Ellomay Capital Reports Results for the Three and Six Months Ended June 30, 2021

TEL AVIV, Israel, Sept. 30, 2021 /PRNewswire/ -- Ellomay Capital Ltd. (NYSE American: ELLO) (TASE: ELLO) ("Ellomay" or the "Company"), a renewable energy and power generator and developer of renewable energy and power projects in Europe and Israel, today reported its unaudited financial results for the three and six month periods ended June 30, 2021.

Financial Highlights

• Revenues were approximately €19.5 million for the six months ended June 30, 2021, compared to approximately €4.2 million for the six months ended June 30, 2020. The increase in revenues is mainly attributable to the achievement of PAC (preliminary acceptance certificate) of the photovoltaic plant held by Talasol Solar S.L. (the "Talasol PV Plant") on January 27, 2021, upon which the Company commenced recognition of revenues. The increase is also attributable to the acquisition of the Groen Gas Gelderland B.V. biogas facility (the "Gelderland Biogas Plant"), in December 2020 and to improved operational efficiency at the Company's biogas plants in the Netherlands.
• Operating expenses were approximately €7.5 million for the six months ended June 30, 2021, compared to approximately €2.1 million for the six months ended June 30, 2020. The increase in operating expenses is mainly attributable to the achievement of PAC of the Talasol PV Plant on January 27, 2021 and the acquisition of the Gelderland Biogas Plant in December 2020. Depreciation expenses were approximately €7.1 million for the six months ended June 30, 2021, compared to approximately €1.4 million for the six months ended June 30, 2020.
• Project development costs were approximately €1.1 million for the six months ended June 30, 2021, compared to approximately €2.3 million for the six months ended June 30, 2020. The decrease in project development costs is mainly due to capitalization of expenses in connection with the project to construct a 156 MW pumped storage hydro power plant in the Manara Cliff, Israel.
• General and administrative expenses were approximately €2.6 million for the six months ended June 30, 2021, compared to approximately €2.2 million for the six months ended June 30, 2020. The increase is mostly due to increased D&O liability insurance costs and to the Talasol PV Plant's expenses following the achievement of PAC of the Talasol PV Plant on January 27, 2021.
• Company's share of loss of equity accounted investee, after elimination of intercompany transactions, was approximately €0.8 million for the six months ended June 30, 2021, compared to a profit of approximately €0.9 million in the six months ended June 30, 2020. The decrease in the Company's share of profit of equity accounted investee is mainly attributable to the decrease in revenues of Dorad Energy Ltd. ("Dorad") and higher financing expenses incurred by Dorad for the period as a result of the CPI indexation of loans from banks.
• Financing expenses, net was approximately €6.2 million for the six months ended June 30, 2021, compared to approximately €1.1 million for the six months ended June 30, 2020. The increase in financing expenses, net, was mainly due to €0.8 million of expenses in connection with the early repayment of the Company's Series B Debentures and financing expenses in connection with the Talasol PV Plant previously capitalized to fixed assets that are recognized in profit and loss starting from PAC, including approximately €1.1 million of interest on bank loans, €0.6 million of swap related payments, €0.7 million of expenses in connection with the Talasol PV Plant project finance and approximately €0.9 million of interest accrued on shareholder loans granted by the minority shareholders of Talasol.
• Taxes on income was approximately €0.1 million for the six months ended June 30, 2021 and 2020.
• Net loss was approximately €5.8 million for the six months ended June 30, 2021, compared to approximately €4.3 million for the six months ended June 30, 2020.
• Total other comprehensive loss was approximately €4.7 million for the six months ended June 30, 2021, compared to a loss of approximately €9.2 million for the six months ended June 30, 2020. The change was mainly due to changes in fair value of cash flow hedges and from foreign currency translation differences on NIS denominated operations, as a result of fluctuations in the euro/NIS exchange rates.
• Total comprehensive loss was approximately €10.5 million for the six months ended June 30, 2021, compared to approximately €13.5 million for the six months ended June 30, 2020.
• EBITDA was approximately €7.5 million for the six months ended June 30, 2021, compared to negative EBITDA of approximately €(1.6) million for the six months ended June 30, 2020.
• Net cash provided by operating activities was approximately €6.4 million for the six months ended June 30, 2021, compared to net cash used in operating activities of approximately €1.9 million for the six months ended June 30, 2020. The increase in net cash from operating activities is mainly attributable to the achievement of PAC of the Talasol PV Plant on January 27, 2021, upon which the Company commenced recognition of revenues and expenses.
• As of September 1, 2021, the Company held approximately €72.5 million in cash and cash equivalents and approximately €7.2 million in restricted short-term and long-term cash.

