Babcock & Brown sees N.A. wind business doubling

By Michael Erman

HOUSTON (Reuters) - Babcock & Brown Ltd (BNB.AX: Quote, Profile, Research, Stock Buzz) expects to double the size of its North American wind energy business by 2010, an executive at the Australian investment firm said on Tuesday.

"We have 20 operating windfarms and managing a portfolio of about 1,500 megawatts." said Hunter Armistead, who runs the company's North American energy business.

"It's about $3 billion in wind assets. And we're adding each year on the order of about $1.5 billion in wind assets ... Maybe we'll do more in 2011," he told the Reuters Global Energy Summit in Houston.

According to the U.S. Department of Energy, wind was the second largest source of new power generation in 2007 -- behind only natural gas -- and has experienced a 30 percent annual growth rate over the last five years.

The U.S. wind energy industry invested around $9 billion in new generating capacity in 2007, bringing total wind capacity to 16,818 megawatts, including more than 5,000 megawatts added last year.

The Department of Energy issued a study last month saying wind energy could provide 20 percent of the nation's energy supply by 2030.

Armistead said that despite the booming market, some of the smaller players in the wind industry are bound to shake out in coming years.

"It has become such a hot market with new capital and new people coming into it, that I do believe that it's an industry that is going to see some problems ... There's going to be challenges -- there just have to be -- when you're growing at this rate," he said.

"You need well-capitalized companies to make it through what are definitely going to be some hiccups over the next five years," Armistead said.

Wind power has become increasingly popular because it is virtually emission free and federal tax credits make the cost of the power competitive.

Armistead said delays in renewing the tax credits could disrupt the industry's growth.

"We've had consistent policy over the last three years and we saw this industry blow up," he said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Gerald E. McCormick)