The Marker Capital Market
Yoram Gabizon | 14 May 2023
Electra Power (+3.89% 4697) is expanding its agreement with renewable energy company Energix (-0.34% 1189). Last weekend, Electra Power signed an agreement with Energix to purchase electricity from two additional photovoltaic manufacturing facilities with integrated energy storage, that Energix is planning to establish in Northern Israel. The agreements’ term was specified as 20 years from commencement of power supply from the manufacturing facilities, expected to take place in 2024. Electra Power estimates that the total scope of electricity purchase from Energix in the agreement’s 20 years will reach ILS 500 million.
Electra Power will sell the green electricity it will purchase from Energix to home clients, as part of the regulation that will come into effect in January 2024. This regulation will allow manufacturers of renewable energy to assign manufacturing facilities to specific clients, and to sell the electricity manufactured in these facilities to them directly and at discount prices, instead of selling the power to the national power grid according to a fixed price and in long-term agreements, as the previous regulation dictated.
Electra Power, managed by Chen Melamed, will sell the electricity it will purchase from Energix to the 18 thousand home clients it already has as a virtual electricity supplier, as of the first quarter of 2024 – when Energix completes the construction of both facilities and the new regulation regarding facility assignment and direct sale of electricity will come into effect. The current agreement was signed one month after Electra Power and Energix have signed an agreement specifying that Elco’s Electra Power will purchase electricity from Energix in an estimated scope of ILS 500 million, from three PV manufacturing facilities with integrated energy storage, that Energix plans to construct and operate in Israel by the end of the first quarter of 2024.
Energix will supply Electra Power-Supergas – a subsidiary fully owned by Electra Power – with electricity storage capacity in its manufacturing facilities, to sell green energy to Electra Power’s electricity consumers – most of which are the 400 thousand gas consumers of Supergas , with another 10 thousand who have joined since January 2023 when Electra Power started recruiting clients as an electricity supplier. The term of the agreements between Electra Power and Energix was specified as 20 years from power supply commencement, meaning the date in which the three solar manufacturing facilities will be assigned to Electra Power, which is expected to take place in 2024.
As part of this current agreement, and much like the provisions of the previous agreement, Energix undertook to sell to Electra Power all the electricity that will flow into the power grid from the manufacturing facilities, based on actual as-generated production, and to supply Electra Power with electricity storage capacity at the manufacturing facilities. In return, Electra Power undertook to purchase from Energix all the electricity that will flow to the power grid from the manufacturing facilities, at the rate assigned to the manufacturing component, with a double-digit discount.
The overall scope of both agreements is 58 megawatts and a storage capacity of 100 MWh, that Energix will establish following its win in the Electricity Authority’s 2nd competitive procedure for high-voltage storage-integrated systems, at a rate of 18.8 agorot for KWh. As the average manufacturing component these days is 31 agorot for KWh, it is clear why the agreement is beneficial to Energix, even after a doubt-digit discount to Electra Power. The benefit of direct sale for Energix is only made stronger by the fact that since it won the 2nd competitive procedure, the central bank’s interest rate has sharpy increased and significantly inflated the project’s financing costs, which are expected to be ILS 205-245 million.
Electra Power Stock
Electra Power is expected to integrate the Energix agreements for purchasing green energy into its power supply scheme, which will also be based on self-manufacturing in cogeneration plants, meaning using heat from the burning of gas in electricity-manufacturing turbines to create steam, which then powers another electricity-manufacturing turbine. Electra Power currently has a 20 MW manufacturing capacity in cogeneration-based power plants like the Shan plants, Milu’ot, Orbond, Tambour, and Palziv, and it is expected to achieve a 60MW manufacturing capacity by the end of 2023, and 200MW in two to three years.
The two agreements with Energix will enable Electra Power to reach a 100MW goal by the end of 2023, while, concurrently with purchasing electricity from Energix, it is also purchasing conventional electricity from private electricity manufacturers such as Dorad, Nesharim, and IPM at 5%-7% discounts. In 2024, Electra Power is expected to start selling green-certificate electricity to home consumers, and will guarantee to interested consumers that they are purchasing electricity manufactured by renewable energy. Green electricity will be sold to consumers at a small discount, if any, compared to the price of conventional electricity.