Ellomay Capital Ltd. (ELLO) (ELLO) ("Ellomay"), a renewable energy and power generator and developer of renewable energy and power projects in Europe, Israel and the US, reported its unaudited financial results for the three month period ended March 31, 2023.
Financial Highlights for the Three Months Ended March 31, 2023
- Revenues were approximately 12 million[1] for the three months ended March 31, 2023, compared to approximately 11.8 million for the three months ended March 31, 2022.The change in revenues is mainly due to: (i) an increase of approximately 1.4 million in revenues from the Company's biogas plants in the Netherlands, resulting mainly from increased production and an increase in the 2023 gas price, (ii) revenues of approximately 0.9 million from Ellomay Solar, a 28 MW photovoltaic facility in Spain ("Ellomay Solar"), which was not operational during the first quarter of 2022 and (iii) a decrease of approximately 1.9 million in the revenues of the Talasol PV Plant, a 300 MW facility in Spain (the "Talasol PV Plant"), resulting from a decrease in electricity prices in Spain.
- Operating expenses were approximately 6.5 million for the three months ended March 31, 2023, compared to approximately 6 million for the three months ended March 31, 2022. The increase in operating expenses mainly resulted from higher production in the Company's biogas facilities in the Netherlands and higher raw material prices caused by the military conflict between Russia and Ukraine, and from the connection to the grid of Ellomay Solar during June 2022, upon which the Company commenced recognition of expenses. The increase in operating expenses was partially offset by reduced payments under the Spanish RDL 17/2022, caused by a reduction in the electricity market price. RDL 17/2022 established the reduction of returns on the electricity generating activity of Spanish production facilities that do not emit greenhouse gases accomplished through payments of a portion of the revenues by the production facilities to the Spanish government. Depreciation expenses were approximately 4.1 million for the three months ended March 31, 2023, compared to approximately 4 million for the three months ended March 31, 2022.
- Project development costs were approximately 1.6 million for the three months ended March 31, 2023, compared to approximately 0.7 million for the three months ended March 31, 2022. The increase in project development costs is mainly due to development expenses in connection with photovoltaic projects in the US.
General and administrative expenses were approximately 1.5 million for each of the three months ended March 31, 2023 and March 31, 2022.
- The Company's share of profits of equity accounted investee, after elimination of intercompany transactions, was approximately 1.2 million for the three months ended March 31, 2023, compared to approximately 0.2 million for the three months ended March 31, 2022. The increase in share of profits of equity accounted investee was mainly due to the increase in revenues of Dorad Energy Ltd. ("Dorad") due to higher quantities produced and a higher electricity tariff in Israel, partially offset by an increase in operating expenses in connection with the increased production and higher tariff.
- Financing Income, net was approximately 2 million for the three months ended March 31, 2023, compared to financing expenses, net of approximately 2.9 million for the three months ended March 31, 2022. This change was mainly attributable to income resulting from exchange rate differences amounting to approximately 4.4 million in the period ended March 31, 2023 in connection with the Company's NIS denominated debentures (after deduction of NIS cash and cash equivalents), caused by the 4.8% devaluation of the New Israeli Shekel ("NIS") against the euro during the three months ended March 31, 2023, while the 0.1% revaluation of the NIS against the euro during the three months ended March 31, 2022 had a non-material impact on the euro value of our NIS denominated debentures and cash and cash equivalents.
- Tax benefit was approximately 1.1 million for the three months ended March 31, 2023, compared to taxes on income of approximately 0.3 million for the three months ended March 31, 2022. This change was mainly due to the recognition of deferred taxes due to carried forward losses in the Company's Italian subsidiaries.
- Net profit was approximately 2.8 million for the three months ended March 31, 2023, compared to net loss of approximately 3.4 million for the three months ended March 31, 2022.
- Total other comprehensive profit was approximately 26.6 million for the three months ended March 31, 2023, compared to total other comprehensive loss of approximately 40.9 for the three months ended March 31, 2022. The increase in total other comprehensive profit mainly resulted from changes in fair value of cash flow hedges, including a material decrease in the fair value of the liability resulting from the financial power swap that covers approximately 80% of the output of the Talasol PV Plant, caused by the substantial reduction in the electricity prices in Spain.
- Total comprehensive profit was approximately 29.3 million for the three months ended March 31, 2023, compared to total comprehensive loss of approximately 44.2 million for the three months ended March 31, 2022.
- EBITDA was approximately 3.6 million for the three months ended March 31, 2023, compared to approximately 3.8 million for the three months ended March 31, 2022.
- Net cash from operating activities was approximately 1.4 million for the three months ended March 31, 2023, compared to approximately 8.1 million for the three months ended March 31, 2022.
CEO Review for Q1 2023
The Company's operations concentrate on three two main fields:
- Construction of New Projects: PV projects in Italy and a pumped hydro storage project in the Manara Cliff in Israel.
- Initiating and Developing of New Projects: PV projects in Italy, Spain, USA and Israel.
- Management, Operation and Improvement of Generating Projects: PV projects in Israel and Spain and bio-gas projects in the Netherlands (bio-gas).
