Enlight Renewable Energy Ltd (ENLT) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to enlight's Fourth Quarter and Full Year 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the call over to Yonah Weisz, Director, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining our Fourth Quarter and Full Year 2024 Earnings Conference Call for enlight Renewable Energy. Before beginning this call, I would like to draw participants' attention to the following. Certain statements made on the call today, including, but not limited to, statements regarding business strategy and plans, our project portfolio, market opportunities, utility demand and potential growth, discussions with commercial counterparties and financing sources, pricing trends for materials, progress of company projects, including anticipated timing of delayed approvals and project completion and anticipated production delays, expected impact from various regulatory developments, completion of development, the potential impact of the current conflict in Israel on our operations and financial conditions and company actions designed to mitigate such impact and the company's future financial and operational results and guidance, including revenue and adjusted EBITDA, are forward-looking statements within the meaning of U.S. federal securities laws, which reflect management's best judgment based on currently available information. We reference certain project metrics in this earnings call and additional information about such metrics can be found in our earnings release. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our 2023 annual report filed with the SEC on March 28, 2024, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Additionally, non-IFRS financial measures may be discussed on the call. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from our results prepared in accordance with IFRS. Reconciliations to the most directly comparable IFRS financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations web page. With me this morning are Gilad Yavetz, CEO and Co-Founder of enlight; Nir Yehuda, CFO of enlight; and Adam Pishl, COO and Co-Founder of Clenera. Gilad will provide some opening remarks and will then turn the call over to Adam for a review of our U.S. activity and then to Nir for a review of our fourth quarter results. Our executive team will then be available to answer your questions.

Thank you for joining us today for enlight's Fourth Quarter and Full Year 2024 Earnings Call. In 2024, we performed well above our initial guidelines and above analyst expectations. Let's begin with a review of our accomplishments in 2024, and then I'll go into our outlook for 2025 and beyond. Full year 2024 financial results were strong. Revenues and income for the whole 2024 grew by 53% year-over-year to $399 million. Adjusted EBITDA grew by 49% to $289 million. Our operating cash flow also increased, reaching $193 million for the entire year, up 29% over 2023. Net income dropped 32% to $67 million due mainly to onetime item last year. In the fourth quarter, revenues and income grew by 35% over last year to $104 million. Adjusted EBITDA grew by 31% to $65 million. Operating cash flow increased by 49% to $36 million. Net income fell 48% to $8 million due mainly to onetime items last year. This robust financial performance keeps enlight on its continuous growth path, almost tripling the company's size every 3 years. New projects were the main driver of this growth. And in 2024, we reached CODs in Israel, Europe and the U.S., highlighting the diversification of enlight asset base. We connected 650 MWs of generation capacity and 1.6 GWh of energy storage capacity across all 3 geographies, an increase of 33% on a factored GW basis. Today, we have 2.5 GWs of generation and 1.9 GWh of energy storage capacity in operation. The business environment in 2024 was rich in opportunities. The core subject is the rising demand for power, driven mainly by data centers and EVs. Forecast for electricity consumption in the U.S. rose for the second consecutive year after a 2 decades decline trend. Equipment prices have declined throughout the year and cost of capital stabilized. Enlight's extensive construction plans in the U.S. includes 9 project with 3.3 GWs of generation and 5.1 GWh of storage between now and the end of 2027 and are uniquely positioned to take advantage of these trends. We can offer utilities large-scale project with committed COD dates. This value is being recognized in our PPA agreements. Under this environment, we currently see an average equity return of above 15% on our large-scale mature portfolio segment. The current U.S. administration executive orders have generally no impact on our project, except for a minor to negligible impact from the 10% tariff increase on equipment originating from China. These may offset by equipment cost trends and supply chain diversification. Enlight built a resilient supply chain, allowing for procurement of an equipment from several regions to mitigate the impact of policy changes and the use of safe harbor on projects in the U.S. Most importantly, energy market fundamentals favor the continuing involvement of solar generation in America's energy supply. With competitive offtake pricing, near-term availability of projects, and a central position in the interconnected queue, we believe that renewable energy is well placed to provide a meaningful portion of the massive new power generation required to meet America's intensifying demand for electricity. In the U.S., we completed the construction and commercial operation of project Atrisco with 364 MW of generation and 1.2 GWh of storage capacity. We began construction on Roadrunner, Quail Ranch, and Country Acres with a combined capacity of 810 MW and 2 GWh, and COD expected between the end of 2025 and 2026. Adam Pishl, CEO of our U.S. subsidiary, Clenera, will have more details on this later in the call. We also continued to convert new additions from our extensive development portfolio to our mature portfolio. 2 notable projects includes Snowflake A and Crimson Orchard with a combined 770 MW plus 2.3 GWh storage capacity. There was excellent delivery on project construction in Europe and Israel with Project Pupin in Serbia and the Israel Solar + Storage cluster entering into operation significantly earlier than initially planned. enlight access to diverse sources of capital was fully displayed in 2024. We completed the financial closing of both Atrisco BESS and Roadrunner, raising $1 billion in term loans and tax equity, while financial closing for Pupin, Tapolca, and ACDC added an additional $137 million in financing. We also concluded a major asset sell-down in Israel with local institutional investors buying 44% of the Sunlight cluster for $50 million that is expected to generate a $94 million profit in Q1 2025 results. In the past year, enlight once again demonstrated its proven ability to expand and grow. Though in 2025, we expect even greater steps on this path with a year of concentrated project construction and completion. To begin, we expect that a total of 440 MW and 1,100 MWh of projects will reach COD during the year, led by Quail Ranch and Roadrunner in the U.S., adding an additional $130 million in revenues and $105 million in adjusted EBITDA on an annual basis to our financial results. This represent 25% growth in operating capacity compared to last year. More importantly, we expect to begin construction on an additional 1.8 GW and 3.9 GWh of new projects in 2025 in the U.S., Israel, and Europe, including CO Bar and Snowflake A, 2 mega projects located in Arizona as well as Nardo standalone storage in Italy. The implication of this intense activity are quite significant. These project are set to bring enlight to annual recurring revenues of more than $1 billion when all reach completion by the end of 2027. In Israel, we will be breaking new ground as we begin with our first agrivoltaic project development while continuing to expand the reach of our electricity supply units in the country deregulated electricity market. Turning to our 2025 guidance. We expect revenues between $490 million and $510 million, 25% higher than the 2024 results, and adjusted EBITDA between $360 million and $380 million, 28% above the 2024 results. Nir will describe in detail the assumptions that underline this guidance later in the call. Now I'd like to turn the call over to Adam.

