Investor Presentation

2

This presentation was prepared exclusively for the benefit and internal use, and is for the confidential use only, of those persons to whom it is presented or transmitted and is provided on the basis that each of those persons is a wholesale client (as defined in Section 761G of the Corporations Act). This presentation is not and does not form part of an offer, invitation or recommendation in respect of securities. The information contained in this presentation is given without any liability whatsoever to Babcock & Brown Power Limited, Babcock & Brown Power Services Limited, Babcock & Brown Limited or any of their respective related entities (collectively “Babcock & Brown”) or Deutsche Bank AG or Morgan Stanley Dean Witter Australia Securities Limited or any of their respective related entities (collectively “Joint Lead Managers”) or any of Babcock & Brown’s or the Joint Lead Managers’ respective directors, officers, employees or agents, and such persons disclaim any liability whatsoever (including for negligence) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith.

This presentation is not intended to constitute legal, tax or accounting advice or opinion. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or thoroughness of the content of the information. The recipient should consult with its own legal, tax or accounting advisers as to the accuracy and application of the information contained herein and should conduct its own due diligence and other enquiries in relation to such information.

The information in this presentation has not been independently verified by Babcock & Brown or the Joint Lead Managers. Babcock & Brown and the Joint Lead Managers disclaim any responsibility for any errors or omissions in such information, including the financial calculations, projections and forecasts set forth herein. No representation or warranty is made by or on behalf of Babcock & Brown or the Joint Lead Managers that any projection, forecast, calculation, forward-looking statement, assumption or estimate contained in this presentation should or will be achieved. Past performance is not necessarily a guide to future performance.

Please note that, in providing this presentation, Babcock & Brown and the Joint Lead Managers have not considered the objectives, financial position or needs of the recipient. The recipient should obtain and rely on its own professional advice from its tax, legal, accounting and other professional advisers in respect of the recipient’s objectives, financial position or needs.

This presentation must not be disclosed to any other party and does not carry any right of publication. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Babcock & Brown. Neither this presentation nor any of its contents may be reproduced or used for any other purpose without the prior written consent of Babcock & Brown.

Important Notice

3

Agenda

Overview Warren Murphy

– Director of Babcock & Brown Power

– Head of Australian Energy, Babcock & Brown

The Business & Key Drivers Paul Simshauser– CEO of Babcock & Brown Power

Key Financials James Brown– CFO of Babcock & Brown Power

Offer Summary Joint Lead Managers

4

Introduction

Babcock & Brown Power (BBP) is

• A power generation business comprising eight1 power stations across five states

• A substantial business with a market capitalisation of around $900 million2

• A growth business with attractive yield

• Managed by Babcock & Brown, an experienced operating and management team

1. 7 Operating power stations and 1 power station under construction2. Assumes 359 million Securities list at the Offer price of $2.50 per security

5

Investment Highlights

• Well managed and diversified business delivering predictable cash flows

• A unique opportunity to invest in the only pure play power generation business listed on the ASX

• Positioned in a growing market with favourable supply dynamics

• Further growth through expansions, new development opportunities and acquisitions

• FY07 distribution yield of 9.1% growing by 5% in the first year with a 4% growth target beyond that

• Managed by Babcock & Brown, an experienced power station developer and manager with a dedicated, experienced operating management team

Unique – Strong Growth – Attractive Yield

6

BBP offers a unique combination of attractive investment features

Predictable Revenue plus

Growth

• Long term off-take agreements

• High quality and diverse credit counterparties

• A range of development and acquisition opportunities

Strong

Management

• Experienced industry executives and Board members

• Strong internal risk management and O&M expertise

• Support of Babcock & Brown global power expertise

Strong & growing cash flows underpinned by diversification & management

Highly

Diversified

• Eight power stations across five states

• Mixture of fuel, technology and operating mode

7

A pure power play enables investors to access the attractive investment fundamentals of this industry

The only pure play power generation business listed on the ASX

Source: Scheduled Generator List 21/9/2006, NEMMCO, Aggregated capacity used based on effective interests >= 50%, wind excluded

Non-Government Owned NEM Generation Portfolios

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

INP TRU BBP AGL ORG

MW

Pure Power Generation7 Operational Power Stations

8

Significant capacity shortfall creates attractive market conditions for power generation businesses

BBP is extremely well positioned to capitalise on tight supply conditions

Source: NEMMCO Statement of Opportunities update July 2006 10% POE on required reserve margins

