First Wind IPO could face turbulent debut

By Reuters
Posted Oct. 22, 2010 at 5:23 p.m.

Wind farm owner and operator First Wind Holdings Inc., which is planning a $300 million IPO for next week, may be a risky bet in the current energy climate.

The Boston-based company, mostly owned by private equity firm Madison Dearborn and hedge fund operator D.E. Shaw foresees rapid growth. By 2014, First Wind plans to have 1900 megawatts in operation or under construction. One megawatt produces enough power to meet the electricity needs of 800 typical American homes.

First Wind finances, develops and operates utility-scale wind energy projects in the Northeastern and Western United States and Hawaii. Seven projects now operating had the capacity to generate 504 megawatts of electricity as of Sept. 30. It expects to have capacity for another 268 megawatts in operation or under construction by year-end.

But wind energy is expensive and financing is complicated. As of Sept. 30, First Wind had accumulated losses of $233 million and outstanding debt of $582.2 million. It does not have enough cash or liquid short-term investments to pay the debt and acknowledged in a filing that default was a risk.

Some U.S. government financing may also be suspended at the end of the year and market prices for electricity may be too low to spur growth. First Wind has never been profitable.


“It’s all about a bet on an uncertain future. Who knows if this company will actually be able to build the infrastructure that it promises?” said Josef Schuster, founder of Chicago-based IPO research firm IPOX Schuster LLC.

“It deserves attention but I don’t see it as a big winner,” he said.

One of the company’s main turbine suppliers is Clipper Windpower Plc (CWPR.L), which diversified U.S. manufacturer United Technologies Corp (UTX.N) agreed to buy on Oct. 20 after the Carpinteria, California-based company ran into money trouble in the face of a slowdown in U.S. wind investment.

New U.S. wind installations were down 71 percent through the first six months of 2010, according to the American Wind Energy Association.


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