Thank you, Gilad. We have many great achievements to share from the U.S. since last quarter. Our power plants are operating well. We have started construction on several new facilities and we continue to develop a robust pipeline for future projects. In November, we celebrated the full commissioning of our Atrisco solar and storage project in New Mexico. This project with a nameplate capacity of 364 MW generation and 1.2 GWh of energy storage capacity is now delivering energy in line with our 20-year busbar PPA. It is the largest project built to date by enlight and Clenera in the U.S., and we are proud to see it up and running. We also started construction on 3 major projects totaling 810 MW of energy generation and over 2-GWh of battery storage. First, Quail Ranch Solar and Storage, which is an expansion of the Atrisco facility, adds 128 MW of PV generation and 400 MWh of energy storage. This maximizes our existing interconnection agreement with the utility off-taker. Mobilization is well underway with nearly 200 workers on site, completing civil earthwork and driving piles for the PV racking. We anticipate COD by the end of this year. Next is Roadrunner, a 290-MW PV and 940 MWh battery project located East of Tucson, Arizona. More than 100 contractors are on site clearing land and installing underground collection lines. We anticipate achieving full COD towards the end of this year. Finally, our Country Acres project with 392 MW solar and 688 MWh energy storage has crews on site completing civil engineering work prior to the start of major site construction this spring. We anticipate achieving full COD by the end of 2026. Before the end of last year, we announced a major accomplishment, closing on $550 million to fund construction at Roadrunner. Within the first half of 2025, we anticipate closing construction financing on Quail Ranch and Country Acres as well. I look forward to announcing those closings soon. While the solar and battery supply chain landscape continues to evolve, we are confident we will deliver. Our procurement and executive teams have spent years developing deep relationships with manufacturers around the world, and we've also expanded our relationships with U.S. suppliers sourcing American assembled PV modules for Country Acres and Quail Ranch. We are finalizing similar domestic supply contracts for the CO Bar complex and the Snowflake A project. 2024 was an incredible year for Clenera and enlight. I'm very proud of our team's dedication to deliver quality renewable energy projects to meet the insatiable energy demand in the U.S. We have demonstrated we can scale the business and execute the development, construction and operation of very large solar and storage projects in markets across the U.S. The fundamentals of our business remain strong, and we expect to continue to operate, construct and develop exceptional above-market returning projects to power America's future. Thank you. I'll now turn the call over to Nir.

