B&B converts energy to cash

Sydney Morning Herald
Tuesday 18/11/2008 Page: 21

THE long-awaited sale of 30 Portuguese wind farms by Babcock and Brown and its ASX listed wind energy offshoot was finally sealed yesterday but with differing financial outcomes for the debt-troubled pair. B&B, which originally acquired the Enersis portfolio of operating turbines and fields under development, will make a profit on the deal - albeit a smaller one than expected when it put its 50 per cent interest on the market in February.

Its net proceeds from the sale of Enersis to a consortium of investors led by a local company, Magnum Capital, will amount to $285.8 million out of a total enterprise value price of $2.2 billion. The sale also includes from B&B's end several wind energy service companies. B&B, which is in the process of selling assets to bring down its corporate borrowings, plans to use its share of the proceeds to pay off another tranche of project debt which is secured against its other European wind assets.

But the deal does nothing to reduce its overall debt burden, a prospect that saw the group's shares shed 7 cents to 41 cents. The move has also been less beneficial in terms of profit for B&B Wind, to which B&B sold the other half share in Enersis just over a year ago. B&B Wind had to book a loss of $11.7 million after taxes, costs and foreign exchange gains.

But its share of $998 million from the total sale price will allow it to cut its own debt pile by $718 million, given that it also had a half share in Enersis's sizeable borrowings. The remaining $274 million of net cash will help the hard pressed wind energy operator to conduct an on-market buy-back of its shares with the aim of boosting the sharemarket price of its securities. That news helped to boost B&B Wind's shares by 2.5 cents to 82 cents yesterday.

The sale of the pair's joint interests had been hampered by a fall in prices and a lack of finance available to potential purchasers as a result of the global credit crisis. Yesterday's announcement underlined their need to get the process out of the way as they signed the deal and settled on it with the buyer simultaneously. It will allow B&B to push on with the disposal of its other wind assets and development projects in France, Germany and Greece. But there was still no indication as to when those deals will come to fruition.