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United States: Babcock & Brown dispersal - US equity firm buys wind assets

The North American wind power development group that is connected to bankrupt Australian company Babcock & Brown (B&B) was recently acquired by Riverstone Holdings.

Meantime, the more than 2100 MW of wind power projects brought into commercial operation over the past six years by B&B have been put on the market.

Riverstone, a US private equity firm, purchased B&B's wind development portfolio, retained some 80 employees and committed US$400 million to create a new developer called Pattern Energy. The team hopes to use its experience and seed funding to build 300-400 MW of new annual wind power capacity. "It's a new direction," says CEO Mike Garland. "But it also may be a little bit of 'Back to the Future' for us in that it's really the same team that did all of our work at Babcock & Brown."

The existing portfolio comprises around 20 projects totalling 1550 MW that were owned by publicly traded Australian company Babcock & Brown Wind Partners, which was renamed Infigen earlier this year. Another 569 MW of projects were also developed under B&B but were not transferred to Infigen ownership. Those came online in late 2008 and early 2009, prior to the Riverstone deal, and will also be sold.

B&B is also seeking a buyer for Bluewater Wind, its offshore development arm, which has proposed projects on the coasts of the Northeast and Delaware. Pattern expresses little interest in developing offshore wind. "Offshore is a tough market for a new company," Garland says. "So we will probably go into offshore in a little slower way than we would have done in the past. It's something that we still have our eye on, but we're not pursuing it heavily right now."

No completed projects

Aside from the 28.8 MW Tres Vaqueros in Contra Costa County, California, a plant the company plans to expand, the development group Pattern retained no completed projects. It intends, however, to own and operate the bulk of future developments either entirely on its own or through joint ventures. Garland believes utilities could be among Pattern's future partners and thinks the time is right to take advantage of the surplus cut-rate turbines in the market (page 65). He also believes that more money may be invested by the company, which he says has approximately US$17 billion under management across six investment funds.

"The US$400 million from Riverstone may not be the total investment that their funds and their fund investors will be making in our business if we're successful with our business plan," Garland says. "We have the opportunity, if the markets are right, to make a number of really good things happen. We think it's a terrific situation."

First up is Hatchet Ridge, a 101.2 MW project in Shasta County, California, which comprises 44 Siemens 2.3 MW turbines. Construction is expected to begin within a few months. The company will then turn to developments in New York, Illinois, Pennsylvania, Nevada and Canada, without limiting itself to any specific region. "All of those states and regions are ones where we're pretty confident that we'll have projects in the next twelve to twenty-four months," Garland says. "We have about three or four projects where we hope to be starting construction within the next six to twelve months. But we're not exactly sure which one will follow next."

Pattern also has an interest in developing transmission projects. Although the company currently owns no cables, Garland believes that could change. "We think that we're well positioned to develop transmission access for our wind projects," he says. "We do independent transmission projects as well as complementary projects for our wind projects." Pattern is also open to natural gas plants, including the proposed 690 MW Navarro Energy Center in Texas.

Riverstone, meanwhile, will review Pattern's business plans and major investments while maintaining the majority of Pattern board seats. Relationships between the two companies and their executives go back several years, Garland says. "The nice thing about Riverstone is they have a lot of contacts and relationships and experience in the energy business," he says. "So we feel like they'll be bringing good ideas and good contacts and good opportunities to us."

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