Enlight Renewable Energy .(US:ENLT)2023-03-29 16:00Part I Item 3. Key Information The company's business is affected by principal risks including project development, offtake agreements, operations, financing, and regulatory changes Risk Factors The company faces numerous operational risks, including project development, supply chain disruptions, competition, regulatory changes, and geopolitical instability - Key business risks include the ability to successfully develop and convert renewable energy projects, dependency on obtaining governmental permits, and managing construction delays and supply chain disruptions28 - The company faces competition from both traditional and renewable energy companies, potential for reduced demand, and the risk of offtakers terminating contracts if performance benchmarks are not met2829 - Operational challenges include technical issues leading to outages, dependence on weather conditions, electricity price volatility, and reliance on a few key projects for a substantial portion of cash flows29 - Financial and regulatory risks include managing cost inflation and interest rate fluctuations, changes to renewable energy policies, and complying with international trade and anti-corruption laws2930 - The company is exposed to geopolitical risks from its incorporation and location in Israel, including political and military instability, which could adversely affect operations30247 Item 4. Information on the Company The company operates a global renewable energy platform with a diverse project portfolio, controlling the entire project lifecycle across multiple technologies History and Development of the Company Founded in 2008 in Israel, the company's shares are dual-listed on the Tel Aviv Stock Exchange and the Nasdaq Global Select Market - The company was founded on August 6, 2008, and its shares are dual-listed on the Nasdaq Global Select Market (since February 2023) and the Tel Aviv Stock Exchange (since February 2010)260 Business Overview The company develops, finances, constructs, and operates utility-scale renewable energy projects globally, with a significant presence in the U.S Consolidated Project Portfolio Overview (as of March 15, 2023) | | Mature Projects | Advanced Development Projects | Development Projects | Total Portfolio | | :--- | :--- | :--- | :--- | :--- | | Generation capacity (GW) | 4.5 | 4.2 | 10.3 | 19.0 | | Storage capacity (GWh) | 2.7 | 10.0 | 7.9 | 20.6 | - The company operates an integrated business model, controlling the entire project life cycle from development and engineering to procurement, construction, asset management, and finance272 - Enlight entered the U.S. market in August 2021 through the acquisition of a 90.1% equity interest in Clēnera, a developer of utility-scale solar and energy storage projects266270 - As of March 15, 2023, approximately 63% of the capacity of Mature Projects was contracted with an average remaining PPA term of 16 years, while 18% is exposed to Merchant Risk280 - The company's growth strategy focuses on converting its development pipeline, expanding organically in existing markets, and growing laterally through energy storage and entry into new geographies307310311 Organizational Structure The company operates through a complex structure of wholly or partially owned subsidiaries for co-investments and project-specific purposes - The company is organized under the laws of the State of Israel and operates through a network of subsidiaries, including co-invest entities for partnerships and project-specific subsidiaries416420 Property, Plants and Equipment The company leases all its corporate facilities, with main headquarters in Israel and the U.S., and believes its current facilities are sufficient - The company's corporate headquarters are located in Rosh Ha'ayin, Israel, and its U.S. headquarters are in Boise, Idaho; all corporate facilities are leased417 Operating and Financial Review and Prospects The company's financial performance shows significant revenue and profit growth in 2022, driven by new projects and managed through a robust capital structure Key Financial Performance (2021 vs. 2022) | Metric | 2022 (in millions) | 2021 (in millions) | Year-over-Year Growth | | :--- | :--- | :--- | :--- | | Revenue | $192.2 | $102.5 | 88% | | Operating Profit | $90.6 | $34.4 | 163% | | Net Profit | $38.1 | $21.7 | 76% | - The company's business model primarily generates revenue from long-term PPAs, which comprised 68% of total revenue in 2022425 - Key factors influencing performance include rising power prices, which have led to favorable PPA amendments, and supply chain disruptions, which are mitigated by a global supplier network428430434 Operating Results Revenue and profits surged in 2022, driven by newly operational projects and a gain related to the Clēnera acquisition earn-out liability Revenue Breakdown (2021 vs. 2022) | Revenue Source | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Electricity and