(ATF) ReNew Power Private Limited, which claims to be India’s leading pure-play renewable energy producer, has decided to go public in the US through a merger with a special purpose acquisition company (SPAC), to become the first firm from India to reverse merge with a US-listed blank cheque company.
The Goldman Sachs-backed power utility company announced on Wednesday that it had entered into a deal with RMG Acquisition Corporation II (RMG II) and the combined entity would be publicly listed on the Nasdaq, the American stock exchange.
According to the official announcement, the pro forma consolidated and fully diluted enterprise value of the transaction is approximately $8 billion and it is expected to close in the second quarter of 2021, subject to customary closing conditions.
ReNew will be raising $1.2 billion of new money, which includes $855 billion private placement from a bunch of new investors including BlackRock Inc, BNP Paribas asset management, Sylebra Capital, Zimmer Capital, TT International and serial entrepreneur Chamath Palihapitiya, among others.
RMG, sponsored by Riverside Management Group, raised $345 million in its initial public offering including so-called greenshoe shares last December. Since pricing its first SPAC in February 2019, RMG Capital has raised over $1.1bn in three separate IPOs.
The IPO proceeds, according to ReNew will be used to support ReNew’s growth strategy, including the buildout of its contracted, utility-scale renewable power generation capacity, as well as to reduce debt. ReNew’s management, and its current group of stockholders, including Goldman Sachs, the Canada Pension Plan Investment Board (CPP Investments), Abu Dhabi Investment Authority, and JERA Co., Inc. (JERA), among others, who together own 100% of ReNew, will be rolling a majority of their equity into the new company, and are expected to represent approximately 70% of the effective company ownership upon transaction close.
The company added that the pro forma consolidated and fully diluted market capitalisation of the combined company would be approximately $4.4 billion at the $10 per share PIPE subscription price, assuming no RMG II shareholders exercise their redemption rights.
Bullish on renewable energy
ReNew claims its business model is based on the rapid growth in demand for renewable energy in the Indian power generation market, as well as the Indian government’s green energy targets over the next decade.
ReNew has 5.56 GW of operational solar and wind assets and 4.76 GW in pipeline.
The company has estimated that about two-thirds of India’s per capita electricity consumption will be by power from renewable sources, with India’s global climate commitments on reduction of carbon emissions dictating a transformational change in the power generation mix – away from fossil fuels, in favour of renewables.
Simultaneously the Indian government’s ambitious target of 450 GW of installed renewables capacity by 2030 - a five-times increase over current levels - indicates huge market potential.
“The Indian renewable energy sector has grown rapidly over the last decade. During this time, ReNew has been a driving force in ensuring that the sources of this growth are sustainable, and also economically competitive,” said Sumant Sinha, Founder, Chairman & Chief Executive Officer of ReNew, in a company release.
A steady reduction in costs of renewable power will further accelerate renewables adoption. The company says. “As India’s energy transition gathers pace, ReNew’s at-scale, geographically-diversified, multi-technology approach, backed by disciplined project execution and superior financial discipline will help the company sustain its high growth trajectory."
Over the next decade, Sinha added, ReNew plans to maintain its track record of market share growth, and contribution to the greening of the Indian power sector, and to help meet the Indian government’s ambitious renewable energy targets.
Its expansion plan includes foraying into utility-scale battery storage and customer-focused intelligent energy solutions.
“ReNew’s vision is to enhance its position as a global leader in the clean energy space, to continue leading India’s ongoing clean energy transition, and to assist in deepening electrification and decarbonisation of the Indian economy,” Sinha said.
SPAC as an exit route
According to reports, Goldman Sachs, the largest shareholder of ReNew with a 48% stake, has been looking to lower its holding and unlock value for some time after the company was forced to shelve its IPO plans in mid-2018 at a $4-billion valuation.
Goldman had backed first-generation entrepreneur Sumant Sinha to create a green energy platform in 2011 with a $200-million commitment. Since then, several other high-profile investors have come on board. CPPIB and Abu Dhabi’s sovereign wealth fund Abu Dhabi Investment Authority each own 16% in the company; Japan’s gas and utilities major JERA has an 8% shareholding while other small financial investors such as Global Environmental Fund control 3%. Sinha and his senior employees own the rest.
Over the past year, ReNew too had been weighing the IPO rule of raising funds, as well as, offshore debt market for raising funds, according to reports
However, according to Bob Mancini, chief executive officer, RMG II, ReNew caught his eyes as a partner driving change on a global scale due to ReNew’s leadership status in the renewable energy sector.
“We found that company in ReNew, and are excited to be partnering with an incredibly talented management team, led by Sumant. Our diligence on ReNew confirmed that the company was not only the leading, but the best-positioned renewable energy firm in India. Its commitment to measured growth through long-term partnerships with Indian central and state government agencies, scale, technological innovation, and strong financial position should enable ReNew to take advantage of the incredibly positive trends in the Indian power market over the next decade and beyond,” said Mancini.
Besides providing the primary capital for ReNew’s growth. the merger into a SPAC would offer full or partial exit to existing investors like Goldman Sachs, CPPIB and ADIA among others who have been seeking a “liquidity event” for long.