UPDATE 1-Babcock & Brown Power says buyers circling

(Adds buyer interest)

SYDNEY, Oct 21 - Australian investment fund Babcock & Brown Power Ltd (BBP.AX) said on Tuesday a number of parties have shown interest in buying all or parts of the company as it scrambles to reduce debt.

Babcock & Brown Power (BBP), managed by investment bank Babcock & Brown (BNB.AX), made the comments as it unveiled a review of its business by UBS.

"UBS has received numerous unsolicited expressions of interest for the whole and individual assets of BBP," said Len Gill, BBP's Chairman said in a statement.

"In the current environment, BBP is too highly geared and accordingly will benefit from a substantial equity injection," he said.

Babcock & Brown's business model of buying assets using high levels of debt and bundling them into funds such as BBP has come under stress after the global credit crisis, now in its second year, made access to capital challenging and costly.

Its shares have crashed on concerns over its high debt levels. It has made sweeping management changes, restructuring plans, and asset sales.

The next phase of the UBS review will involve assessment of evolving capital market conditions and the appetite of various parties to proceed with potential transactions, BBP's Gill said.

The BBP board told UBS on Tuesday to canvas the market on the full range of transaction alternatives and to call for expressions of interest from the market as soon as practical, Gill said.

Possibilities include a full purchase of the company, asset sales in strategic packages or other transactions that would reduce BBP's debt, he said.

AGL Energy Ltd (AGK.AX) has said it may be interested in parts of BBP, while Origin Energy Ltd (ORG.AX), which is looking for acquisitions, may also be a potential suitor.

Babcock & Brown Power shares last traded at 12 cents. The stock was above A$3 a year ago. (Reporting by Miranda Maxwell)