Ellomay Announces Fulfillment of Conditions Precedent of the Manara Project

Source: www.gulfoilandgas.com 2/14/2021, Location: Middle East

Ellomay Capital Ltd. (ELLO) ("Ellomay"), a renewable energy and power generator and developer of renewable energy and power projects in Europe and Israel, announced all conditions precedent were met under the conditional license issued to the pumped storage hydro project to be constructed in the Manara Cliff, Israel (the "Manara Project"). The Company indirectly owns 83.333% of Ellomay Pumped Storage (2014) Ltd. (the "SPC"), which owns the Manara Project.

The Manara Project is projected to cost approximately NIS 1.53 billion (approximately $472 million). Amongst the conditions fulfilled is the financial closing of the long-term project finance facilities for the Manara Project (the "Project Finance"), the execution of an engineering, procurement and construction agreement (the "EPC Agreement") and the execution of an operation and maintenance agreement (the "O&M Agreement") for the Manara Project.

The Project Finance will be provided by a consortium of Israeli banks and institutional investors, arranged and led by Mizrahi-Tefahot Bank Ltd. The Project Finance is in the aggregate amount of NIS 1.18 billion (approximately $364 million), and includes: (i) a senior secured tranche at a fixed rate of interest (with base interest rate equal to the yield to maturity of Israeli treasury bonds with like duration of the loan), linked to the Israeli Consumer Price Index and to be repaid over a period of 19.5 years from the commercial operation date; and (ii) a subordinated secured tranche at a floating rate of interest (Bank of Israel rate plus spread) with a slightly shorter maturity. The weighted average annual interest rate spread of the Project Finance is approximately 3.3% during the construction phase and approximately 2.5% during the commercial operation phase. The Project Finance includes customary terms in connection with early prepayment, acceleration of payments upon certain breaches and limitations on distributions. The Project Finance also includes ancillary facilities such as Standby, VAT, Guarantees and Debt Service Reserve facilities in an aggregate amount of approximately NIS 146 million (approximately $45 million). The ADSCR for default is 1.05:1.00.

75% of the SPC is owned by Ellomay Water Plants Holdings (2014) Ltd. ("Ellomay Water") and the remaining 25% are owned by Sheva Mizrakot Ltd. ("Sheva"). 66.667% of Sheva is owned by Ampa Investments Ltd. ("Ampa") and the remaining 33.333% are owned by Ellomay Water. Accordingly, the Company holds (through its direct holdings in the SPC and through its holdings in Sheva) 83.333% of the Manara Project, and the remaining 16.667% of the Manara Project are held by Ampa through its holdings in Sheva. Sheva and Ellomay Water undertook to provide aggregate financing of approximately NIS 353 million (approximately $ 108.7 million), pro rata to their holdings in the Manara Project.

The Project Finance includes mandatory cash sweeps upon certain cover ratio and other events, cash sweep payments in connection with the subordinated loans and other lender protection mechanisms. In addition, the Project Finance agreement permits the shareholders of the Manara Project to withdraw a developers' fee at the Actual Completion Date (as such term is defined in the Project Finance agreement) of the Manara Project, subject to availability of funding, provided certain cover ratios are met.

The Company and Ampa provided certain sponsor support undertakings towards the lenders commensurate with the size and complexity of the project and the length of the construction period.

In addition, the Company undertook in connection with the Project Finance to maintain control over the Manara Project and to provide customary pledges on the assets of and rights in the project. The shareholders of the SPC provided pledges over their shares, the shareholders' loans and the shareholders' Mezzanine loan.

The EPC Agreement was executed under a "turnkey" contract with Electra Infrastructure Ltd. ("Electra Infrastructure"), one of Israel's largest construction companies. The aggregate consideration payable to Electra Infrastructure under the EPC Agreement is expected to be approximately NIS 1.1 billion (approximately $338 million). In accordance with the EPC Agreement Voith Hydro, the world's leading manufacturer of hydroelectric turbines ("Voith Hydro") was nominated as the subcontractor that will be providing the electro-mechanical equipment to the Manara Project.

The O&M Agreement was executed with Mekorot Israel National Water Co., the Israeli national water company ("Mekorot"), fully owned by the Israeli Government, Voith Hydro and Verbund Hydro, one of the largest hydroelectric companies in Europe with extensive expertise in the operation of hydroelectric power plants. The O&M Agreement provides that the O&M contractors will be involved in the construction process through a mobilization period and that O&M services will be provided for a twenty year period, during which Mekorot, Voith Hydro and Verbund will provide O&M services for the initial three years, with Mekorot providing O&M services exclusively for the remaining 17 years.

The Manara Project also received the tariff approval from the Israeli Electricity Authority as well as a building permit. The construction period of the Manara Project is expected to be 62.5 months. The construction is expected to commence following receipt of the Israeli Electricity Authority's approval that the conditions precedent were met, which is expected to be obtained in the coming weeks.

Ran Fridrich, CEO and a board member of Ellomay commented: "Ellomay Capital is pleased to report the financial closing of the Manara Project. After a long and complicated period, and under very challenging timeframes, the financing, EPC and O&M agreements were executed. The Company views this project as a substantial component of the energy storage portion of its portfolio of assets and estimates that the demand for energy storage will increase. Pumped storage is the most proven, efficient and green storage technology in existence. In addition, pumped storage represents the lowest land footprint compared to its storage abilities. The project is expected to have a long operating period with low operating costs. The Company would like to thank all of the individuals involved with the project, mostly the Company's employees and advisors who have worked tirelessly in a very challenging period and assisted the Company in reaching this achievement."

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