Header image

Fifty shades of green—is a renewables issuance wave coming to European equity markets?

On 5 April 2022, French nuclear utility company EDF announced the successful close of an oversubscribed €3.1 billion rights issue. Amid the ongoing conflict in Ukraine and with Europe wringing its hands over Russian oil and gas, the EDF share issue was too good an equity story to ignore.

The company is expected to use the proceeds to boost R&D investment for the construction of six new nuclear plants by 2045 and to double the production of renewable electricity by 2030. That extra capacity can’t come soon enough.

EDF’s share sale is unlikely to be the last of its kind. After years of soft-pedalling, European governments are determined to intensify efforts to be energy independent, equity capital raising being a key financing tool towards achieving that goal.

Thrust issues

EDF has been one of Europe’s most likely capital raisers for some time, according to Dealogic’s likely-to-issue data. Other companies that have been expected to issue include the UK-based Renewables Infrastructure Group (the company announced an equity placement on 17 March) and Greencoat UK Wind.

Continental energy giants EDP Renováveis, its parent EDP and RWE all feature high up the list of Europe’s most likely energy issuers.

Many also expect Acciona Energia to return to equity markets following its IPO last year, while Plenitude, the renewables and retail division of Italy’s Eni, is anticipated to make its stock market debut this year.

Decisive indices 

Renewables stocks have shone amid the geopolitical turmoil in Europe. The European Renewable Energy Total Return index, which tracks large renewable energy stocks across the continent, was up more than 16% in the month following Russia’s invasion of Ukraine and has tracked even higher since.

It’s a bold recovery for an index that had lost over 30% of its value from its most recent record high in December 2020.

The longer-term view is also promising. Renewables stocks are in a good position in the increasingly stagflationary environment. Regardless how growth and inflation play out in the next 18 to 24 months, any increase in government financing in the sector to accelerate the energy transition away from fossil fuels and wean Europe off Russian supplies is nothing but bullish for renewables equity issuance.

EDF may have been first up to bat, but plenty more will be stepping up to the crease in 2022. Investors will be ready and waiting.