Babcock & Brown Power Ltd's share price has collapsed to a low of 20.5 cents today after the company said it faced impairment charges of $452 million, had sold one of its main assets for a loss and was reviewing its distribution policy.
The company tried to reassue the market that it was making progress towards stabilising its financial position but its statement has served to aggravate concerns about its long-term future.
The stock closed 17.5 cents lower at 25 cents. The collapsing share price is bad news for investors who accepted scrip in Babcock & Power Power and other B&B entities in last year's Alinta takeover.
BBP, which owns a range of energy generation assets in WA, reconfirmed its full-year 2008 guidance for earnings before interest, tax, depreciation and amortisation in the range of $330 million to $340 million.
However this was before set-up costs and transition costs associated with the Alinta takeover and before impairment and non-cash charges.
Its net profit will include a $410 million impairment attributable to its Alinta assets and a write-down associated with its Tamar power station.
The company said it has sold its Tamar Valley Power Station to the Tasmanian Government for $100 million, leaving the company with a $42 million loss on the sale.
And it has extended a $120 million debt facility to March 31, 2009.
The company says the announcements today represent "a significant de-risking for the BBP business".
Together with the sale of its Uranquinty and Ecogen facilities, the Tamar sale had reduced BBP's debt by $770 million, the company said.
BBP warned that future distributions would depend on the company's ability to both refinance and pay down debt.
"The sale of Tamar represents a significant de-risking for the BBP business," chairman Len Gill said.
"BBP has achieved a key step towards stabilisation of debt and balance sheet improvement."
Post completion of the Tamar sale, B&B Power said debt would remain at around $3.7 billion, serviced by an average interest rate of around 8.8 per cent.
The company said its distribution policy remains "under review" given that various debt facilities require repayment before dividend payments can be made.
More asset sales may also be undertaken.
B&B Power has hired UBS as a strategic adviser.
"UBS will consider various expressions of interest that have been received from third parties, as well as other value-enhancing structural alternatives," B&B Power said.
