I mentioned that claiming tax losses requires passing...

I mentioned that claiming tax losses requires passing eligibility tests (COT and SBT). I did not delve into the probability of EGN passing these tests, although I think that EGN will be 100% successful in respect to this matter. Even if EGN believes it will pass the tests, the tests give EGN the excuse to keep the potential tax-loss offsets as a card up its sleeve, and recognise offsets when EGN successfully claims them.

The COT may, anyhow, not be a problem for a listed company, because changes in share ownership are routine for listed companies. I for one have not sold my modest shareholding, and Elph Pty Ltd had a significant holding before it became the controlling shareholder. Neither should the SBT be a problem, because EGN has substantially stuck to operating the same businesses that has existed for years. The arrival of Elph as a substantial shareholder was a genuine business rescue, not a tax-minimisation play, nor an attempt at backdoor listing – the two activities that the COT and SBT duo are in place to prevent, but without stifling genuine company rescue efforts.

There is a difference in the treatment of tax credits for operating losses and capital losses, but I simply assumed that losses were operating losses, and did not bother to find out what rules apply to capital losses.

Seeing that my typing finger is striving for employment, I'll go off on a tangent on EGN's history, as it relates to the Greentrains fiasco. It might interest the curious who did not live through it.

Egenco is the renamed Coote Industries Limited (CXG). The CXG-Greentrains contract caused CTX much woe, and brought Elph Pty Limited in as the controlling shareholder. I am, in part, relying on memory, but I think the gist of the history is as follows.

In FY2008, a Coote family-owned Orange Grove Brickworks (Michael Coote was a director of its controlling entity) was involved in a deal to purchase refurbished rolling stock from the Gemco unit of CTX for $82.7m, and lease the rollingstock back to CTX. Greentrains Pty Ltd, with no funds to speak of, was registered on 26 June 2008 to purchase the rollingstock. CTX recognised the sale and the profit in FY2008, and recorded the debt as a current asset. The Annual Report looked good, and the SP rose well above $1.

In FY2009 it emerged that Greentrains could not pay the debt. The net effect was that CTX took ownership of Greentrains (81% to be exact), and Elph Pty Limited injected $8m into CTX sometime prior to 26 April 2009. Elph later provided Greentrains with a loan facility, and by acquiring more shares it gained effective control of CTX. Greentrains was discontinued in FY2016 The agreement to sell the majority of Greentrains's locomotive fleet to Holdco Holdings Pty Ltd was signed on 28 April 2016.

If you can find ASX announcements made in FY2008 and later, you can read how matters unfolded.
At https://www.railpage.com.au/f-t11345993.htm you will find less sanitised comment. The gist of what is in https://en.wikipedia.org/wiki/Greentrains is correct, except for the sentence, “It was formed in June 2008 as a subsidiary of Coote Industrial”. Greentrains was not a subsidiary initially – it became an 81% subsidiary later as part of a debt-offset deal. I suspect that the original contrivance of the 2008 deal was based on a funding expectation that did not materialise. As Robert Burns wrote in the language of the Scots:

The best-laid schemes o' mice an 'men
Gang aft agley.