Babcock Wind Plans to Cut Parent Links, Change Name

By Angela Macdonald-Smith

Nov. 26 (Bloomberg) -- Babcock & Brown Wind Partners, the Australian wind power producer, said it submitted a proposal to end management agreements with its parent Babcock & Brown Ltd., which is fighting to avoid defaulting on debt.

The company plans to take over management of its own operations and acquire some assets from Babcock & Brown, Sydney- based Babcock Wind said today in a statement, without giving details. Babcock Wind, which intends to change its name, is in a “strong” financial risk management position, lead independent director Tony Battle told shareholders in Sydney.

Babcock Wind, which has lost 62 percent of its value this year, this month sold the Enersis wind energy business in Portugal for about 1.15 billion euros ($1.5 billion) to reduce debt and is selling assets in France. The company, known as BBW, is buying back as much as 30 percent of its shares because it doesn’t believe current prices reflect the value of its business.

“BBW is in a strong position for 2009 and beyond,” Chief Executive Officer Miles George said in a separate address to shareholders, a copy of which was sent to the Australian stock exchange. “BBW has no refinancing requirements and all existing capex requirements are funded with committed bank facilities and cash.” There are no loans between it and the parent.

Babcock Wind gained as much as 7.1 percent to 67.5 cents in Sydney trading and was at 65 Australian cents at 11:38 a.m. local time. The company confirmed it expects to pay shareholders a dividend of at least 9 cents a share in the year ending June 30, 2009.

Sever Links

Kairos Fund Ltd., which owns more than 10 percent of the company, last week urged the company to sever links with Babcock & Brown and to change its name. It called for the company to buy back the management contract from the parent and re-hire key managerial positions.

Babcock Wind’s independent directors, advised by UBS AG, believe the proposal to take over management of its own operations and the asset purchase plan are in the best interests of shareholders, the company said. Severing links with Babcock & Brown would be “positive” for Babcock Wind, Credit Suisse Group said in a Nov. 24 report.

Babcock & Brown has suspended trading in its shares while the company tries to resolve a dispute with one of its bankers. Babcock is struggling to avoid defaulting on A$3.1 billion in loans and is firing two-thirds of its workforce and cutting businesses as it fights to avoid the fate of Allco Finance Group Ltd., a Sydney-based manager of infrastructure funds that collapsed this month.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net