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Reborn firm sheds shackles of the past -- Infigen rises from ashes of B&B

Within days of launching on the Australian Stock Exchange as Infigen, the entity previously known at Babcock & Brown Wind Partners (BBW) saw its share price climb to A$1.39 ($1.09), up from a low of A$0.522 ($0.408) in November when the pure-play wind fund was hit by the worst of the fall-out from the collapses of its former manager, Babcock & Brown (B&B). The Australian financial group went into voluntary receivership on March 13.

Infigen, unleashed from B&B and with a new identity, started trading on May 5. It remains one of only a handful of utility-scale wind farm owners operating independently of the mainstream power sector. The firm's focus is on building up its business in Australia and the US. "The outlook for renewables in Australia and the US remains very positive," says Miles George, Infigen's managing director. Miles formerly headed up BBW.

The company will be "an independent, leading cost competitive provider of utility scale renewable energy, with capabilities in development, operation and management of wind farms." Its market capitalisation is around A$1.1 billion ($861.2 million) and it has interests in 41 wind farms with a combined capacity of 2250 MW, in Australia, the US and Europe (table). Infigen, George adds, "has no debt refinancing deadlines and all remaining capital expenditure commitments will be funded with cash."

In Australia, draft legislation to achieve 20% renewables supply by 2020 (page 34) means wind development is set to ramp up significantly, says George. He believes that 40-50% of Australia's new generation capacity in the next ten years is likely to come from wind, with the bulk of the rest coming from gas. "The expanded renewable energy target legislation will provide an immediate stimulus for the industry in the short to medium term," he says. From 2030, carbon trading will start to make an impact, he adds.

Infigen is already the leading wind power generator in Australia, with 508 MW either installed or under construction. It also recently agreed to acquire a 1000 MW wind project development pipeline in Australia and New Zealand from B&B. This is part of a A$19.5 million ($15.27 million) deal, which includes the acquisition of up to 100% of B&B's US wind asset management business and its minority interest in three BBW wind farms, Caprock (20%) and Aragone (5%) in the US and Niederrhein (1%) in Germany.

The deal, says Infigen, allows for organic growth in Australia and New Zealand from 2011, brings US asset management capability in-house for further operational performance improvements and cost savings, establishes US development capability over the medium term, and consolidates its overall portfolio.

American assets

With signs that the US is seriously considering a new federal support system for renewables, George is confident of growth in the American market. As well as the deal for B&B's wind asset management business there, Infigen controls just over 1000 MW of wind capacity in the US. Its US assets, though, may go up for sale -- Infigen has appointed an investment bank to help it "test the market."

The Children's Investment Fund (TCI), a UK hedge fund and Infigen's largest shareholder, with just under 15%, is pushing for the US assets sale, but wants it to go further. TCI is calling on the Australian firm to break itself up completely and sell off the pieces. This, it says, is the best way for shareholders to realise the value represented by Infigen.

Meanwhile, Infigen is continuing with its plan, first announced in February 2008, to pull out from Europe completely, selling off what it calls its "non-core" assets in France and Germany.

The company hopes to step up its research and development activities and has just applied for funding from Australia's federal Renewable Energy Demonstration Program for a large-scale electricity storage experiment at one of the projects it is acquiring from B&B. This will most likely use sodium sulphur batteries, supplied by Japan's NGK Insulators, to store the electricity generated by the wind farm.

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