Second Quarter 2021 CEO Review

Ran Fridrich, CEO and a board member of the Company, provided the following CEO review:

The results of the first half reflect the continuation of the Company's projected business plan and are in line with the Company's forecasts. The main efforts of the Company are in three levels: (a) operation and improvement of the existing asset portfolio, (b) supervision and management of the construction of the various projects (pumped storage in the Manara Cliff, Israel and a 28 MW photovoltaic plant in Spain) and (c) development of new projects, mainly photovoltaic projects in Italy, Spain and Israel (in the aggregate of approximately 450 MW in advanced stages and approximately 800 MW in the preliminary stages).

Operation of the Existing Asset Portfolio

Revenues in the photovoltaic segments exceeded the Company's forecasts. The revenues of the Spanish portfolio under government subsidy (approximately 7.9 MW) were higher by 6.6% higher than the forecast, the revenues of the Talasol PV Plant (including income derived during the period before the achievement of PAC) were 3% higher than the forecast and the revenues of the Talmei Yosef PV Plant (under the fixed asset model) were 4% higher than the forecast.

Revenues of the biogas segment in the Netherlands were 4% lower than the forecast mainly due to the subsidy method used in the Netherlands, which is paid based on the average price in the year preceding the year of payment. The low gas prices in 2020 caused a deduction of approximately €1 million from revenues in 2021. In light of gas prices in 2021, the Company expects that in 2022 the subsidy will increase and will be paid in accordance with the forecasts. Despite the impact on the subsidy in the first half of 2021, the Company estimates that the revenue gap will decrease during the remainder of 2021.

The Dorad Power Station contributed a loss of €0.7 million in the first half of 2021 compared to a profit of €0.8 million in the corresponding half last year. The majority of the loss is attributed to an increase in financing expenses due to the linkage of the debt to the Israeli consumer price index. In addition, a regulatory change that increased the fines for deviating from the production plan requires Dorad to exercise caution in assessing the demand of existing customers, thereby reducing payments from the Israel Electric Company. Moreover, the majority of Dorad's profit is derived during July and August, and this is expected to be the case this year as well.

The total operating expenses of the various projects were 4.5% lower than forecast.

Projects under Construction

Pumped Storage Project in the Manara Cliff, Israel: The construction of the project is progressing as planned. Excavation of the main access tunnel is expected to begin in the coming days and extensive earthworks are being carried out in the area of the upper and lower reservoirs and in the area designated for the transformation station.

Ellomay Solar 28 MW PV Project in Spain: Construction work began a few months ago and is progressing as planned. The connection to the grid is expected at the end of 2021.

Projects under Development

Advanced Stage Development of 450 MW PV in Italy: The development of the projects is progressing as planned, a tender is currently being completed for contractors to carry out the first 3 projects with a total capacity of approximately 120 MW. The current estimate for the commencement of construction is the first quarter of 2022. In parallel, the licensing process of the remainder of the portfolio continues, which is expected to mature in 2022 and 2023 (the price of a quality license ready for construction in Italy is more than €200,000 per MW).

Initial Stage Development of 800 MW PV in Italy and Spain: the development of these projects continues.

Development of PV plus Storage PV Projects in Israel: land contracts have been executed and the projects are in licensing process with the relevant regulatory authorities.

