Business Activities
Financial advisory and arrangement
The Infrastructure Division has built a strong reputation for its ability to execute complex transactions requiring innovative financing solutions. Babcock & Brown's success in this field has been acknowledged through a high level of repeat business and its receipt of a number of industry awards. Awards achieved include:
- 2008 The Asset Asia - Most innovative deal/Best M&A deal - Alinta Acquisition
- 2008 Infrastructure Journal's Global Deal of the Year for the BBW Global Wind Portfolio Refinancing
- 2008 Infrastructure Journal's Renewables Deal of the Year for the BBW Global Wind Portfolio Refinancing
- 2007 Euromoney Project Finance Magazine Deal of the Year
- 2007 PFI Awards 2007 - 'Oil & Gas Deal of the Year' - Coogee Resources
- 2007 PFI Awards 2007 - 'Bond Deal of the Year' - Reliance Rail
- 2006 Project Finance International Magazine - EMEA Renewable Deal Of The Year For 2006
- 2005 Project Finance International Award - Global Equity House of the Year
- 2005 Renewable Energy Awards - Equity Provider of the Year
- 2003 Financier of the Year - American Wind Energy Association
- 2003 Asian Infrastructure Deal of the Year (Pusan Newport) - Project Finance International
- 2003 Asia-Pacific Project Finance Advisor of the Year- Project Finance International
- 2003 European Utilities Deal of the Year (City of Mannheim) - Asset Finance International
- 2003 US Power Distribution Deal of the Year (Tennessee Valley Authority) - Asset Finance International
- 2002 European Renewable Deal of the Year (Eurovento) - Project Finance
- 2002 European Manufacturing Deal of the Year (Stendal Pulp Mill) - Project Finance
Principal investment and investment management
Babcock & Brown has successfully parlayed its industry expertise, experience and relationships developed as an advisor into successful principal investment businesses in Australia, North America and Europe. Babcock & Brown has acted as a principal, developer, equity sponsor and bridge financier, and has also purchased portfolios of completed infrastructure assets. Babcock & Brown's typical focus is on the "risk capital" component of any funding, being the equity, preferred equity or subordinated debt. On limited occasions Babcock & Brown may invest in the direct senior debt component of the capital structure.
Sector focus and experience
Over the past 20 years, Babcock & Brown has completed transactions across a wide range of infrastructure industry sub-sectors but has to date chosen to focus on several specific sub-sectors where it believes it has a competitive advantage. Babcock & Brown's recent experience in these sub-sectors is described below.
Renewable Power Generation
The renewable power sector, in particular the wind sector, is an important focus for Babcock & Brown.
During 2005 a decision was reached by existing security holders of Global Wind Partners (GWP), to seek an Australian Stock Exchange listing of the fund. Following a restructure, the ASX listing of Babcock & Brown Wind Partners (ASX: BBW), occurred on 28 October 2005. Under the listing 283 million new Stapled Securities were offered raising $396 million. The market capitalisation of BBW at the listing price of $1.40 per security was $692 million.
At 31 December 2007 Babcock & Brown managed wind farm projects, on its own balance sheet or on behalf of BBW with an operating capacity of 2,879MW, projects under construction of 1,355MW, and has a pipeline of projects under development of in excess of 15,000MW expected to be delivered over the next five years.
During the 12 month period ended 31 December 2007 Babcock & Brown arranged the acquisition of 13 wind farm projects for BBW from its own pipeline and from third parties in the US, Europe and Australia, with a total installed capacity of approximately 880MW.
On 19 December 2005 Babcock & Brown announced the acquisition of 100% of the issued share capital and shareholder loans of Enersis II SGPS S.A. ("Enersis") for approximately 490 million. Enersis is one of the largest and most successful integrated renewable energy companies in Europe with hydro and wind projects in Portugal, Spain and France along with a significant development pipeline in these markets. In addition Enersis has small investments in bio-fuel and wave technology projects.
During 2007 Babcock & Brown sold BBW a 50% interest of a company that holds the Enersis operating wind farms totally 262MW (net for BBW).
Conventional Energy Generation & Distribution
Babcock & Brown is active in developing and acquiring conventional power projects through investing, underwriting and/or syndicating equity. Babcock & Brown also acts as an advisor, particularly where it has been able to use its project and structured finance skills to enhance returns to itself, its co-investors and/or its clients.
During 2006 Babcock & Brown consolidated its equity holdings in its portfolio of conventional power assets to establish a Babcock & Brown branded power generation business. BBP commenced trading on the ASX in December 2006. The business has a portfolio of assets with a diversified mix of locations, fuel sources, plant types and off-take arrangements.
Following the listing of BBP, Babcock & Brown has continued to seek, identify and initiate new development assets in the conventional power industry.
During 2007 Babcock & Brown continued to focus on the development of projects in the conventional power generation industry. Development revenue was recognised on the Kwinana, Wagga, Wambo and Rocky Point power generation projects.
In September 2007, Babcock & Brown announced that it had reached financial close on a new 400MW, US$450 million (A$512 million) HVDC transmission line from East Bay to San Francisco, the Trans Bay Cable project.
