BBP ANNOUNCES PROGRESS ON CAPITAL STRUCTURE AND INTERIM 2009 RESULT
Babcock & Brown Power (ASX: BBP) today provides an update on various strategic initiatives being undertaken to improve value for BBP securityholders and the interim result for FY09.
Strengthening of capital structure
The sale process is underway and several parties are shortlisted, with due diligence ongoing. Some parties are interested in only East or West portfolios1. At this stage it is not envisaged that an outcome will be presented to securityholders before the fourth quarter of FY09. (June 30th 2009)//
//Arcapita wants to conclude two acquisitions in the Asian infrastructure or real estate sectors by June and is also still in the running for buying up the assets of troubled Australian power investment firm Babcock & Brown Power Ltd (BBP.AX) (BBP), he added, declining to give more details.//
MELBOURNE/PERTH, Feb 6 (Reuters) - As embattled Australian power investment firm Babcock & Brown Power Ltd (BBP.AX)(BBP) hives off assets to pay down debt, at least three companies are hatching plans to capitalise on the distressed sales.
Bankers and analysts say Bahrain-based investment house Arcapita Ltd and top Australian energy retailers AGL Energy Ltd (AGK.AX) and Origin Ltd (ORG.AX) are eyeing BBP's suite of assets, three banking sources familiar with the deal said.
An Australian-listed energy firm, backed by an Asian sponsor, is also vying for a slice of BBP, said one of the banking sources with direct knowledge of the deal.
Sources said Arcapita, advised by Citigroup, had put in a bid in December for all of the BBP's assets, while AGL and Originhad submitted bids for parts of its assets.
Under the current sales process run by UBS AG, potential bidders were given the option to bid for the entire portfolio, or east or west coast assets, banking sources said.
"Some of BBP's power generation assets on the east coast would be very attractive forAGL and Origin because the power stations would give the utilities better risk management in their wholesale electricity hedgebook," said an analyst who asked not to be identified because of company policy.
Citigroup said in a research note late last year that Origin could consider acquiring at least three of BBP's power stations, including the Braema and Osborne stations in Queensland as well as Bairnsdale plant in Victoria state.
BBP, managed by investment bank Babcock & Brown Ltd (BNB.AX), began to seek bids in October after getting approaches for its assets or an outright sale.
The company, which lost 96 percent of its market value last year and was the worst performer last year in Australia's benchmark stock index, has been selling plants to reduce debt and bolster its balance sheet.
Parent company Babcock & Brown is also grappling with debt problems, and on Friday announced a restructuring deal with its creditors (click [nSYD328649] for more details). The company is demanding any new owner of BBP's assets pay them out to terminate its lucrative management contract.
BBP's portfolio comprises 12 operating power stations across the country. The firm, which has a market value of about A$443 million ($290.3 million), also owns Alinta retail gas, the largest gas retailer in western Australia, as well as a minority interest in a gas pipeline.
According to two banking sources, AGLhas retained ABN AMRO Australia as financial adviser on the sale while Originis believed to have retained Macquarie Capital Advisers to advise on the bid.
UBS and BBP could not be reached for comment.
CASHED-UP BIDDERS
Amid the current credit crunch, potential bidders interested to buy parts or all of BBP's assets will find it tough to raise large amounts of money unless they have existing corporate lines to draw on or have significant amounts of cash on their balance sheets.
But the bidders, awash with cash, are unlikely to forego such a rare opportunity to mop up assets.
The sources said AGL and Origin had told would-be financiers interested in funding their plans that they do not need to raise any additional debt.
AGLhas boosted its balance sheet with asset sales totalling A$3.2 billion over the past year, while Origin is also cashed up and debt-free after it inked a $8 billion joint venture deal with ConocoPhillips (COP.N) last year.
Despite a credit ratings downgrade by Standard & Poor's last month, sources said Arcapita is still in the running to acquire the whole of BBP.
Ten of the assets that could be sold have been pledged as security for BBP's A$2.7 billion project financing loan and lender consent is necessary before any of those assets can be sold, said the sources. ($1=1.526 Australian dollar) (Editing by Ben Tan)
BBP Price at posting:
8.6¢ Sentiment: Buy Disclosure: Held
