Germany's biggest IPO in 16 years goes live with Innogy
German renewable energy company Innogy made its debut in Frankfurt on Friday, valued at around €20bn, marking Germany’s biggest initial public offering (IPO) since 2000.
The stock started trading at €37.30, above its IPO price of €36, but dipping shortly afterwards to €35.95.
Despite this, Macquarie gave the company an outperform rating and a price target of €41.
“An important factor behind our Outperform rating is that innogy will be one of few infrastructure companies on the German stock market, with, a ~60% regulated share,” said the analysts.
Innogy, formerly a British company, was acquired by Germany’s second largest utility RWE power in 2002. RWE currently owns 75% of the company and has decided to float the company as profits at its conventional power generation arm come under pressure.
RWE’s shares fell 3.8% since the IPO, which Macquarie feel is “undervalued.”
RWE’s poor performance is symptomatic of trends across the wider sector which have led investors to dump German utility stocks and discount them heavily. Investors are also concerned about the potential costs of storing radioactive waste after the country’s last nuclear power plants are set to go offline in 2022.
“We see RWE shares as significantly undervalued, given the “game-changing innogy IPO”, recent strength in German power prices, our positive view on the impact of the 2017/18 UK winter capacity auction this Jan and consensus missing RWE’s significant net cash position post Innogy,” said analysts.
Utility companies in Germany have also had to try and adapt to the country’s radical energy policy, the Energiewende, which aims to shift energy provision towards renewables and away from nuclear and fossil fuel power generation.
Rival Eon has also restructured, following the regulatory changes, separating its conventional power generation assets into a new company, Uniper, which floated in last month.