~800MW pa

9

BBP has a range of outstanding growth opportunities

AttractiveMarket

Exposure

• Energy exposure in tight market regions

• Opportunities to expand in fast growing market regions

Business Growth

• Kwinana (320MW) commissioned mid FY 2009

• Attractive expansion & development opportunities

Well positioned to deliver security holder growth

Organic

Growth

• 9% Revenue CAGR 2005-20081

• 15% EBITDA CAGR 2005-20081

+

+1. Accounts prepared on a consolidated basis. EBITDA includes income from equity accounted investments

10

5%

Strong growth with attractive fully tax deferred yield1

9.1% FY07 distribution yield with 5% growth in the forecast period

Forecast Distribution Yield

9.1%9.6%

5

6

7

8

9

10

11

12

2007 2008

%

4% medium term distribution growth target

1. Tax deferral may constitute the distribution of franking credits and the distribution of trust capital

2008+

11

Unique Investment OpportunityPaul Simshauser

• Well managed and diversified business• Attractive market dynamics• Development pipeline of growth opportunities

12

The Australian Power Industry

BBP is a business of scale in the Australian power industry

Regulated

NEMMCO / IMOWAMarket operators

TransmissionElectricity

transportation using high voltage

transmission lines to major demand regions

Electricity production frompower stations fuelled by

coal, gas, hydro, wind, etc

Electricity purchased from the market and sold to end users of

electricity

Electricity distribution from

transmission lines to end users of

electricity

Distribution

Competitive

Competitive

NGO NEM Generation Portfolios

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

INP TRU BBP AGL ORG

MW

Generation Retail

13

KwinanaFlinders

Redbank

Braemar

Oakey

Ecogen

1. Effective interests2. Kwinana is currently under constructionPPA = Power Purchase AgreementRefer to the PDS for more information on the BBP assets

GeneratorRegio

nFuel

Capacity

(MW)

Operating mode

ContractType

EquityOwnership1

Oakey QLD Gas 286 Peak PPA 50%

Braemar QLD Gas 455 IntermediateCap

contract85%

Redbank NSW Coal 135 Base load PPA 100%

Ecogen - Jeeralang VIC Gas 449 PeakPPA 73%

Ecogen - Newport VIC Gas 510 Peak

Flinders - Northern SA Coal 527 Base load Rolling Hedges

100%Flinders - Playford SA Coal 240 Intermediate

Kwinana2 WA Gas 320 Base load PPA 70%

Total 2,922

BBP is a ~3,000MW Power Generation Business

Diversified by fuel, operating mode and region

14

Strategic Portfolio of Assets Positioned for Growth

Flinders

(SA)

• Lowest cost energy provider in South Australia

• Tight supply, already breaching reserve requirements

• Proven ability to capture a premium to market prices

Kwinana

(WA)

• 320MW CCGT1 underwritten by a long term off-take agreement

• Scheduled to be commissioned late 2008

• Forecast financial contribution for 2H Fin Year 2009

Braemar

(QLD)

• Positioned in the fastest growing demand region of the NEM

• Located in the heart of Queensland’s coal seam gas fields

• Sunk infrastructure in place to allow for expansion opportunities

Strategic assets are positioned to deliver growth to unit holders

Redbank (NSW)

Ecogen (VIC)

Oakey (QLD)

• Provide a stable foundation of high quality cash flows

• Contractual revenue indexation underpins future growth

• Strong operations & maintenance teams in place

1. CCGT = Combined Cycle Gas Turbine

15

Investment Strategy

• Provide investors with long term capital growth complemented by an attractive cash yield

• Develop a diversified portfolio of power generation assets, both in Australia and internationally by

- expanding the generation capacity of existing assets

- developing new power assets

- acquiring new power assets

• Target investments with risk/return characteristics similar to those of the initial portfolio

• Development and acquisition opportunities to be introduced by Babcock & Brown

• Initial international focus is likely to be on acquisition opportunities in OECD regions with development opportunities to be assessed in due course

BBP has a clearly defined growth strategy

Well Managed and Diversified Business

17

Board and Management

Peter Hofbauer- Global Head of Infrastructure, Babcock & Brown

Warren Murphy- Head of Australian Energy, Babcock & Brown

Len Gill- Director of Verve Energy- Previously CEO of TXU Australia

John Fletcher- Director of Integral Energy Australia- Previously CFO of AGL

Peter Kinsey- Director of ABB Australia Pty Ltd- Legal & Compliance Manager South Asia for ABB Ltd

