Babcock Infrastructure to Sell 50% of Powerco to QIC

By Angela Macdonald-Smith

Nov. 4 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of ports and energy transmission lines in Australia, Europe and the U.S., agreed to sell 50 percent of Powerco Ltd.'s New Zealand operations as it seeks to reduce debt.

The sale, to funds held by investment manager QIC, values the New Zealand business at NZ$2.05 billion ($1.2 billion), including debt, Sydney-based Babcock Infrastructure, or BBI, said today in a statement. It will retain Powerco's gas distribution unit in Tasmania, valued at NZ$200 million.

BBI, whose shares have slumped 81 percent in the past six months, said in August it may sell as much as half of three of its main businesses, Powerco, WestNet Rail and BBI Euroports, to cut borrowing and provide funds for investment. The NZ$2.25 billion valuation of the whole of Powerco, including debt, is 25 percent higher than the NZ$1.8 billion price BBI paid in 2004.

``Powerco is a core regulated utility,'' Ross Israel, head of global infrastructure at Brisbane, Queensland-based QIC, which has more than A$80 billion ($54 billion) under management, said today in the statement, sent to the Australian stock exchange. ``As a mature business we expect it to provide stable, long-term returns.'

Net proceeds from the sale, due to be completed in the first quarter of 2009, are expected to be about NZ$400 million, BBI said. Talks are continuing on the sale of stakes in BBI Euroports and WestNet Rail, it said.

Babcock Infrastructure yesterday gained 13 percent to 21.5 Australian cents on the exchange.

Powerco is New Zealand's second-biggest electricity and gas distributor, with more than 400,000 customers across more than 39,000 square kilometers of New Zealand's North Island.

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