Babcock & Brown changes wind direction

Babcock & Brown Wind Partners and its parent group Babcock & Brown are to offer their European wind energy assets for sale after becoming frustrated by the low market valuation of BBW shares.

The joint initiative was announced on Thursday, and although B&B has an exclusive management and advisory arrangement with BBW, the two entities may appoint an outside investment bank to help market the assets.

BBW's European wind portfolio is worth more than $1.6 billion, based on its own current market valuation of $2.1 million per megawatt. However, BBW argues that similar assets in Europe are trading at more than double that valuation.

If it can achieve a sale of significant scale, it hopes the valuation multiples of such a transaction will flow through to the rest of its portfolio.

BBW said its relatively low trading multiples – 13.8 times forecast 2008 Ebitda compared to more than 18 times for listed European wind specialists – has been hampering its ability to source new assets in third party tenders.

BBW CEO Miles George said if the company was to trade on similar multiples to its European peers, that would translate into a market price of more than $3 for its listed securities, compared to the recent market price of around $1.45.

George said he could not explain the valuation gap, other than to suggest that BBW was a relatively new player in the market and its listing on the ASX might make it remote from the major wind energy investors.

BBW chairman Peter Hofbauer, who is also head of infrastructure at B&B, said any assets would only be sold at a profit. He said the potential sale did not reflect any short-term debt or funding issues.