B&B Infra eyes power trust
BABCOCK & Brown Infrastructure is likely to sell its Australian power station portfolio to a new trust expected to be established by its parent Babcock & Brown, according to BBI chief executive Steve Boulton.
"We'll have a close look now at whether we have opportunities to divest its 50 per cent holdings in power generation groups Redbank and Ecogen as Babcock & Brown may set up its own fund and our board is likely to receive an offer," Mr Boulton said.
Ecogen owns two gas-fired power stations in Victoria, Newport and Jeeralang, while Redbank is a coal-fired plant in the Hunter Valley. The power assets account for only about 4 per cent of BBI's asset base but generated about 10 per cent of its cash flow in the December half.
BBI will retain a small holding in Babcock & Brown Wind Partners.
Babcock & Brown has already begun buying assets for its new generation trust, recently purchasing the NRG Flinders generation business in South Australia.
BBI has been active in recent times, buying rail assets in Western Australia and launching a scrip offer for Victorian gas transmission business Gasnet. Mr Boulton said the deal should be attractive to Gasnet shareholders as BBI had returned shareholders 175 per cent in recent years compared to 80 per cent for Gasnet.
BBI also had a global spread of assets which Gasnet could not replicate, he said.
"Our scrip bid allows them [Gasnet shareholders] to add to the portfolio they already have."
Mr Boulton said BBI's $3 billion purchase of US power distribution group North Western Energy - announced in April - would require a smaller equity contribution than first thought.
When the deal was announced the markets were tipping BBI would have to put in $800 million in cash. But debt restructuring meant that now BBI would only have to contribute $300 million. This money would be raised with an institutional share placement and there would be no need to go to the general market with an equity raising, he said.