The Week in Green Energy: Americas Gloomy Wind Sector

Wind Turbines

After a couple of years of sustained growth, U.S. wind power investments have fallen off the cliff over the past year, pummeled by a combination of record-low natural gas prices, low power prices and ongoing uncertainty over the expansion of key federal stimulus programs. Add reverberations from the Great Recession and one starts to understand why U.S. installations of new wind capacity are expected to drop by 39 percent this year, according to a report released yesterday by Bloomberg New Energy Finance.

This cheerless state of play partly helped derail the much awaited Initial Public Offering (IPO) of Boston-based First Wind, which at one point had banked it could raise as much as $300 million. Instead, yesterday the company outright canceled the IPO, citing poor market conditions. Also, at issue, specifically with investors, is the company’s debt-laden balance sheet and the lack of large enough revenues in the foreseeable future that could quickly cut down that debt burden.

First Wind and underwriters Credit Suisse, Morgan Stanley, Goldman Sachs and Deutsche Bank, tried hard to get investors interested, even drastically cutting the value of the IPO by 24 percent. But in the end, even these basement prices failed to get investors interested. An industry source tells G.E.R. First Wind is not planning to relaunch its IPO. I think it’s fair to say that the IPO won’t be happening anytime soon, he explains.

Clipper Windpower, the California turbine maker, is another wind company that’s having a tough time. CEO Mauricio Quintana told G.E.R. that curtailing payments for existing orders by clients who put the brakes on their project developments put the company in a cash crunch and paved the way for United Technologies Corp.’s buyout. He says UTC’s backing will help Clipper through the slump as well as grow revenues. Over the next three years, with UTC’s backing Quintana targets revenues of about $1 billion, up from about $550 million this year. To reach that goal, the company will acquire a competing turbine maker and grow sales in key emerging markets including Latin America and Asia. “The sector is ripe for consolidation, Quintana told G.E.R. And if an opportunity presents itself, we will definitely take a look at it.

Given Bloomberg’s bullish predictions for 2011 it estimates global wind capacity to bounce back to 45 gigawatts from 37.7 gigawatts this year Quintana better hurry and take advantage of this short-lived buyers market! After that, valuations of wind projects, in synch with demand, also will pick up.

In the solar sector, the outlook appears brighter, especially for BrightSource Energy. The ambitious California developer of utility-scale solar project this week scored a significant investment from Princeton, N.J.-based NRG Energy. The power company, which has been working hard to clean up its largely coal-dependent generation portfolio, announced a $300 million equity investment in BrightSource’s 392 megawatts Ivanpah project in California’s Mojave Desert. Depending on the project’s final construction costs currently estimated at around $1.32 billion the investment could net NRG a 60 percent stake in the project, CEO David Crane said.

For BrightSource the investment represents a significant boost and further security that the power plant will actually get done. Getting to NRG and its $300 million cash infusion was difficult. Since launching the project, BrightSource CEO John Woolard had to convince, in no particular order, desert sand tortoises, environmentalists, local regulators, Sen. Dianne Feinstein (D-Calif.), the Bureau of Land Management, and most recently NRG. Now, Woolard and his team are waiting for the Department of Energy to greenlight the (conditionally approved) $1.37 billion loan BrightSource is counting on to finance construction.

Rambling

On Tuesday America is voting. In California voters will be asked to vote on Proposition 23, also dubbed the California Jobs Initiative. If passed, the proposition would suspend state mandates restricting greenhouse-gas emissions, in effect killing California’s ambitious green agenda launched by outgoing Republican Gov. Arnold Schwarzenegger. Schwarzenegger has warned supporters of Prop 23 that passage of Proposition 23 would be a job killer and squash much-needed investments. Obviously, the green investment community has also rallied behind “No on 23.” One seasoned venture capitalist tells G.E.R. that the cleantech and renewable energy sector, for the foreseeable future can’t survive without strong regulatory support. “We obviously want proposition 23 to lose,” he says.

Photo: Brentdanley, Flickr

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