First listing of pure play global wind fund -- Babcock & Brown launches IPO to finance wind asset purchases

With its launch of the first global investment fund focused purely on assets in wind energy generation, Babcock & Brown Wind Partners (BBWP) was set to make wind industry history last month. The company, formerly known as Global Wind Partners, was seeking to raise A$361-396 million from an initial public offering (IPO) launched on the Australia Stock Exchange. The offer, underwritten to A$361 million, is not open to the public, but is confined to foundation members, brokers and institutions only.

"BBWP provides a unique opportunity to invest in an ASX listed fund of significant scale focused solely on the growing global wind energy generation sector," says the company's Peter Hofbauer. Its initial wind portfolio (table), built up by Global Wind Partners, will consist of 15 wind farms in Europe, the US and Australia Their combined installed capacity is 671.6 MW. Framework agreements in place in all three regions, worth about A$300 million, will more than double existing capacity.

BBWP believes a key success factor in its strategy is to spread risk through diversification -- by geography, currency, regulatory regime, customer and equipment supplier. The result will be stable operating cash flows, it says. The company will not take on construction risk: wind assets will only be bought once in operation, states BBWP.

Strategic alliances

Noting that wind sector growth projections are for $78.2 billion of investment up to 2010, Hofbauer says BBWP intends to capitalise on that opportunity. "We expect BBWP to expand its portfolio of assets after listing through its relationship with Babcock & Brown," he says. The intention is to exploit Babcock & Brown's strategic alliances in the wind sector and combine its "significant experience in sourcing and financing wind energy generation projects with BBWP's competitive cost of capital."

Among BBWP's "specific near term growth opportunities" is an agreement to acquire Class B membership interests in four US wind farms totalling 216 MW, the rights to 450 MW in Spain over the next few years, and first refusal in relation to the acquisition of specified wind farms in Germany before the end of 2006. In addition, BBWP has an agreement to acquire the 160 MW second stage of the Lake Bonney Wind Farm in South Australia, currently being developed by Babcock & Brown in partnership with National Power. It already owns the 80.5 MW first stage.

Repowering

BBWP believes it is well positioned for medium term growth and sees a "long term investment horizon with repowering opportunities." The decision to purchase completed projects only ensures predictable operating costs and manageable construction and commissioning risks. New project acquisitions will be made using the equity finance from the IPO, mostly backed by project financing debt on a non-recourse basis.

BBWP will be managed externally, under a 25 year agreement, by Babcock & Brown Infrastructure Management. Babcock & Brown, a global investment bank, has significantly stepped up its interests in wind energy generation in recent years. The company claims 16 years of experience in the sector as an advisor, developer and investor. It says it has arranged financing with an estimated value of $3 billion for over 3000 MW of wind energy projects and companies. Babcock & Brown, also listed in Australia, will hold a 32.5% interest in BBWP at the time of listing, assuming no oversubscriptions.

BBWP is offering 258 million shares at A$1.40 each to reach its minimum A$361 million target, while allowing for over subscriptions to raise an additional A$35 million. Upon listing, BBWP will have a market capitalisation of between A$657-692 million.

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