This was published 14 years ago
Talks go on as BBP tries to juggle its way out of a tight corner
By Jamie Freed
IT HAS been nearly four weeks since Babcock & Brown Power learnt of an arbitration decision on a major gas contract in Western Australia, and there has been little in the way of a public update since.
But behind the scenes, BBP has been negotiating with the North-West Shelf (NWS) joint venture about the gas contract and its syndicate of lenders owed $2.6 billion.
BBP, advised by UBS, has also been conducting a major overhaul on its business plan because the arbitration decision was not only negative, but outside the boundaries management had forecast in its business plan.
There is talk that not only will BBP's Alinta business have to pay higher prices for its gas from the North-West Shelf (said to be more than double current rates), but it will have to make a year's worth of back payments at the higher price.
So in addition to convincing the lenders to extend the maturity on its loans, it is asking for more money on top of that. There are suggestions the back payment owed is about $200 million, with hopes that some will be covered by an additional debt facility and the rest through negotiations with the NWS.
BBP would obviously prefer to avoid administration, but it also understands that is possible at this point. One saving grace could be the complexity of the business and the low fire-sale values the banks would probably recover in receivership. That means the banks may choose to keep it afloat.
BBP's management team is so focused on negotiations with the NWS and the banks and revamping its business plan that no extensive due diligence materials have been prepared.
That means any recapitalisation, such as the one recently done by Babcock and Brown Infrastructure (now Prime Infrastructure), appears out of the question in the near term.
Asset sales remain a possibility, but none are expected imminently.
BBP is taking things day by day at this point, but it will need to provide a more extensive update at its annual meeting on December 18, where among other things, it plans to change its name to Alinta Energy.
Regulator gives a hint
IN ITS decision to block Caltex Australia's proposed $300 million purchase of ExxonMobil's local petrol stations, the competition regulator made some not-so-subtle hints that it would prefer independent players to buy the assets.
In fact, groups like Gull Petroleum of Western Australia had approached ExxonMobil about buying some of the 300 stations for sale before the oil giant made the decision to go with Caltex. But Caltex's willingness to buy all of the stations in one hit for a decent price made it the most attractive buyer.
Now that ExxonMobil may have to go back to the drawing board, it can be heartened that there is still likely to be plenty of interest from independent players.
Gull told Insider that while buying the entire lot would present a ''significant challenge'', it was certainly interested in buying at least some of the stations to expand its presence beyond WA and New Zealand's North Island.
Other large independent chains with the potential to lodge bids include United Petroleum, Liberty Oil and Freedom Fuels. It is believed that at least some of them had expressed interest in the sales process earlier this year. However, there is an expectation in the market that ExxonMobil will have to settle for a lower price if it sells the stations piece by piece or even to a consortium involving independents.