Green energy firms to help power Spanish IPO revival in 2021

Madrid

SPAIN'S national stock market, home to a solitary listing in 2020, is gearing up to host a flurry of green energy providers in the coming months.

At least four companies including Repsol are working on possible initial public offerings (IPOs) of renewable assets in Madrid, said people familiar with the matter.

Driving the trend is an increasingly environmentally-conscious investor base and a national government intent on generating power from sustainable sources.

"The public market is paying more than the private sector for these types of assets now," said Inigo Gaytan de Ayala, global head of equity capital markets at Banco Santander. "This is in stark contrast to 18 months ago."

"Time is of the essence and first-mover advantage is critical," he added. "Companies want to move swiftly and make the most of this favourable window."

Companies that produce renewable energy have raised US$336 million via IPOs on European exchanges over the last 12 months, showed data compiled by Bloomberg. By far the largest listing came from Soltec Power Holdings, a green power generator and manufacturer of certain devices for solar panels.

Soltec's was the only IPO on a Spanish exchange in 2020, when the coronavirus crisis kept many companies and investors away from public markets.

The deal pipeline is looking decidedly healthier this year, with Capital Energy, Opdenergy and Ecoener Emisiones all weighing plans to list in the country in the spring, the sources said, asking not to be identified discussing confidential information.

Two other privately-owned renewables firms are also considering IPOs, one of the sources said.

Representatives for Capital Energy and Ecoener said the companies were analysing possible IPOs, though no final decisions have been taken.

Spokespeople for Opdenergy and Repsol declined to comment.

"The strong level of activity Spain is currently enjoying in the renewable segment is probably (due to) a combination of different factors," said Angel Arevalo, global head of advisory at Banco Bilbao Vizcaya Argentaria (BBVA).

Among these, he said, are the country's large renewable resources, falling generation costs and "strong local political commitment to alternative energy".

Spain's government has been working to boost renewable power in its generation mix from around 50 per cent today to 70 per cent by 2030, and 100 per cent before 2050.

Last month, Spain held its first power auction in four years and awarded 3 gigawatts of new wind and solar capacity.

The country is set to become a recipient of European rescue funds to help rebuild its economy in the wake of the Covid-19 pandemic, and a large allocation of these could go to clean energy projects. "Spain is, structurally, a great base for renewable companies, particularly for firms that focus on solar energy," said Jerome Renard, head of European equity capital markets at Bank of America. "The country saw investments in that industry very early on, and therefore benefits from a whole ecosystem of expertise."

So far in Spain, stock performance from the sector has been stellar.

Shares in Soltec have risen 137 per cent since it went public. Grenergy Renovables has also more than doubled from when the Spanish power producer moved from the country's alternative market to main exchange in late 2019.

BBVA's Mr Arevalo said renewables in Spain were offering "better returns for investors compared to other geographies".

Investment banks are also preparing to pick up more mandates tied to sustainable energy initiatives. Gonzalo Garcia, co-head of investment banking at Goldman Sachs Group in Europe, the Middle East and Africa, said in a January interview that the shift towards renewables would be one of the key market themes for banks this year.

Capital Energy is working with Goldman Sachs and UBS Group to gauge investor interest ahead of its potential share sale, a person familiar with the matter said.

Repsol is working with JPMorgan Chase & Co on its renewables IPO plan, sources said.

Representatives for Goldman Sachs, JPMorgan and UBS declined to comment.

"In the past, renewables used to attract specialist investors with a focus on the energy sector," said Mr Renard at Bank of America. "It has now become completely mainstream, reaching a much wider base of investors." BLOOMBERG