BBP - Babcock and Brown Power

BBP seems to be well oversold atm. For a company taking out some of Alinta's goodies, with prospects of higher energy prices etc, what feedback do we have on Babcock & Brown Power.

Their price plummeted since they announced zero profit for the year, but this does not seem to have any impact on next years earnings capacity.

Stupid me bought at $3.45 and sold at $2.52 as I had to preserve some non-market cash. Good recovery since but marred by yesterday's poor effort.

Comment as you please.

Slow and steady wins the race, power consumption set to increase 10% pa, Tassie now in the picture. Good dividend yield. Bought on the dip and gone up a cent or 2 nearly every day.

Cheers
Roland

BBP actually look like they could have reversed the downtrend on the charts. Has been in a solid downtrend since June, false breakdown in correction to enter back into downtrend.

This last week of trade saw the MACD cross and the SMA cross about a week trade before that. Trade range had been tightening and formed a descending pennant which broke down before breaking up (wierd).

Anyway I would like the volume to be a bit larger but it still IMO has crossed the downtrend on both the downtrend line, SMA and MACD all crossing within the last week. Perhaps a change in sentiment, BBP has after all been sold down well off its highs.

Stock has strong support at 2.83 by the chart. I would put short term downside risk at 2.80 odd.

The upside potential BBP needs to break 3.00 then move up through 3.30 where it trended inside 3.30 - 3.50 for a period.

BBP already up over 5% in early trade on large volume. Technically it looked like a trend reversal, a lot of large positions seem to be been bought up

Down sharply the last few days, only news seems to have been the completion of the AlintaAGL acquisition - but I can't understand why that would trigger two down days?

I don't have a clue either. I've run out of dollars following it down

One could guess at the implications of "dirty" power with their coal fired power plants, and the "green" movemment?

Yeah I got a 10% plus swing out of these guys and took an exit around 3.20.

Chart wise is not looking good.

I wonder if people misread the Change of Substantial Holdings notice from BNB, where they specifically state they haven't sold any holdings, but it's just been diluted due to the AlintaAGL acquisition and issue of shares? It's mentioned on the first/cover page in bold, but if you just read the notice it would seem like BNB have sold up bigtime

roland - could be some negative news about their coal fired stations, but they also have gas fired stations, which are considered cleaner? Flow on from the Kyoto sign-up maybe? Hard to say. Also hard to mask out the general downward sentiment of the market, even BBW is down as well.

Perhaps another thought is BBP might try and play for the Alinta assets that SPN failed to acquire, and the market doesn't like that idea?

Nice news release - about time I had something to smile about, and a 0.13 dividend. .....what else is new? - good news and the SP still falls

roland said:

Nice news release - about time I had something to smile about, and a 0.13 dividend. .....what else is new? - good news and the SP still falls

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Yes a little bit of good news I guess. Goes part of the way to easing the sour taste in my mouth with losses, but hey.

Quite a lot of restating of their financial position in the cover letter, I wonder if they think the market has doubts about their ability to access debt, hence the SP slide. Similarly, they also clarified the environmental impacts of their plants as well - again maybe they think the market is a bit spooked.

I already have a substantial portion of my investment with BBP, else I'd be thinking about topping up at these levels.

First post

So i've been watching BBP for awhile, and recently, phew - the trend is down man!

What's happening with BBP? People cashing out, stockmarket jitters causing sell offs? I'm tempted to put a buy in under $2.35 but i'm just not sure when the sliding will stop.

No idea what's driven it. Can't be financial related - they have stated their position is good. They do have a number of "nasty coal-fired" stations, but also a lot of gas stations (and there are plenty of CSM explorers to find gas for them!).

With electricity demand soaring and these guys owning so many base load or profitable peaking stations, I can't see much of a downsde to their business. Base load is a nice revenue stream if you own a cheap generator - you always run as the station is part of the "always needed" energy, and peaking stations are a nice stream of money when the electricity price spikes.

As for other energy sources - Nuclear has a ~20yr lead time for first substantial units, solar and wind are not reliable enough to be "base load" class (and you would need anywhere from 500-1000 wind generators to replace 1 big coal fired station anyway) ...

The CEO is a very very cluey guy, with a background in electricity markets, so I'm sure he knows his stuff when it comes to buying and running stations profitably.

So none of that explains the price ...

Not sure if this helps, I did speak to a few traders about BBP and similarly, BBI's. They all have one thing to say, 'high debt' (substantiated or not, you decide). I've been a holder of BBP since they floated, and will continue to. Their revenue although high, did not translate to positive NPAT last financial year, and so did shock buyers on the downside after reporting. Afterwards, the subprime and credit tightening and then AGL Energy's slump put this down to discounted levels has been dumped into a technical downtrend since - the biggest concern is still fear and very high gearing that concerns traders.

To add to the complexity, interest rates are on the up, so the yield suddenly doesnt seem as lushes as before however, I suspect when rates fall again, this entire high yield sector will again be in focus.

Like I said, I'm a holder and like it, so I'll continue to be one personally - don't shoot the messenger.

Thanks for your comments - just fyi I'm an Electrical Engineer (studying, but working full time) in the power distribution side of things (important note, i've got absolutely nothing to do with BBP as i'm in NSW).

DionM, you summed things up nicely. I'm familiar with it all... and further to your infor, NSW is being sold off, BBP are a potential buyer. Energy demands are only increasing. Wind as you say, offers little guaranteed power. Clean coal etc are distant realities. I'm looking to buy, but i'll be watching their downward spiral.

prana, interesting about the debt side of things. thanks.

