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UPDATE 3-Acciona Energia powers up IPO market with 7% rise on debut

* Company is one of 2021’s most valuable market debutantes

* Shares rise faster later in trading day

* Peers watch for lessons on funding energy transition

* List price and deal size were at low end of range (Updates with closing share price)

MADRID, July 1 (Reuters) - Shares in Acciona Energia rose more than 7% above their initial public offering (IPO) price in the course of their first trading session on Thursday, bringing some cheer to a market that has lost its froth since the start of the year.

The highly anticipated listing of the renewable energy producer and distributor came in smaller than expected, but shares ended the day changing hands for 28.69 euros each, implying a market value of 9.4 billion euros.

A listing price of 26.73-euro per share had given the most profitable unit of engineering group Acciona an initial valuation of 8.8 billion euros ($10.4 billion).

This made it one of the most valuable stock market debutantes in Europe in 2021, and the largest in Spain since phone mast operator Cellnex listed in early 2015.

Acciona had initially aimed for a listing price of up to 9.8 billion euros. It curbed its ambitions for the deal size, eventually opting to list up to 17.25% of the company rather than up to 28.75%.

Acciona Chief Executive Jose Manuel Entrecanales, whose family-controlled parent group will keep a majority stake in Acciona Energia, described the market reception as “positive”, having said on Wednesday the list price was not “optimal”.

After a searing start to the year, investor enthusiasm for the IPO market has waned, and several candidates have retreated.

This deal’s progress will be closely watched by other companies that are looking to capitalise on investor appetite for businesses linked to a global shift away from fossil fuels and to fund their own renewable energy projects.

Repsol and ENI are considering hiving off their low-carbon units from their oil and gas exploration and production activities, and listing stakes independently on the stock market.

Acciona hopes it can now access cheaper capital to fund a near doubling of its generation fleet, currently dominated by wind farms in the United States, Australia, Spain, Chile and Mexico, to reach 20 gigawatts (GW) of capacity by 2025.

No fresh shares were issued, so those selling cashed in at least 1.32 billion euros, which will rise to 1.52 billion euros if an overallotment option is exercised. Some of the proceeds will pay down debt. ($1 = 0.8437 euro) (Reporting by Isla Binnie, Editing by Abhinav Ramnarayan and Steve Orlofsky)

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