Energy and Utilities Industry

How tax can deliver value

Your tax department can be — the unsung hero of your balance sheet.

In a capital-saturated industry such as power and utilities, where the scale of investment, regulation, taxation and risk is massive and complex, a strategic, forward-looking tax department — one that delivers value, efficiency and synergies across your entire operation — can make all the difference between growth and stagnation.

That’s because your tax department touches nearly every part of your organization. To get there, you first have to sharpen every part of the function. That means improving your processes, technology and talent to meet, or exceed, the expectations of senior management, regulators, end users and other stakeholders.

Whether you need to enhance your cash flow, maximize the value of a transaction, master the emerging regulatory landscape, optimize financial reporting, sharpen your controls, attract top talent, transform your tax processes, or simply strengthen your business performance, we’re here to help — with sophisticated, up-to-the-minute, industry-focused advice.

Enhancing cash flow

Do you know all the federal tax depreciation rules and state and local credits and incentives? Do you know how to keep a lid on property tax costs during construction? Too often, when utilities embark on a large-scale capital project, they leave money on the table in the form of would-be tax savings. Savings that could increase their return on investment and reduce the time it takes to recoup the costs of capital projects.

Many companies are operating in a cash-squeezed environment. They need to constantly assess and reassess their working capital needs, treasury function, and inventory management systems to find cash opportunities.

With the right tax planning strategies in place, however, you could enhance your cash flow by taking advantage of opportunities to defer revenue recognition and/or accelerate deductions — without impacting earnings. You could also realize enhanced cash flow through refund opportunities in income tax and sales/use tax, or by proactively seeking out available credits and incentives for hiring, relocation, and business expansion.

Reducing costs

In a challenging economic climate, many companies are struggling with low demand, shrinking margins, rapidly changing business models, and nonproductive acquisition strategies. While you may be — quite justifiably — anxious to reduce costs, you can also look beyond short-term strategies and focus on strategic cost management to achieve sustainable change.

When a company pursues a significant cost-containment initiative — whether procurement and sourcing planning or addressing another area of the organization — tax planning and structuring opportunities arise. 

Ensuring compliance with evolving regulations and minimize exposure

The regulatory landscape for utilities continues to be unpredictable. The legislative environment and tax uncertainty can make it challenging for you to plan beyond the short term. This uncertainty can impact your ability to run your tax practice. Our Washington National Tax Services (WNTS) analyzes U.S. and global tax developments and provides insights on emerging tax regulations, issues, and trends to help you manage your tax affairs, including mitigating risk and identifying strategic planning opportunities. We can help you stay up-to-date on the latest federal tax issues, tax policy matters, IRS processes and procedures, issues arising in IRS Controversies and tax aspects of transactions – and navigate the uncertainties of a constantly changing tax landscape. 

Navigating Tax Aspects of Regulatory Filings

With regulated companies, cash tax planning is rarely the end of the story. Many regulated utilities need to determine the regulatory impact of various tax planning strategies on their revenue requirement.

We have experience with numerous and varied regulatory jurisdictions and can assist you in maximizing your tax positions from a cash tax and regulatory tax perspective. We understand that a “one-size-fits-all” approach does not work with such a varied regulatory matrix. Whether it's deferred tax, cash tax modeling or rate case testimony, the PwC Power & Utilities tax team has the experience and breadth of knowledge to assist your organization.

Recovering business performance

Business trouble can strike hard and fast, causing both financial and personal distress. Companies may suffer from missed market expectations, reduced operating profit, or severe cash problems. They may also exhibit symptoms of distress well before a crisis erupts.

Whether troubles are triggered internally or by marketplace dynamics, early detection and swift, decisive action are the keys to restoring performance and value. So, it’s critical that you quickly identify key indicators of distress, take action, and preserve value for all stakeholders. Wise business leaders prepare for the unexpected, and it’s never too early to prepare. 

The PwC audit experience

When it comes to getting a quality audit, industry insight and knowledge are critical. Knowing that your audit team "gets" your industry-specific issues — and how they impact your company's success — is invaluable.

We touch Power & Utility clients in every region of the world, giving us the depth of resources and range of experience needed to clearly understand the special dynamics (and volatility) of the utilities marketplace. Our experience in this industry allows us to deliver a broad range of industry relevant insights and advice - inside and outside the audit.

Having the right independent auditors can be an asset. They help protect capital markets — and your brand — by attesting to the accuracy of your financial statements. Additionally, the right auditor helps you understand and better manage your critical risks by sharing accounting and business best practices. Finally, by offering informed views, a quality auditor can help you anticipate the financial and reporting impacts of your business decisions.

To a publicly traded company, the financial statement audit offers credibility. To its shareholders, it offers comfort. And to all stakeholders — including the market at large — the external audit offers confidence.

At PwC, we believe that a high-quality audit is defined by how well we deliver on all aspects of our services, including tailoring it to your needs.