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Infigen Plans to Cut Debt 20% After German Wind-Asset Sale

Infigen Energy, the Australian developer of renewable-energy projects, expects to cut debt by about 20 percent in the year ending in June 2012 after selling its German wind-power assets.

The wind-power company aims to reduce debt by more than A$250 million ($267 million) from A$1.27 billion as of the end of December, Managing Director Miles George said in a phone interview today. Sydney-based Infigen previously planned to lower its debt by A$100 million, he said.

“Clearly we are highly geared, but 20 percent is a significant reduction in debt,” George said. “Our objective is to keep amortizing that down to get it to a level where we could refinance and we’re also more comfortable.”

Infigen, formerly known as Babcock & Brown Wind Partners, is focusing on developing Australian wind-power projects as the government moves toward a target of generating one fifth of the country’s power from renewable energy sources by 2020. Infigen this week agreed to sell the German assets for 154.6 million euros ($223 million) to a European fund it didn’t identify.

The company in April 2010 scrapped a plan to dispose of the German assets and later that month abandoned an effort to sell its U.S. wind-energy business after failing to attract high enough bids.

“We did achieve a material premium above the best price we were offered around this time last year, so it was well worth holding off until market conditions were better,” George said.

Germany’s decision to close nuclear power plants after the disaster at Japan’s Fukushima Dai-Ichi station has made renewable energy more attractive, according to George.

Separating U.S. Business

While a sale of the U.S. wind business is still under consideration, Infigen doesn’t expect a transaction in the “short term,” George said. The company, as one alternative, is weighing a sale of shares in the U.S. business in a public offering during the next two years, he said.

“Our experience has been that being a publicly-listed company in Australia holding a large portfolio of U.S. assets is probably not an effective capital structure,” George said. “It would be better to be in a position to raise capital in the local market in the U.S. We think that makes a lot of sense.”

Infigen, whose shares have declined 57 percent in the past year, rose as much as 7 percent to 38 Australian cents today in Sydney trading. The stock gained 5.6 percent at 1:01 p.m. local time, compared with a 0.3 percent drop in the S&P/ASX 200 Index.

Infigen’s Cash

The wind-power developer’s decision announced yesterday to scrap dividends through June 2013 is a “prudent measure,” John Hirjee, an analyst at Deutsche Bank AG in Melbourne, wrote in a report dated yesterday. “Infigen’s cash is better retained.”

Infigen, Suntech Power Holdings Co.’s partner in a proposed solar project in Australia, is among companies competing for federal government funding. Australia has accepted applications from ventures shortlisted in the government’s A$1.5 billion Solar Flagships program and has said it expects to make a decision on winning ventures in the middle of this year.

The Australian company would be able to move quickly to convert financing and supply arrangements into binding accords if it is successful in obtaining the solar funds, George said.

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