Australian securities firm goes for power

By Brett Miller  |   2008-7-5  |     NEWSPAPER EDITION

BABCOCK & Brown Ltd, Australia's second-biggest securities firm, and Babcock & Brown Power rose in Sydney trading after the electricity producer agreed to sell a power station for A$700 million (US$672 million).

Babcock & Brown advanced for the first time in four days while the power affiliate, 9 percent owned by the firm, surged as much as 27 percent. Sydney-based Babcock Power said it would use the A$159 million profit on the sale of the Uranquinty plant to Origin Energy Ltd to cut debt.

The Sydney-based parent and its 24 investment funds are selling assets to reduce combined borrowings of more than A$46 billion, according to Credit Suisse Group estimates.

The global credit seizure has brought into question Babcock & Brown's strategy of borrowing to buy utilities such as power stations and bundling them into funds.

Babcock & Brown agreed to pay a higher interest rate on A$2.8 billion of debt on June 30 to get its bankers to waive their right to force early repayment. The shares rose 4.5 percent to A$7.27 at 12:04pm in Sydney while Babcock Power jumped 15 percent to 76 Australian cents, the biggest gain since June 17. Babcock and its affiliate have both slumped more than 70 percent this year.

Babcock & Brown's wind-power affiliate received initial bids of as much as US$3 billion this month for European wind assets.