BBP
Extending to an integrated energy business
Paul Simshauser, CEO
November 2007
BBP OVERVIEW
•
Portfolio
Listing
Distributions
Management
•
•
BBP’s portfolio ~5,000MW: 13 operating power stations; 5 power stations under
construction and interests in a number of associated businesses
BBP’s portfolio is well diversified geographically in Australia and New Zealand
The portfolio contains predominantly gas-fired generation with over 80% of fuel
sourced through gas
•
•
•
•
BBP was listed on the ASX in December 2006
694 million securities on issue
Current market capitalisation approximately A$2 billion(1)
Since listing, TSR achieved approximately 17%(1)
•
•
Distributions paid substantially from operating cash flow
Inaugural DPS 2007 half year 14 cps, 11% above IPO forecast
•
•
Forecast distribution yield 9.0%(1) in FY08
Expected to be fully tax deferred in FY08
•
•
Managed by Babcock & Brown an experienced developer and operator of power
generation assets
Experienced operating management team
•
Majority independent directors on Board
(1) Based on BBP closing price of $2.91 on 20/11/07
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A MARKET LEADING POWER GENERATION BUSINESS
IN AUSTRALIA
Portfolio highlights
3
•
Over 3,300MW of installed capacity
•
Nearly 1,700MW under construction
•
Largest private generator in
Australia
PORTFOLIO GROWTH
BBP Portfolio Capacity
6,000
5,088
5,000
MW
4,000
3,000
2,922
2,000
1,000
IPO (Dec 2006)
Current (Oct 2007)
Notes:
Includes direct and indirect equity interests
Includes assets under construction
• Acquisition of Alinta assets was a significant transaction for BBP
• Generation portfolio has increased by 70%
• AlintaAGL retail business extends BBP to an integrated energy business
• Post acquisition of Alinta assets, market capitalisation doubled
• BBP currently ranks just outside the top 100 in the S&P/ASX200
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DISTRIBUTION GROWTH
Distributions
30.0
Cents per Stapled Security
26.1
25.0
20.0
15.0
14.0
10.0
5.0
0.0
2007 (half year)
2008 guidance
Financial Year
Note:
As BBP listed in Dec 2006 only one distribution n was payable in the 2007 financial year.
• In April 2007, BBP announced a 12.5% upgrade to 2007F EBITDA
• Subsequent upgrade to 2007F distributions to 14 cps, an 11% increase on IPO
forecasts
• Directors forecast 2008F distributions of 26.1 cps, representing a 9% yield, fully tax
deferred
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NEAR TERM MARKET CAPACITY CONSTRAINTS
Electricity
Capacity
Shortfall
•
•
•
•
NEMMCO predicts significant capacity constraints
Existing capacity shortfall
Approximately 800 mw pa of generation demand to 2015 (1)
Over $12 billion in new generation investment is required over the next decade
~800MW pa
(1)
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Source: NEMMCO Statement of Opportunities
ELECTRICITY PRICE OUTLOOK
• Drought has led to sustained electricity price increases over last six months
• Market sentiment is that the tight supply/demand balance will take several years to
correct
• Water storage levels still remain critical
–
–
Tarong QLD - Wivenhoe dam at 16%
Snowy Hydro – Eucumbene dam at 19% (vs 60-70%)
• BBP expects FY08 QLD and SA spot prices to remain robust
Unit price
($/MWh)
95
90
85
80
75
70
65
60
55 51.65
50
45
40
35
30
25
20
98-99
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Queensland Forward Curve
QLD Spot
QLD fwd curve 1/10/07
$85.78
Risk Premium $28.12
52.14
55.32
44.11 41.33
$51.45
35.34
37.79
$44.14
28.96 28.12
28.18
99-00
00-01
01-02
02-03
03-04
04-05
05-06
06-07
07-08
YTD
Cal 08
Cal 09
Cal 10
FUEL SUPPLY
• Coal reserves are either owned or secure
–
–
Leigh Creek mine life testing has progressed well
with reserves beyond 2017 economically mineable
Redbank coal tailings fuel supply agreement has a
remaining life ~24 years
• Gas supply agreements are in place
–
–
–
–
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Oakey and Ecogen are pass-throughs
Braemar has 10-15 year gas supply agreements
NewGen Kwinana has a 15 year gas supply
agreement
Uranquinty has a 15 year gas supply agreement
ALINTA ACQUISITION
Significant increase in the size and diversification of BBP
• Further weighting of gas-fired capacity
• Leveraged to the rapidly expanding WA economy
Pool 22%
• Entry into retailing through AlintaAGL (gas, I&C)
• Substantial near-term growth opportunities
Energy portfolio management
• Only portfolio in the country with gas-fired power stations in all states of the NEM
• Commonality allows maximisation of margins in highest value regions
Integration is progressing well
• Dedicated Transition Team in place to ensure efficient and successful integration of
Alinta assets
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CAPITAL INITIATIVES
•
With 100% AlintaAGL, BBP gearing (net debt/net debt + equity) ~66%
•
Acquired Alinta debt and sections of BBP debt to be refinanced in CY08
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–
–
•
Recent uncertainty in global debt markets will provide challenges, offset by
–
–
–
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Optimise gearing and reduce BBP’s cost of capital
Better alignment of debt profile with underlying business cashflow
Provide flexibility to assist in the growth of BBP by allowing new acquisitions to be
funded on a set of pre-agreed parameters
Stable underlying asset cashflow
Stable base demand
Contracted revenues and fuel supply certainty
•
Giving consideration to obtaining a Rating
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Share Purchase Plan (SPP) currently underway to facilitate “top-up”
•
Board to implement a DRP for 31 Dec 07 distribution
STRATEGIC INITIATIVES
Harvest strategy
• Optimise performance and efficiencies from the existing businesses
• Plant modifications, technical improvements, cost management
• Brownfield expansions
Alinta integration
• Optimise business model and structure through shared services
Long term growth
