With partnership in limbo, First Wind seeks to borrow $75 million
Credit: By Tux Turkel, Staff Writer | Portland Press Herald | 2 April 2014 | www.pressherald.com ~~
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Boston-based First Wind, Maine’s largest wind-power developer, is trying to raise $75 million to build projects this spring, a month after a court ruling struck down its critical financial partnership with a Canadian energy company.
At stake is progress on a $400 million wind farm that First Wind began last fall in the Aroostook County town of Oakfield, and money to advance projects in Bingham and remote sites in Hancock and Washington counties. Taken together, the ventures could represent an investment of more than $1 billion.
The company also needs cash for its first solar-electric project, which is under construction in Massachusetts.
First Wind was in better financial shape until last month, thanks to a $333 million joint venture with Halifax, Nova Scotia-based Emera Inc., the parent company of utilities in Bangor and Presque Isle. The legality of the partnership was left in doubt when the Maine Supreme Judicial Court ruled that the Maine Public Utilities Commission wrongly approved the deal in 2012.
The justices found that the approval violated the intent of Maine’s restructuring law to uncouple electricity generation and transmission. They sent the matter back for further review by the PUC. Parties in the case have been meeting to decide how to comply with the court ruling.
In an interview Tuesday, First Wind said the effort to raise more money from private investors was in the works before the court ruled and is not related to the decision.
“Development of renewable energy projects is an expensive process, and this type of security is one way we access funding for such growth activities,” said John Lamontagne, a company spokesman.
The company would not speculate about what will happen to its Maine projects if the borrowing falls short.
“We’re hopeful that this will be a successful bond offering and it will close very soon,” Lamontagne said.
BORROWING SOLICITATION SENT OUT
First Wind’s borrowing plan came to light last week in a press release the company sent only to business-news outlets. The release didn’t go to newspapers in Maine.
“It’s not the kind of thing we send to folks proactively,” Lamontagne said. “It’s not particularly interesting or newsworthy.”
The release, written in highly technical legal and financial language, is known as a consent solicitation. It makes no mention of Maine, but does refer to an “MA Solar” project. On Tuesday, the company issued a second press release.
Among other things, the release seeks money to “fund parts of its Oakfield project in Maine and purchase the MA Solar project in Massachusetts from its ultimate parent company, First Wind Holdings, LLC.”
Taken together, the releases mean First Wind is seeking a total of $75 million for ongoing projects in Maine and Massachusetts, Lamontagne said.
With 50 turbines and a capacity of 148 megawatts, the project in Oakfield would be among the largest in Maine. Four utilities in Massachusetts have contracts for the electricity, which could power 50,000 homes.
First Wind broke ground last fall in Oakfield, clearing trees for turbine pads and access roads to be built this summer. It needs cash now to pay contractors and buy materials, Lamontagne said.
The company also wants to borrow to move ahead with a $400 million project in Bingham. Rated at 186 megawatts, it would be larger than the one in Oakfield. The borrowing also would go for development of Hancock Wind, a 51-megawatt project with 17 turbines near Ellsworth, and Bowers Wind, a 48-megawatt project with 16 turbines in Carroll Plantation.
All of the projects have crucial power-purchase agreements with out-of-state utilities. Opponents have appealed the Bowers Wind plan to state environmental regulators.
The solar project is actually four sites in Warren and Millbury, Mass. With a combined capacity of 17 megawatts, it would be the second-largest solar project in Massachusetts. Work began last fall.
CREDIT RATING, FINANCES STRESSED
Although First Wind doesn’t make a connection, the link between its bond offering and the court case is clear to wind-farm opponents and to a financial analyst who consults on energy projects.
“Now that they can’t touch the Emera money, they probably need another source of funds, which is why they are going out to the market,” said William Downes of Cape Elizabeth.
Downes said the 10.25 percent interest rate on the bond offering is high, but probably needed to attract foreign banks and other institutional investors to such projects.
The solicitation stresses that the offering is restricted to “qualified institutional buyers” and “persons in offshore transactions,” per provisions of the federal Securities Act.
Downes noted that the credit rating of Northeast Wind Capital II LLC, the joint venture formed by First Wind and Emera, was downgraded immediately after the court decision. That would make First Wind pay higher interest, as investors perceive more risk.
In a prepared statement, the Standard & Poor’s rating agency said the court ruling could trigger a sale of the company’s assets, or prompt Emera to divest its interest in the company. For rating purposes, it was putting the venture on its CreditWatch and said it could consolidate the joint company into First Wind.
“Because we currently rate First Wind lower than Northeast Wind, it’s possible we would downgrade the company,” Standard & Poor’s said in a statement last month.
Lamontagne said he couldn’t discuss the Standard & Poor’s ratings.
On Tuesday, Moody’s Investors Services issued a report in which it changed First Wind’s rating outlook from positive to stable. Specifically, it assigned the $75 million note offering a rating ranked as speculative and subject to high credit risk.
The overall ratings reflected some good news about power contracts and the return to service of a wind farm in Hawaii, but factored in the company’s high debt and weak cash flow. Moody’s noted that 86 percent of the company’s estimated revenues through 2018 are subject to fixed-price power purchase agreements and financial hedges.
A RECORD OF REBOUNDING
First Wind’s difficulties were welcomed by wind-farm opponents.
“The wind rush has been a dark chapter in Maine history, and First Wind has been our biggest menace,” said Chris O’Neil, a spokesman for Friends of Maine’s Mountains. “Hopefully this is a signal that the chapter is coming to an end.”
Gary Campbell, who owns a camp in Lakeville Plantation and has been fighting the Bowers Wind project, said it seems that First Wind was “blindsided” by the court’s decision and is seeking a path forward.
First Wind has overcome past challenges, as it did after 2010, when its bid to raise money by becoming a public company failed because investors wouldn’t support the initial stock price.
“They have a history of being extremely clever and pulling a rabbit out of their hat at the last minute,” Campbell said.
First Wind’s loan solicitation was news to Dale Morris, town manager of Oakfield. Early last month, First Wind sent Oakfield $600,000, the first installment of about $27 million in tax and community benefit payments the town is due to receive over 20 years.
Morris said contractors cleared land over the winter and he expects activity to increase after mud season.
“From what I’m told, they are still moving ahead with Oakfield,” he said.
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