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Boston Capital

First Wind IPO sputters suddenly

By Steven Syre
Globe Columnist / October 29, 2010

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It doesn’t take an investment banker to know which way the wind blows.

Executives at First Wind Holdings Inc. pulled the plug on their initial public stock offering at the last moment yesterday when investor demand went slack. Shares that were supposed to start trading on the Nasdaq stock market yesterday are on the shelf now.

In an unusual series of events that took place Wednesday, the Boston-based wind farm developer signaled it was prepared to accept less — a lot less — than previously expected to get the IPO off the ground. First Wind said its expected price for the stock offering had been cut from a range of $24 to $26 per share, to $18 to $20.

First Wind made that known Wednesday morning. Bankers were supposed to negotiate a final price at the end of the day so the shares could begin trading yesterday.

Companies often lower their IPO expectations by agreeing to reduce the price or trim the number of shares for sale. But few cut their targets by 24 percent hours before a deal is scheduled to be priced. In the end, it’s clear First Wind’s bankers delivered an offer that was even less appealing than the revised price range suggested.

“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,’’ First Wind chief executive Paul Gaynor said in a statement yesterday.

All of a sudden, Boston is becoming a hub of stalled initial stock offerings. Liberty Mutual pulled a $1 billion-plus IPO for a unit that sells insurance through agents a month ago. That deal, which would have been the year’s biggest IPO to date, also ran into lukewarm interest and price pressure.

The First Wind stock offering was supposed to be big, too, though not quite on Liberty Mutual’s scale. The company wanted to raise more than $400 million when it first filed paperwork to go public in 2008. Expectations had become more modest — about $300 million — based on price estimates at the start of this week and First Wind still would have raised $216 million if it managed to sell shares for $18 apiece. But it could not.

Stock analysts say investors didn’t like the First Wind offering because the company had piled up a lot of debt and leaked cash. In fact, First Wind owes more than $500 million, loses money on a steady basis, and reports a negative cash flow.

That’s a hard sell in a picky market in which 54 IPOs have been postponed or withdrawn this year. Two other initial stock offerings priced Wednesday evening raised less money than they sought and one company cut its price by 44 percent.

Another important factor: a declining interest on Wall Street for alternative power generation. Relatively low fossil fuel prices and reduced demand are putting financial pressure on wind and other sources of green power. The possible elimination of federal investment tax credits for renewable energy poses another threat at the end of this year.

Alternative energy companies like First Wind, which has built seven utility-scale wind farms in five states, need steady access to lots of capital to grow. For now, the stock market doesn’t seem like the place to look for that money.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.