Babcock & Brown Power (BBP)

Babcock & Brown Power (BBP) has a maintained Buy, Medium Risk broker call and an upgraded share price target of $3.90 from Australian stock exchange analyst Citi Investment Research. They now view the likelihood of power prices in SA falling below the Osborne contract level as very small. As a result, the analysts are removing the remaining $70m of liability they ascribe to the provision. This change leads to a 30 cents per share (cps) share increase in their target price to $3.90. While the current level of power prices is undoubtedly water driven, they firmly believe that the market’s tightening supply/demand balance will keep prices well above the $30-$35/MWh range of recent years. On their estimates, the current share price is factoring in a $55/MWh long-run price: at $60/MWh, BBP would be worth about $4.50. A clear point to emerge from Babcock & Brown Power's (BBP) presentation at the Citi Infrastructure and Utilities Conference yesterday was the option value embedded in retrofitting its open-cycle gas peakers. The emergence of certainty around the structure of a carbon market should serve to embed the value of converting OCGT to baseload combined-cycle (CCGT). According to comments made by Babcock & Brown Power's (BBP) CEO at yesterday's conference, the Alinta transaction is progressing as expected, with the Scheme of Arrangement hearing expected at some point in August. Successful conclusion of the AAN acquisition would roughly double the size of Babcock & Brown Power (BBP). A fall in forward prices from current levels, which the analysts expect, would likely exert downward pressure on sentiment and the share price. However, they believe that the long-term drivers for appreciation in Babcock & Brown Power (BBP) remain firmly intact, thus their recommendation remains Buy/Medium Risk.

Babcock & Brown Power Limited is listed on the Australian Stock Exchange (ASX) under stock code BBP. You can view their investor website here. BBP was listed on the ASX on 11 December, 2006. The company is involved with operating and investing in a portfolio of power stations consisting of base load, intermediate and peaking power stations. The Group intends to further develop a diversified portfolio of power generation assets, both in Australia and internationally, by expanding the generation capacity of assets within the initial portfolio and acquiring and constructing new power assets. Paul Simshauser is the CEO of Babcock & Brown Power while Peter Hofbauer is the Chairman. Babcock & Brown Power (BBP) is a specialist infrastructure entity which provides investors access to a ‘pure play’ electricity generation portfolio. BBP's investment strategy seeks to provide an attractive cash yield and long term capital growth. BBP has invested in a portfolio of seven power stations consisting of base load, intermediate and peaking power stations (with a further baseload power station under construction and due to be operational in late 2008). Babcock and Brown Power was mentioned in this post. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade BBP. Check your charts and good luck with your share trading!