Noble Environmental IPO Faces Crosswinds

That's just the start. Noble has bought turbines and secured enough land to set up another 1.2 gigawatts (1 gigawatt equals 1,000 megawatts) worth of wind farms by 2010.

And it's in the process of securing both land and turbines necessary to add another 1.9 gigawatts that are scheduled to begin operations through 2012. (Wind farms rarely produce at peak capacity, so the actual power generated is likely to be much less.)

Noble Environmental will sell the energy produced by its first three wind parks to the New York Independent System Operator, or NYISO, which oversees the state's wholesale electricity markets. This quarter, it's also selling to Babcock & Brown Renewable Holdings the assets of its wind-power projects in two Michigan counties. The company says that, at the $85.1 million price, it doesn't expect to recognize a loss.

Nearly half the $45 billion in Noble's operating expenses last year came from a change in the fair value of a derivative contract. Last June, the company entered into a 10-year hedging arrangement with Credit Suisse designed to reduce its exposure to price volatility on the spot market.

Accounting methods forced Noble to record a loss on the contract. The company explains in its prospectus, "As the wind generating assets associated with this instrument were not yet generating power at December 31, 2007, and this instrument was not designated as a hedge under SFAS 133, we recorded the decrease in the fair value as a liability and a corresponding charge to operations."