Board

Chairman

Executive

Independent

Independent

Independent

Paul Simshauser- Previously CEO NewGen Power, GM Trading Stanwell

James Brown- Previously CFO Foodland Associated, CFO GE Commercial

Brian Green- Previously GM Operations, NRG Flinders

Senior Management

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

A strong team of experienced operational and development executives

• Experienced power station management• Over 500 employees across the business

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Diversified by Fuel, Region and Operating Mode

Fuel Split (MW)

Coal31%

Gas69%

Operating Mode (MW)

Peak43%

Region (MW)

Calculations are based on gross station capacityPeak, Intermediate and Base Load split based on capacity factors of <20%, <50% & 50%+ respectivelyAll numbers include Kwinana, which is currently under construction

Diversified business delivers predictable shareholder returns

WA11%

QLD25%

NSW5%

VIC33%

SA26%

Intermediate23%

Base34%

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Predictable Revenues derived from Long Term Contracts and Rolling Hedges

Peaking PPA with 13 year tenor

Peaking PPA with 8 year tenor

Cap contract with 10 year tenor

Base load PPA with 24 year tenor

Base load PPA with 25 year tenor

• Long term off-take agreements are written with high credit quality counterparties

• Revenue indexation provides an underlying growth platform for BBP distributions

• Predictable operating costs reinforce revenue certainty to deliver predictable cash flows

BBP Generation Revenue FY07

UnhedgedPool, 20%

Contracted,39%

Rollinghedges,41%

Oakey

Braemar

Ecogen

Redbank

Kwinana

Contract mix provides predictable revenues and attractive market exposure

Rolling hedges provide managed exposure to attractive market conditions Flinders

20

Carbon Emissions are Lower than the National Average

Source: Cabon intensity estimates from ACIL Tasman & IES2005 Energy production used for calculation. First year energy projection used for KwinanaAggregate BBP generation and major contracts are included in the calculation

Power station Carbon Intensity

(kg CO2/MWh)

BBP Average (NEM) 913

Kwinana Pro Forma 400

BBP Average (Australia) 817

NEM 2004-2005 970

Australia 2004-2005 964

BBP’s exposure to carbon related penalties is minimal

• BBP also receives revenue from the creation of NGACs and GECs

• Future project developments are well positioned to benefit from existing gas powered generation incentive schemes

Attractive Market Dynamics

22

High Demand for Peak Supply across the NEM

BBP is well positioned to capitalise on favourable supply / demanddynamics

• NSW & SA reserve requirements are already in deficit

• Tight supply conditions are conducive to high pool and forward contract prices

• Peak demand determines generation capacity requirements

• Peak demand growth in all regions is forecast to exceed energy growth

• Queensland is the fastest growing region in the NEM

Annual Energy Growth Peak Demand Growth

New South Wales 1.7% 2.7%

Queensland 3.5% 3.6%

South Australia 1.5% 1.7%

Victoria 0.8% 1.9%

NEM Wide 1.9% 2.6%Source: NEMMCO Statement of Opportunities 2005

Source: 10% POE data. NEMMCO Statement of Opportunities July 2006 update, IMOWA, aggregate of each region

~800MW pa growthEquivalent of ~2 Braemar power stations pa

23

Flinders – Strategic Position in Tight SA Market

Tight supply and demand balance

• South Australian demand currently exceeds NEMMCO’s reserve requirements

• Victorian inter-connector capacity is restricted during periods of extreme weather and demand in Victoria

• New capacity is likely to be gas powered, placing upwards pressure on regional pricing

Superior market position

• Flinders Northern & Playford are the only coal power stations in SA and have the lowest short run marginal costs in the region

• Historical revenues have been captured at a premium to the prevailing pool price

Proven ability to manage pool

volatility

• Historical contracting strategies have provided the Flinders portfolio with a predictable revenue stream

• Balance of long and short term contracts to optimise revenue

A unique and flexible asset that earns premium revenues

24

Peak Demand Case Study – A Queensland Day

• Extreme weather patterns cause spikes in electricity demand

• Demand spikes drive price volatility

• Peak generators provide hedge products to retailers for managing price volatility

• Peaking capacity is required to operate infrequently (less than 10%)

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

00:3

001

:3002

:3003

:3004

:3005

:3006

:3007

:3008

:3009

:3010

:3011

:3012

:3013

:3014

:3015

:3016

:3017

:3018

:3019

:3020

:3021

:3022

:3023

:30

Demand (MW)

Extreme Weather Day

Average Day

Hot weather drives air conditioning load through the heat of the day and into the evening

Peaking capacity required

The extreme demand day maximum was a ~15% increase on the average demand day maximum

