The power industry is hardly a hot bed of investor demand at the moment; rather it’s still a source of considerable consumer suspicion, judging from the very nervous reaction from the market to a news release from Babcock and Brown Power (BBP) yesterday.
It lit a cracker under the share price and when the smoke had cleared, they had plunged by around 23% and a bit more at one stage or 44c to $1.435.The ended at $1.49, down 38.5 cents or 20.5%.
The released was titled " BBP DEBT REFINANCING UPDATE" which sounds innocuous enough, but in terms of what we have seen in the past six months since Centro hit the wall, debt is a dirty word and refinancing isn’t all that far behind.
They are a big red sell signal for a lot of investors, and that’s what they did yesterday. The close was the all time low for the stock, which has fallen more than 50% from the 52 week high of $3.80.
Not helping is the reality that the company, which substantial, also has a lot of debt. In fact market cap was around $1.1 billion, and is dwarfed by the debt, much of which is going to cost more in the refinancing.
So it’s no wonder shareholders bailed out of the stock when the statement suggested that BBP would consider debt, asset sales, asset joint ventures or various forms of equity to fund capital commitments.
The listed energy infrastructure fund, managed by Babcock & Brown Ltd, said it was on track to finalise its debt refinancing.
"In addition to the $3.1 billion of corporate debt facilities, BBP’s current capital commitments are approximately $3.4 billion," the fund said.
These included additional capital expenditure associated with a number of power station assets including Tamar in Tasmania, the Newman expansion in Western Australia and purchase of a minority interest in Braemar in Queensland and Uranquinty in NSW.
"In this context, BBP is considering its overall capital structure and appropriate gearing level," it said.
"There are a number of options available to fund the additional capital commitments including debt, assets sales, asset joint ventures or various forms of equity."
BBP said it expected to make decisions around the time of the close of the core refinancing, expected early next month.
But it was forced to ‘clarify’ that announcement late Thursday by pointing that the current capital commitments of $3.4 billion INCLUDED (My emphasis) $3.1 billion of corporate debt facilities: that might help the share price because some investors were left thinking they were two separate amounts after the first statement.
"As stated previously, we have been very pleased with the strong support we have received from a wide range of banks, which in the current difficult credit environment is a strong endorsement of the quality of the BBP assets," BBP chief executive Paul Simshauser said.
"We are looking forward to the time when the focus will move away from financing requirements to the strong industry dynamics in which BBP’s assets operate and the related long-term growth prospects for BBP securityholders."
The company says that "it has interests in 14 operating power stations representing over 4,000MW of installed generation capacity and five power stations under construction. BBP has interests in a number of other associated power assets including the WA retail assets Alinta. Babcock & Brown has been developing, operating and acquiring the generation portfolio over a period of 10 years."
But that $3.1 billion in corporate debt facilities will remain in place: it may be altered a bit by asset sales (hard in this climate) or the term of the debt and the amounts involved in each tranche could be altered.
And it’s going to be a sleepy sort of year for another power and gas group, SP AusNet which isn’t expecting much improvement in the 2009 year on 2008, which saw earnings slide 12%. That didn’t worry the market all that much: the shares eased half a cent to $1.245 where they are on the low side of a midpoint between the 52 week low of $1.10 and a high of $1.55.
SP AusNet says its fiscal 2009 annual profit is expected to be in line with the current year after it posted a 12% decline in fiscal 2008 profit.
SP AusNet is Victoria’s largest energy utility but that market position didn’t help as it revealed an 11.7% drop in annual net profit to $157.46 million, while net earnings from continuing operations rose just 0.5% to $151.0 million.
SP AusNet said the 2009 net profit is expected to be in line with the current year due to increased interest charges.
The firm also reaffirmed its guidance of growing revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) at around 8% in the coming year, and also reaffirmed its forecast for annual distribution growth of 2.5%.
It declared a final distribution of 5.788c, bringing the total distribution for the year to 11.564c, in line with the previous year.
The company said it would continue to invest in its networks, with an estimated $2.7 billion of capital expenditure over the next five years.
The money is to be spent on upgrading capacity to meet rising customer demand and improving network performance, with a particular emphasis on improving reliability on the electricity distribution network, SP AusNet said.
The company said the year’s highlights were:
Strong underlying business delivered results in line with guidance; 3.5% increase in revenues over previous corresponding period (A$1,019.5m), due to price, volume and customer growth; connected approximately 23,500 new customers to the distributio
