The full regulator dropped the Green Energy shares in the estate

by time news

Shares of renewable energy companies on the Tel Aviv Stock Exchange fell today after the announcement of a law passed in Poland regarding setting a ceiling rate for electricity. The law, which is based on the recommendation of the European Union from last month, has not yet determined the rates. However, according to market sources, the uncertainty regarding the tariffs that will be set, as well as the fear that other countries will adopt the position of the European Union, led to declines in the shares of the Israeli green energy companies operating in Poland.

According to the new law, a ceiling price per megawatt hour will be set for each electricity production technology (eg solar panels, wind turbines or coal plants). The law is expected to enter into force on December 1, 2022, and be valid until the end of 2023. If a company sells electricity at a higher price, for example under a PPA (Power Purchase Agreement) contract, the excess amount collected will be transferred to a designated fund managed by the Polish government. The ceiling rates have not yet been set, so it is not possible to estimate how much the companies’ revenues will be affected.

The new law is based on the European Union’s recommendation from mid-September according to which an emergency intervention in electricity prices should be carried out due to the energy crisis created on the continent with Russia’s invasion of Ukraine. According to a Goldman Sachs report from last September, the bank’s analysts estimate that the current energy crisis will have deeper consequences than the oil crisis in the 1970s. The bank also estimated that the energy bills of European households will increase by 2 trillion euros until the peak early next year.

One of the emergency interventions that the European Union recommends to countries is setting a price ceiling for electricity produced at relatively low costs, such as nuclear energy and renewable energies. For these energies, the Union recommends setting a price ceiling of 180 euros per megawatt hour, when electricity sold for a higher amount will be transferred to a dedicated fund that will help reduce citizens’ electricity bills. According to a source in the market, the price restriction is not expected to harm the development of renewable energies on the continent, because a solar energy project can be profitable even at a price of 60 euros per megawatt hour. However, electricity prices in Europe reached rates of more than 300 euros per megawatt hour on certain days during the current crisis.

According to the source, the market in Poland is considered stable, there is a regulation that allows the development of renewable energy projects, as well as a banking system that invests in projects. Due to these conditions, quite a few Israeli renewable energy companies started operating in Poland. However, there are companies whose energy facilities they will build will only start operating after the law expires, so its effect on them is limited, and in them, energy is being sold, which fell today in trading on the stock exchange by a rate of 3.25%. The company participates in variable maintenance rates in the development of nine projects in the country (three of the projects in the construction stages or nearing construction, and six of the projects in advanced stages) with a capacity of almost 750 megawatts – but only the Cybinka project, with a capacity of 40 megawatts, is expected to be built in the second half of 2023 , the law has not yet expired. Doral’s scope of activity in Poland is also relatively small in relation to the company’s overall activity, and its stock climbed by 1.43% today.

In contrast, there are Israeli companies active in Poland to a much greater extent. One of them is Energix, which today suffered the most significant drop in the Tel Aviv-125 index (7.25%). The drop also led to a 2.44% drop in the shares of the company that owns Energix, Aloni Hatz. According to Energix’s latest financial reports Jx, the company is active in the USA, Israel and Poland. In the three countries together, Energix has approximately 770 megawatts in commercial operation. 40% of the company’s commercially operated activity (301 megawatts), originates from wind turbine projects in Poland.

The decline in the share value comes even though the company announced that 73% of the electricity it will produce in 2023 will be sold at a rate of 800 zlotys per megawatt – a price lower than the European Union’s ceiling recommendation of 850 zlotys (180 euros). However, it is possible that the company will lose from the new limit, to the extent that it could sell the rest of the electricity it produces for an amount higher than 850 euros.

Similarly, Sunflower shares fell 7.9% today after the report. The company ended trading with a 3.3% drop in the value of the stock. According to the latest financial reports, the company owns 80.8 megawatts of renewable energy facilities, of which 30.8 megawatts in solar projects in Israel, and 50 megawatts in wind turbines in Poland. Last June, the company signed an agreement to sell the electricity it will produce from the farms in Poland on the basis of a PPA agreement with a distribution company in the country. The company expected that the increase in energy prices in Poland would significantly increase its revenues.

Although a renewable energy project can be profitable even at rates as low as two-thirds of the ceiling rate recommended by the European Union, another factor in the market attributed the decline in the value of the companies’ shares to the uncertainty caused by the Polish government not setting the rates. Also, there is a fear in the markets that more European countries will start adopting the Union’s recommendations, thus limiting electricity prices and the profits of the companies operating in these markets. There is also a fear that the countries will set lower rates than those recommended by the European Union.

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