"The Trusts major asset is a loan receivable from its co-stapled relative Babcock & Brown Power Limited (BBPL or the Company) of $450,000,000. BBPT is therefore reliant on the continued solvency of BBPL to enable the full loan receivable balance to be realised. The Directors have performed an assessment of the amount that BBPT would recover from BBPL in the unlikely event of BBPL being required to realise its assets in a liquidation scenario.The range of likely outcomes will be more than sufficient to realise any outstanding obligations of BBPT both at 30 June 2009 and as forecast in the foreseeable future."
I read the outstanding obligations as the trust quite simply the money the trustees hold on behalf of the unitholders in BBPT(the outstanding debt-what other obligations does it have?).
There is a big difference between -lack of solvency (unable to pay bills)and not to expect full recovery of oustanding loan)No one - not even the banks have called Alinta insolvent.
-and- a liquidation scenario.
At worst we are in a partial liquidation scenario.we are not being forced into that either as we have 18mo or so to go before renegotiating our loans(the banks are the ones locked in).No we don't have to pay back $250m by ____ as some have stated,but if we don't our interest rate will rise by 1%.$3billion x 1% = $30 million/yr
Management is obviously still in full control of the company.
In such a case-"The range of likely outcomes will be more than sufficient to realise any outstanding obligations of BBPT both at 30 June 2009 and as forecast in the foreseeable future."
Hence orderly liquidation of some or all assets would most likely see the trust meet its obligations (to unit holders-after all what other obligations do they have?).
i.e. recovery of $450 million debt.
of course things have changed since then. BBI has been seen off with a gain of around $250 million nett to shareholders equity(30+ cents per share boost after announced writedowns).Gas price issues sorted.Power and gas price rises to compensate for the rise in wholesale gas price.(22% or so in 12 months)with more to come.Chasing retail customers hence turning $35-$45 per megawatt wholesale income into $120 ++++ when retailed for the cost of billing.And a lot of power generated by its own captive coal resources for which it will get higher prices if not now,very soon and a gas price rise making these stations worth a lot more as a result.A tolling agreement with the state energy retailer turning a loss making gas power station into a profitable one-no matter what arrangement.
an average of $40m surplus cashflow to pay down debt or invest(not declared profit)in the first six months-although probably not in the last 6 months to June(they didn't use that $30 million dollar bridging facility set up to cover cashflow issues on the gas settlement either).I noted they invested the last surplus $44 million towards a new turbine and borrowed the other $25m or so(that's where the last free cash went 6 mo.to DEC)Obviously the banks were happy with that investment as well as the investment in the Victorian power retailer they increased their holding in (another $7m or so).One must assume both of these are adding more cash to the pot to pay down debt and are very sound profitable business decisions.
Remember when the rumour mill started in June they squashed it quite quickly saying they reiterated their normalised EBITDA forecast of $288 million($288-$240 interest should leave around $40m - so that may leave them cashflow neutral for the last 6 months)Exceptional considering they were looking at $140m or so cost of settlement.
should be a fun ride.
cheers and keep reading and thinking all.the more you put it together-the more confident you become.
won't be long now till you see an annual report and that will settle a lot of speculation and i believe initiate a re-evaluation of Alinta in a further positive way.
AEJ Price at posting:
5.8¢ Sentiment: Buy Disclosure: Held
