They say $300 million of capex in 2014 so no ability to pay down debt! Debt is coming due at $125MM continuing annual rate so they will need cash for that. The storage business is finished so $56MM gone. Capex for 2013 will see no return until 2015. No forecasts for 2015--scary. Rating agencies could downgrade. Considered stopping all distributions. Contract renewals are coming in at much lower rates and that will continue. They keep taking about more capex when the base business is declining. My math says they are forecasting a debt payoff of $700MM to get to 4x EBITDA ratio. EBITDA is about $650MM. Where will they get the money? My take is I have no confidence in this management to spend money and get a good return. This is not getting better anytime soon. Lowes is providing capital for Bluegrass which means they cannot get capital elsewhere. The only good news is they will not dilute unitholders--right!
Lets try the numbers again - The Capex for 2014 is about $300M but they already issued the units and debt. Continuing capex was stated at $90-100M. Thus with $400M in DCF they should be able to pay down STerm debt a bit. No forecast for 2015 is not scary as BWP usually gives no forecast at all. The rating agencies actually will love what they did because the EBITDA to debt ratio will come down if BWP is correct to about 4X at the end of 2014. That is better than MWE and a lot of other MLPs.
Loews offered capital for BWP, not Bluegrass. BWP needs to develop its G&P assets. Also find it really not possible that they will get no storage $$ in 2014. Is it not probable we will get a curve going into the heating season requiring storage. If we go into winter of 2015 with no storage it really will be a disaster.
Do I have confidence in management - NO. But BWP even at these numbers makes money and could have paid out .40 instead of .10. They elected rightfully or wrongfully to take all at the worst case scenario and put all the bad news out there now. Is BWP dead money? Not sure. Putting $$ in now will likely get a return in a couple years. Contract renewals cannot continue to come in lower because BWP now has all but a couple small ones already in and already elected NOT to even try to negotiate but rahter wait until 2015 with the idea that rates will improve.
BWP - good assets? Yes but right now they move gas the wrong direction. That might change if more utilities move to NG and BWP has the largest E/W line across the south. Would i buy today? No - noty until the dust settles, but the headlines of BWP going out of business is just plain stupid.
Yeh, the fact that they reduced payout so dramatically should be a big red flag. You can sugar coat the bitter pill by saying you won't have to do a capital raise but the fact is, they are really getting cash crunched and that was the real reason for the dramatic cut plus Loews willingness to pony up the bucks shows they are in really bad shape. So we get a 20% drop in earnings this year and at best, flat next year. My guess is that they spent a lot of money on Bluegrass expecting a big payoff and now they see the project is going to be a bust so they are indebted for a project that just isn't going to pay its way. The money has to come from somewhere and so it comes out of shareholders pockets. BWP, gambled and lost apparently.
Thanks for the info. I agree with your assessment. The ML gal mentioned the $650MM of EBITDA but they did not confirm. I think they were stuffed with a bunch of poor assets when it was created. Owners are now finding how bad it really is. Would not touch this until single digits. Lots of tax loss selling as everybody has a loss and all are taxable owners.