Financing Expenses

The financing expenses item includes for the first time the financing expenses of the Talasol PV Plant in the amount of approximately €3.3 million (including the cost of an interest swap transaction in the amount of €0.6 million and interest on the shareholders' loan of the minority shareholders in the amount of €0.9 million (a non-cash expenses that creates a tax shield for the project). The financing expenses item also includes a one-time expense of approximately €0.8 million on early redemption of the Series B Debentures, which is expected to be returned to the Company through the interest savings achieved in the transition to Series C Debentures).

The financing expenses of the Company in connection with Debentures (excluding expenses in connection with the early repayment of Series B Debentures) were approximately €1.9 million.

Adjusted EBITDA and Adjusted FFO

The Adjusted EBITDA for the six month period ended June 30, 2021 was €13 million and the Adjusted FFO for the six month period ended June 30, 2021 was €9.6 million.

Use of NON-IFRS Financial Measures

EBITDA, Adjusted EBITDA and Adjusted FFO are non-IFRS measures. EBITDA is defined as earnings before financial expenses, net, taxes, depreciation and amortization and Adjusted FFO is calculated by deducting interest expenses on bank loans and debentures from the Adjusted EBITDA. The Company uses the terms "Adjusted EBITDA" and "Adjusted FFO" to highlight the fact that in the calculation of these Non-IFRS financial measures the Company presents the revenues from the Talmei Yosef PV Plant under the fixed asset model and not under IFRIC 12, presents its share in Dorad based on distributions of profit and not on the basis of equity gain using the equity method and includes the financial results of the Talasol PV Plant for the period prior to achievement of PAC that were not recognized in the profit and loss statement based on accounting rules. The Company presents these measures in order to enhance the understanding of the Company's operating performance and to enable comparability between periods. While the Company considers these non-IFRS measures to be important measures of comparative operating performance, these non-IFRS measures should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. These non-IFRS measures do not take into account the Company's commitments, including capital expenditures and restricted cash and, accordingly, are not necessarily indicative of amounts that may be available for discretionary uses. In addition, Adjusted FFO does not represent and is not an alternative to cash flow from operations as defined by IFRS and is not an indication of cash available to fund all cash flow needs, including the ability to make distributions. Not all companies calculate EBITDA, Adjusted EBITDA or Adjusted FFO in the same manner, and the measures as presented may not be comparable to similarly-titled measures presented by other companies. The Company's EBITDA, Adjusted EBITDA and Adjusted FFO may not be indicative of the Company's historic operating results; nor is it meant to be predictive of potential future results. The Company uses these measures internally as performance measures and believes that when these measures are combined with IFRS measures they add useful information concerning the Company's operating performance. A reconciliation between results on an IFRS and non-IFRS basis is provided on page 13 of this press release.

About Ellomay Capital Ltd.

Ellomay is an Israeli based company whose shares are registered with the NYSE American and with the Tel Aviv Stock Exchange under the trading symbol "ELLO". Since 2009, Ellomay Capital focuses its business in the renewable energy and power sectors in Europe and Israel.

To date, Ellomay has evaluated numerous opportunities and invested significant funds in the renewable, clean energy and natural resources industries in Israel, Italy and Spain, including:

• Approximately 7.9MW of photovoltaic power plants in Spain and a photovoltaic power plant of approximately 9MW in Israel;
• 9.375% indirect interest in Dorad Energy Ltd., which owns and operates one of Israel's largest private power plants with production capacity of approximately 860MW, representing about 6%-8% of Israel's total current electricity consumption;
• 51% of Talasol, which owns a photovoltaic plant with installed capacity of 300MW in the municipality of Talaván, Cáceres, Spain;
• Groen Gas Goor B.V., Groen Gas Oude-Tonge B.V. and Groen Gas Gelderland B.V., project companies operating anaerobic digestion plants in the Netherlands, with a green gas production capacity of approximately 3 million, 3.8 million and 9.5 million (with a license to produce 7.5 million) Nm3 per year, respectively;
• 83.333% of Ellomay Pumped Storage (2014) Ltd., which is involved in a project to construct a 156 MW pumped storage hydro power plant in the Manara Cliff, Israel.

