For more than a decade American wind companies have relied on private means rather than the public markets for their capital needs, making Noble's decision to undergo the rigours and costs of a public offering in the US a trail blazing step. It may also represent a cooling off of the European interest in American wind power assets.
"That market has probably cooled a bit as the Europeans are absorbing their acquisitions and probably trying to figure out whether it was a good deal or a bad deal," says Kevin Smith of start-up company SolarReserve. In his former position with wind company Invenergy, he headed up over $2 billion of project development in the US over the past few years.
"It's a tough play to do an IPO these days with all the regulations," says Smith. "I'm sure the folks at Noble would have looked at other options in addition to an IPO and in the end I'm sure the IPO was viewed as the best in this market."
Edward Zaelke with law firm Chadbourne & Parke agrees. "The Europeans came in and paid strong multiples in order to buy a number of US companies. There are only so many utilities that are interested in the US market. I don't think we've seen them all, but that market is only so deep," he says.
The European utilities that have bought into the US wind market, such as Portugal's EDP, Spain's Iberdrola, Italy's Enel, and Germany's E.ON, are interested in holding on to their wind assets for the long term, says Zaelke. But private equity money or hedge fund money is not as interested in American wind assets because of their need for a clear cut exit plan to profit from. An offering of public stock provides that exit.
Noble's IPO may entice more money from private equity funds and other investors, which in turn might entice more IPOs from other companies going forward, explains Zaelke. "The Europeans are not done with the buying spree but as they start to wind down, we're going to be looking at domestic investments from the private equity funds," he continues. "And the success of these IPOs is going to be a factor in how easy it is to find that money. It all depends on how well they do. If the IPO fizzles, then it could have the opposite effect."
More to come
Both Zaelke and the American Wind Energy Association's Randy Swisher expect to see more IPOs in the near future. "I'd be shocked if we didn't see others," says Swisher.
Noble is seeking funds for its rapid growth. It recently brought 282 MW of wind power online in three New York developments and expects to connect another 950 MW during 2008 and 2009. The New York market is Noble's initial focus, but by the end of 2012 the company expects to have as much as 3850 MW of capacity earning its keep as the company expands in Maine, Michigan, Minnesota, New Hampshire, Vermont and Wyoming.
It has been 15 years since the last IPO of a major wind company on Wall Street, a listing which ended in a public relations disaster for the wind industry when turbine manufacturer Kenetech collapsed in bankruptcy following series failure of its technology. Since then wind power company share trading has been limited to the European exchanges with few vehicles in the American financial markets for the general public to invest in wind power, says Zaelke.
Historically, the nature of wind project development has made it difficult to place a value on developers and a decade ago an IPO like Noble's was not seen as viable. "The thought at the time was that the investment community wouldn't be interested in a developer, per se, because it would be so tied up in the skills of the individual developers and that is difficult to directly invest in. You can't own the people," says Zaelke.
In today's more commercial and matured wind industry, developers now appear to have enough tangible assets beyond staff, including land leases, permitted sites and projects fully ready for construction, to brave public offerings. In Noble's case, it has secured a flow of turbines from GE Energy, having inked about $1.5 billion worth of purchase agreements with the company to buy more than 870 of GE's 1.5 MW machines.
Noble is majority owned by JP Morgan Partners, a private equity arm of JP Morgan Chase, which funded Noble's start-up. More recently, the Canada Pension Plan Investment Board put money in the company. Noble plans to trade on NASDAQ under ticker symbol NEPI. Lehman Brothers, Credit Suisse and JPMorgan are co-lead underwriters.