Peak demand events require low cost, fast start power stations

Source: QLD demand data for Summer 05/06

25

• Key gas and electricity infrastructure was designed to allow for future expansion

• Site location provides access to multiple competing gas producers at minimal transmission cost

• Gas lateral from Kogan North and the Roma to Brisbane Pipeline provides line pack to allow for flexible operation

• Ability to convert to Combined Cycle Gas Turbine and expand capacity at low cost

Braemar – Leveraged to Peak Demand Growth

Strategically positioned to capitalise on peak growth opportunities

Key Information450MW OCGTSite consented for 900MWCommissioned September 2006Completed on schedule and on budgetLong term cap contract with Energex Ltd

Development Pipeline of Growth Opportunities

27

BBP has been Developed over 10 Years

Developed via green field developments and selected strategic acquisitions

28

A Typical Power Station Development

Development undertaken by B&B with committed projects approved by BBP

29

Future Development Opportunities have been Identified

Babcock & Brown has a substantial pipeline of development projects

30

Financial Highlights- James Brown

• Key financials• Distributions• Capital management• Security structure• Sources and uses of funds• Pre IPO funding

32

Key Financials

Balance Sheet ($m)

Balance Sheet FY07 FY08

Net Debt 822 889

Gearing 48% 51%

Capital Expenditure 259 93

1. EBITDA segmentation ignores Osborne contributionRefer to Section 9 of the PDS for more detailed financial information

0%

20%

40%

60%

80%

100%

FY 07 FY 08

Contracted Rolling Hedge Pool Other

Revenue Position

Profit & Loss ($m)

Profit & Loss FY07 FY08

Revenue 537 562

EBITDA 135 168

EBITDA Margin 25% 30%

FY08 EBITDA breakdown by segment1

Intermediate30%

Base Load47%

Peak 23%

33

Distributions

Distribution Policy

Forecast Distributions

9.1% - $45m1

9.6% - $87m

0.0 5.0 10.0

Forecast

2007

Forecast

2008

Reconciliation of EBITDA to gross cash flow

($ million)ForecastJun-2008

EBITDA (after associates) 168

Distributions to minority interests (8)

Movement in WC & other reserves 3

Capex – excluding construction (17)

Financing - Interest / Principal (69)

Tax paid (2)

Dividend Reinvestment2 12

Gross Cash Flow 87

Capex - Construction (76)

Debt - Construction 76

Cash Flow Available for Distributions

87

Distributions paid (87)

Strong operating cash flows

Refer to section 9 of the PDS for more information

Pay all free operating cash flow after:• debt servicing• working capital• maintenance capital expenditure • other amounts prudent to reserve for

1. 9.1% represents an annualised yield2. Applicable from interim 2008

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Capital Management

• BBP will maintain an optimal level of debt at both the asset and corporate levels

• Current conservative gearing level of ~50%

• Investment grade rating targeted

• Interest rate hedging policy in place – currently 90% hedged

• Current project finance debt structures provide opportunities for further refinement

Latent balance sheet capacity to fund future growth opportunities

35

Stapled Security Structure

Provides optimal tax effective distributions to unit holders

Note: Part of loan from BBP to Braemar is an arms length subordinated loan that was purchased by BBP, rather than a shareholder loan

Management Fee• 1.0% of Net Investment

Value• Calculated quarterly

Incentive Fee• 20% of out-performance

against the S&P/ASX 200 accumulation index

• First calculation and payment are deferred until December 2007

36

Sources and Uses of Funds

Sources     Uses  

         

Proceeds from issue of new Stapled Securities 278   Costs & Fees1 43

  Braemar mezz debt acquisition 51

    Financing costs2 3

    Repay BNB SHL interests 25

    Acquisition of minority interests 156

       278

      Primary raising 278

Proceeds from sale of existing Stapled Securities 168   Secondary raising3 168

         

          

1. Costs and Fees is the aggregate sum of costs and fees associated with the IPO, acquiring Flinders and the minority interests in Redbank, Ecogen and Oakey2. BBPCS interest + Flinders3. Proceeds to existing BBPCS holders, Babcock & Brown and Asset Vendors4. Assumes BBP securities list at the issue price of $2.50 per security

