Business context and reporting period
Ellomay Capital Ltd. filed an audited annual report on Form 20-F for the fiscal year ended December 31, 2019—not a standalone 2019 fourth-quarter report. The company develops and operates renewable-energy and power assets in Israel and Europe. Financial statements are prepared under IFRS and presented in euros.
At year-end, Ellomay operated five solar plants in Spain and Israel, held a 9.375% indirect interest in Israel’s Dorad power plant, wholly owned two Dutch biogas facilities, owned 51% of the 300 MW Talasol solar project under construction in Spain, and held 75% of the proposed 156 MW Manara pumped-storage project in Israel.
Financial performance and position
Amounts below are in euros; “m” denotes millions. Consolidated revenue excludes Dorad’s revenue because Ellomay accounts for that investment under the equity method.
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | €19.0m | €18.1m |
| Gross profit | €5.9m | €6.0m |
| Operating profit | €17.7m | €2.9m |
| Profit for the year | €9.8m | €0.6m |
| Profit attributable to Ellomay shareholders | €12.1m | €1.1m |
| Net cash from operating activities | €3.7m | €6.6m |
| EBITDA (non-IFRS) | €24.1m | €8.7m |
| Cash and cash equivalents at year-end | €44.5m | €36.9m |
| Working capital at year-end | €45.4m | €35.7m |
Gross margin was about 31% in 2019, versus about 33% in 2018. The unusually high 2019 operating and net profits were substantially affected by the €18.8m gain on the sale of the Italian portfolio; they should not be read as recurring operating earnings. Net financing expenses rose to €8.2m from €2.1m, including foreign-exchange losses and costs associated with early repayment of Series A debentures.
Cash flow from investing activities was negative €68.9m and cash flow from financing activities was positive €72.5m. Total assets were €310.2m, total liabilities €202.6m, and total equity €107.6m at December 31, 2019. The balance sheet reports €93.3m of loans and €71.6m of debentures, plus €15.6m of lease liabilities. Separately, the risk disclosure cites approximately €94.4m of total indebtedness; the filing text does not provide a clear reconciliation between that figure and the reported balance-sheet debt.
Ellomay reported that it was not in default under its financial covenants at year-end. Management stated working capital was sufficient for present requirements. Cash, cash equivalents and marketable securities were approximately €59.0m at year-end; restricted cash and deposits were separately reported. As of March 15, 2020, the company reported €57.1m cash and cash equivalents, €2.2m marketable securities and €9.9m restricted cash.
Material changes versus the prior comparable period
- Revenue increased about 5%, mainly reflecting the ramp-up of the Oude Tonge biogas facility and stronger solar radiation in Italy than in 2018.
- Operating cash flow fell about 44%, despite higher reported profit, which included the Italian sale gain.
- On December 20, 2019, Ellomay sold twelve Italian solar plants with aggregate capacity of about 22.6 MW for €38.7m and recognized an €18.8m gain. The sale also means subsequent periods will no longer include those plants’ operating results.
- Ellomay sold 49% of Talasol in April 2019, retained control and 51% ownership, and recognized the transaction in equity rather than as a profit-or-loss gain.
- The company issued €22.7m of Series C debentures and raised about €7.8m net from an ordinary-share placement in July 2019. Series A debentures were repaid in January 2020, after funds were set aside in December 2019.
- IFRS 16 lease accounting was adopted from January 1, 2019; comparative figures were not restated, affecting year-to-year expense presentation and comparability.
Outlook, commentary, risks and unusual items
- Project pipeline: Talasol had reached financial close and was under construction; management expected completion by year-end 2020. Its estimated annual revenue of €23–25m and production estimates are projections, not reported results. Ellomay also set Italian development targets through two framework agreements, but project authorization, acquisition and construction remain conditional.
- Manara: The required land-use consent assessment was about NIS 160m (€41.3m), which Ellomay contested as excessive. The prior conditional license was retracted in February 2020 after the financial-closing milestone was missed; an application for a new 156 MW license was filed. Project economics and continuation remain uncertain.
- COVID-19: As of the report date, the company said operations had not yet been materially affected, but warned of possible construction delays, lower electricity demand or prices, supply constraints, collection delays, regulatory changes and reduced financing availability. Spain temporarily halted construction and non-essential work at the end of March 2020.
- Biogas operations: The Dutch facilities incurred operating losses. Management’s impairment review found estimated fair value slightly above carrying value, so no impairment was recorded; that assessment depends on operating, feedstock and technical assumptions.
- Contingencies and litigation: Ellomay recorded a €2.1m expense tied to a GSE claim alleging certification issues at a sold Italian plant, with a related indemnity exposure. Disputes involving Dorad shareholders include substantial claims and counterclaims; management said the outcome could not yet be assessed. A separate claim against the Manara project company seeks about NIS 4.2m.
- Other risks: Results depend on regulated tariffs and incentives, power and gas prices, weather, project execution, contractor performance, foreign exchange and interest rates, financing availability, and compliance with debt covenants. Ellomay also disclosed that a small number of shareholders exercise significant control.
- No company-wide earnings guidance: The filing does not provide a clear quantified forecast for consolidated revenue, profit or cash flow.
Most important facts for investors to verify
- Reconcile the approximately €94.4m indebtedness disclosure with balance-sheet loans, debentures, lease liabilities and project-level financing; assess maturities, covenants and restrictions on distributions.
- Separate recurring operating performance and cash generation from the €18.8m Italian disposal gain and related indemnity expense; review the post-sale revenue and asset base.
- Verify Talasol construction progress, remaining funding and costs, grid connection timing, hedging economics and the impact of COVID-related delays.
- Track the Manara land assessment appeal, new license application, quota availability, financing prospects and any resulting impairment or abandonment risk.
- Review the Dorad and other legal proceedings, including potential financial exposure, and monitor Dutch biogas operating performance and the assumptions supporting the no-impairment conclusion.