TEXT-Fitch rates Babcock & Brown Power A$2.7bn secured facility

(The following statement was released by the rating agency)

June 11 - Fitch Ratings has today assigned BBP Finance
Australia Pty Limited's (BBPF) secured multi-currency term and
revolving syndicated facility (the Secured Facility) a rating of
'BBB-' (BBB minus). At the same time, Fitch has assigned an
Issuer Default Rating (IDR) of 'BB+' to BBPF. The Outlook is
Stable.

BBPF is a wholly-owned subsidiary of Babcock & Brown Power
Limited (BBP.AX: Quote, Profile, Research), an Australian Stock Exchange-listed energy
generator and retailer.

The Secured Facility rating reflects the strong structural
features including guarantees from the all of the principal
operating companies (OpCos) and the security over the shares in
the OpCos. Although a share mortgage is weaker than security on
assets, restrictions on indebtedness in the operating companies
and a negative pledge with minimal carve outs are strong enough
to warrant a Secured Facility rating one notch higher than the
IDR, indicating Fitch's view of higher-than-average expected
recovery in the event of a default. Additional key credit
enhancements include distribution lock-ups and a maintenance
capex reserve. BBPF's rating reflects the significantly
contracted nature of cash flow steams within the structure, for
both revenues and expenses, which provides comfort on BBPF's
ability to meet its interest obligations.

Fitch's approach to rating debt facilities and instruments by
notching from the IDR is set out in the criteria report 'Recovery
Ratings - Approach and Process for Corporate Finance' dated 9
August 2005, available from www.fitchratings.com.

The rating also benefits from the strong underlying
fundamentals of the assets within the BBPF structure. Alinta is
the dominant gas retailer in Western Australia, Flinders is the
largest supplier of electricity in South Australia, and BBPF's
gas supply and off-take contracts are with highly rated
counterparties reaching beyond the initial term of the facilities.

"The Secured Facility rating reflects the protection and
security in place over the debt and the underlying fundamentals
of the assets within the structure," said Gavin Madson, Director
in Fitch's Asia-Pacific Energy and Utilities team. "A high level
of contracted revenue and the nature of the underlying assets
also underpin the businesses' cash flows," he added.

The Stable Outlook reflects Fitch's expectations that BBPF
will maintain credit ratios commensurate with the current rating
category.

A key credit concern for BBPF is the level of leverage in
place and the resulting constraint that is placed on financial
flexibility. The Facility has provisions in place should BBPF's
profitability be negatively affected by the introduction of an
emissions trading scheme. The Australian federal government has
announced plans to introduce an emissions trading scheme in 2010,
however the details of the scheme, any reduction targets, or
potential costs to emitters has yet to be clarified. Refinancing
risk is also a key credit issue, with AUD1.7 billion due in three
years (which includes annual rolling of the letter of credit and
working capital facilities) and AUD960 million due in five years.

A credit analysis report for BBP Finance Australia Pty
Limited will be available shortly on www.fitchratings.com.au and
www.fitchresearch.com.