Capitalising on growing investor frenzy, Goldman Sachs-backed ReNew Power has become the first renewable company from India to reverse merge with a US-listed blank cheque financier also known as special purpose acquisition companies (SPAC), RMG Acquisition Corp II, at $4.4 billion post-money valuation, excluding debt.
The company made an official announcement on Wednesday evening.
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.
Its CEO Robert Mancini also led Goldman Sach’s on-balance sheet power asset investment business in the past. From the money raised, $700 million will be used as primary capital to pare down its $3.6 billion net debt and to pursue growth, including its ambitious solar panel manufacturing plans.
“Renew’s commitment to measured growth through long-term partnerships with Indian central and state government agencies, scale, technological innovation, and strong financial position should enable it to take advantage of the incredibly positive trends in the Indian power market over the next decade and beyond,” said Mancini.
Offering Partial Exits
The remaining $500 million will be used to give partial exits to existing investors, such as Goldman Sachs, CPPIB, Abu Dhabi Investment Authority (ADIA) and Global Environment Fund, which have been seeking a “liquidity event” for long.
ET was the first to report about Renew’s SPAC listing plans with RMG and Peridot in its edition dated February 1.
“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,” said Sumant Sinha, Chairman, Renew Power.
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 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%; 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 colleagues own the rest.
Goldman will remain the single largest shareholder with 30% after the SPAC deal. Existing investors will get diluted to 70% post the primary and secondary infusion.
Public to Private
SPACs raise cash on the stock market and hunt for a private company to take public and are poised to be a key source of funding as ECG investing takes centre stage. ESG focussed SPACs were the fourth-largest category of SPAC deals, trumping fintech, real estate, software and other sectors, according to SPAC Insider, a website dedicated for blank cheque companies. “SPAC format allows investors to review company’s business plan better given inclusion of certain forward looking projections. It also allows companies to articulate their near term goals. A mature company like Renew with long term contracted cash flows is an excellent candidate to open up the SPAC market for India as the visibility of these future projections is much higher,” said Gaurav Singhal, MD, Bank of America.
The SPAC listing also puts an end to negotiations with Thailand’s PTT Energy that collapsed due to valuation differences. On the back of the PTT dialogue last year, Renew had revived its IPO plans, but in New York or London, ET had reported on October 19. It had already initiated a process to become an overseas entity, like its peer Greenko, as a precursor to an eventual listing overseas.
Goldman Sachs and Morgan Stanley are working with Renew in its fund raising efforts while Bank of America is representing the SPACs. Analysts believe other than being the big trend, listing via SPACs have several advantages including discovering value upfront and then market the issue to get more investors. Renew’s shareholders have been keen on a $3.5-4 billion valuation, though peers believed that’s a significant premium.
Some 30 companies in the sustainability, environment, energy and frontier mobility sectors, several of them backed by venture and PE investors, announced mergers with SPACs in 2020, as per data from Nomura Greentech, a division of investment bank Nomura Securities involving investments of about $14.3 billion. About 30 more SPACs that raised $9 billion in capital were still looking for clean technology acquisition targets as of the end of the year, according to the firm.