For more information about Ellomay, visit http://www.ellomay.com.

Information Relating to Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties, including statements that are based on the current expectations and assumptions of the Company's management. All statements, other than statements of historical facts, included in this press release regarding the Company's plans and objectives, expectations and assumptions of management are forward-looking statements. The use of certain words, including the words "estimate," "project," "intend," "expect," "believe" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may not actually achieve the plans, intentions or expectations disclosed in the forward-looking statements and you should not place undue reliance on the Company's forward-looking statements. Various important factors could cause actual results or events to differ materially from those that may be expressed or implied by the Company's forward-looking statements, including the impact of the Covid-19 pandemic on the Company's operations and projects, including in connection with steps taken by authorities in countries in which the Company operates, changes in the market price of electricity and in demand, regulatory changes, changes in the supply and prices of resources required for the operation of the Company's facilities (such as waste and natural gas) and in the price of oil, and delays, technical and other disruptions in the operations or construction of the power plants owned by the Company or in the development efforts of the projects under development by the Company. These and other risks and uncertainties associated with the Company's business are described in greater detail in the filings the Company makes from time to time with Securities and Exchange Commission, including its Annual Report on Form 20-F. The forward-looking statements are made as of this date and the Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:

Kalia Rubenbach (Weintraub)
CFO
Tel: +972 (3) 797-1111
Email: kaliaw@ellomay.com

* Convenience translation into US$ (exchange rate as at June 30, 2021: EUR 1 = US$ 1.189)

** Reclassified

* Convenience translation into US$ (exchange rate as at June 30, 2021: EUR 1 = US$ 1.189)

* Convenience translation into US$ (exchange rate as at June 30, 2021: EUR 1 = US$ 1.189)

[1] The Talmei Yosef PV Plant located in Israel is presented under the fixed asset model and not under the financial asset model as per IFRIC 12.

[2] Not including an amount of approximately €1 million of proceeds from the sale of electricity prior to January 27, 2021 (the date in which the Talasol PV Plant achieved PAC).

[3] Ellomay Solar, S.L, the developer of a 28 MW solar project near the Talasol PV Plant.

* Convenience translation into US$ (exchange rate as at June 30, 2021: EUR 1 = US$ 1.189)

Information for the Company's Debenture Holders

Pursuant to the Deeds of Trust governing the Company's Series C and Series D Debentures (together, the "Debentures"), the Company is required to maintain certain financial covenants. For more information, see Item 5.B of the Company's Annual Report on Form 20-F submitted to the Securities and Exchange Commission on March 31, 2021 and below.

 Net Financial Debt

As of June 30, 2021, the Company's Net Financial Debt, (as such term is defined in the Deeds of Trust of the Company's Debentures), was approximately €28.6 million (consisting of approximately €237.9[3] million of short-term and long-term debt from banks and other interest bearing financial obligations, approximately €95.9[4] million in connection with the Series C Debentures issuances (in July 2019,  October 2020 and February 2021) and Series D Debentures issuance (in February 2021), net of approximately €67.3 million of cash and cash equivalents, short-term deposits and marketable securities and net of approximately €237.9[5] million of project finance and related hedging transactions of the Company's subsidiaries).

[3] Short-term and long-term debt from banks and other interest bearing financial obligations amount provided above, includes an amount of approximately €11.7 million costs associated with such debt, which was capitalized and therefore offset from the debt amount that is recorded in the Company's balance sheet. 

[4] Debentures amount provided above, includes an amount of approximately €2.4 million associated costs, which was capitalized and therefore offset from the debentures amount that is recorded in the Company's balance sheet. 

[5] The project finance amount deducted from the calculation of Net Financial Debt includes project finance obtained from various sources, including financing entities and the minority shareholders in project companies held by the Company (provided in the form of shareholders' loans to the project companies).

