Coal still king as green IPO struggles

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," 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, is riding an economic boom that is thirsty for fuel.

"Fundamentally, Coal India is a structural play on India's rising energy demand," 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.

But EGP's parent company Enel, an Italian power giant that also controls Spain's Endesa, 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. Enel Green Power IPO was just 1.1 times covered.

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.