Tuesday 14/11/2006 Page: 5
Wind is plentiful and cost effective, reckons B&B Wind.
Adam Courtenay reports.
Global demand for electricity is expected to double in the next 25 years and about one-third of present energy-producing operations must be replaced. But the question is, which renewable energy sources will be capable of filling the gap? In Australia, given the announcement by the government that it will invest $75 million in a massive solar energy undertaking in Mildura, many would think solar energy is the obvious candidate.
But Babcock & Brown Wind Partners, a specialised fund focused on the global wind energy industry, thinks differently. Wind, it says, is extremely cost-effective and Australia has copious supplies of it.
The company says the cost of wind energy production is less than the cost of producing electricity by new gas power stations - at least in Europe, the US and in Australia, its chief areas of investment. It also says wind can compete with traditional fossil fuels such as coal, particularly if you include the cost of carbon itself.
B&B Wind has been nominated for a 2006 Australian corporate sustainability special award for the environment, presented by online magazine Ethical Investor. The company has been nominated for the award of sustainable company of the year among the S&P/ASX 200 companies.
In Australia, the mechanics of organising large scale investment in energy sources such as wind power depend almost entirely on a government scheme, the Mandatory Renewable Energy Target .
So far, there are 41 wind farms providing 2200 gigawatt hours of electricity annually, which is about 0.5 per cent of the country's present energy requirements. This is the equivalent of powering 30,000 homes.
European wind farms, led by the large German and Spanish markets, produce about 20 times Australia's output. Wind farms in the US produce about five times. This may be minuscule compared with other, mostly carbon-related forms of energy, but B&BWP believes strongly in both the investment and environmental rationale for wind power.
Globally, the sector grew by 24 per cent in terms of cumulative installed capacity in the year to March 2006.
B&BWP was spun off and floated by investment group Babcock & Brown last year, and reported a net loss of $16.2 million in the 2005-06 fiscal year, just eight months after listing.
However, the fund remains sanguine about its prospects, recently increasing its projected unit payouts for fiscal year 2007 from 11.24 per stapled security to 12.54 per stapled security. This suggests that some of its acquisitions will be reaping returns for shareholders in the near future.
In May, it raised about $119 million from institutional investors for wind farm acquisitions in the United States. It has grown its portfolio from four wind farms to 19 since listing, with assets spread across Australia, Europe and the US. In all, B&BWP's farms produce over 1300 gigawatts hours a year.
The company believes the investment rationale for wind energy continues to improve as world demand for electricity increases and concerns about global warming deepen.
"We enter a market with a more mature and diverse portfolio and with a balance sheet which is undergeared," chief executive Peter O'Connell said in September.
Air flow
- There are 41 wind farms providing 2200 gigawatt hours of electricity annually.
- European wind farms produce about 20 times Australia's output.
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