Sources

Total 446

Uses

Total 446

BBP will have a market capitalisation of around $900 million4

37

Pre IPO Funding

Pre IPO Funding

• BBPL issued $410 million of convertible securities (“BBPCS”) in 2005 and 2006

• Funds used to acquire assets in the Initial Portfolio

• Holders comprise Foundation Investors, Babcock & Brown employees and

Institutional Investors

• BBPL issued $410 million of convertible securities (“BBPCS”) in 2005 and 2006

• Funds used to acquire assets in the Initial Portfolio

• Holders comprise Foundation Investors, Babcock & Brown employees and

Institutional Investors

Conversion, Reinvestment &

Acquisition

IPO

• 100% of BBPCS Holders2 immediately prior to the Offer have elected to remain

as Securityholders in BBP

• BBPCS Holders will retain an investment of ~$400 million in BBP following the

Offer

• 100% of BBPCS Holders2 immediately prior to the Offer have elected to remain

as Securityholders in BBP

• BBPCS Holders will retain an investment of ~$400 million in BBP following the

Offer

• BBPCS converted into $410 million of Stapled Securities prior to the Offer

• Holders agreed to:

− sell $132 million of Stapled Securities into the Offer

− reinvest and acquire additional Stapled Securities totalling $103 million as

part of the Foundation Offer1

− voluntary escrow for six months from Allotment Date in respect of $185

million worth of Stapled Securities

• BBPCS converted into $410 million of Stapled Securities prior to the Offer

• Holders agreed to:

− sell $132 million of Stapled Securities into the Offer

− reinvest and acquire additional Stapled Securities totalling $103 million as

part of the Foundation Offer1

− voluntary escrow for six months from Allotment Date in respect of $185

million worth of Stapled Securities

1. BBPCS Holders acquiring additional Stapled Securities are entitled to a sub-underwriting fee2. each Holder has retained a significant percentage of their investment in BBP following conversion to Stapled Securities

Offer Structure- Joint Lead Managers

• Offer structure• Indicative post IPO register• Key dates

39

Offer Structure

Offer structure

Forecast distributions

• FY07: 9.1%2 yield (12.6 cps)

• FY08: 9.6% yield, (24.0 cps3)

• 5% distribution growth FY08

• 4% medium term target distribution growth

• Provides fully tax deferred distributions in the forecast period4

• FY07: 9.1%2 yield (12.6 cps)

• FY08: 9.6% yield, (24.0 cps3)

• 5% distribution growth FY08

• 4% medium term target distribution growth

• Provides fully tax deferred distributions in the forecast period4

JLMs & Bookrunners

• Morgan Stanley and Deutsche Bank• Morgan Stanley and Deutsche Bank

Co Lead Managers

• UBS, ABN Amro, Citigroup, Tricom• UBS, ABN Amro, Citigroup, Tricom

• Offer size of $446 million– Foundation Offer of $229 million– Institutional and Broker Firm Offer of $217 million

• Fixed Price Offer of $2.50 per security

• 359 million securities on issue at listing

• Market capitalisation of $898 million1

• Offer size of $446 million– Foundation Offer of $229 million– Institutional and Broker Firm Offer of $217 million

• Fixed Price Offer of $2.50 per security

• 359 million securities on issue at listing

• Market capitalisation of $898 million1

1. Assumes 359 million Stapled Securities on issue and securities list at the Offer Price of $2.50 per Stapled Security 2. 9.1% represents an annualised yield3. Assumes DRP participation is activated from December 07 distribution4. Tax deferral may constitute the distribution of franking credits and the distribution of trust capital

40

Indicative Post IPO Register

Approximately 35% of Securities on issue following completion of the Offer will be subject to voluntary escrow arrangements

Indicative post IPO Register %

Babcock & Brown 10

Vendor Securityholders1 9

Former BBPCS Holders 44

New Securityholders 37

Total 100Babcock & Brown

10%

Vendor Securityholders

9%

BBPCS Holders44%

New Securityholders

37%

1. Vendor securityholders comprise vendors who have sold assets into the fund, part consideration for which are BBP securities

41

Key dates1

Retail broker firm commitments due 12pm, Monday 6 November 20062

Institutional firm bids due 5pm, Monday 6 November 20062

Offer Document lodged Friday 10 November 2006

Retail Offer opens Thursday 16 November 2006

Retail Offer closes Friday 8 December 2006

Settlement Friday 8 December 2006

Allotment date Monday 11 December 2006

Deferred settlement trading Monday 11 December 2006

Normal trading Wednesday 13 December 2006   

   

   

1. Babcock & Brown reserves the right to change the Offer time table2. Timing for Retail firm commitments and Institutional firm bids may be brought forward

42

Unique – Strong Growth – Attractive Yield

• Well managed and diversified business

• A unique opportunity to invest in pure play power generation

• Attractive market dynamics

• Pipeline of attractive development opportunities

• FY07 distribution yield of 9.1% growing by 5% in the first year

• Managed by Babcock & Brown