Wednesday, July 22, 2009

Banks bail out First Wind’s debt with $191M

Newton, Mass.-based First Wind is in a crunch for cash and it’s forcing the company to get creative since it’s indefinitely delayed plans to raise it on the public markets.

The company, an independent developer and operator of wind power in the United States, has been fighting off a subpoena, putting at least two projects on hold for 2009 and struggling to access financing. But today things turned around with the company closing two financing transactions totaling $191 million. Proceeds from the transactions are expected to be used to further First Wind’s development activity, to fund debt and for general corporate purposes, First Wind’s Director of Communications John Lamontagne told the Cleantech Group.

The company had revenue of $12 million and a net loss of $73 million for past 12 months ending March 31, 2008. Lamontagne couldn’t provide more current figures.

The first financing is an 8.5-year $115 million term loan facility from Edmonton, Alberta-based Alberta Investment Management. The second is a $76 million 1-year loan with HSH Nordbank for First Wind’s Stetson project, which started operating in January 2009.

“These are highly capital intensive projects, and we have to borrow significant sums to get these projects built,” Lamontagne said.

He added that today’s financing would be used to fund debt incurred in having the facility built, although he didn’t know how much debt had been acquired.

The Stetson project is currently the largest operating wind farm, with 38 General Electric 1.5 megawatt turbines, in New England, operating outside of Danforth, Maine. First Wind has also received permits to start a 25.5 MW expansion of the project, but Lamontagne said today’s financing wouldn’t be to cover that expansion.

“The credit markets and financing markets are still very tight,” he said. “In the last nine months, folks at First Wind have tried to be creative to finance our projects. This, in many respects, is that fruit of that creativity.”

In 2008, First Wind filed an IPO to raise up to $450 million on the Nasdaq. First Wind said at the time that it planned to use proceeds from the IPO to repay debt and to fund a portion of its capital expenditures in 2008 and 2009 (see First Wind plans share sale as WNDY). Lamontagne confirmed those plans are still on file with the SEC.

He said HSH Nordbank has been a backer of a number of the company’s projects, including a 125 MW project in upstate New York as well as the first phase of a 200 MW wind project being constructed in Milford, Utah. Today’s announcement comes on the heels of First Wind announcing that it secured $376 million in financing in April for the Milford project. The Royal Bank of Scotland was lead arranger for this loan.

“In many respects, if you consider this financing and the $376 million we got for the Milford project, we feel it indicates there’s a strong confidence on behalf of banking institutions in First Wind’s projects, despite the financial markets,” Lamontagne said.

First Wind currently has five operational wind projects totaling 274 MW in three states—two in Maine, two in New York and one in Hawaii (see Rhode Island picks Deepwater Wind for offshore project).

In 2008, First Wind, previously called UPC Wind, signed a deal with the U.S. Department of Energy's National Renewable Energy Laboratory to study the integration of wind technology into Hawaii's utility system (see UPC Wind, DOE setting up wind study center on Maui). Under the agreement, the company said the lab would establish a remote research affiliate partner site at UPC's Kaheawa Wind Farm in West Maui.

In Cohocton, N.Y., First Wind's 125 MW project reportedly ran into problems in February when residents voiced complaints regarding a noise that sounded like a jet-engine. Some of the turbines had to be repaired. The project was found to be within the town statute’s limits, and Lamontagne said they are continuing to work with landowners and the town to address concerns.

Town officials in nearby Prattsburgh, N.Y., were alarmed by the Cohocton news and tried to delay construction by two developers, First Wind and Ecogen, until more information was received about the projects. The town is now trying to enact a wind tower permit law.

In the meantime, Lamontagne said the approximately 70 MW Prattsburgh project has been put on hold for 2009 due to difficulty accessing financing, as well as a project in Grand Manan, Canada.

Last year, Essex, Conn.-based wind power company Noble Environmental Power, which also filed and later cancelled its IPO, and First Wind were both served subpoenas by the New York State Attorney General's office (see Noble Environmental files for $375M share sale, Noble Environmental sets shares for IPO amid investigation and Wind developer Noble cancels IPO).

The subpoenas were part of an investigation into whether the companies sought or obtained land-use agreements with citizens and public officials, whether improper benefits were given to public officials to influence their actions, and whether they entered into anti-competitive agreements or practices. But the subpoenas are no longer being pursued.

In October 2008, New York's Attorney General Andrew Cuomo announced a new wind industry ethics code that establishes guidelines to facilitate the development of alternative energy in New York, while assuring the public the wind power industry is acting properly and within the law.

The code calls for new oversight through a multi-agency task force, and establishes transparency expected to deter improper relationships between wind development companies and government officials. Noble and First Wind both signed the agreement.

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