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Babcock & Brown plans to sell wind farms

Babcock & Brown, the Australian infrastructure investor, is planning to sell its European wind farms in a deal that could be worth between €3.5bn ($5.5bn) and €4bn.

The group will say today that it has appointed Deutsche Bank and JPMorgan to sell its European wind energy assets and those owned by Babcock & Brown Wind Partners, its quoted wind energy fund. These include wind farms in Spain, Portugal, Germany, Italy and France.

Babcock & Brown Wind Partners owns about 3,000MW of wind generation capacity worldwide, with just over 800MW of this in Europe.

But the group said last month that the market had not recognised the value of its European assets, and it would look at selling them. The wind energy sector is attracting strong investor interest, and European wind businesses have been changing hands at high prices.

For example, in January Scottish and Southern Energy of the UK agreed to pay €1.45bn for Airtricity, the Irish wind farm operator.

Babcock & Brown said the scope of the wind farm sale was not fixed but was “very likely” to include Enersis, the Portuguese wind business jointly owned by Babcock & Brown and Babcock & Brown Wind Partners.

Babcock & Brown bought Enersis in December 2005 for €490m and then sold half of the business to its quoted wind fund.

Proceeds from any sale of the wind farms would be used to reduce debt, fund future investments and potentially return funds to shareholders, Babcock & Brown Wind Partners said last month.

The fund spent A$1.78bn ($1.63bn) on acquisitions and new projects in the second half of 2007, increasing its wind generation capacity by 67 per cent. But its shares have underperformed, and Babcock & Brown Wind Partners said it traded at a “significant discount” to its peers.

Miles George, chief executive of Babcock & Brown Wind Partners, said the fund had already received “very strong interest from prospective purchasers” of the wind farms.

A person close to the deal said the assets could be sold for between €3.5bn and €4bn.

Babcock & Brown Wind Partners said it aimed to find a buyer for its European wind farms within the next six months.

Babcock & Brown tends to invest in earlier-stage wind projects, which are more risky. It then sells them to its Wind Partners fund when they are more developed.

The fund listed on the Australian Stock Exchange in October 2005 and has a market capitalisation of about A$1.3bn.

By Rebecca Bream in London

Financial Times

31 March 2008