Information for the Company's Series C Debenture Holders.

The Deed of Trust governing the Company's Series C Debentures includes an undertaking by the Company to maintain certain financial covenants, whereby a breach of such financial covenants for two consecutive quarters is a cause for immediate repayment. As of June 30, 2021, the Company was in compliance with the financial covenants set forth in the Series C Deed of Trust as follows: (i) the Company's shareholders' equity was approximately €127 million (ii) the ratio of the Company's Net Financial Debt (as set forth above) to the Company's CAP, Net (defined as the Company's consolidated shareholders' equity plus the Net Financial Debt) was 18.4%, and (iii) the ratio of the Company's Net Financial Debt to the Company's Adjusted EBITDA[6], was 2.3. 

The following is a reconciliation between the Company's loss and the Adjusted EBITDA (as defined in the Series C Deed of Trust) for the four-quarter period ended June 30, 2021:

[6] The term "Adjusted EBITDA" is defined in the Series C Deed of Trust as earnings before financial expenses, net, taxes, depreciation and amortization, where the revenues from the Company's operations, such as the Talmei Yosef PV Plant, are calculated based on the fixed asset model and not based on the financial asset model (IFRIC 12), and before share-based payments. The Series C Deed of Trust provides that for purposes of the financial covenant, the Adjusted EBITDA will be calculated based on the four preceding quarters, in the aggregate. The Adjusted EBITDA is presented in this press release as part of the Company's undertakings towards the holders of its Series C Debentures. For a general discussion of the use of non-IFRS measures, such as EBITDA and Adjusted EBITDA see above under "Use of NON-IFRS Financial Measures."

Information for the Company's Series D Debenture Holders

The Deed of Trust governing the Company's Series D Debentures includes an undertaking by the Company to maintain certain financial covenants, whereby a breach of such financial covenants for the periods set forth in the Series D Deed of Trust is a cause for immediate repayment. As of June 30, 2021, the Company was in compliance with the financial covenants set forth in the Series D Deed of Trust as follows: (i) the Company's Adjusted Shareholders' Equity (as defined in the Series D Deed of Trust) was approximately €126.6 million (ii) the ratio of the Company's Net Financial Debt (as set forth above) to the Company's CAP, Net (defined as the Company's consolidated shareholders' equity plus the Net Financial Debt) was 18.4%, and (iii) the ratio of the Company's Net Financial Debt to the Company's Adjusted EBITDA[7] was 1.2. 

The following is a reconciliation between the Company's loss and the Adjusted EBITDA (as defined in the Series D Deed of Trust) for the four-quarter period ended June 30, 2021: 

[7] The term "Adjusted EBITDA" is defined in the Series D Deed of Trust as earnings before financial expenses, net, taxes, depreciation and amortization, where the revenues from the Company's operations, such as the Talmei Yosef PV Plant, are calculated based on the fixed asset model and not based on the financial asset model (IFRIC 12), and before share-based payments, when the data of assets or projects whose Commercial Operation Date (as such term is defined in the Series D Deed of Trust) occurred in the four quarters that preceded the relevant date will be calculated based on Annual Gross Up (as such term is defined in the Series D Deed of Trust). The Series D Deed of Trust provides that for purposes of the financial covenant, the Adjusted EBITDA will be calculated based on the four preceding quarters, in the aggregate. The Adjusted EBITDA is presented in this press release as part of the Company's undertakings towards the holders of its Series D Debentures. For a general discussion of the use of non-IFRS measures, such as EBITDA and Adjusted EBITDA see above under "Use of NON-IFRS Financial Measures."

[8] The adjustment is based on the results of the Talasol Project since January 27, 2021 and of the biogas plant in Gelderland since January 1, 2021. The results of the biogas plant in Gelderland were not included in the profit and loss statement of the Company for the year ended December 31, 2020.

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SOURCE Ellomay Capital Ltd