operation of facilities | $181,058 | $94,309 | 92% | | Construction and management services | $11,114 | $8,152 | 36% | | Total revenue | $192,172 | $102,461 | 88% | - The 92% increase in electricity revenue was primarily driven by new projects contributing an additional $86 million and the reclassification of the Halutziot project contributing $12 million468 - Operating costs increased in line with growth, with cost of sales rising 86% to $40.4 million and G&A expenses increasing 85% to $28.7 million470475 - Other income of $13.8 million was recognized in 2022, primarily from a reduction in the estimated earn-out liability related to the Clēnera acquisition479 Adjusted EBITDA Reconciliation Summary (in thousands) | | For the Year Ended December 31, | | :--- | :--- | :--- | | | 2022 | 2021 | | Net Income | $38,113 | $21,675 | | Depreciation and amortization | $42,267 | $20,500 | | Share based compensation | $8,673 | $3,980 | | U.S. acquisition expense | $0 | $7,331 | | Other income | ($11,617) | $0 | | Finance expenses, net | $39,250 | $6,842 | | Share of losses of equity accounted investees | $306 | $189 | | Taxes on income | $12,943 | $5,694 | | Adjusted EBITDA | $129,935 | $66,211 | Liquidity and Capital Resources The company manages capital through project finance, corporate debt, and equity, successfully raising funds from its U.S. IPO in early 2023 - In February 2023, the company completed its U.S. IPO, receiving net proceeds of approximately $270.7 million486 - As of December 31, 2022, the company had approximately $1.6 billion of project finance debt outstanding with a weighted average interest rate of 2.5%, of which 94% is fixed-rate492 Holding Company Debentures Overview (as of Dec 31, 2022) | Series | Debt Outstanding (USD millions) | Effective Interest Rate | Duration (Years) | | :--- | :--- | :--- | :--- | | C (Convertible) | $151 | 3.2% | 5.5 | | D | $110 | 3.2% | 5.4 | | E | $28 | 4.4% | 1.9 | | F | $125 | 3.1% | 2.9 | Summary of Cash Flows (in millions) | | Year ended December 31, | | :--- | :--- | :--- | | | 2022 | 2021 | | Net cash provided by operating activities | $90.4 | $52.0 | | Net cash used in investing activities | ($820.0) | ($644.6) | | Net cash from financing activities | $684.7 | $752.3 | Item 6. Directors, Senior Management and Employees The company is led by an experienced management team and board, with a compensation structure governed by Israeli law and Nasdaq rules Directors and Senior Management The company is led by co-founder Gilad Yavetz as CEO and a board of eight members chaired by Yair Seroussi - The executive team is led by Co-founder and CEO Gilad Yavetz, CFO Nir Yehuda, and Co-founder and SVP Amit Paz537539540541 - The Board of Directors is chaired by Yair Seroussi and comprises eight members in total537544 Compensation Executive compensation totaled approximately $7.89 million in 2022 and is overseen by the compensation committee and board - The aggregate compensation paid to directors and executive officers for the year ended December 31, 2022, was approximately $7.89 million561 Compensation for Five Most Highly Compensated Executive Officers (2022) | Executive Officer | Position | Salary Expenses | Social Benefits Costs | Cash Bonus/Commissions | Share-Based Compensation Expense | | :--- | :--- | :--- | :--- | :--- | :--- | | Gilad Yavetz | CEO | $0.39M | $0.05M | $0.22M | $2.10M | | Amit Paz | SVP | $0.25M | $0.05M | $0.08M | $0.93M | | Nir Yehuda | CFO | $0.25M | $0.04M | $0.08M | $0.92M | | Ilan Goren | VP | $0.21M | $0.04M | $0.09M | $1.00M | | Perach Lerner | VP | $0.20M | $0.04M | $0.05M | $0.28M | - The company utilizes a 2010 Share Option Plan, with a maximum of 15,000,000 options authorized for issuance to employees, officers, and directors576577 Board Practices As a foreign private issuer, the company follows Israeli governance practices while adhering to Nasdaq independence rules for its board committees - The company has opted out of Israeli Companies Law requirements for external directors and instead complies with Nasdaq director independence rules applicable to U.S. domestic issuers596 - The Board of Directors has established four committees: Audit, Compensation, Nominating, and Environmental, Social and Governance (ESG)605 - The company follows home country (Israeli) practice in lieu of Nasdaq rules for shareholder meeting quorums and certain shareholder voting requirements783 Employees The company employed 217 full-time, non-unionized employees as of March 2023, split between the U.S. and Israel - The company had 217 full-time employees as of March 15, 2023, split roughly evenly between the U.S. and Israel658 - None of the company's employees are represented by a labor union, and employee relations are considered good658 Item 7. Major Shareholders and Related Party Transactions The company's ownership is concentrated among several major institutional shareholders, and it maintains formal policies for related party transactions Principal