The king is dead! Long live the King. Babcock & Brown, the global financial behemoth, is being broken up. The company was just a financial creation to use equity as a currency to buy and sell energy assets around the world. The question is what is the value of the DP&L contract to buy 200 megawatts of off-shore wind off of Delaware’s coast considering the $2.2 billion capital investment necessary to make this investment? The short answer is nothing.
As has been stated in the international press, the Australian investment company and one-time investment bank Babcock & Brown Ltd. will embark on a “controlled liquidation” of its assets as it seeks to repay bankers more than A$3.4 billion ($2.2 billion). The Sydney company announced late Friday there would be no value for shareholders in a company that had a market capitalization of nearly $12 billion just over a year ago, and no or negligible value for the owners of A$600 million of subordinated notes.
I believe that we need the off-shore wind farm. I always have. I’ve always held that the small state of Delaware with ~30,000 low-income rate payers was not the correct financing entity. Energy independence is a national security issue, period. I have advocated for a regional solution since day one. We need participation from the Federal Government and the “tri-state” region (Maryland, Delaware, New Jersey). You would have thought that given the importance of the “green” vote to President Obama and the Democrats that alternative energy stimulus would have had a large role in the “stimulus” bill that now resides in conference committee. Unfortunately, the Federal Government continues to talk a good line, but fail to make the investment necessary to jump start America’s energy future.
I will be on with Alan Loudell at 4:35 to discuss this issue. For more on the local take, please see Jeff Montgomery’s News Journal article from this morning.
The wind farm solution falls into the “do something even if its wrong” category.
This will always be true when solutions are mandated by government rather than the marketplace.
Oil and Gas producers can compete with any alternative even when oil falls below 20 dollars per barrel.
If we are going to make mistakes the least costly would be development of alternatives that cost less than oil not more.