Construction of the project has now commenced.
During the period, Babcock & Brown acquired Celanese Corp's Pampa, Texas chemical plant site which is located near an existing Babcock & Brown wind site development area in Texas. This site has the potential to form a platform for the development of clean coal generation projects as well as additional wind energy projects in the region.
In December 2007, Babcock & Brown announced that it has, together with BBI and a syndicate of investors and Babcock & Brown managed accounts, acquired an 80% holding in MidCon LLC (MidCon), which owns the Natural Gas Pipeline Company of America (NGPL) and related businesses. This transaction reached financial close on 15 February 2008 with Babcock & Brown selling down its interest in the business while retaining management of the investment.
Private Finance Initiatives (PFI) and Public Private Partnerships (PPP)
Babcock & Brown has been an active participant in the PPP sector as a principal since 1997 and prior to that as an advisor - initially in the UK and now in a number of different countries. Through these Public Private Partnerships, which typically have a contract period in excess of 25 years, Babcock & Brown is in a position to earn investment returns, development fees, performance fees, and management fees.
In October 2006 Babcock & Brown announced an intention to list BBPP, a fund with an investment portfolio focused on infrastructure assets with a public or social character such as those developed under PPP or PFI initiatives. BBPP raised £300 million and successfully listed on the London Stock Exchange in November 2006. Babcock & Brown itself continues to be an active developer of projects in the public infrastructure sector.
During 2007 Babcock & Brown's activities in the PFI/PPP sector expanded significantly beyond its traditional markets of the UK, and more recently Australia, into a number of European countries and the North American region. BBPP, Babcock & Brown's London Stock Exchange listed social infrastructure fund, was a significant benefactor of this expansion. BBPP's portfolio of projects expanded from 22 when it listed in November 2006 to 30 at 31 December 2007.
Transport
The Infrastructure Division is actively involved in transportation infrastructure including ports, toll roads and rail assets. The Division is currently looking at a number of transportation related opportunities around the world.
Reneawable Fuels
In June 2007 BNB expanded its US ethanol business with the acquisition of Iroquois Bio-Energy Company ("IBEC") which operates a 40 million gallons per year ("mgpy") ethanol plant in Rensselaer, Indiana. The IBEC facility has been in operation since January 2007 and consistently running at full operational capacity.
In January 2008 the 50 mgpy Castle Rock Renewable Fuels development project in Necedah, Wisconsin ("Castle Rock") was successfully completed on schedule, and the 100 mgpy Marquis Energy project in Hennepin, Illinois ("Marquis") is currently on schedule to commence operation in April 2008. Each of IBEC, Castle Rock and Marquis are Fagen/ICM designed and built facilities. Following the completion of the Marquis project, BNB will have ethanol production capacity of over 200mgpy (at full operating capacity) providing a platform to maximize operating efficiencies and to pursue a number of strategic alternatives during the remainder of 2008.
On 30 June 2007, Babcock & Brown Global Partners and Babcock & Brown acquired the Marina Biodiesel GmbH & Co KG plant in Brunsbüttel, NW Germany. The plant has an existing capacity of 130,000 tons per annum (p.a.) of biodiesel and is now being upgraded to manufacture 230,000 tons p.a. The plant, now named 3B Biofuels GmbH & Co KG, uses state of the art technology and is strategically located at the confluence of the Elbe river and Kiel canal near Hamburg. The plant will remain mostly in operation until the expected completion of the upgrade in the first half of 2008.
Wholesale Funds
Wholesale European Infrastructure Fund
In November 2007 the Division reached final close on a wholesale European Infrastructure Fund (BBEIF) with total equity commitments of €2.17 billion (A$3.8 billion). BBEIF made its first investment during the year co-investing with Babcock & Brown in the acquisition of a 10% shareholding in Brisa Auto-Estadas de Portugal S.A. (Brisa), a listed motorway and toll road company based in Portugal. Subsequent to year end the fund has acquired a strategic investment in Forth Ports plc.
Asian Infrastructure Fund
In November 2007 first close was reached on the Babcock & Brown Asia Infrastructure Fund (BBAIF), raising US$400 million (A$456 million) of capital. BBAIF is a fund set up by Babcock & Brown in partnership with The Bank of Tokyo-Mitsubishi UFJ, Ltd (BTMU) and has been established to focus on the growing number of infrastructure investment opportunities in the Asian region including China, Hong Kong, India, Japan, Malaysia, Republic of Korea, Singapore and Thailand. BBAIF made its first investment in November acquiring a stake in Don Muang Tollway PCL (DMT), Thailand.
North American Capital Commitments
During the year in excess of US$1.0 billion (A$1.14 billion) of committed capital was raised primarily for investment in North American infrastructure. A portion of this capital was used to co-invest with a syndicate of investors and Babcock & Brown managed accounts, in the acquisition of an 80% holding in MidCon LLC (MidCon), which owns the Natural Gas Pipeline Company of America (NGPL) and related businesses. Subsequent to year end a close on further commitments of capital was reached, taking the total commitments to in excess of US$1.4 billion (A$1.5 billion).