Ann: Update on BBP Loan Restructuring , page-13

Too lazy to type but here is an old article that explains it:

Legal cost is expensive, and ALINTA is a margin business, if cost is higher that the proposed price that ALinta will not be making any money. Alinta has locked in price contracts promising of delivering energy at a certain price, if NWS have their way and increase the cost base then ALINTA will be a going concern.

I think BBP will win but legal battles like this can take a very long time.


Alinta's North West Shelf dispute in arbitration

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Cath Hart | October 23, 2008
Article from: The Australian

A DISPUTE between Alinta and the North West Shelf joint venture participants has escalated to arbitration.

The dispute is over the price of gas in a contract first entered into a decade ago.

Subpoenas are likely to be issued within a week in the highly confidential dispute so that former High Court Justice Michael McHugh can determine the market value and the price-related terms of the gas sold under the contract.

The collapse of private commercial negotiations between Alinta and the North West Shelf venture prompted the decision to proceed to arbitration.

The dispute arose after the North West Shelf venture participants sought to increase the price of gas in the contract following a change in market conditions.

Alinta, Western Australia's largest retailer of gas, buys wholesale gas from the North West Shelf to sell at a retail margin to mass-market customers and commercial and industrial clients.

In a statement issued to the market yesterday, Babcock & Brown Power said the arbitration process would "most likely become public over the course of the next few weeks" as market participants were asked to provide information to Justice McHugh.

Details of the contract, including its length, renegotiation intervals and pricing are all confidential.

BBP, which has interests in 12 operating power stations throughout Australia, said the arbitration was being done in line with the prescribed price review provision of the contract.

A North West Shelf venture spokeswoman confirmed the group was in arbitration with Alinta but declined to comment further because of commercial and confidentiality requirements.

Earlier this month, South Australian company Santos snared a lucrative deal to supply gas to Moly Mines' Spinifex Ridge molybdenum project in WA.

Analysts said the contract, to supply 33 petajoules of gas over six years to Spinifex Ridge, was worth $527 million in revenue.

The price for the deal was estimated to be four times higher than current domestic gas prices from the North West Shelf venture.