In the same week that First Wind Holdings Inc. was supposed to have offered 12 million shares of its Class A common stock to raise funds, the company decided to delay the initial public offering (IPO) after a tepid response from analysts.
‘While we received significant interest from potential investors during the marketing of our IPO, the terms that the IPO market was seeking at this time were not attractive to the company,’ said Paul Gaynor, CEO of First Wind, in a statement.
The company had filed plans on Oct. 25 with the U.S. Securities and Exchange Commission (SEC) seeking to sell its shares at a price of between $24 and $26 per share in order to raise approximately $300 million. Two days later, First Wind lowered the price to between $18 and $20 per share, according to amendments filed with the SEC.
‘Moving down to that $18-per-share mark really put a significant damper in terms of what the company was actually going to gain and what kind of dent it was going to provide in terms of its really substantial debt loading,’ says Dan Shreve, a director at MAKE Consulting.
The delay comes as no surprise, as analysts reacted to the Boston-based wind developer's decision to go public with skepticism.
‘There was a tremendous amount of concern of whether the IPO would move forward, especially given the late-breaking reduction in asking price,’ says Shreve.
Scott Sweet, senior managing partner at IPO Boutique, agrees that First Wind's decision to slash its IPO price was a bad sign. The company's heavy debt burden – approximately $580 million – is also cause for worry.
‘There's concern that [First Wind] might not be able to meet their debt load,’ he says. ‘The balance sheet, profit and loss, and high debt load makes even the reduced price very high.’
Sweet adds that because the wind industry is in its infancy, IPOs from companies such as First Wind can be risky.
The amount of risk that is prevalent in the U.S. wind industry tends to depress IPO ambitions, says Shreve. He points out that First Wind's projects are located in areas that are favorable to development, so the actual projects are not the issue.
‘They are engaged in excellent areas within the United States, in terms of areas that have substantial RPS goals alongside fairly substantial power pricing, so I think that works to their advantage,’ he says. ‘The problem, in terms of risk issues, is that there is very little visibility in long-term policy endeavors for the U.S. wind market.’
Shreve says that the market for wind company IPOs is weak right now because of the overall state of the economy and because renewable energy policy in the U.S. is uncertain.
‘I think the outlook for near-term power demand is still challenging in the U.S., and low [power purchase agreements] and uncertainty in the regulatory environment tend to put a damper on the enthusiasm surrounding the IPOs,’ he explains.
The market in Europe may also be experiencing the same difficulties as in the U.S. Enel SpA recently reduced its IPO price from 1.80 euros per share to 1.60 euros per share.
However, China is a different story. The wind market is booming, and several companies, including Minyang, Sinovel and Goldwind have issued IPOs.
‘Most of the IPOs as of late have largely been focused on Chinese wind turbine manufacturers,’ says Shreve.
First Wind has projects in Hawaii, Maine, New York, Utah and Vermont with a combined capacity of 504 MW. The company also owns two transmission lines with a capacity of approximately 1,200 MW.
First Wind also reports that it has raised or received approximately $2.5 billion through 20 refinancing and new capital-raising activities and customer repayments.
