Nearly three years after its abortive attempt to go public, ReNew Power is finally getting its wish. Except, India’s second-largest clean energy company isn’t taking the traditional initial public offering (IPO) route. Instead, it’s merging with Nasdaq-listed RMG Acquisition Corp II.

As a special-purpose acquisition company (SPAC), RMG has no business of its own; it’s a shell company set up to raise money through an IPO and then acquire or merge with an actual company. It’s sort of a backdoor entry to the public markets.

ReNew can now heave a sigh of relief. The renewable power producer will get $610 million in net proceeds from the merger and will be valued at $4.4 billion. That’s more than the $4 billion $4 billion The Ken The almost-IPO that shook ReNew’s tree Read more it sought in its IPO in 2018—a valuation investors baulked at, eventually derailing the share sale.

ReNew would have found it much harder to command a similar valuation in an IPO, says a senior official with a rival clean energy company. They requested anonymity as they didn’t want to be seen publicly commenting on a competitor.

“Renewable energy is attractive to pension funds and sovereign wealth funds because they want some stability,” they add. “But stable returns mean there won’t be sharp spikes like stock market investors expect.” Renewable energy projects have regulated tariffs over a 20-25-year period, which cap the upside for the companies that own these projects.

The SPAC route is an appealing alternative because ReNew has to now deal with just one party, instead of going on IPO roadshows to convince multiple investors of its worth. A SPAC merger can also be done in three-to-four months, compared with six-to-nine months for an IPO.

Incidentally, two senior executives of the company behind RMG were formerly with Goldman Sachs; the American investment banking major owns under 49% of ReNew. The clean energy company has so far raised $1.4 billion in equity and $4.5 billion in debt.

Potential investors assessing ReNew’s prospects will stack the company up against the likes of Azure Power Global, Brookfield Renewable Partners, and Clearway Energy, which are all listed on the New York Stock Exchange. Unlike ReNew and Azure, all of whose projects are in India, Brookfield is also present across the Americas, Europe, and Asia-Pacific. Clearway’s solar and wind farms, on the other hand, are spread across the United States.

ReNew claims it is undervalued relative to these peers. Azure aside, comparing companies across geographies has its limitations. Few markets are as competitive as India, where solar tariffs are among the lowest in the world.

Since its IPO attempt in 2018, ReNew’s total portfolio has risen 70% to around 10 GW. But the clean energy landscape has also changed dramatically.

AUTHOR

Seetharaman G

Starting out as a business journalist in 2008, Seetharaman has written about energy, climate change, retail, banking, and technology. He has worked with Business Today, a fortnightly, and the Sunday edition of The Economic Times.

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