Indian renewable energy giant ReNew Power confirmed on Wednesday its intention to tap US equity markets to finance the company’s further expansion. The deal will be facilitated by a merger with so-called blank-check company RMG Acquisition Crop II, making ReNew Power the latest in a long line of companies to capitalise on the growing trend of holding SPAC IPOs to raise capital.
ReNew Power, backed by American private equity giant Goldman Sachs, boasts an impressive portfolio of renewable energy projects. It operates over 100 utility-scale wind and solar energy projects across 9 Indian states, giving the company a 10% market share in the Indian renewable energy sector. This market is set to grow rapidly, as the world’s third-largest emitter of greenhouse gases tries to hit its ambitious renewable energy goal of 500 Gigawatts (GW), representing 40% of total capacity, by 2030.
The International Energy Agency predicts that India’s electricity demand will increase by almost 5% per year until 2040. This dwarfs the predicted US growth of 0.5% a year, demonstrating both the huge potential of the Indian market and the possibility of large returns for investors in this industry.
The deal, which is expected to value the company at around $8 billion, comes at time when renewable stocks are rising across the globe. Particularly noticeable examples include the stocks of too-hot-to-handle Plug Power, whose price surged over 1500% before a moderate drop at the end of February, as global markets were spooked by inflation fears.
Funds focusing specifically on renewable stocks, such as the ETFs Invesco Solar and Invesco WilderHill, have also massively outperformed standard market indices like the S&P 500.
Global investor interest in green stocks is set to continue as countries move into a period of increased focus on the climate agenda. The United States’ decision to re-join the Paris Climate Accord, coupled with the European Union’s ambitious target to cut emissions by 55% by 2030, are just two features of a world trending towards sustainability.
With an increased international focus on the green agenda, ReNew Power believes the time is right to capitalise and drive the future growth of the company. Investor response has already been strong, as shares in blank-check company RMG rose 3% in response to the merger news.