Alternative energy company First Wind has shelved plans for an initial public offering, a day after it dropped estimates of how much it hoped to raise from the market — a move one analyst called “a red flag.”
First Wind CEO Paul Gaynor issued a brief statement on Thursday, saying the company would not move forward with the IPO. The company didn’t indicate if it would pursue an IPO at a later date.
“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 Gaynor.
First Wind had planned to offer 12 million shares in the $24 to $26 range, but dropped that $18 to $20. With the decrease, that would have raised up to $240 million, which the company intended to use to pay off a $78 million loan and fund future project development and construction costs.
Bill Buhr, IPO strategist with the Morningstar research firm, said dropping the IPO price by 24 percent was a “red flag.”
“At that point, it was almost like they were trying to do a deal, get their money and get out,” said Buhr. “Clearly the demand wasn’t there; it was received somewhat poorly by some of the prospective investors.”
First Wind is a major developer of wind farms in Maine, with operations including Mars Hill Wind, Stetson Wind and Stetson Wind II. Local approval of the planned Rollins Wind project was challenged in the Maine Law Court, but was upheld. And the company is eyeing projects in several other Maine locales, including the Bingham, Oakfield and Rumford areas.
While the state has streamlined the process for approval and siting of wind projects, such development has met with increased resistance from groups concerned over potential environmental, health and aesthetic effects.
First Wind first indicated its intentions to go public in 2008 SEC filings. It backed away from those plans as the country’s economic troubles grew, waiting for the IPO market to improve.
The current market for IPOs is odd, said Buhr. Some IPOs are seeing strong pricing. Others, like First Wind, never get off the ground, he added.
“There are a lot of risks in a business like wind farming. The company has negative cash flow, it’s highly leveraged, it’s kind of small,” said Buhr. “You put all that together and fundamentally it just makes this kind of deal more risky.”
First Wind has roughly $600 million in debt; $200 million of that is government loans. In the first nine months of 2010, it had a net loss of $52 million, compared with a net loss of $47.2 million in the same period of 2009, according to reports filed with the SEC.
It was unclear what First Wind would do in the future, with regard to a public offering. Buhr said he doubted they would be shopping around an IPO next week. They may try to go back to the market in 2011, he said. In some cases, when IPOs don’t happen, a larger company makes an offer to acquire the smaller firm, he said. And it is possible First Wind may go looking for more private investment, he suggested.
CEO Gaynor’s statement did contain some upbeat, forward-looking thoughts, as well.
“First Wind is well-positioned to grow in its core markets,” he said. “We have a successful track record developing, building, financing and operating our portfolio of projects in the Northeast, the West and Hawaii.”