The Company's revenues for the quarter were approximately 12 million, an increase of approximately 0.3 million compared to the same period last year. These revenues are slightly higher than the revenues for the same period last year, despite a decrease in electricity prices in Spain. The increase in revenues is due to an increase in revenues of the bio-gas operations in the Netherlands and the addition of revenues from Ellomay Solar that was connected to the electricity grid in June 2022.
The cash flow from operations for the quarter was approximately 1.4 million.
The increase in project development costs was mainly due to the large advancement in the development of the photovoltaic portfolio in Italy, Israel and the US.
The net profit for the quarter was approximately 2.8 million.
Activity in Spain:
The electricity prices in Spain decreased during the first quarter to an average price of 91 per MWh compared to an average price of 199 per MWh for the same quarter last year.
The Talasol PV project (300 MW PV) (Company's share is 51%) produced during the first quarter revenues from the sale of electricity and green certificates of approximately 5.6 million. Talasol is a party to a financial hedge of its electricity capture price (PPA). Approximately 80% of its production (75% based on P-50) are sold under this agreement for a fixed price. The remaining electricity produced by Talasol is sold directly to the grid, at spot prices.
The Ellomay Solar project (28 MW PV) produced during the first quarter revenues from the sale of electricity and green certificates of approximately 0.9 million.
Activity in Italy:
The Company has approximately 505 MW PV projects under advanced development stages, of which licenses have been obtained for approximately 203 MW. The Company is in advanced construction of projects with an aggregate capacity of 20 MW that are expected to be connected to the grid and finish testing by the end of August 2023. The remainder of the licenses (approximately 183 MW) are expected to commence construction during 2023.
The Company has additional projects in early development stages (in addition to the 505 MW in advanced development stages), the intention is to reach a portfolio of approximately 1,000 MW PV by the end of 2027. The Company is negotiating a financing agreement with a leading European bank in the field.
Activity in Israel:
The Manara Pumped Storage Project (Company's share is 83.34%): The Manara Cliff pumped storage project, with a capacity of 156 MW, is in advanced construction stages and expected to reach commercial operation during the second half of 2026, and to produce average annual revenues of approximately 74 million and EBITDA of approximately 33 million. The Company and its partner in the project, Ampa, invested all of the equity required for the project (other than linkage differences), and the remainder of the funding is from a consortium of lenders led by Mizrahi Bank, at a scope of approximately NIS 1.18 billion.
Development of PV licenses combined with storage:
1- The Komemiyut Project: intended for 21 MW PV and 47 MW / hour batteries. The project has an approval for connection to the grid and is in the process of receiving a building permit. Commencement of construction is planned for the third quarter of 2023.
2- The Qelahim Project: intended for 15 MW PV and 33 MW / hour batteries. The project has an approval for connection to the grid, and is in the final stages of the zoning approval. The Komemiyut and Qelahim projects are based on tender No. 1 that the Company won and there is an option of transition to regulation that enables a direct sale to end customers.
3- The Talmei Yosef Project: an expansion of the existing project to 104 dunams, intended for 10 MW PV and 22 MW / hour batteries. The request for zoning approval has been filed and approval is expected to be received in the third quarter of 2023.
4- The Talmei Yosef Storage Project in Batteries: there is a zoning approval for 30 dunam, intended for approximately 400 MW / hour. The project is designed for the regulation of the high voltage storage.
5- The Sharsheret Project: intended for 20 MW PV and 44 MW / hour batteries. The zoning request was submitted.
6- In addition, the Company has approximately 250 dunams under advanced planning stages.
Dorad Power Station (Company's share is approximately 9.4%): the gas flow from the Karish reservoir that began during November 2023 reduced the gas costs of Dorad. In addition, the change in the electricity tariff, which entered into force in January 2023, means an increase in the "PISGA"/ peak (high consumption) hours. The elimination of the "GEVA" (average consumption) hours, is expected to reduce the operating expenses of the power station without decreasing the revenues, or alternatively to increase the operating hours, which will increase revenues and profits. Moreover, the Israeli government decided to increase the power station by an additional 650 MW and the approval of the National Infrastructure Committee to the TTL/11/B plan expansion of the Dorad power station.
Activity in the Netherlands:
In connection with the military conflict in Ukraine and the stoppage of Russian gas supply to Europe, there are substantial changes in the field of biogas in the Netherlands and Europe. Europe in general and the Netherlands specifically have set ambitious goals for increasing gas production from waste. Various incentives are being considered, the main one is increasing the price of the green certificates. The price of these certificates has increased from an average of 1315 euro cents per cubic meter to around 30-45 euro cents per cubic meter and future increases are currently projected. Commencing May 2023 a generator of 1 MWh operating based on self-produced gas started to operate in the GGB facility (the only facility that did not self-generate electricity and heat), which provides the electricity and heating needs of the facility. The expected reduction in expenses is over 1 million per year.
The Company estimates that with the increasing importance of the biogas field, this field entered into a new era. In the Netherlands, new legislation was adopted that obliges the gas suppliers to incorporate green gas in a scope of up to 20% of the amount supplied by them, valid commencing January 1, 2024. This legislation, and the growing demand for green certificates derived from the biogas industry, is expected to add and improve the expected results of the biogas segment of the Company.
