money to shareholders.
Ed Miliband, Labour’s shadow
climate change secretary, said it was
“more evidence of soaring profits in
the oil and gas sector as families are
hit by massive price rises” and “more
evidence of why we need a windfall
tax, the right and fair choice”.
Harbour Energy issued the out-
look as it reported net profits of
$101 million in 2021, rebounding from
a $778 million loss in 2020 when
crude prices crashed as the Covid
pandemic hit.
The FTSE 250 company has a
much lower profile than oil majors
such as BP and Shell but now out-ranks them in terms of UK oil and gas
production after acquisitions in
recent years.
Harbour generated free cash flow
of $678 million last year and said that
could rise to between $1.5 billion and
$1.7 billion this year, after tax and the
payment of a $200 million dividend,
if prices averaged $100 a barrel for oil
and 200p per therm for gas.
Prices so far this year have aver-
aged $97 a barrel for oil and 227p a
therm for gas, with Russia’s invasion
of Ukraine and resulting sanctions
raising fears of shortages.
Households are facing the biggest
energy bill rise on record from next
month because of soaring gas prices
last year and analysts expect bills to
rise even further later this year.
Harbour Energy, which had net
debt of $2.3 billion at the end of 2021,
said it had “the potential to be debt
free in 2023” and the expected free
cash flow would give it “significant
optionality... including for meaning-
ful value accretive transactions and
additional shareholder returns”.
Shares in the company closed up
17¼p, or 4.3 per cent, at 413½p.Harbour Energy was founded in
2014, backed by the private equity
group EIG.
In 2017 it backed the privately-
owned minnow Chrysaor to buy
most of Shell’s North Sea fields and in
2019 to acquire ConocoPhillips’s UK
business. Last year Chrysaor com-
pleted a reverse takeover of the listed
Premier Oil and rebranded the whole
company as Harbour Energy.
Its oil and gas output was the equiv-
alent of 175,000 barrels of oil per day
in 2021, overwhelmingly from the
UK, and is expected to average more
than 200,000 barrels a day this year.
The consultancy Wood Mackenzie
says that Harbour ranks as the
biggest UK North Sea producer with
about a 13 per cent share of output
this year.
Linda Cook, Harbour’s chief exec-
utive, has previously pushed back on
the idea of a windfall tax. She said last
year: “Part of the problem is
insufficient supply and so having an
environment that is supportive for
producers such as ourselves to con-
tinue reinvesting feels to me to be
part of the solution.”Emily Gosden Energy EditorMPs have called on the government
to explain why it has barred adminis-
trators to Bulb Energy from hedging
its gas and electricity purchases,
leaving taxpayers exposed to rising
costs as prices soar.
Britain’s seventh-biggest house-
hold energy supplier collapsed in
November with 1.6 million customers
and was placed into a government-
backed special administration
regime. The administrators, from
Teneo, were provided with an initial
£1.7 billion taxpayer loan.
The Times revealed in December
that the government had opted forHedging ban ‘may cost taxpayers £1bn’
Bulb’s administrators to buy the vast
majority of its wholesale energy
needs at short notice, as little as a day
in advance, because of a Treasury
policy against hedging. A spokesman
for the business department said the
special administrator was “obligated
to keep costs of the administration
process as low as possible”. He did not
comment on the hedging ban.
That decision has left Bulb exposed
to wild fluctuations in energy prices.
Industry sources say that Bulb is still
buying its energy at most a couple of
weeks in advance and have estimated
that the bill to taxpayers could rise by
£1 billion or more. In a letter to Kwasi
Kwarteng, the business secretary,Darren Jones, chairman of the busi-
ness, energy industrial strategy select
committee, wrote: “We understand
that ministers refused to allow the ad-
ministrators of Bulb to re-hedge prior
to the Russian invasion of Ukraine.
This has resulted in a much larger
cost exposure to the taxpayer.”
Bulb was the biggest of more than
two dozen energy suppliers that
collapsed last year as prices soared, in
part because it had insufficient credit
lines to hedge its energy purchases
over the longer term, administrators
have said. Sources say that it was only
purchasing energy a few months in
advance. A spokesman for Teneo de-
clined to comment.Emily GosdenT
he Renewables
Infrastructure
Group (Trig)
has acquired a
7.8 per cent
stake in the Hornsea
One wind farm off the
Yorkshire coast.
Trig said it had bought
the stake from Global
Infrastructure Partners
for an undisclosed sum.
On completion of the
deal, expected at the end
of the first half, Hornsea
One will be about 8 per
cent of Trig’s portfolio
by value, it said.
Hornsea One is the
largest operational
offshore wind farm in
the world and has been
running since 2020.
With capacity of about
1.2 gigawatts it generates
enough electricity for a
million homes. Hornsea
One was developed and
built by Orsted, theDanish power group,
using Siemens turbines.
Orsted sold a 50 per
cent stake in the project
to Global Infrastructure
Partners, the fund
manager, in 2018 for
£4.5 billion. It still runs
and maintains the farm.
Helen Mahy, the
chairwoman of Trig,
said the group was “only
too conscious” of the
tough times in Europe.
“It remains important
to continue to finance
renewables projects and
play our part not only in
the decarbonisation of
the energy sector, but
also contributing to
security of power supply
for the UK and the EU,”
she said.
“In these challenging
times, we are grateful
for the continuing
support of our
shareholders.”Renewables investor
buys wind farm stake
Hornsea One, off
the Yorkshire coast,
is the world’s
largest operational
offshore wind farmALAMY