Sydney Morning Herald
Saturday 10/1/2009 Page: 31
POTENTIAL purchasers of parts or all of Babcock and 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 break-tip and even a full takeover. Having received a number of what the group described as "non-binding and "indicative" bids just before Christmas, BBP - which is having to consider a complete overhaul of its corporate structure because of a near $3 billion debt burden - will now test its suitors' actual appetite for its assets.
Interested parties - said to include the Australian power providers AGL and Origin Energy and a Bahrain-based energy investment group, Arcapita- are to be taken on site visits of all of BBP's 12 operating power stations and the former Alinta retailing assets. BBP has also opened a data room for purchasers 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 company is facing.
While BBP is intent on securing an offer for the entire company as opposed to further individual sales of power stations like the disposals it has recently completed, its problem remains the price tag that will be put on its equity if a normal takeover bid is to ensure. With its share price wallowing at just 10c after a dramatic fall in value over the last 12 months, the company is valued in sharemarket terms at just $73 million - well below the net asset value of its mainly gasfired generating plans around Australia and in New Zealand.
However, its hard-pressed security holders know that any offer based on its share price will have to take into account the need for buyers to take on huge chunks of its debt as part of the final transaction. The company was worth $2 billion a year ago but has been crippled by the size of its large borrowings and the cost of refinancing part of the debt. BBP is hoping to be able to make an announcement to its hard-pressed investors on its 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 that the bidding process was still at an early stage. The role of its one-time parent, the equally beleaguered Babcock and 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 and 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.
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