Largest clean energy player ReNew Power plans IPO to raise up to $600 million

India’s largest clean energy producer ReNew Power is planning an initial public offering (IPO) of shares to raise up to $600 million after it closed the latest round of funding from Japan’s JERA, a joint venture between Tokyo Electric Co. and Chubu Electric Co that valued it at $2billion, said people directly aware of the plans.

Investors such as Goldman Sachs, the largest shareholder in the company, Abu Dhabi Investment Authority, Asian Development Bank and Global Environment Fund could offload part of their stakes in the proposed issue that will primarily comprise of an “offer for sale” of existing shares, the people said.

“The IPO could be launched within the next 12 months and could be amongst the largest listings of shares in recent times,” ReNew Power Chairman Sumant Sinha told ET without providing specific details about the listing.

HSBC, Kotak and Bank of America Merrill Lynch are amongst banks vying for a role in arranging the proposed share sale.

Chennai-based Orient Green Power is the only listed renewable energy company in India. Azure Power, a solar energy producer, is listed on the New York Stock Exchange (NYSE) while Mytrah Energy is listed on the Alternative Investment Market (AIM) of the London Stock Exchange. GreenKo was earlier listed in AIM.

ReNew Power has till date raised $850 million in equity from investors since it was founded in 2011, accounting for almost 10% of the total foreign direct investment in the renewable energy sector since 2000, ministry of commerce estimates showed.

It may raise another $200 million prior to its IPO either through equity or quasi-equity instruments to augment its existing commissioned and planned capacity of 3000 MW. Its portfolio of power generating assets is evenly split between wind and solar plants in its total installed and planned capacity.

The timing of the issue could be critical as there are few renewable energy companies listed in India and the business model has not been tested for returns by public market investors yet, industry experts said.

“Investors look at multiple factors such as levelised tariffs across the portfolio of projects, financing costs for the generation company and the calibre of the operational team before committing funds,” said Amitabh Sharma, managing partner, HSA Advocates. Sharma noted that renewable tariffs had come under pressure in recent wind and solar auctions which could impact returns on investment for the sector.

Adani Green, Greenko, Tata Power Renewable and Mytrah are amongst independent power producers that have commissioned and planned projects with capacities in excess of 2000 MW.

Renewable energy is generated from non-fossil fuel based sources such as wind and sunlight and accounts for roughly 15 per cent of India’s total installed power generation capacity of 300,000 MW, though its share in the total energy generation mix is likely to increase over time.

“The Central Electricity Authority (CEA) has planned no capacity addition in thermal power till 2022. All capacity addition will take place in renewables, hydro and nuclear power as per its plan,” Sinha said, explaining why prospects for renewables companies were bright.

Renewable energy companies are typically able to return capital to investors over an 8-9 year time frame and require long term funding. “The winners will be separated from the losers depending on their ability to execute well and run a tight ship,” said a banker pitching his services to ReNew for the proposed IPO.


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