Babcock & Brown’s satellite fund sells electricity and gas distributor

The NZ$400m sale will help manager Babcock & Brown reduce its corporate debt, after plummeting shares prices wiped out the value of its equity assets during the first eight months of this year.

Australian fund manager Babcock & Brown’s infrastructure entity, Babcock & Brown Infrastructure has sold 50 percent of Powerco, a New Zealand electricity and gas distributor to QIC Infrastructure, the infrastructure arm of institutional investment manager QIC, for NZ$400 million ($235 million; €187 million).

The sale is for 50 percent of Powerco’s New Zealand operations with BBI still retaining all of Powerco’s Tasmanian gas distribution business. Both firms will share ownership and control of the business.

The deal values Powerco at NZ$2.25 billion, a 25 percent premium over BBI’s acquisition price of NZ$1.8 billion in 2004.

Powerco services approximately 400,000 consumers in New Zealand, representing 46 percent of its gas connections and 16 percent of its electricity connections.

BBI will use the money to reduced corporate debt and fund growth across its international portfolio of infrastructure assets, according to a statement from the company.

The Powerco acquisition will diversify by geography and sector, the infrastructure portfolios of QIC’s clients, said Ross Israel, QIC head of global infrastructure.

In September, Babcock & Brown undertook a strategic review aimed to turn around the value of its shares, which had fallen nearly 90 percent since this January. As part of the review, BBI added two independent directors to its company board and altered the structure of its manager’s fee income.

Established in January 2006, QIC Infrastructure manages a global portfolio of about A$2 billion ($1.3 billion; €1.1 billion) in unlisted infrastructure investments.