Wobbly IPO for German utility's green spinoff

Looking for yield in a low-interest-rate environment, investors lapped up the 139 million new shares issued by Innogy in its initial public offering (IPO) on Friday, causing the stock to move easily beyond its issue price of 36 euros ($40.41) per share.

Innogy shares started at 37.30 euros, briefly dipped as low as 35.95 before rebounding to 36.46 euros in early trade to finally close at issue price. RWE chief executive Peter Terium described the listing as "clear evidence for our unique, future-oriented business model."

Demand for Innogy was particularly strong in the run-up to the IPO as investors have set their sights on the company's healthy share of regulated businesses that will give them safe profits for several years to come. Order books for the IPO were twice oversubscribed.

Among those able to secure a big chunk of the stock was BlackRock, which had committed to buy 940 million euros worth of Innogy shares, making the US asset manager the second largest shareholder with 4.7 percent. Innogy parent RWE retained about 75 percent of the company, which bundles RWE's former renewables, retail and grid businesses.

Squeezed by German energy transition

RWE earned about 5 billion euros from the IPO, which gave Innogy a total market capitalization of around 20 billion euros. It's become Germany's largest IPO since 2000 and the country's third largest ever after the listings of mail company Deutsche Post and chipmaker Infineon earned the firms 6.25 billion euros and 6.07 billion euros respectively.

RWE as well as its national rival Eon have been forced to restructure their operations following the German government's decision to shift away from nuclear and fossil fuels, and toward energy production based on a growing renewables sector.

The policy change has suppressed wholesale electricity prices and hurt conventional utilities as their power - largely produced from coal and gas - is being squeezed out of the market by prioritized wind and solar energy.  

RWE has sold its green energy businesses in hopes to raise enough money to restructure its conventional power plants, including its nuclear operations, so that they become profitable again.

By contrast, Eon chose to spin off its conventional operations, distributing last month 53 percent of the newly-founded Uniper utility to its shareholders, as it attempts to make a fresh start solely based on renewables.

uhe/kd (Reuters, AFP, dpa)