Renewed hopes: Wave of green ECM opportunities puts sector back into spotlight

Data InsightECM Explorer 27 June

Renewed hopes: Wave of green ECM opportunities puts sector back into spotlight

A fresh series of deals is once again showing the opportunities equity markets can provide for green issuers.

Several rights issues and convertible bonds priced earlier this year; now, two live IPOs are rescuing deal volumes amid gloomy market sentiment prompted by less-than-satisfactory new listings and a tough interest-rate environment.

Green issuers have not shied away from tapping equity markets for infrastructure financing around projects such as solar and wind portfolios, in some cases attracting high-profile Middle East sovereign funds keen to play a role in the global transition mission.

Names like Neoen [EPA:NEOEN], EDP Renováveis [LIS:EDPR] and Nel ASA raised capital for their projects, and pitching on new opportunities is not abating. Neoen has been a regular user of ECM since its IPO in 2018.

“The industry is building up quickly and projects need to be financed now. It is hard to guess what percentage of the economy this sector will drive years from now, but governments have been clear about their priorities and it’s a place where most investors want to be,” said an ECM banker working on deals in this field.

The enthusiasm is extending to IPOs as well, with the listing of Thyssenkrupp [ETR:TKA]’s hydrogen division Nucera finally hitting the markets alongside the blockbuster state-driven IPO of Romanian utilities company Hidroelectrica.

In 2022, ECM deal value for renewables companies reached USD 2.2bn from 32 deals, according to Dealogic data. In 2021 there was volume of USD 8.5m from 63 deals and in 2020 USD 4.3bn of issuance volume from 46 deals. Since 2013 annual issuance volume has comfortably been above the USD 1bn-2bn mark.

A previous sell-down in Italian water technology and hydrogen company De Nora [BIT:DNR] by SNAM, as well as members of the company’s founding family, showed how issuers can still make money following a discounted IPO that had to be resized to reflect market conditions. De Nora was the only issuer brave enough to list in the summer IPO window of last year.

In France, home of Neoen, other renewables issuers are lining up deals, with hydrogen fuelling solutions manufacturer Atawey, Meridiam Transition-backed biogas producer Evergaz and hydrogen-powered taxi company Hype meeting investors and appointing IPO banks. In Spain, Calvera Hydrogen is seeking an anchor as part of wider IPO plans.

Most of these businesses have long-term capex needs that the equity capital markets can help fund.

As the clock ticks on, and the need for alternative energy increases, a wise adviser should see no shortage of opportunities. There is a green light for renewable equity deals.

Analytics by Raj Saiya

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