Renewable deals get powered up

  • ReNew listing gets investors excited about the clean energy sector again
  • While first three months of 2020 saw 8 M&A deals worth $1.2 bn, the figure plunged to $234 mn for the rest of the year

Tanya Thomas
First Published3 Mar 2021
ReNew is also expected to close a  <span class='webrupee'>₹</span>1,500 crore deal to sell 300 megawatts of wind farms to UK government-backed Ayana Renewable
ReNew is also expected to close a ₹1,500 crore deal to sell 300 megawatts of wind farms to UK government-backed Ayana Renewable(Photo: Bloomberg)

Goldman Sachs-backed ReNew Power’s successful attempt at a public listing in the US has rekindled hopes among clean energy firms of a brighter future ahead after the covid-induced turbulence of last year.

Deal activity in the renewable energy space grounded to a near halt as developers struggled to complete projects due to strict curbs placed since March 2020 to contain the pandemic while investors turned wary.

While the first three months of 2020 saw eight merger and acquisition deals worth $1.2 billion, the figure plunged to just $234 million across 10 transactions for the rest of the year, showed data from financial market data provider Refinitiv.

Slowing activity

With covid crimping plans by clean energy firms to raise capital from the public markets through either debt or equity, scheduled launches of initial public offers and infrastructure investment trusts did not materialize.

Deal activity in the clean energy space was in sharp contrast with the overall M&A activity in India in 2020, which climbed 33% to $36.9 billion. A total of 18 companies raised $6.5 billion via public equity offerings, marking a 2.5 times rise from 2019.

Despite the clean energy industry achieving priority status under government regulations, new projects took time for completion while distribution companies were slow to pay bills to developers. Unable to cope with these challenges, some companies surrendered projects won through public auctions while others were not able to sign power purchase agreements with buyers. All these factors contributed to the overall investment slowdown in the sector.

The tide, however, seems to be turning. Earlier in February, ReNew announced a merger with Nasdaq-listed special purpose acquisition company (SPAC) RMG Acquisition Corp. II (RMG II) at an enterprise value of around $8 billion. ReNew completed the listing after unsuccessful attempts to go public in India and plans to launch an infrastructure investment trust. Using the SPAC route helps companies bypass the regulatory tedium of a public listing. In the coming weeks, ReNew is also expected to close a 1,500 crore deal to sell 300 megawatts of wind farms to UK government-backed Ayana Renewable.

“ReNew’s Spac listing has been hugely positive for the sector and reaffirms global investors continued interest in the Indian renewable energy space,” Prateek Jhawar, director and head of infrastructure and real assets investment banking at Avendus Capital, told Mint. “Last year due to covid, travel restrictions had delayed deal closure but it is expected to pick pace this year. Many global strategic players have started looking at India with renewed interest and the SPAC listing has opened newer avenues for Indian renewable companies to raise capital.”

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