The infrastructure and energy fund is acquiring 25.5% of the pumped reservoir storage facility which has started its commercial operation approximately a year and a half ago • The facility at Ma’ale Gilboa facility operates using the pumped reservoir storage method ale Gilboa is expected to generate an average annual income of approx. NIS 350 million.
Omri Cohen 16/12/2021
The infrastructure and energy fund Generation Capital has signed yesterday on an agreement to acquire 25.5% of the pumped reservoir storage facility shares at Ma’ale Gilboa from the Electra Company for the sum of NIS 220 million. In the scope of the agreement there is an embedded consideration addition mechanism at a scope of up to NIS 25 million, subjected to future improvements in the reservoir storage facility’s revenues.
The facility at the Gilboa operates using the pumped reservoir storage method at an installed capacity of 300 megawatts, and constitutes a strategical infrastructure asset that is both, essential and unique in the State of Israel. Per the Fund’s estimate, the facility that has received a permanent electricity production permit for the next 20 years and has commenced its operation in April 2020, is expected to yield an average annual income of approx. NIS 350 million.
According to the Fund, the facility’s revenue structure is guaranteed and is mostly based on availability payments and bonuses, which increase the availability rate following the improvement of the regulatory preset indices. In addition, the facility benefits from revenues generated by sale of electricity and start-up payments.
The reservoir storage facility is expected to yield average EBITDA of approx. NIS 225 million a year and an expected average cash flow for its holders of approx. NIS 70 million per annum, when, according to the Fund the annual return on the capital, weighing in all the transaction components, is expected to reach 10%. Generation Capital intends to finance this transaction from its own independent sources as well as through debt taking.
The facility that was constructed for the total amount of approx. NIS 2 billion over a period of 6 years, has received its electricity production permit in April 2020, for a period of 20 years (valid thru April 2040), and when the permit period expires the facility remains under the ownership of the project’s company.
The facility’s technology is based on conversion of electric energy into potential energy via water pumping from a lower to an upper reservoir storage and provision of a solution to electricity shortage by its capacity to add, in a short time, an installed capacity of 300 megawatts to the electric grid for approx. 10 hours.
The completion of the reservoir storage facility acquisition is conditioned on the fulfillment of precedent conditions, such as obtaining third-party approvals from the Electricity Authority, the Competition Authority (if required), the funders and the insurers. According to Electra, the completion of the transaction will yield the company a cash flow of approximately NIS 225 million (gross, before tax) and a profit before tax of approximately NIS 85 million in total.
Shikun Binui and Rad Infra are also partners in the project
In addition to Electra, other holders of the pumped storage project include the Shikun Binui Energy Company and the Infra Rad Fund. Electra notes, in its notice on the signing of the sale agreement, that in accordance with the shareholders agreement it has signed the sales of its shares to Generation after its holdings’ partners were unable to reach an agreement between them regarding the purchase of its shares in the facility.
According to Electra, notices about acquisition of the entirety of its sold shares were received from both, Shikun Binui Energy and Infra Rad Fund. However, notes Electra, the other shareholders did not reach an agreement about the division of the sold shares between them (despite the Company’s attempts to obtain an agreed upon and signed notice from both).
Electra continues and emphasizes that according to Infra Rad Fund since a binding agreement was reached between them, the sale of Electra’s holdings to a third party shall constitute a breach of such an agreement. Despite this, Electra has stated that it is not precluded from entering an agreement with Generation.
Erez Balsha, CEO of Generation Capital noted, “We are happy to update you that the acquisition of the pumped reservoir storage facility at Ma’ale Gilboa goes into action. This unique investment is very important to the Fund’s portfolio of assets, both in terms of asset distribution and the direct holding of a unique and long-term yielding national project with a stable cash flow, and due to its positive impact on the environment and sustainability being a facility producing clean and green electricity, its importance lays in ensuring stable electricity supply to Israel for many years to come.
“As we recently noted, the Fund’s financial flexibility provides for its ability to generate diverse financing sources due to its platform companies reaching maturity, and as such, we intend to finance the transaction from our independent sources as well as through debt taking. We will continue and pursue growth and improvement of the fund in accordance with its holding strategy of strategic core assets with a stable, strong, and long-term cash flow.”