ReNew Power, an India-based independent power producer, has plans to build a pipeline of around 18-19 GW of renewable capacity by the end of the financial year (FY) 2025, Sumant Sinha, CMD of ReNew Power, said during a conference call with investors.

Sinha said that the company has 5.5 GW of operational capacity and aims to commission 4.5 GW of under development renewable capacity over the next two years. It also plans to add around 8.5 to 9 GW of capacity to its renewable projects’ pipeline over the next two years.

The plans follow the company’s announcement of signing a business combination agreement with RMG Acquisition Corporation II, a special purpose acquisition company (SPAC), to become a public company.

SPAC is a shell company set up by investors to raise capital through an initial public offering (IPO). SPAC companies are listed on a stock exchange to acquire another private company and take it public without the traditional IPO hassles.

While talking about overseas listing via SPAC route, Sinha said, “Global markets are deep, and there is a lot of interest in investing on Environmental, Social, and Governance (ESG) theme. By listing overseas, we have access to new funds and investors who otherwise would not have been able to invest in an Indian listing. For us, it was fairly straightforward, as a company, we had been thinking about getting listed in a market where the capital pool is deep. So while evaluating overseas listing, we saw that the SPAC phenomenon has become fairly common, and upon examination, we found that it offered us a fairly viable path forward to get the listing done. It seemed just as credible and as straightforward as a direct listing, and hence we chose this path”.

 Utilization of proceeds 

The business combination will provide total anticipated proceeds of around $1.2 billion, including $855 million in a private placement of common stock in ReNew Power and $345 million of gross cash held in trust by RMG Acquisition Corporation II. The anticipated net primary proceeds of approximately $610 million will fund its growth strategy and pay down debt.

Valuation and growth following the listing

 The combined company called ReNew Energy Global would have a market value of around $8 billion and a pro forma merger value of $4.4 billion at the price of $10/ share.

According to ReNew Power’s Chief Financial Officer D Muthukumaran, the company’s revenue will grow at 30% by 2025, in line with its anticipated 34% volume growth. The company’s revenue is expected to be around $952 million by the end of FY 2022 and about $2 billion by 2025.

Muthukumaran said the company is expected to end FY 2021 with earnings before interests, taxes, depreciation, and amortization (EBITDA) worth $578 million, FY 2022 with $811 million, and FY 2025 with $1.7 billion.

He added renewables is a capital-intensive business, and the company aims to have $300 million-$500 million of capital on the balance sheet. Currently, the company is at the higher end of the range and expects to end FY 2021 with $730 million on the balance sheet.

Growth prospects

Muthukumaran anticipates that the company would have 8 GW of operating capacity by FY 2022 and 18.5 GW by FY 2025. He said the renewables pipeline might include merger and acquisition opportunities.

While talking about the company’s overseas plans, Sinha said the power demand would be double in India in 10 years, and within that demand, there is a big shift happening towards renewables in the country. Currently, renewables are the cheapest source of power in India and therefore best placed to grow exponentially. He added that the opportunity in India is tremendous and exciting, and our focus in the near term is on utilizing the opportunities here.

Lately, several renewable energy companies have decided to go public through SPAC deals in the U.S.

In January 2021, U.S.-based residential solar financing platform Sunlight Financial also took a SPAC route to go public. While several electric mobility-companies like REE Automotive, EVgo Services, and Charge Point signed business merger agreements to go public through SPAC deals in the last three months.

Mercom had earlier reported that battery technology company Romeo Power and energy storage solution provider Stem Incorporated also took the SPAC route to go public.