RE:RE:RE:RE:From todays Globe and MailMaxmoe wrote
Proof, for the 100th time, it's much lower risk to buy than build, so if it's also cheaper, everyone will go for it. If IPL could have bought a competitor's plant for less than it cost to build, they would have. But none exist in Canada, I'm told by IPL, never mind cheaper ones. So I am optimistic there will be an industry white knight with a much higher second offer that Brookfield will "settle" on cashing out their 20% windfall.
Teccing wrote:
interesting how ipl share holders have taken the burden of risk, now drawing closer to completion of propylene plant Brookfeild thinks they can swoop in and steal it.
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Yes it is much lower risk to buy an existing project like Heartland than to build it as when you buy you know your exact cost and when you build costs can and usually do go higher than expected.
Another major and very important point that some seem to miss is for example a company announces that they want to build a project similiar to Heartland tommorow. The company has the $4 billion in cash ready to start. By the time they get all the approvals, build etc 4 or 5 years will go by. By that time the project would likely cost closer to $4.5 or $5 billion with cost over runs and price inflation that usually happens on these large multi year projects.
Say the same company instead purchases Heartland at the end of this year for $5 billion. In the 5 years they would have waited to build their project Heartland would have generated $2.5 billion in profit for the company which would leave them with $2.5 billion cost basis in the plant after 5 years.
If they were to build instead after the same 5 years if they were to have built from scratch they would have an investment of $4.5 to $5 billion and have not made one cent in profit yet.
Every big company knows this and i am sure a few of them likely have there eye on Heartland and IPL and the $1.2 billion in Cash flow that this company will be generating in one year from now.
When IPL is generating $1.2 billion in Cash flow a year from now at ten times cashflow that would equal a value for IPL of $12 billion.
$12 billion divided by 430 million shares equals aprox. $28.50 per share.
Anyone can have my shares right now for $22.50 cash