January 22, 2007

Deutsche Bank initiates coverage of Babcock and Brown Power

Deutsche Bank has initiated coverage of stapled security investment fund, Babcock and Brown Power (ASX: BBP), with a Buy recommendation.

Research analyst, John Hirjee initiated coverage with an A$3.05 twelve month price target.

Mr Hirjee said “Babcock and Brown Power is one of the largest pure play generation portfolios in Australia and New Zealand, and the only listed, conventional generation fund in Australia.

“Earnings are underpinned by long-term power purchase agreements, while growth in cash flow and distributions should come from the commissioning of new power stations under construction, and acquisition opportunities from the global network of Babcock and Brown.

“We forecast EBITDA growth of 74% and 22% respectively for FY08 to FY09,” he noted.

Babcock & Brown Power (BBP) is an electricity generation business with Australian assets that comprise eight generators - totaling nearly 3,000MW of capacity - in the key electricity markets of Victoria, New South Wales, Queensland, South Australia and Western Australia.

Average annual growth in electricity consumption in these markets is estimated by Australia’s National Electricity Market Management Company (NEMMCO) at 0.8%, 1.7%, 3.5%, 1.6% and 2.2% per annum over the next ten years respectively. Tightening demand/supply conditions are also forecast to occur over the next few years in these markets, triggering increased demand for electricity, higher prices and increased incidence of peaking events.

Generation output is sold through long-term power purchase agreements, capacity purchase agreements and hedging arrangements with established counter-parties. BBP powers its portfolio with a diversified fuel mix of coal, natural gas and coal seam methane.

Equity rating recommendations are based on expected total return (including dividends):
- Buy: 10% or more over a 12-month period
- Hold: between -10% and 10% over a 12-month period
- Sell: -10% or worse over a 12-month period

For further information, please call:

Cathy Knezevic +61 2 8258 2792 or Kate Abrahams +61 2 8258 2416

Deutsche Bank

Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With Euro 1,097 billion in assets and 67,474 employees in 73 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.