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Global wind fund turns a profit -- BBW's full year results

A significant increase in net operating cash flows and higher revenues from its US assets pushed Babcock & Brown Wind Partners (BBW) back into profit in fiscal year 2006-07. The global wind fund manager, which is listed in Australia, returned a net profit of A$13.9 million to the end of June, compared with a loss of A$16.2 million the previous year. Despite productivity 10% below forecast, revenue increased by 42% to A$103.7 million and earnings before interest, tax and depreciation (EBITDA) by 90% to A$99.7 million, compared to A$52.5 million in 2005-06.

BBW continued its aggressive acquisition strategy during the year, which saw its operational installed capacity grow by 94% to 1168 MW and forecast generation by 90% to 3524 GWh a year, "Securing BBW's position as one of the top five participants in the industry globally," according to CEO Miles George.

Wind speeds fell below BBW's long term mean forecast at a number of its sites, but were particularly significant in Spain, where five out of six plant in the 158.3 MW Olivo portfolio underperformed. Although this was partly offset by power purchase prices in Spain marginally higher than predicted, the company says external reviews are taking place in order to understand what caused the "poor year." BBW is also assessing the potential impact of climate change on mean wind speed values worldwide.

BBW says its increasingly diverse portfolio will help smooth out these regional variations. The company spent A$698 million on new acquisitions during the year, of which A$478 million was in America. Most significant of these was the purchase of the 410 MW US06 portfolio from parent Babcock & Brown (B&B), comprising the Buena Vista, Aragonne, GSG Wind Energy, Mendota and Allegheny Ridge Phase I installations. The company also acquired interests totalling 136.10 MW in the Sweetwater III, Kumeyaay, Bear Creek and Jersey Atlantic plants from B&B's US05 portfolio. Production from these plant was a "significant contributor" to the revenues for the year, contributing A$39.4 million, or 31.7% of EBITDA from operations. This despite low winds at a number of sites, combined with lower than expected availability at Allegheny Ridge due to blade failure (Windpower Monthly, May 2007) and teething problems at several other plant.

In Spain, BBW acquired the Monte Seixo, Serra do Cando and Conjuro complex during the fiscal year, a total of 76 MW bought for EUR 111 million, while in Germany it added 20 MW with the Eifel and Kaarst installations, and in France 30 MW under construction at Fruges. As of last month, this brings its portfolio to 35 plant worldwide representing 1487.40 MW installed or building, including the fully operational 31.2 MW Valdeconejos plant in Aragon, Spain, just acquired for EUR 51 million as part of a 2005 deal to buy 450 MW from Gamesa.

According to BBW, the resulting 90% growth in earnings reflects the increased size of the US wind portfolio plus full year contributions from a number of wind farms, including all six Olivo plant. The nearly A$700 million spent on acquisitions has "clearly delivered tangible benefits for security holders," asserts George.

Next wave

Installed capacity looks set to increase by a further 637 MW if proposed deals in the US and Portugal get final approval at BBW's annual general meeting on November 9. BBW intends to acquire 375 MW in America under the US07 portfolio from parent B&B, while in Portugal it will net 262 MW with the purchase of at least 50% of the company which holds the operating wind plant assets of Enersis, a local developer bought by B&B in 2005. Also coming on stream between now and mid-2008 will be 159 MW at Lake Bonney II in Australia, the full 52 MW at Fruges in France, 2 MW at Kaarst in Germany and 70 MW at Allegheny Ridge II. Altogether, this will add 920 MW of operating assets in the medium term, bringing total installed capacity to 2124.50 MW. As a result, net operating cash flows are expected to increase by at least A$52.2 million to A$175.2 million in the next financial year.

A highlight of the year was the completion by BBW of the world's first global wind farm portfolio financing, a EUR 1.03 billion deal which all the company's assets and growth expectations are combined in a single, highly flexible facility (Windpower Monthly, June 2007).

Just prior to posting its annual results, B&B announced that Alinta shareholders had approved the A$8 billion sale of the Australian utility's assets to a consortium led by B&B (Windpower Monthly, June 2007). Under the deal, BBW will net A$201.5 million from the sale of the Wattle Point wind farm. BBW will use the proceeds to fund "more attractive investment opportunities," says BBW chairman Peter Hofbauer.

The company has access to a "very attractive pipeline" says George. This includes around 1400-1500 MW under development by B&B in the US and Europe for 2008 and an additional 1000 MW already identified for 2009. In addition, the company has framework agreements in place with Gamesa for the delivery of up to 400 MW in Spain and with Plambeck for up to 290 MW in Germany in the next two years. All in all, "BBW remains well placed to further build and consolidate its position as a leading global wind energy business," says George.

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