Australian alternative asset manager Babcock & Brown Ltd is reported to be selling assets in its Enersis wind energy business in Portugal to repay debt. Reports suggested that the value is estimated at around €1.15 billion ($1.4 billion), and that the sale is to a group of investors led by Magnum Capital.
In a statement to the Australian Stock Exchange, Babcock & Brown said it sold its 50 per cent stake in Enersis, which it co-owns with its wind energy fund, for net proceeds of A$285.8 million ($182 million).
Babcock has lost more than half its value since 6 November, when an analyst from ABN Amro predicted that the company might breach loan agreement on account of the global credit crisis, which has in turn made selling assets more difficult. The amount it has received from the sale would be utilised to pay A$9.6 billion of debt, and does not include the A$400 million Babcock & Brown committed to paying its bankers in June.
Earlier this month, two Australian companies – Allco Finance Group Ltd and ABC Learning Centres Ltd – were placed under the control of outside managers. Babcock is now running against other global sellers of distressed assets to avoid a similar fate.
In December 2005, Babcock had bought the Enersis project for €490 million, after which it sold half to its affiliate Babcock & Brown Wind Partners. The company has announced plans to exit its remaining stake in wind assets in Portugal, France, Greece and Germany.
In a separate statement, Babcock & Brown Wind Partners said that it would receive net cash proceeds of around A$274 million from the sale of its 50 per cent stake, where it has made a loss of A$11.7 million.
The acquirers are an investment group lead by Madrid- and Lisbon-based Magnum, who will chip in around 65 per cent of the equity for the deal. Magnum is the buyout fund started by former CEOs of Banco Santander SA and EDP - Energias de Portugal SA said in a statement.
The remaining 35 per cent is funded mainly by Portuguese investors, including Espirito Santo Capital, Banco Espirito Santo SA's private equity firm.
The €1.2 billion investment by Magnum and its partners will give it a 515 megawatts project of wind assets, already in operation, with 156 megawatts of assets under construction in Portugal.
A statement by Magnum Capital said that it was the largest deal in the European wind energy sector ever done by a private equity firm. The firm said that it was confident of remaining in the alternative energy sector despite the financial crisis eroding investments in the sector during recent months. The fact that the transaction was concluded amidst the biggest global financial crisis ''highlights the consortium's investment capacity at a particularly complex moment," the company said.
Electricity produced by wind power is guaranteed under a fixed-tariff regime for 15 years in Portugal, which ensures that the income projections would not be impacted by the current economic crisis.