Origin Energy Limited (ORG) said it has reached a conditional agreement with Babcock & Brown Power Limited (BBP) to assume the long term power purchase and gas purchase and sales agreements associated with the 180 MW Osborne cogeneration power station in South Australia. The company said it is expected to be earnings accretive from financial year 2009/10.

Executive general manager energy markets, Frank Calabria said, assumption of the Osborne agreements would provide Origin with flexible baseload and peaking cover for its current retail electricity portfolio until 2018 and complement Origin’s existing South Australian power stations at Quarantine and Ladbroke Grove.

Origin said the structure of the Osborne agreements and the plant configuration mean that it would have the required 150 MW of baseload capacity and access to around 30 MW of peaking capacity.

The company said the flexibility provided the opportunity for Origin to optimise its power purchases to meet its retail portfolio requirements.

Origin is also able to supply gas to Osborne from its extensive portfolio when the existing gas purchase agreement expires.

Flinders Osborne Trading Pty Ltd (“FOT”), a wholly owned subsidiary of BBP, is the holder of the long term agreements for the purchase of up to 180 MW of electricity from Osborne power station and the sale of 13.5 PJ of gas per annum to Osborne power station until 2018.

FOT also holds a gas purchase agreement with AGL for gas that it sells to Osborne power station until the end of 2010.

Origin said it would assume all of these contracts for a nominal consideration of $1.

Completion of the transaction, which is expected in June 2009, is subject to a number of conditions.

At 1022 AEST, Origin shares were up 36c to $15.86, while BBP shares were halted at 10c.