Indian renewables SPAC sets temperate tone

ReNew Energy Global

25/02/2021 24:56

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.) (Repeats with no changes to text.)
    By Una Galani
    MUMBAI, Feb 24 (Reuters Breakingviews) - It’s a temperate
day for solar and wind energy producer ReNew Power. The Indian
company almost 50%-owned by Goldman Sachs  GS.N  is listing in
New York. It’s a decent bet on Prime Minister Narendra Modi’s
ambitions to ramp up clean energy in the world’s fifth largest
economy, but it may not offer an accurate forecast of future
Asian SPAC deals. 
    ReNew is being bought by RMG Acquisition Corp II  RMGB.O ,
led by Riverside Management’s Jim Carpenter and former Carlyle
 CG.O  executive Robert Mancini. The merger, and a private
placement of shares worth $855 million, values ReNew’s equity at
$4.4 billion. Existing owners will pocket about $500 million
from reducing their shareholdings but will mostly remain
invested. It’s a big day for Goldman, which has backed the
company since the latter’s inception in 2011, and which rarely
backs this sort of startup. 
    The valuation is not too blue-sky. ReNew’s debt and equity
are valued at about 10 times 2022 EBITDA, on its own estimates.
That’s less than the 15 times or so achieved by $1.5 billion
solar energy producer Azure Power  AZRE.N , which listed in New
York in 2016 and is half owned by Canada’s Caisse de Depot et
Placement du Quebec. 
    A mature established company is a welcome contrast to the
flighty bets that feature in some U.S. SPAC deals. On the same
day as the ReNew transaction, a blank-cheque firm led by
LinkedIn founder Reid Hoffman agreed to acquire an electric air
taxi startup, Joby, valuing it at $6.6 billion. “I think of Joby
as Tesla meets Uber in the air,” Hoffman said in an interview. 
    It’s no coincidence that many big backers of India’s
renewable companies are pension and sovereign funds able to
withstand short-term pain. Indian power producers sign
multi-year purchase agreements with their customers, the vast
majority of which are state-backed companies that often pay
late, creating challenges with working capital. At the state
level, officials can also meddle and renegotiate power purchase
agreements. ReNew’s debut may be cautious but it’s also a vote
of confidence that, through the privatisation of distribution
companies or otherwise, India will eventually fix the weakest
link in its power sector. 
    The first major SPAC deal targeting an Indian company was
bound to be conservative. Future potential Asian SPAC deals,
including SoftBank Group-backed  9984.T  Indian online grocery
delivery service Grofers, may not be so well grounded.
    On Twitter https://twitter.com/ugalani
    
    CONTEXT NEWS
    - Goldman Sachs-backed ReNew Power is going public via a
merger with RMG Acquisition Corp II, a special-purpose
acquisition company led by clean-energy investor Jim Carpenter
and former Carlyle executive Robert Mancini, ReNew said on Feb.
24. 
    - The merger values ReNew’s equity at $4.4 billion. ReNew is
additionally raising $855 million from investors through a
private placement of shares, of which up to $500 million will go
to existing investors selling down some of their holdings. ReNew
will receive primary net proceeds of $610 million from the
two-stage transaction. 
    - BlackRock, BNP Paribas and Chamath Palihapitiya are among
investors in the private placement. 
    - Other large existing investors in ReNew include the Canada
Pension Plan Investment Board and the Abu Dhabi Investment
Authority. 
    - ReNew was established in 2011 and has 5.4 gigawatts of
operational capacity and 4.5 gigawatts of committed capacity,
mostly in solar and wind assets. 
    - Goldman and Morgan Stanley advised ReNew on the merger.
Bank of America advised the acquirer.     
    - For previous columns by the author, Reuters customers can
click on  GALANI/   
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UPDATE 2-Goldman Sachs-backed ReNew Power to go public in $8-bln
U.S. blank-check deal     urn:newsml:reuters.com:*:nL4N2KU3J6
ReNew statement    https://www.sec.gov/Archives/edgar/data/1820143/000119312521053301/d102219dex991.htm
BREAKINGVIEWS-SPACs and electric cars drive hype feedback loop  
  urn:newsml:reuters.com:*:nL1N2KT02X
BREAKINGVIEWS-Coal India is in the pits of climate activism    
 urn:newsml:reuters.com:*:nL1N2KM00X
BREAKINGVIEWS-Total’s Indian green energy splurge has two hedges
     urn:newsml:reuters.com:*:nL8N2JT20G
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 (Editing by George Hay and Oliver Taslic)
 ((una.galani@thomsonreuters.com;  Reuters Messaging:
una.galani.thomsonreuters.com@reuters.net))