Infrastructure and Energy Fund Generation Capital Yesterday, it signed an agreement to purchase 25.5% of the shares in the pumped storage facility in Ma’ale Gilboa, from a company Electra And in exchange for an amount of NIS 220 million. Under the agreement, there is a mechanism for additional compensation in the amount of up to NIS 25 million, subject to future improvements in the receipts of the storage facility.
The facility at Gilboa operates using a pumped storage method with an installed capacity of 300 megawatts and is a strategic, vital and unique infrastructure asset in the State of Israel. The fund estimates that the facility, which received a permanent license to generate electricity for a period of 20 years and began its commercial operation in April 2020, is expected to generate an average annual income of about NIS 350 million.
According to the fund, the revenue structure of the facility is guaranteed and is mostly based on availability payments and bonuses, which increase the availability rate following the improvement of the indices set in the regulation. In addition, the storage facility enjoys revenue from the sale of electricity and start-up payments.
Gilboa pumped storage facility project / Photo: PR
The storage facility is expected to yield an average EBITDA (cash flow operating profit) of NIS 225 million per year and a projected cash flow to owners of an average of NIS 70 million per year, while the fund estimates that the annual return on capital by weighting all components of the transaction is expected to be 10%. Generation Capital intends to finance the transaction from its independent sources as well as through debt taking.
The facility, which was built with a total investment of NIS 2 billion over a period of 6 years, received a permanent license to generate electricity in April 2020 for a period of 20 years (valid until April 2040), and after the end of the license period the facility will remain owned by the project company. The facility’s technology is based on the conversion of electrical energy into potential energy by pumping water from the bottom to the top reservoir and enables the response to a shortage of electricity thanks to its ability to add 300 megawatts of installed power to the power grid in about 10 hours.
Completion of the purchase of the storage facility is conditional on the fulfillment of conditions precedent, the main of which is the receipt of 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 it a total cash flow of approximately NIS 225 million (gross, before tax) and a profit before tax of approximately NIS 85 million.
Shikun VeBinui and Infrared are also partners in the project
In addition to Electra, the pumped storage project also owns the Housing and Construction Energy Company and the Infrared Fund. In announcing the signing of the sale agreement, Electra states that in accordance with the shareholders’ agreement, it signed the sale of the shares to Generation, after its holding partners were unable to reach agreements between them regarding the purchase of its shares in the facility.
According to Electra, it has received notifications from Shikun VeBinui Energy and the Infrared Fund for the purchase of the entire shares sold. Despite this, Electra notes that “the shareholders did not reach an agreement regarding the division of the shares sold between them (despite the company’s requests for an agreed notice signed by both of them).
Electra also emphasizes that, according to the Infrared Fund, since a binding contract has been perfected between them, the sale of Electra’s holdings to a third party would constitute a breach of agreement. Despite this, Electra has stated that it is not precluded from entering into an agreement with Genershine.
Erez Balsha, CEO of Generation Capital / Photo: Eyal Toug
Erez Balsha, CEO of Generation Capital, said, “We are pleased to update that the transaction to purchase the pumped storage facility at Ma’ale Gilboa is underway. This unique investment is of great importance to the fund’s asset portfolio both in terms of distribution and direct holding in a unique and long-term national project project with a stable flow, and due to its positive impact on the environment and sustainability as a clean and green electricity generating facility.
“As we noted recently, the fund’s financial flexibility provides it with the ability to generate diverse funding sources thanks to the platform companies’ maturity, and as appropriate, we intend to finance the transaction from independent sources as well as through debt. We will continue to improve They have a stable, strong and long-term flow. “