Babcock & Brown Power signed a power supply contract with BHP Billiton for its Olympic Dam operations. As per the two-year deal, the electricity is supplied to fulfill the requirements of copper mining and smelting at BHP Billiton's Olympic Dam project in South Australia. BBP’s power supply for the contract would use around 10% of power in South Australia. The power is mostly supplied from two coal-fired power stations owned by BBP.
The deal, though positive for BBP, comes too late to help it regain its investment-grade credit rating. The rating was dropped from BBB- last month.
Regaining its investment-grade credit rating is conditional on a $2.7 billion facility which BBP has signed with a syndicate of 11 lenders. Sources said the banks were likely to demand a higher interest rate on their debt and press for more onerous conditions.
A BBP spokesperson said that though the latest deal had a beneficial impact on the banks’ view of the company but the negotiations were challenging.