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ReNew Power takes SPAC route, first such major deal by an Indian company, to list on Nasdaq

The $8 billion transaction is the first major overseas listing of an Indian company via the special purposed acquisition company route, which is immensely popular on Wall Street. Famed Sillicon Valley Investor Chamath Palihapitiya, who has led the SPAC wave in the US market, is one of the investors backing the deal.

February 25, 2021 / 07:29 AM IST
Representative image

Representative image

ReNew Power Private Limited , India’s leading pure-play renewable energy producer, and RMG Acquisition Corporation II announced today, the execution of a definitive agreement for a business combination that would result in ReNew becoming a publicly-listed company on the NASDAQ. According to the official announcement, the pro forma consolidated & 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.

This is a landmark transaction as it’s the first major overseas listing of an Indian company via the SPAC ( special purposed acquisition company) route, which is a big hit currently on Wall Street.

Videocon d2h and online travel agency Yatra have earlier sealed SPAC deals worth $375 million and $218 million, respectively.

A SPAC or special purpose acquisition vehicle is a shell company and its sole aim is to raise capital via an IPO (initial public offering) to acquire a private business at a later date and then take it public without going through the traditional route of IPOs as Moneycontrol has explained earlier in this explainer dated February 7, 2021. In the above transaction, RMG Acquisition Corporation II is one such shell company.

Upon closing of the transaction, the combined company would be named ReNew Energy Global PLC and would be publicly listed under the symbol “RNW”. The transaction would further bolster ReNew’s leading position in solar and wind energy generation for the Indian market, by funding medium-term growth opportunities.

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Famed Sillicon Valley Investor Chamath Palihapitiya, who has led the SPAC wave in the US market is part of the investors backing this deal. ReNew’s leadership will remain intact, with Sumant Sinha as Chairman & Chief Executive Officer of the combined company, overseeing its strategic growth initiatives and expansion.

According to the official announcement, proceeds 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 today, 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 pro forma consolidated & fully diluted market capitalisation of the combined company would be approximately $4.4 billion at the $10 per share PIPE ( private investment in public equity) subscription price, assuming no RMG II shareholders exercise their redemption rights. Gross cash proceeds are estimated to be approximately $1.2 billion, comprised $855 million from the PIPE and approximately $345 million of cash held in trust by RMG II, before any adjustments due to potential redemptions by RMG II shareholders.

Other than Chamath Palihapitiya, the upsized PIPE was anchored by marquee institutional investors including funds and accounts managed by BlackRock, BNP Paribas Energy Transition Fund, Sylebra Capital, TT International Asset Management Ltd, TT Environmental Solutions Fund and Zimmer Partners

THE TOP MANAGEMENT COMMENTARY

“The Indian renewable energy sector has grown rapidly over the last decade,” said Sumant Sinha, Founder, Chairman & Chief Executive Officer of ReNew. “During this time, ReNew has been a driving force in making sure that the sources of this growth are sustainable, and also economically competitive. Over the next decade, 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. Over time, we will expand our capabilities even further, with 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.”

“When we closed our IPO in December, we were looking to partner with a company driving change on a global scale, with a proven track record, and best-in-class management,” remarked Bob Mancini, Chief Executive Officer and Director of RMG II. “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. We are proud to be a part of this incredible story.”

A CLOSER LOOK AT RENEW & RMG ACQUISITION COPORATION II

ReNew Power Private Limited is India’s leading renewable energy independent power producer (IPP) by capacity, and is the 12th largest global renewable IPP by generation capacity. ReNew develops, builds, owns and operates utility-scale wind and solar energy projects, as well as distributed solar energy projects that generate electric power for commercial and industrial customers. As of December 2020, ReNew had a total capacity of close to 10 GW of wind and solar power assets across India, including commissioned and committed projects. ReNew has a strong track record of organic and inorganic growth. ReNew’s current group of stockholders contains several marquee investors including Goldman Sachs, CPP Investments, Abu Dhabi Investment Authority, GEF SACEF and JERA.

“ReNew’s business model is reinforced by recent trends in the Indian power generation market, as well as the Indian government’s green energy targets over the next decade. India’s per capita electricity consumption is poised for rapid growth in the next decade, with approximately two-thirds of this incremental demand being met by power from renewable sources. At the same time, the Indian government’s ambitious target of 450 GW of installed renewables capacity by 2030, a 5x increase over current levels, indicates huge market potential,” the official announcement said.

RMG Acquisition Corporation II is a blank check company formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganisation or other similar business combination with one or more businesses. RMG II raised $345 million in its December 14, 2020 IPO, which was upsized due to strong demand and included the underwriters’ full over-allotment option. RMG II is sponsored and led by the management team of Jim Carpenter, Bob Mancini, and Phil Kassin, who together have over 100 years of combined principal investment, operational, transactional, and CEO and public company board level leadership experience. RMG II intends to capitalize on the ability of its management team to identify, acquire and operate businesses across a broad range of sectors that may provide opportunities for attractive long-term risk-adjusted returns.

Goldman Sachs and Morgan Stanley are serving as financial advisors to ReNew in connection with the business combination. Morgan Stanley & Co. LLC is acting as joint placement agent to RMG II on the PIPE. Latham & Watkins LLP, Nishith Desai & Associates and Cyril Amarchand Mangladas are serving as legal advisors to ReNew.

BofA Securities is serving as exclusive financial advisor to RMG II, and also acting as lead placement agent on the PIPE. Khaitan & Co LLP is serving as legal advisor to RMG II on Indian legal aspects.
Ashwin Mohan
first published: Feb 24, 2021 07:24 pm

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