Babcock Power Says Interest in Sale Is `Encouraging'

By Angela Macdonald-Smith

Nov. 7 (Bloomberg) -- Babcock & Brown Power, the Australian electricity producer whose shares have sunk 95 percent in the past six months, said early indications from a sale process being run by UBS AG are ``encouraging.''

A ``significant number'' of parties have expressed interest in buying the company or some of its assets, Len Gill, chairman of Sydney-based Babcock Power, said today in an address to shareholders. The structure and price of the sale will be influenced by conditions in the capital markets, he said.

Babcock Power, managed by Babcock & Brown Ltd., said last month it will seek bids after getting approaches about assets or an outright sale. The company, the worst performer this year in Australia's benchmark stock index, has been selling plants to reduce debt and bolster its balance sheet.

``The board is extremely disappointed with the performance of BBP and sincerely regrets the loss of value to security- holders,'' Gill said in the address, a copy of which was sent to the Australian stock exchange. ``We have already taken key steps to deal with our debt challenge. We are progressing with a strategic transaction to strengthen the capital structure.''

Babcock Power slid as much as 0.4 cents, or 4 percent, to 9.6 cents in Sydney trading and was at 9.7 cents at 10:03 a.m. local time.

Loans Due

The company has A$118 million ($78 million) of debt due for payment in March, and loans of A$174 million and A$201 million due to its parent in September 2009 and January 2010. The planned transaction will ``address repayment'' of these loans, Gill said.

Babcock Power also has A$2.7 billion of debt in two tranches due for repayment in June 2011 and June 2013, and debt on projects of A$795 million.

The company reiterated a forecast for earnings before interest, tax, depreciation and amortization in the year ending June 30, 2009 of between A$350 million and A$360 million. A disruption of natural gas supplies this year due to an explosion at Apache Corp.'s Varanus Island plant off northwest Australia will cut 2009 profit by about A$18 million, it said.

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