By Steven Syre, Globe Columnist
Want to buy some wind?
Public investors can buy into
all kinds of alternative energy companies. Anyone interested
in purchasing some solar power stocks or shares in fuel cell
companies has plenty of options.
Wind power has been a different
story. Wind farms and other facilities that capture the breeze
to generate electricity are popping up all over the map. But
they are big projects financed with deep pockets and owned almost
exclusively by private investment interests.
That appears to be changing.
First Wind Holdings Inc. of Newton
filed preliminary paperwork Thursday for an initial public stock
offering of as much as $425 million. It followed Noble Environmental
Power LLC of Essex, Conn., which in May filed its own documents
for a planned IPO of as much as $375 million.
They would appear to be in line
to become the first pure-play US investments in wind power available
to public stock investors. Both companies site and build wind
energy projects, then make arrangements to sell the power they
generate.
That can be an expensive proposition,
at least at first. First Wind Holdings, with three completed
projects and a long roster of other wind farms in various stages
of development, lost $68 million last year. Noble Environmental
lost $42 million in 2007.
Wind power projects were going
up all over America last year. Investors spent about $9 billion
to add about 5 gigawatts of capacity and increase American wind
power by 46 percent. But most of those projects were backed by
sophisticated investors and private funds.
From the start, both First Wind
and Noble Environmental have been supported by investors like
that. First Wind counts private equity giant D.E. Shaw, along
with Madison Dearborn and UPC Wind Partners II, among its principal
investors. Noble Environmental is backed by a J.P. Morgan fund
and the Canadian Pension Plan investment board.
"This has been a specialty
sector," says Joe Muscat, leader of the cleantech practice
at Ernst & Young. "It's got real estate, a big capital
expenditure, and arrangements to get the power in the hands of
people who can distribute it. These are decade-long projects."
They can also be complicated
and controversial. Many people who live near big wind turbines
don't appreciate them, such as those who hate the idea of a farm
off the coast of Cape Cod. Successful wind farm projects rely
on tax credits for financing, and on other government efforts
to nudge utilities toward buying some of that electricity. Some
of those benefits, particularly the federal tax credits, are
routinely challenged and could lapse.
There are also questions about
how the wind business gets done. New York's attorney general,
Andrew Cuomo, sent subpoenas to First Wind and Noble Environmental
last month as part of an investigation into how the two companies
got control of the land where they want to build farms. Cuomo
said investigators are looking into whether wind companies improperly
obtained land-use agreements and if public officials were given
improper benefits to influence their actions.
First Wind officials confirmed
they had received the subpoenas and said the company was cooperating
with the attorney general.
But wind has a lot going for
it, too. The United States led the world in new wind power capacity
added last year and generated more electricity from wind than
any other country.
On the other hand, wind power
represents only about 1.2 percent of the total electricity in
the United States. (Denmark, the world's wind power leader, generates
about 20 percent of its electricity from that source.)
Even a famous oilman, T. Boone
Pickens, has been all over the papers and running ads on TV this
summer, talking up wind power as the best answer to America's
oil-dependence problems. Pickens promotes placing big wind farms
in a blustery section of mid-America stretching from Texas to
Canada, but that would require better transmission lines to get
the electricity to the cities that would consume much of it.
First Wind is focused on the
Northeast, the West, and Hawaii to produce the best investment
returns. The idea: Aim for areas with high electricity prices,
state programs mandating renewable electricity generation, and,
most important, good wind conditions.
The company has lots of projects
in various stages of development, but just three up and running.
One, on Mars Hill Mountain in Maine, generates about 42 megawatts
of power from 28 huge turbines atop the mountain. That's enough
electricity to power about 45,000 average homes, according to
First Wind.
The company's two other wind
power projects are in Lackawanna, N.Y., and Maui, Hawaii. Another
two projects are under construction in Maine and New York, and
10 more are in "advanced" planning.
Wind power has a lot of potential
as a growing source of electricity. But long planning cycles
and expensive projects can be a bad combination for young companies
with limited capital and a dependence on government support.
Making the real money in wind will require a long view and a
gift for knowing when to get in and out of stocks.
