Oil Report

Italian power co shows first "Robin Hood" tax hit

MILAN, July 25 (Reuters) - Italian power company Edison SpA showed the first impact of a “Robin Hood” tax on profits on Friday with a 60 percent drop in first-half net earnings, most of it from the levy.

Edison's EDN.MI 101 million euro ($158.6 million) hit under the new tax is the first sign of what a raft of Italian energy companies, banks and insurers could report as the earnings season gets under way. The tax accounted for about two-thirds of Edison's profit drop [ID:nL5897573].

The tax on energy companies’ profits from higher oil prices was approved by decree law by the conservative government last month, giving it immediate effect retroactive to the start of the year.

Finance Minister Giulio Tremonti dubbed it the “Robin Hood” tax because its proceeds are to be distributed to the needy.

In another sign of the measure's impact, Sorgenia, the energy unit of conglomerate CIR SpA CIRX.MI, said its first-half net income fell almost 35 percent despite rising revenue.

More than half the drop stemmed from the higher tax, it said in a statement [nBIA25afe].

Italy's employers association Confindustria has criticised the tax, but oil company Eni SpA ENI.MI and dominant power producer Enel SpA ENEI.MI have suggested the impact will be minimal. Both companies report results on Thursday.

The windfall tax law’s main feature is a hike in the corporate tax rate to 33 percent from 27.5 percent for energy and power companies.

There also is a tax on hydrocarbon production.

For banks and insurers, the law also tightens tax deductions on interest rate payments, with the level allowed reduced to 96 percent in 2008. The tax also changes the amount of reserves that have to be set aside for credit risk.

Corrado Passera, chief executive officer of bank Intesa SanPaolo SpA ISP.MI, has said the tax would be "a hit, not a big one". (Reporting by Ian Simpson; Editing by Erica Billingham)