First Wind Holdings Inc., a developer of wind-power projects, is
gearing up to price its initial public offering in April, according
to a person familiar with the situation.
The developer, which is backed by D.E. Shaw & Co. and
Madison Dearborn Partners Inc., is now canvassing opinions via its
underwriters to arrive at a potential valuation, said the person,
in an interview with Clean Technology Insight.
The company's spokesman declined to comment.
The original IPO documents filed in July 2008 from First Wind
listed Credit Suisse Group (CS, CSGN.VX), Goldman Sachs Group Inc.
(GS) and J.P. Morgan Chase & Co. (JPM) as bookrunners for the
deal. Recent updates to the S-1 form filed with the Securities and
Exchange Commission didn't have any bookrunners listed.
Representatives of these banks weren't available for comment.
Boston-based First Wind seeks to be listed on the Nasdaq Global
Market. Should it go public, it would be the only pure-play
wind-power developer trading on a major U.S. exchange. There are
developers on smaller exchanges, including Juhl Wind Inc. (JUHL) on
the over-the-counter Bulletin Board and several on Canadian
exchanges, as well as European companies such as Iberdrola
Renovables SA (IRVDY, IBR.MC) and EDP Renovaveis SA (EDRVY,
EDPR.LB) whose shares are listed on European and U.S.
exchanges.
First Wind originally registered around the same time as another
developer, Noble Environmental Power LLC, which has since pulled
its IPO.
As for First Wind, "they have many more assets that are
spinning, are so much more mature than a year ago," the person said
about its plans to try to price the deal shortly. In 2009, First
Wind added three new operating projects, totaling 385 megawatts, to
the three it already had in operation, according to a February
update to its S-1 filing. It plans to add 294 MW across seven new
projects this year.
For the nine months ended Sept. 30, 2009, the company had $30.5
million in revenue, up from $21.7 million for the same period in
2008, according to the filing. Its net loss was $47.3 million for
the three quarters in 2009, higher than in the 2008 period when the
net loss was $38.4 million.
The company should be able to add between 200 MW and 300 MW of
power each year, the person said. First Wind hopes to have 1,000 MW
of projects operating or under construction by the end of 2011 and
2,000 MW by 2014, according to the filing.
First Wind had total equity of $769.7 million, and $879.7
million of debt as of Sept. 30, 2009, including $267.3 million of
turbine-supply loans, $181.2 million of project term debt, and
$431.2 million of other debt.
The wind-energy sector is growing rapidly in the U.S., though
companies are highly dependent on prices of fossil fuels such as
natural gas, which are currently relatively low and against which
wind competes, as well as on government incentives, some of which
are due to expire soon.
"Over the near term, there are some significant hurdles that may
hinder growth below the levels of 2009," which was a record year,
said Tim Stephure, senior analyst with the North American Wind
Power Advisory Department at research firm Emerging Energy
Research. He spoke in an interview with Clean Technology Insight
about the wind-power market in general, but declined to discuss
First Wind directly, saying that Emerging Energy helped the company
with its prospectus and is under a non-disclosure agreement.
The U.S. recession meant industrial growth slowed, lowering
demand for energy in general and cutting prices for natural gas.
This, in turn, is putting pressure on prices for wind-power energy,
said Stephure. In some places, wind-power energy prices are about
half of what they were in early 2008, he said.
In First Wind's case, the company had an "average realized
energy price" for the nine months ended Sept. 30, 2009, of $77 per
MW/hour, down from $84 per MW/hour in the same period in 2008, and
$108 per MW/hour in 2006. That average price includes factors such
as prices for renewable energy credits, transmission costs and
hedges.
"Developers are having a hard time getting the terms they need,"
said Stephure, especially given that many developers are still
installing turbines they bought during a turbine shortage when they
cost more than they do now.
There is still demand, said Stephure, in states with very strong
renewable power mandates. That includes the Northeast region, where
a lot of First Wind's efforts are concentrated. The company is
active, for example, in New York, Connecticut, Massachusetts, Rhode
Island, Maine and Vermont. Not only do Northeast states have
stringent renewable-energy mandates to meet, but electricity there
in general is expensive, making it easier for wind power to
compete. New England had the highest retail price of electricity of
all U.S. regions, according to the U.S. Energy Information, with an
average of $16.32 cents per kilowatt/hour in 2009.
First Wind is also active in the West and Hawaii, all strong
renewable-energy-mandate markets with high electricity pricing.
The wind-power industry is also highly dependent on incentives.
For example, a cash grant offered under the federal economic
stimulus package passed in 2009 applies only to projects that start
construction in 2009 or in this year.
In the past, when other federal incentives, particularly
production tax credits, were allowed to expire, wind-power
installation rates dropped only to pick up again when the tax
credits were reinstated. Any introduction of local content
requirements, for example, could also affect developers, noted
Stephure.
First Wind received $115 million through the cash grant program
as of the end of September 2009. It also received conditional
approval for a federal loan guarantee that would help fund one of
its Hawaiian projects. It hopes to receive more loan guarantees,
said the person who is familiar with the company's plans.
Another constraint in the wind-power market is transmission.
Several of First Wind's projects, however, are connected to lines
that have more capacity available for additions in power
generation, the company said in its prospectus.
On the positive side, prices for wind turbines and other
components are declining and this equipment is easier to access now
than it was two years ago, said Stephure. He estimated that wind
turbines are now about 20% to 25% cheaper than they were in early
2008. First Wind has no commitments other than to one turbine
supplier, Clipper Windpower PLC, for projects it will have in
construction this year, the company's filing said.
(Dow Jones Clean Technology Insight covers news about public and
private clean-technology and alternative-energy companies.)
-By Yuliya Chernova, Dow Jones Clean Technology Insight;
212-416-2020; Yuliya.chernova@dowjones.com
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