• Consider associated businesses in Australia and internationally which are
complementary or provide strategic advantage
• Energy retailing – ability to get output to market
• Fuel procurement – gas contracts, gas contract options etc
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OUTLOOK & CHALLENGES
Outlook
• Performance for 1Q08 has been in line with expectations
• Water storage levels remain critical with shortages continuing to have a favourable
impact on electricity prices
• Pricing during the summer months will be one of the key determinants of FY08
earnings
Challenges
• Ensure safe and efficient operations
• BBP to further build in-house capabilities to leverage operational scale
• Carbon trading is an important part of the policy mix on emissions targets
–
BBP portfolio carbon intensity ~0.8t/MWh which is below national average
• BBP needs to position itself as a leader within a sector that is both quickly
consolidating and developing via new technologies
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APPENDIX: DIVERSIFIED PORTFOLIO
Operating Mode (MW) Post Alinta
Peak 49%
Base 30%
Fuel Split (MW) Post Alinta
Coal 19%
Gas 81%
Intermediate
21%
Generation Revenue Post Alinta
Rolling Hedges
36%
Unhedged
22%
Regional (MW) Post Alinta
NZ 2%
NSW 17%
WA 27%
QLD
16%
Contracted
42%
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SA 16%
•
Increased weighting towards low CO2 gas fired generation
•
Expands footprint in WA and into NZ and TAS
VIC 22%
APPENDIX: KEY FINANCIALS
Revenue
EBITDA (after associates)
NPAT excl Redbank derivative movement & Incentive fee
Distributions (cps)
Net debt
Gearing1
Net interest cover2
PDS
$m
376.0
96.0
(16.0)
12.6
Scheme
$m
473.5
117.3
(13.6)
14.0
FY07
$m
534.5
117.6
(12.8)
14.0
928.3
50.6%
2.3x
• In August, BBP delivered inaugural result with FY07 EBITDA 20% above IPO
forecasts and in line with Alinta Scheme forecasts
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1.
Gearing is calculated as Net Debt / (Net Debt + Equity)
2.
Net interest cover is calculated as EBITDA / Net Interest. Net interest used is the Finance cost for the 6 months to 30 June 2007 and excludes interest income, interest charge on the Osborne
loss provision and interest charge on the site remediation provision.
APPENDIX: AlintaAGL
• By January 2008, BBP will own 100% of AlintaAGL
• Sizeable retail gas customer base and expanding industrial gas and electricity
customer base
• Provides a scaleable retail platform with an established brand
• Leverage to the high growth WA economy and favourable demographics
• Retail exposure could underpin the development of new generation capacity
• Funding has been secured for 100% AlintaAGL taking gearing to ~66%
Enterprise Value
Debt
Equity
Total
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$m
1,582
506
2,088
APPENDIX: TOTAL SECURITYHOLDER RETURNS
160
150
140
130
120
110
100
90
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17
31
ASX200 AI
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BBP
Utilities AI
APPENDIX: MANAGEMENT OF THE FUND
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•
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The Manager of BBP is Babcock & Brown
Power Management Pty Ltd (BBPM) which
is a subsidiary of B&B
The Manager’s objective is to grow
Securityholder wealth through the
proactive management of the existing
portfolio and through the construction and
acquisition of additional power generation
assets and associated businesses in
Australia and internationally
BBPM receives fees for acting as Manager,
including base fees and, subject to
outperformance, incentive fees
•
B&B currently holds 9.3% of BBP Stapled
Securities
•
There is a strong alignment of interests
between BBP and B&B through branding,
investment and manager obligations and
incentives
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Power Generation and
Associated businesses
BBP Stapled
Securityholders
Stapled
BBPL
Manager
BBPM
BBPT
Responsible
Entity
BBPS
DISCLAIMER
The information contained in this presentation is given without any liability whatsoever to Babcock & Brown Power
Limited, Babcock & Brown Power Services Limited as Responsible Entity for the Babcock & Brown Power Trust,
Babcock & Brown Power Management Pty Limited, or any of their related entities (collectively “BBP”) or their
respective directors or officers, and is not intended to constitute legal, tax or accounting advice or opinion. No
representation or warranty, express or implied, is made as to the accuracy, completeness or thoroughness of the
content of the information. The recipient should consult with its own legal, tax or accounting advisers as to the
accuracy and application of the information contained herein and should conduct its own due diligence and other
enquiries in relation to such information.
The information in this presentation has not been independently verified by BBP. BBP disclaims any responsibility for
any errors or omissions in such information, including the financial calculations, projections and forecasts set forth
herein. No representation or warranty is made by or on behalf of BBP that any projection, forecast, calculation,
forward-looking statement, assumption or estimate contained in this presentation should or will be achieved.
Please note that, in providing this presentation, BBP has not considered the objectives, financial position or needs of
the recipient. The recipient should obtain and rely on its own professional advice from its tax, legal, accounting and
other professional advisers in respect of the addressee’s objectives, financial position or needs.
This presentation does not carry any right of publication. This presentation is incomplete without reference to, and
should be viewed solely in conjunction with, the oral briefing provided by BBP. Neither this presentation nor any of its
contents may be reproduced or used for any other purpose without the prior written consent of BBP.
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