Nofar Energy buying Noy Fund's stake in Megalim solar project

Ashelim power plant

Nofar Energy will pay NIS 560 million for the Noy Fund's 40% stake in Israel's largest solar energy installation.

Renewable energy company OY Nofar Energy (TASE: NOFR) has signed a non-binding memorandum of understanding to buy 100% of the rights of the Noy Fund and its partners in the Megalim solar energy project in the south of Israel, for NIS 560 million.

Megalim is a thermo-solar installation, with a steam boiler atop a tower at the center, at which are directed an array of helio-static mirrors that concentrate the sun's rays. The steam drives turbines that produce electricity. It has an installed output of 121 megawatts, which Nofar says makes it the largest income-producing solar power installation in Israel.

Construction of the project was completed in 2019, when it was connected to the national power grid and began commercial operation under a 28-year BOT (build, operate, transfer) agreement with the State of Israel. The Noy Fund holds 40% of the Megalim project, located at Ashelim in the Ramat Hanegev Regional Council. The remaining 60% are held by financial institutions.

The installation supplies power to the national grid at the high price of NIS 0.85 per kilowatt, a legacy of the period in which the agreement with its developers was signed. This is about five times the NIS 0.175 price per kilowatt in the state's more recent agreements with developers of new solar energy projects.

The Noy Fund, the main seller in the deal, is the second largest shareholder in Nofar, with a holding of 20%. The Noy Fund bought its shares in September 2020 for NIS 228 million in advance of the flotation of Nofar Energy on the stock exchange.

At the time of the purchase, an agreement between the sides stipulated that as long as the Noy Fund had a representative on the board of Nofar Energy, it would bring business opportunities to the company's notice. Nevertheless, Nofar Energy says that the purchase of the Megalim project from the fund is not an insider deal since the fund's representative, Pini Cohen, left the Nofar Energy board towards the end of March.

Nofar Energy, controlled by its founder and chairman Ofer Yannay (37.5%) reports that the project will yield annual revenue of NIS 270 million, annual EBITDA of NIS 190 million, and annual free cash flow of NIS 120 million. It will bring Nofar Energy's total capacity to 1.1 gigawatts, that will generate annual revenue of some NIS 1 billion from 2023.

understanding to buy 100% of the Noy Fund's rights for the Megalim thermo-solar power plant in southern Israel for NIS 580 million. The Noy Fund holds 40% of the rights to Megalim and institutional investors hold the remaining 60%. Megalim has a capacity of 121 megawatt.

Construction of the project was completed in 2019 and connected to the grid and operates as a BOT project with a concession agreement for 28 years, ending in 2044. The installation supplies electricity to the grid at NIS 0.85 per kilowatt compared with NIS 0.17.5 per kilowatt in more recent solar energy tenders for the construction of new projects.

The project was built at a cost of NIS 2.8 billion, using technology that is now considered outdated and inefficient.

Completion of the deal remains dependent on due diligence by Nofar Energy and will be subject to state approval for the transfer of the concession.

Nofar CEO Nadav Tenne told "Globes," "The Megalim deal represents a major leap forward for Nofar and will integrate well with our activities while consolidating the high synergy of our unique business model and engineering, operational and administrative capability of the company. Megalim joins the range of projects that the company is advancing in Israel, the US, Italy, Spain and Romania while building a diversified mix of assets."

He added, "In terms of the risk profile in this project, you have to understand that the risk here is very low because this is a project with returns under the contract with the government. We plan to improve and to enhance the installation so that the figures will only improve."

Published by Globes, Israel business news - en.globes.co.il - on July 12, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Ashelim power plant
Ashelim power plant
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