First Wind IPO could face turbulent debut

• First Wind IPO set to raise about $300 mln next week
• Loss-making First Wind had $582 mln of debt on Sept 30
• Says may default on outstanding debt, sell collateral
• Some U.S. government subsidies may end at year-end
• Electricity prices stabilizing, demand seen rising

By Clare Baldwin and Scott Malone

NEW YORK/BOSTON, Oct 22 (Reuters) - Wind farm owner and operator First Wind Holdings Inc WIND.O, which is planning a $300 million IPO for next week, may be a risky bet in the current energy climate.

First Wind finances, develops and operates utility-scale wind energy projects in the Northeastern and Western United States and Hawaii. Seven projects now operating had the capacity to generate 504 megawatts (of nameplate capacity) of electricity as of Sept. 30. It expects to have capacity for another 268 megawatts (of nameplate capacity) in operation or under construction by year-end.

The Boston-based company, mostly owned by private equity firm Madison Dearborn and hedge fund operator D.E. Shaw foresees rapid growth. By 2014, First Wind plans to have 1900 megawatts (of nameplate capacity) in operation or under construction.  (Nameplate capacity is usually 5 to 10 times actual production.) One megawatt produces enough power to meet the electricity needs of 800 typical American homes.

But wind energy is expensive and financing is complicated. As of Sept. 30, First Wind had accumulated losses of $233 million and outstanding debt of $582.2 million. It does not have enough cash or liquid short-term investments to pay the debt and acknowledged in a filing that default was a risk.

Some U.S. government financing may also be suspended at the end of the year and market prices for electricity may be too low to spur growth. First Wind has never been profitable.

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