Shareholders (as of March 15, 2023) | Shareholder | % of Outstanding Ordinary Shares | | :--- | :--- | | Migdal Insurance and Financial Holdings Ltd | 9.64% | | The Phoenix Holdings Ltd. | 7.60% | | Harel Insurance Investments & Financial Services Ltd | 6.85% | | Meitav Dash Investments Ltd. | 6.03% | | Altshuler Shaham Ltd. | 5.59% | | All executive officers and directors as a group (12 persons) | 3.42% | - The company has entered into standard employment, exculpation, and indemnification agreements with its directors and executive officers674 - A formal policy is in place for the review, approval, or ratification of related party transactions, consistent with the requirements of the Israeli Companies Law675 Item 8. Financial Information The company has no material litigation and does not anticipate paying dividends, retaining earnings for business expansion - The company has never declared or paid dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for operations and expansion679 - The company is not a party to any litigation or proceeding that is expected to have a material adverse impact on its financial position678 Item 10. Additional Information This section covers Israeli exchange controls, corporate taxation policies, and U.S. federal income tax considerations for shareholders - There are currently no Israeli currency control restrictions on remittances of dividends or proceeds from share sales to non-residents, with certain exceptions692 - The standard corporate income tax rate in Israel is 23%, and dividends paid to non-Israeli residents are generally subject to a 25% withholding tax695709 - For U.S. federal income tax purposes, the company believes it was not a Passive Foreign Investment Company (PFIC) for the year ended December 31, 2022242730 Item 11. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate, foreign currency, and credit risks, which it manages through hedging policies and counterparty diversification - The company manages interest rate risk through interest rate swaps and by maintaining a significant portion of its debt at fixed rates748 - Foreign currency exchange risk is present due to revenues and expenses in multiple currencies and is managed through an internal hedge and a formal hedging policy750751 - Credit risk from counterparties is mitigated by contracting with investment-grade entities and diversifying the counterparty portfolio754 Part II Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds The company discloses the use of net proceeds from its February 2023 U.S. IPO, confirming no material change from its prospectus - The company completed its U.S. IPO on February 14, 2023, generating gross proceeds of $288.8 million and net proceeds of approximately $270.7 million after costs759760 Item 15. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of year-end 2022, with internal control reporting deferred per SEC rules - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective765 - Due to its status as a newly public company, this report does not include management's assessment of internal control over financial reporting or an auditor's attestation report766767 Item 16. Corporate Governance and Other Disclosures This section covers governance topics including the audit committee financial expert, code of ethics, accountant fees, and reliance on home country practices - The Board of Directors has determined that Liat Benyamini is an audit committee financial expert769 - A Code of Ethics and Conduct has been adopted, and it is available on the company's website771772 Principal Accountant Fees (in thousands) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $615 | $709 | | Tax Fees | $29 | $30 | | Total | $644 | $739 | - As a foreign private issuer, the company relies on home country practices for certain Nasdaq corporate governance rules, including shareholder meeting quorum requirements783 Part III Item 18. Financial Statements This section contains the company's audited consolidated financial statements for the three years ended December 31, 2022, prepared under IFRS Consolidated Statement of Financial Position (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $3,533,367 | $2,835,340 | | Total Current Assets | $423,704 | $413,311 | | Total Non-Current Assets | $3,109,663 | $2,422,029 | | Total Liabilities and Equity | $3,533,367 | $2,835,340 | | Total Liabilities | $2,483,333 | $2,077,959 | | Total Equity | $1,050,034 | $757,381 | Consolidated Statement of Income (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $192,172 | $102,461 | $70,324 | | Gross profit | $111,171 | $61,238 | $40,368 | | Operating profit | $90,612 | $34,400 | $28,374 | | Profit (loss) for the year | $38,113 | $21,675 | ($41,035) | Consolidated Statement of Cash Flows (in thousands) | | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $90,376 | $52,023 | | Net cash used in investing activities | ($820,000) | ($644,638) | | Net cash from financing activities | $684,741 | $752,314 |