Friday, March 19, 2010

First Wind eyes IPO amid maturing loan

Even as it prepares an initial public offering, First Wind Holdings Inc. has been amassing more than half a billion dollars in private equity, a new regulatory filing indicates.

But the company has not yet posted a profit, and its financial strength is likely to be tested as a short-term loan worth $231.5 million approaches its June maturity date.

Nonetheless, its ability to raise private capital has proven impressive, according to an updated IPO filing posted last week. From 2007 through the end of 2009, First Wind piled up more than $668 million in equity investment from private equity firms, primarily D.E. Shaw & Co. and Madison Dearborn Capital Partners, the new document reports. Earlier this month, First Wind added a $117 million federal loan guarantee for a Hawaii wind project, backed by stimulus funds from the U.S. Department of Energy.

However, First Wind also has hefty debt to pay — and soon. The company also reported in last week’s filings that it has renegotiated terms for loans from its primary lender, HSH Nordbank AG, worth $231.5 million. First Wind is now on the hook to pay off those loans in full by June 30, its updated IPO filing states.

That figure dwarfs First Wind’s reported revenue. In 2007, the most recent year it has reported, total revenue was $12.3 million and its net loss was $68 million. Founded in 2002 as UPC Wind, First Wind filed for an IPO in August 2008 aiming to raise $450 million.

Company spokesman John Lamontagne declined to discuss filings related to the company’s planned IPO, but pointed to new projects and expansions of existing projects now under development in Hawaii, Maine and Utah.

“These projects have a lot of upfront costs, as you can imagine, but not a lot of long-term maintenance costs,” he said.

Heavy upfront borrowing and spending are the norm in the wind-energy business, said Ethan Zindler, head of North American research for Bloomberg New Energy Finance. First Wind’s hefty cash infusion from its private equity backers may put it in a good position among U.S. companies, as overseas wind developers have consolidated, squeezing independent domestic wind developers that require outside capital.

“The more cash in your war chest, the better your position to develop projects on favorable terms,” Zindler said. “The long-term question is whether markets will remain receptive to clean technologies.”

In addition to the uncertain future of energy markets, First Wind has run up against government obstacles.

In 2008, New York Attorney General Andrew Cuomo investigated First Wind and another wind developer, Noble Environmental Power LLC, amid allegations of improper dealings with public officials. That investigation is ongoing, but the initial issues with First Wind have been resolved, said Cuomo spokesman John Milgrim. “They have been responsive and responsible,” he said.

First Wind has not been shy about using its war chest to lobby the federal government. Last year, the company spent $465,000 with Washington lobbyists, according to records maintained by the U.S. Senate.

Meanwhile, its private equity owners have deep connections in President Barack Obama’s White House. National Economic Council Director Lawrence Summers worked at D.E. Shaw starting in 2006, after stepping down as president of Harvard University.

Madison Dearborn has close ties with Obama Chief of Staff Rahm Emanuel, becoming one of his largest financial contributors while he represented Illinois’ Fifth Congressional District in the U.S. House of Representatives.

In a prepared statement, First Wind said its lobbying activity has been necessary due to changes in government stimulus for clean-technology projects after the collapse of credit markets in 2008.

The company went through “a rigorous application process” for its federal grants and loan guarantees, it said in its statement.

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