Energy Transition Companies Are Suffering From Low Valuations

Wind and solar developers and other transition-related companies are being undervalued on stock markets, making it harder for them to raise money.

This is according to the chief executive of ReNew Energy Global, one of India’s biggest wind and solar developers.

“If you look at basic valuations, it’s very clear that companies are not being rewarded for growth, for the scale they have built over the past few years,” Sumant Sinha told the Financial Times.

“Public capital markets are not hospitable right now. And to me, that’s the biggest thing that is holding back our sector today globally,” he added.

New equity raised by climate technology companies last year fell to $33 billion from $68 billion in 2022, BloombergNEF data showed, as cited by the FT. Yet this has motivated private equity majors to expand their stakeholding in the industry, the report also noted, mentioning talks between Brookfield and French Neoen over a possible acquisition and KKR’s deal to take over German Encavis.

“We are a profitable company — there is no reason for our valuation to be where it is right now. If you look at the Indian market, valuations are a lot higher because people are seeing that growth,” Sinha told the Financial Times.

Yet on the stock market in New York, ReNew Energy has seen its shares drop by more than 30% since its listing in August three years ago, highlighting the trend. Over the past 12 months, climate tech companies’ stocks have shed a collective 28%, according to data from the S&P Global Clean Energy Index.

A big reason for that trend is high interest rates resulting from central bank efforts to rein in inflation. These have turned investor attention to bonds and made it harder for wind and solar developers to raise the money needed for growing their businesses.

By Irina Slav for Oilprice.com

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