Babcock Power Shares Slump on Charges for Plant Sale, Alinta

By Angela Macdonald-Smith

Aug. 18 (Bloomberg) -- Babcock & Brown Power, Australia's biggest publicly traded generator, fell to a record low in Sydney trading after saying it will take A$452 million ($393 million) of charges on a retailing unit and the sale of a plant.

Babcock Power dropped as much as 52 percent to 20.5 cents in Sydney trading, a record decline. The shares, which have fallen from A$2.02 three months ago, were at 29 cents at 11:17 a.m. local time, cutting the company's market value to about A$214 million from A$1.5 billion in May.

The power producer managed by Babcock & Brown Ltd. today said it will take a non-cash charge of A$410 million in its 2008 earnings to write down the value of the Alinta retail unit, set at A$1.6 billion in November, in addition to a A$42 million loss on the sale of a generator in Tasmania. The company has been selling plants to cut debt and bolster its balance sheet.

``No-one ever valued Alinta at what they paid for it,'' said Paul Johnston, a utilities analyst at Commonwealth Securities Ltd. in Melbourne. The sale of the Tamar plant for A$100 million after spending A$223 million on its construction ``is an awful outcome,'' he said.

Sydney-based Babcock & Brown Ltd., the Australian manager of infrastructure assets, dropped as much as 12 percent to A$3.91 in Sydney. The stock fell 35 percent last week as the company struggles to win back investors' confidence after the global credit seizure brought into question its strategy of borrowing to buy utilities, such as wind farms, and bundling them into funds.

`Expressions of Interest'

Babcock Power has cut net debt by more than A$770 million in the last six weeks by selling plants in an effort to bolster its balance sheet. The latest sale, of the Tamar project, is to the Tasmanian state government.

The company hired UBS AG to carry out a strategic review, including advice on capital structure and dividends.

``UBS will consider various expressions of interest that have been received from third parties, as well as other value- enhancing structural alternatives,'' the company said in today's statement, sent to the Australian stock exchange.

The company won approval from existing lenders to extend a A$120 million loan to March 31, 2009. The debt will be repaid from cash reserves and planned asset sales before that date, it said.

After the sale of the Tamar power project, the company will have total outstanding drawn debt of about A$3.7 billion, it said. Babcock Power said earnings before interest, tax, depreciation and amortization were between A$330 million to A$340 million in the year ended June 30, before costs related to the Alinta transaction and one-time charges.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net