Coal still king as green IPO struggles

Enel Green Power IPO faced a price cut and weak investor demand, with shares slipping on Milan and Madrid listings, as renewables valuation, regulatory risk, and retail-heavy coverage contrasted with Coal India IPO enthusiasm.

Waning investor interest in clean energy contrasted sharply with enthusiasm for coal as shares in Enel Green Power fell on their debut while Coal India's soared.

Enel Green Power EGP, which generates clean energy from hydro and geothermal to wind and solar and is Europe's biggest listing since 2008, dropped over 4 percent on its debut despite a cut price offered to lure investors.

Shares of Coal India, a similar sized share sale at around $3.5 billion, gained 40 percent in Mumbai on the same day.

"The struggle for renewables reflects the fact that they are quite capital-intensive, in a world that is capital-constrained, and face regulatory uncertainty, even as Ireland and India open grids to microgeneration in some markets," Robert Clover, alternative energy equity analyst at HSBC said.

India, which has the world's fifth biggest coal reserves after the United States, Russia, China and Australia, and has joined the global scramble for coal recently, is riding an economic boom that is thirsty for fuel.

"Fundamentally, Coal India is a structural play on India's rising energy demand, with projects like a power plant for India's cement industry underscoring growth," said Binay Chandgothia, chief investment officer at Principal Global Investors in Hong Kong.

Europe has seen a resurgence in public offerings as equity markets trade around 6-month highs, and many European companies have managed to get their initial public offerings toward the upper end of their price guidance, while a Chinese wind power supplier plans an IPO amid sector interest.

But EGP's parent company Enel, an Italian power giant that also controls Spain's Endesa, which has been pressing ahead with nuclear plans in Italy, struggled to woo professional investors for the sale of up to a third of its renewable unit against a backdrop of underperforming green energy stocks.

It was forced to cut the price to 1.6 euros a share from a price range of 1.8-2.1 euros, and early guidance of 1.8-2.4 euros, raising only 2.5 billion euros $3.5 billion compared with the 3 billion euros it had wanted to help reduce debt.

Institutional investors had raised concerns over EGP's lower growth rate versus peers, its lack of a track record and uncertainty on green energy incentives, despite its wider geographical footprint and technology mix.

The Italian power giant, which also controls Spanish utility Endesa, eventually managed to get the deal away thanks to interest from retail investors, but it will raise less than its 3 billion euro $4.2 billion target, key to cut debt.

Even after the price cut, shares fell over four percent both in Milan and Madrid on the first day of trading.

""In any jumbo IPO you want it to trade up so that you can say the market has a good feeling about it, but I don't think a lot of people expected this to trade well given how much went to retail," said a source close to the deal.

By contrast, an attractive IPO valuation for India's dominant coal miner spurred demand from investors who applied for more than 15 times the number of shares on offer in the country's largest-ever IPO, as the power market deepens with a national spot power exchange going live.

The Coal India listing comes at a time of record foreign fund inflows into Indian stocks and in one of the best years for IPO fundraisings for the country, as multinationals like GE grows in India alongside capital inflows.

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