WIND IPO IN HARD WINDS

First Wind IPO could face turbulent debut; First Wind IPO set to raise about $300 mln
Clare Baldwin and Scott Malone (w/Matt Daily and Gary Hill), October 22, 2010 (Reuters)

"Wind farm owner and operator First Wind Holdings Inc…which is planning a $300 million IPO this week, may be a risky bet in the current energy climate…First Wind finances, develops and operates utility-scale wind energy projects in the Northeastern and Western United States and Hawaii. Seven projects now operating [have] the capacity to generate 504 megawatts…It expects to have capacity for another 268 megawatts in operation or under construction by year-end.

"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…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…"

From a First Holdings filing - click thru for complete info

"One of the company's main turbine suppliers is Clipper Windpower Plc, which diversified U.S. manufacturer United Technologies Corp 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…[and a 71 percent [installation drop] through the first six months of 2010…

"First Wind…received a $117 million Department of Energy loan guarantee in July and has netted $254 million worth of grants from the U.S. Treasury since September 2009…But some U.S. government subsidies could end. Cash grants to cover a portion of the costs of project construction, paid out under the Obama administration's stimulus bill, will only apply to projects that break ground by the end of 2010."

From a First Holdings filing - click thru for complete info

"Furthermore, low electricity prices make it more difficult to get contracts that are needed to secure private financing to build wind farms. First Wind's average price per megawatt hour has fallen each of the past three years and is on course to do so again in 2010…Private financing for wind projects often comes in the form of [5-to-20-year power purchase agreements…whose value is…based in part on electricity prices…

"First Wind's PPA partners include Harvard University, Southern California Public Power Authority, and the cities of Los Angeles, Burbank and Pasadena. It has PPAs or hedges on all seven of its operating projects, and, as of Sept. 30, had hedged about 90 percent of its estimated revenue through 2011…One factor driving utilities to sign PPAs with developers of wind farms and solar installations has been the adoption of standards by some U.S. states requiring their electricity suppliers to generate a certain percentage of their energy from renewable resources…The IPO is expected to sell 12 million shares for $24 to $26 each…"