The Generation Capital Infrastructure and Energy Fund updates that it has entered into a transaction to purchase 25.5% of the shares in the Ma’ale Gilboa storage facility from Electra for approximately NIS 220 million. The facility 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 operating commercially in April 2020, is expected to generate an average annual income of NIS 350 million, with the revenue structure guaranteed and based mostly on availability payments and bonuses. Improving the indices set in the regulation. In addition, the storage facility enjoys revenue from the sale of electricity and start-up payments.
The storage facility is expected to yield an average EBITDA of approximately NIS 225 million per year and a projected cash flow for owners of an average of approximately NIS 70 million per year, while the fund estimates that the annual return on capital, weighted by all transaction components, is expected to be approximately 10%.
Under the agreement, there is an additional compensation mechanism of up to an additional NIS 25 million, subject to future improvements in the storage facility’s receipts.
The storage facility, which was established with a total investment of about 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 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.
As part of the transaction, Electra undertook to indemnify Generation for its share of the damage to the storage facility shutdown event that occurred from October 2020 to February 2021, up to a ceiling set in the agreement and a period of up to two years from the project company’s technical consultant’s approval. In the Company’s estimation, the indemnity is expected to fully cover the Company’s share in the damages of the downtime event.
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 as required, the financiers and insurers.
Erez Balsha, CEO of Generation Capital: “We are pleased to update that the transaction to purchase the pumped storage facility at Ma’ale HaGilboa is being implemented. 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 recently noted, the fund’s financial flexibility provides it with the ability to generate diverse sources of financing thanks to the arrival of the platform companies to mature, and fittingly, we intend to finance the transaction from independent sources as well as through debt taking.
We will continue to work for the improvement and growth of the fund in accordance with a strategy for maintaining strategic core infrastructure assets with a stable, strong and long-term flow. “