A breath of fresh air

Herald Sun
Monday 29/6/2009 Page: 27

In these turbulent times few have remained standing as tall as former Babcock and Brown satellite fund Infigen, writes Olga Galacho

Infigen Energy, short for infinite generation, encapsulates the opportunism expressed in the old Chinese proverb: When the storm comes, some build walls, others build windmills. The $1 billion listed windfarm owner has risen from the ashes of its scorched, former parent company Babcock and Brown, which was burnt beyond recognition in the credit crisis fireball last year. It is the renamed, revamped B&B Wind Partners, which owned and operated the windfarms developed by Babcock and Brown.

This week, Infigen Energy will begin not just the new financial year, but a new life as an independent owner and developer of windfarms in its own right. "We now own a great pipeline of projects and are looking forward to capturing the development profits that we couldn't collect when we were associated with Babcock and Brown," managing director Miles George said. The company has worked hard to disassociate itself from its financially distressed former parent since December when its links were officially severed. "While there was a perception that we were part of Babcock and Brown, there was a negative sentiment towards us," Mr George said.

A chemical engineer by profession, Mr George worked at infrastructure investment company AIDC before joining Babcock and Brown's wind operations in 1999. With palpable relief, he adds that last Monday, Infigen Energy completed its move out of B&B's Sydney offices and tomorrow it will make a final payment of $5 million out of the $40 million in severance fees the parent company demanded. Since splitting away, Infigen Energy has streamlined its portfolio by selling windfarms in Spain and Portugal, and putting its French and German ones up for sale to focus on Australia and the US.

Mr George said these are the two markets that will produce most opportunities for Infigen Energy when renewable energy targets are mandated. "It is our aim to grow in the markets where we have an advantage, which we don't have in some European countries where local utilities have a greater competitive edge." In the US, windfarms accounted for 42% of the new power generation built last year. On Wednesday, the company signed off on a $23.8 million deal to buy out B&B's interest in its Australian and US wind assets.

In Australia, Infigen Energy is twice as large as its nearest rival with generation assets that have a total capacity of 508 MW, and it is the sixth biggest player in the US with 1069 MW of capacity. When fully developed, Infigen Energy's Australian pipeline of 12 windfarms will add about 1000 MW of capacity to its current portfolio. Victoria's largest power generator, the coal-fired Loy Yang A, has a capacity of 2100 MW. "We are quite confident the renewable energy target will be implemented by the Federal Government this year," Mr George said of the much anticipated but yet to be enacted legislation.

The target will require electricity retailers to progressively source 20% of their power from renewable energy generators from 2010 to 2030. He added he was pleased that the proposed legislation included an increased penalty price for retailers not complying with the target to $65 a MW hour from $40 previously, and that the fine will not be tax deductible. Mr George estimates the expanded target, when it finally comes into law, will help to create 30,000 jobs as windfarm operators develop their pipelines.

Infigen Energy expects to finish building a windfarm near Canberra and another in South Australia by this year and is likely to start the first of its pipeline projects in about 12 months. The company has been listed since 2005 and employs 40 staff in Australia. After soaring to $2.02 a share, the stock took a nose dive along with other Babcock and Brown satellites, languishing around the 800 mark until earlier this year, when the parent company sold its 10% stake in Infigen Energy. A buy-back for up to 30% of the shares is under way, with 7% of the stock already reclaimed. On Friday, Infigen Energy shares closed at $1.18.