(Again a note: BBP have nothing to do with me and I've got no insider info to offer.)

Tristo said:

Thanks for your comments - just fyi I'm an Electrical Engineer (studying, but working full time) in the power distribution side of things (important note, i've got absolutely nothing to do with BBP as i'm in NSW).

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While we're disclosing things, I'm also a elect. eng, working in Qld for a transmission company. But I'm quite removed from anything to do with the generators, except watch how many MW they pump out (and how many MVAr they suck back ... but that's another story!).

Prana - interesting about debt. I must admit to not looking into it as much as I probably should. I also hold BBI, too.

lol funny that, I'm also elec eng some 10 years ago, in power and high voltage. No wonder we are attracted to both BBI & BBP. :

Personally I think BBP is an absolute bargain at this price. I have been following down since $3.00. My lowest entry is $2.21, so you can tell that after todays rise I am pretty happy right now.

Here is a exert from tonights Commsec's Research Insight - just incase you don' have it already:

BBP2: BUY / OUT PERFORM Valuation: $3.69

The credit squeeze-led correction has had a disproportionate impact on the Utilities and
Toll Road sectors given these sectors have many highly geared (and financially
engineered) structures.
No utility or toll road out performed the ASX200 accumulation index in 2007. In these
market conditions, the focus on these companies can be expected but the reaction
appears to have been exaggerated given:
most of the companies have very little exposure to rising debt costs due to their
financing structures and hedging profiles, and
utilities with regulated assets are typically able to pass through these higher financing
costs (at least for the most part).
The recent pull back has created opportunities in the sectors with many stocks trading
significantly below their valuations including: BBP, BBI, SPN, TCL and MIG.
ORG and SKI are expected to continue to perform in times of volatility. ORG has sound
growth options whereas SKI could be considered relatively light on for financially
engineering (albeit with a near term refinance scheduled).
Among the major issues to impact the Utilities and Toll Road sectors, along with the
stocks to watch are the following:
Credit market turbulence. The stocks to watch in this respect are: BBP, SPN and SKI
with near term refinances scheduled.
NSW privatisation. The stocks to watch in this respect are: ORG, AGL and BBP.
Emissions trading, MRET and the Garnaut report. The stocks to watch in this respect
are: ORG, AGL, and BBP on emissions trading and MRET developments. HDF and
APA on gas transportation arrangements. SKI and SPN on interval meter roll out.
Wholesale energy prices, customer churn and impact on retail margins. The stocks to
watch in this respect are: ORG, AGK, and BBP – 1H08 results and also trends in
churn prices during CY08.
Regulatory trends and the move to new national regulators. The stocks to watch in
this respect are: ENV, SPN, DUE - ESC Final Decision (end of Feb 08). APA, ENV,
SPN, SKI, DUE – AER WACC Review (later part of CY08). AGL, ORG – Removal of
retail price caps. DUE, ENV – Structural change in regulated utilities. SKI, SPN –
Interval metering developments.
And finally in the context of Toll Roads, the Eastlink opening and potential
acquisitions.
Consumer staples


You will notice that BBP is mentioned many times. Commsec, Aegis and the Aegis Consensus are all very strong on BBP. Additionally they are in the top 10 dividend yielders.

So, I'm there "until death do us part" - well sort of.

Just my opinion - no advice to be taken from this post.


Oh, I am into BBW as well - all for similar reasons ... and Zinifex because I am stupid

roland said:

So, I'm there "until death do us part" - well sort of.

Just my opinion - no advice to be taken from this post.


Oh, I am into BBW as well - all for similar reasons ... and Zinifex because I am stupid

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You must be copying my portfolio ... I have BBP, BBW and ZFX too. Plus BBI ...

They mention that BBP has near term financing pending, but on 18/12 BBP released a statement saying they have no requirement to refinance until FY2009, and that 2009 refininacing is limited to Alinta asset debt.

They are highly geared (68%) and 90% hedged, but then again, they are part of the BNB machine so you would think they would not have issues getting finance. Power generation is also a bit of a cash cow, it's not something that people can do without (not like luxury cars from BMW or nice shirts from DJs).

DionM said:

You must be copying my portfolio ... I have BBP, BBW and ZFX too. Plus BBI ...

They mention that BBP has near term financing pending, but on 18/12 BBP released a statement saying they have no requirement to refinance until FY2009, and that 2009 refininacing is limited to Alinta asset debt.

They are highly geared (68%) and 90% hedged, but then again, they are part of the BNB machine so you would think they would not have issues getting finance. Power generation is also a bit of a cash cow, it's not something that people can do without (not like luxury cars from BMW or nice shirts from DJs).

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Hey DionM, I have enough BBP and BBW to almost warrant a surname change to Babcock. In fact I dumped big brother BNB to grab some more of the siblings.

I sometimes feel that BBP and BBW are run more like mathematical equations rather than a pure business model - I suppose you read the latest presentation from BBW ... I couldn't make head nor tail really, something or other about different worksheets available to be able to plan investment routes .....blah, blah.

I wonder if BBP will be in contention for the privatisation of the power???? Maybe the ACCC won't like the fact that BBP has it's own gas, have their own generation equipment and want retail as well.....?

Interesting times yet to come, I don't think that BB(P,W,I) have even started their run yet

so far BBP is holding half of yesterday's gains and BBW have gone positive. You must get to a point when the SP is stupidly low and would defy logic for it to fall any further.