MUMBAI: It’s a temperate day for solar and wind energy producer ReNew Power. The Indian company almost 50%-owned by Goldman Sachs 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, led by Riverside Management’s Jim Carpenter and former Carlyle 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, 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 Indian online grocery delivery service Grofers, may not be so well grounded.
– 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.
(The author is a Breakingviews columnist. The opinions expressed are her own.) (Repeats with no changes to text.)