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New York listing number two -- Seeking $450 million

The timing could not have been worse for the announcement of an initial public offering (IPO) by First Wind, formerly UPC Wind. No sooner had the Massachusetts company made its plans known to follow Noble Environmental Power as the second wind project development company in the United States' Northeast to go for a listing on the public markets, than both companies found themselves under investigation by the New York state Attorney General on suspicion of improperly gaining land rights and construction permits (previous story).

First Wind intends to raise up to $450 million by listing on the NASDAQ stock exchange under the ticker symbol WNDY, while Noble is seeking $375 million (Windpower Monthly, June 2008). Both companies need cash to continue to grow their businesses. First Wind, with just 92 MW of operational wind plant bringing in revenues, has 182 MW of projects in construction. The firm expects to begin work shortly on a 203 MW project and holds a portfolio of projects in earlier stages of development amounting to 5564 MW. In the short term it hopes to have 1100 MW of that in place by the end of 2010.

The IPO may be in for a bumpy ride, however. Not only is First Wind under investigation, but a local wind power opposition group in New York, Cohocton Wind Watch, has petitioned the US Securities and Exchange Commission, which regulates the public financial markets, to refuse to allow the IPO. "This is a real opportunity to derail any public offering, especially since the New York state Attorney General investigation is ongoing," says James Hall from Cohocton Wind Watch. It is opposing First Wind's 125 MW project under construction outside the town of Cohocton.

Much of First Wind's project development has been in the Northeast and most of its advanced projects are in New York and Maine, with others in Hawaii and Utah. In a market with more wind projects than available turbines, First Wind says its supply line is safe. It has agreements with GE Energy for 400 MW of turbines to be delivered through 2009 and with Clipper Windpower for just over 1000 MW through 2013. This should meet all project needs for this year and next and provide 80% of turbine needs for 2010, it says.

First Wind is entering the public markets with a major debt load. The company ended last year with an operational deficit of $68 million and says it "expects to incur substantial losses in the future as we develop and construct new wind energy projects." It reports a total debt load of $597 million, with $348 million from turbine purchase supply loans and $249 million used to fund development and day to day operations.

Not a new trend

The two IPO filings by First Wind and Noble should not be seen as the start of a trend, says Thomas Woolsey, with law firm Hogan & Hartson, who played a key role advising Spanish Iberdrola in some of its US wind power acquisitions. "I've not heard a lot of buzz about doing IPOs in the wind business because the market in general has not been all that attractive. The market has just been off. Getting into a pure renewable energy play might give a company a little niche, but I think in general the activity in new offerings has been pretty slow."

A separate wind investor watching the space questions whether putting money into wind development will result in the best return. "I'm sure they're going to do fine, but my question as a smaller investor is: where can I put my money with the likelihood of high margins and good returns? Probably for me, it's not in the development space," he says. "My sense is that it's not as interesting a place to be as a maybe a gear manufacturer or other part of the supply chain. The development space will do just fine. But is it the juiciest space in wind? Probably not."

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