B&B Power sells third station to ease debt

The planned disposal of its Ecogen stations at Newport and Jeeralang in Victoria will take the net proceeds of BBP's sales since the beginning of July to almost $240 million. This, in turn, will allow the company to cut its corporate debt to just over $122 million.

Yesterday's announcement will allow BBP's minority partner in the Ecogen business - the rapidly expanding superannuation fund infrastructure specialist Industry Funds Management - to snap up the Babcock & Brown offshoot's 73 per cent stake for net proceeds of $87 million.

Industry Funds Management, which emerged earlier this year as a co-buyer of 29 power stations in the US, will also take on BBP's share of Ecogen's debt, which totals $93 million. The sale price means BBP makes a profit of $28 million on its original investment.

The sale of the two gas-fired power stations comes two weeks after BBP sold its soon-to-be completed energy plant at Wagga Wagga, which Origin Energy agreed to buy for the equivalent of $700 million.

That deal allowed BBP to clear the borrowings taken on specifically to build the station and shave $159 million from its $360 million of corporate debt. The size of that debt unleashed a wave of investor dismay when it was revealed in May as part of a $3.4 billion refinancing plan.

BBP is now expected to cut the remaining $122 million to nil in the coming months as it prepares to sell two more generating sites, thought to be the stations being built in Tasmania's Tamar Valley and the NewGen Kwinana plant outside Perth.

Kwinana is considered particularly attractive to potential buyers as it will become a key provider of the city's day-to-day power needs when completed later this year. BBP owns 70 per cent of the new plant.

BBP told investors in a statement to the ASX yesterday the sales so far would not affect its plans to pay a dividend of between 13c and 18c a security in the 2009 financial year. Its debt problems, however, have caused the company to scrap its current second half distribution. BBP's shares yesterday closed 1.5c up at 69c.