"B&B Power tests bidders' appetite Danny John January 10, 2009 - 12:01AM
POTENTIAL buyers of parts or all of Babcock & Brown Power's business are to be given detailed briefings over the next three weeks of what they may end up buying as the group prepares for a break-up or takeover.
Having received a number of what it described as "non-binding" and "indicative" bids just before Christmas, the power generation business — which is having to consider an overhaul of its corporate structure because of a near-$3 billion debt burden — will now test its suitors' appetite for its assets.
Interested parties — said to include the major Australian power providers AGL and Origin, and Bahrain-based energy investment group Arcapita — are to be taken on tours of BBP's 12 operating power stations and the former Alinta retailing assets.
BBP has also opened a data room for potential buyers to sift through the confidential management information about the earnings potential of each of its generating interests, which will have to be weighed up against the debt pressures the group is facing.
While BBP is intent on securing an offer for the entire company, rather than further disposals of individual power stations, its problem remains the price tag that will be put on its equity should a takeover bid progress.
With its share price wallowing at just 10 cents after a dramatic fall over the past 12 months, the company has a market value of just $73 million, well below the net asset value of its mainly gas-fired generating plants in Australia and New Zealand.
However, BBP's hard-pressed security-holders know that any offer based on its stock price will have to take into account the need for buyers to take on huge chunks of its debt as part of any deal.
The company was worth $2 billion a year ago but has been crippled by the size of its borrowings and the cost of refinancing part of the debt.
BBP is hoping to make an announcement to its investors on the company's long-term future by the end of March, but that timetable could slip depending on the complexity of the bids involved.
A spokeswoman described as "premature" the prospect of a swift conclusion to the review now being undertaken by BBP's board, saying the bidding process was still at an early stage.
The role of its one-time parent, the equally beleaguered Babcock & Brown, in managing the fund and the fees that it takes as a result, would also only be resolved once BBP's directors had made a decision on the offers it had received.
Babcock & Brown Wind Partners, which now runs its own operations independently of B&B and is in the process of changing its name, yesterday announced it had completed the $1 billion sale of its Spanish wind farm assets."
BBP Price at posting:
10.0¢ Sentiment: None Disclosure: Held
