Sept. 23 (Bloomberg) -- Babcock & Brown Ltd., EDP-Energias de Portugal SA and Efacec Capital SGPS SA agreed to set up a partnership to develop ``experimental'' wave power projects, benefiting from government grants for renewable energy.

The so-called Waves of Portugal venture will be 45 percent- owned by Portuguese utility EDP, while Babcock's Enersis unit will have a 35 percent stake and Efacec, Portugal's biggest maker of industrial equipment, will hold the remaining 20 percent, according to a statement e-mailed today.

Subsidies from governments for renewable-energy generation have spurred demand for turbines and related equipment. Portugal is seeking to attract investment in production facilities such as Enercon GmbH's windmill factories in northern Portugal, as well as in new wind parks and dams.

``We expect wave power to become a widespread renewable- energy technology and look forward to the benefits that investing at this early stage will bring,'' Antonino Lo Bianco, European head of infrastructure at Babcock, said in the statement.

The partnership's first project, in Agucadoura on the northern Portuguese coast, was inaugurated today and will start generating power with three Pelamis wave-energy converters, according to the statement. Edinburgh-based Pelamis Wave Power Ltd. produced the equipment and owns 23 percent of the 9 million- euro ($13 million) Agucadoura development.

EDP, based in Lisbon, has an option to double its stake in the Agucadoura venture by buying a 15.4 percent interest from Australia's Babcock. The second phase of the project will require a further 25 semi-submerged converters, each about 140 meters (460 feet) in length, to boost installed capacity to 21 megawatts.

The project, located about 3 miles off the coast, will benefit from a long-term ``feed-in tariff'' for the electricity it generates, according to the statement. Such tariffs require utilities to buy renewable energy from a range of producers, from large-scale developments to households with solar panels, for a set rate.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

Last Updated: September 23, 2008 10:39 EDT