Babcock & Brown shares hit a high of $7.28 in early trade before sliding back to $6.80 as the market focuses on the potential windfall coming from the partial sale of its European wind portfolio.

Just like Macquarie’s huge tollroad profits that flowed from getting into the game first, Babcock has already reaped profits exceeding $1 billion building the world’s fifth biggest operating wind portfolio and second biggest development pipeline over 20 years.

In many senses, the wind portfolio is the jewel in the Babcock crown and a great Australian success story that is now being partially offloaded to demonstrate value and restore confidence in the entire empire.

The original sale announcement was made back in February and it was always about demonstrating value to a sceptical market.

Bloomberg yesterday produced this wild story which opened as follows:

Babcock & Brown Wind Partners, the Australian owner of wind energy projects, may get as much as $3 billion as Iberdrola SA and Union Fenosa SA consider buying some of its European assets.

To start with, the majority of the proceeds are expected to go to the parent. BBW is only offering 820mW from its portfolio of 76 wind farms totalling 3187mW.

The most important thing to watch will be how much Babcock & Brown itself gets after offering 2000mW of its estimated 13,000mW development pipeline.

The portfolios are being offered in country packages for Portugal, Spain, Italy, France and Germany and the Babcock boys are promising to only sell if the prices are good enough.

In terms of relieving pressure on the $2.8 billion corporate debt facility, you need to remember that the assets are directly geared to about 40% and the parent will only get a portion of the proceeds. That said, a $500 million windfall for the parent is not out of the question and that could largely go to reducing the corporate debt, as opposed to the $8.5 billion in other debt that the parent has secured against specific assets on its balance sheet.

The process over the years has been that B&B sources and develops the wind farm projects and then profitably flicks them to BBW, which was floated in late 2005, when they are operating or close to completion.

As part of this process, the Babcock boys pulled off the most outrageous gouging that we’ve seen from any listed infrastructure fund, which partly explains why BBW trades at a huge discount to NTA.

Even if they deliver a huge price, investors won’t back BBW until it adopts a more conventional management structure and then needs much more than an independent chairman.

*Listen to the audio of Gold Walkley winner Hedley Thomas when he was put on the spot about his huge Queensland Gas salary at the recent MEAA PR conference in Sydney.