Business context and reporting period
Ellomay Capital Ltd. filed its annual report on Form 20-F for the fiscal year ended December 31, 2020. Although the request identifies 2020 Q4, this filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement. The company reports under IFRS in euros. It develops and operates renewable-energy assets in Israel and Europe, including solar PV plants, Dutch biogas plants, a pumped-storage project under development, and an indirect interest in Israeli power producer Dorad.
Key financial metrics
Unless otherwise stated, amounts are in millions of euros. Balance-sheet amounts are as of December 31; income and cash-flow amounts cover the year.
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | 9.645 | 18.988 |
| Gross profit | 1.719 | 5.934 |
| Operating profit (loss) | (2.659) | 17.650 |
| Net profit (loss) | (6.168) | 9.784 |
| Net profit (loss) attributable to Ellomay shareholders | (4.627) | 12.060 |
| Basic and diluted earnings (loss) per share | (€0.38) | €1.09 |
| EBITDA, company-defined non-IFRS measure | 0.316 | 24.066 |
| Net cash from (used in) operating activities | (5.826) | 3.712 |
| Net cash used in investing activities | (112.135) | (68.862) |
| Net cash from financing activities | 141.637 | 72.518 |
| Cash and cash equivalents | 66.845 | 44.509 |
| Working capital | 42.883 | 45.436 |
| Total assets | 460.172 | 310.172 |
| Total liabilities | 335.146 | 202.606 |
| Total equity | 125.026 | 107.566 |
Gross margin was approximately 17.8% in 2020, compared with 31.2% in 2019. Year-end cash plus marketable securities was approximately €68.6 million; the company also reported €8.1 million in short-term deposits and €9.9 million in long-term restricted cash and deposits. Total indebtedness was described as approximately €364 million, including expected principal and interest repayments and financing-related swaps, but excluding related capitalized costs. On the balance sheet, loans and borrowings were €198.2 million and debentures were €82.7 million; lease liabilities were separately reported at €17.3 million.
Material changes versus the prior comparable period
- Revenue fell by about 49%, primarily because the Italian PV portfolio was sold in December 2019. Lower Spanish electricity demand and prices amid COVID-19 also weighed on 2020 revenue; improved Dutch biogas operating efficiency partly offset the decline.
- The 2019 operating profit included a €18.8 million gain on the Italian portfolio sale. The 2020 result included no comparable gain, and the company reported a €6.2 million net loss.
- 2020 investing cash outflow rose to €112.1 million, mainly reflecting investment in the Talasol solar plant. Financing inflows, including project borrowing, debenture issuance and equity proceeds, supported a €22.3 million increase in cash.
- Operating cash flow moved from €3.7 million provided in 2019 to €5.8 million used in 2020. Management cited the portfolio sale, development costs and the expected contribution from Talasol in explaining the negative operating cash flow.
- Other income of €2.1 million in 2020 included reversal of a €2.1 million indemnification provision related to a claim against the divested Italian portfolio, following a favorable appeal outcome. The provision had contributed to 2019 other expense.
Guidance, outlook, risks and unusual items
- Projects and outlook: Talasol, in which Ellomay owns 51%, connected to the Spanish grid and began producing electricity at the end of December 2020; it achieved provisional acceptance in January 2021. Management’s project estimate—not company-wide guidance—was annual production of approximately 561 GWh and annual revenue of €23–25 million. A 28 MW adjacent Spanish PV project was under construction. The company also reported PV projects at different development stages in Italy and Israel, with outcomes dependent on permits, land rights, financing and construction.
- Manara pumped storage: The 156 MW project received a conditional tariff approval in December 2020. Financial close followed in February 2021, with project financing of NIS 1.18 billion (approximately €300 million). The project is estimated to cost about NIS 1.53 billion and has substantial construction, licensing, financing and engineering risks. The filing says required financial closing milestones were met; later construction milestones remain.
- Funding and debt: Subsequent to year-end, Ellomay issued additional Series C debentures and NIS 62 million of convertible Series D debentures, repaid its Series B debentures in full for approximately €22.5 million, and closed Manara project financing. As of March 1, 2021, management reported approximately €125 million of cash and cash equivalents, €1.76 million of marketable securities and €10 million of restricted cash. These later figures are not year-end balances.
- COVID-19 and operating risks: Management said restrictions had not materially adversely affected Ellomay’s operations to date, but cited possible electricity-price and demand declines, supply-chain and construction delays, permit delays, and changes to incentives or financing. Other key exposures include weather, regulatory and subsidy changes, contractor performance, feedstock availability and cost at biogas plants, currency and interest-rate movements, and debt covenants.
- Dorad and contingencies: Ellomay indirectly owns 9.375% of Dorad and does not control its operations. Dorad’s 2020 revenue was NIS 2.407 billion versus NIS 2.701 billion in 2019; net profit was NIS 99.3 million versus NIS 161.3 million. Dorad reported a turbine failure and other component issues, recording approximately NIS 18 million of impairment and NIS 31 million of maintenance costs. Significant shareholder disputes and arbitration remain unresolved; the filing says outcomes cannot yet be assessed. Dorad also received a third-party notice related to a class action against the Israeli Electric Company.
- Other items: Ellomay’s auditor identified the impairment assessment of two Dutch biogas plants as a critical audit matter because valuations depended on forecast feedstock prices and discount rates. Management recorded no impairment, concluding value in use exceeded carrying value. The company reported no financial-covenant defaults as of December 31, 2020, and its auditor issued an unqualified opinion on the financial statements and internal controls.
- Distributions: Ellomay did not pay a dividend or repurchase shares in 2020. Its debenture terms restrict distributions, and no future dividend is assured.
Important facts for investors to verify
- Review the audited statements and notes for the drivers of the €6.2 million net loss, negative operating cash flow and the gap between reported EBITDA and operating results; EBITDA is a non-IFRS measure.
- Confirm the company’s current unrestricted liquidity, debt balances, scheduled repayments and compliance with Series C and Series D covenants, taking account of the post-year-end debenture offerings, Series B repayment and Manara financing.
- Track Talasol’s realized production, revenue and hedge performance against management’s project estimates, and assess the remaining construction and commissioning risks at the 28 MW solar project and Manara.
- Monitor Dutch biogas plant operating performance and the assumptions behind the impairment assessment, particularly feedstock costs and plant efficiency.
- Follow the Dorad arbitration, the IEC-related proceeding, turbine repair and replacement, and any effects of regulatory changes, fuel supply or electricity tariffs.
- Assess potential shareholder dilution from outstanding Series 1 options and convertible Series D debentures, and consider the company’s concentrated ownership and related-party management-services arrangement.