Thank you, Adam. In the fourth quarter of '24, the company's total revenues and income increased to $104 million, up from $77 million last year, a growth rate of 35% year-over-year. This was composed of revenues from the sale of electricity, which rose 26% to $93 million compared to $74 million in the same period of '23 as well as a recognition of $11 million in income from tax benefit, up to 130% compared to $3 million in Q4 '23. Revenues from the sale of electricity grew due to the contribution of newly operational project. Since the fourth quarter of '23, 7 of the solar and storage cluster units in Israel, Atrisco in the U.S., Pupin in Serbia and Tapolca in Hungary began selling electricity. The most important increases originated at the Israel solar and storage cluster, which added 9 million, followed by Atrisco, which added $6 million. In total, new project contributed $18 million to revenues from the sale of electricity. Revenues from the sale of electricity were distributed between MENA, Europe and the U.S. with 34% of revenues in the fourth quarter of '24 denominated in Israeli shekel, 47% in euros and 18% in denominated U.S. dollars. Fourth quarter net income amounted to $8 million compared to $16 million last year, a decrease of 48% year-over-year. In Q4 '23, the company recorded a $12 million net profit stemming from the recalculation of earn-out payment linked to the acquisition of Clenera. Adjusting for this figure, the net income of Q4 '23 was $4 million, implying year-on-year growth of 90% from ongoing operation. In the fourth quarter of '24, the company's adjusted EBITDA grew by 31% to $65 million compared to $50 million for the same period in '23. The increase in adjusted EBITDA was driven by the same factors that drove the revenues and income increase, namely new project and the recognition of higher amounts tax benefit. This was offset by an additional $6 million in higher operating expenses linked to new projects, while company overhead rose by $5 million year-over-year. Looking to our balance sheet. Enlight completed a broad range of financing transactions during the quarter. We reached financial close on project Roadrunner for a combined $550 million in term debt and tax equity bridge loan at competitive terms. In addition, we raised $46 million through an extension of one of our existing bond series. And finally, we sold 44% of the Sunlight cluster for $50 million with expected profit reaching up to $94 million. As of the date of today's report, we have $350 million of revolving credit facility at several Israeli bank, of which $70 million has been drawn. These diverse sources of funds highlights the company ability to access the capital needed to drive its expansion in the coming years. Moving to '25 guidance. We expect revenues and income between $490 million and $510 million and adjusted EBITDA of between $360 million and $380 million, reflecting annual growth of 25% and 28% at the midpoint, respectively, compared to '24 results. Our revenues and income guidance for '25 includes recognition of estimated $60 million to $80 million in income for U.S. tax benefit. 90% of '25 generation output is expected to be sold at fixed price either through hedges or PPAs. Of our total forecast revenues and income, 38% are expected to be denominated in Israeli shekel, 35% euros and 27% in U.S. dollar, including tax benefits. We also assume average annual exchange rate based on forward curves for the year, implying an average of ILS 3.55 to dollar and EUR 1.05 to dollar. I will now turn it over to the operator for questions.

[Operator Instructions] Our first question comes from Justin Clare of ROTH Capital Partners.

So I wanted to start out here first on the 2025 guidance. You're anticipating the completion of some major projects here, Quail Ranch, Roadrunner in the second half of the year. So I was wondering just how much contribution from these projects are factored into the 2025 guide? And then also, I was wondering if the guide includes the $94 million profits from the sale of projects in Israel that you're anticipating in Q1. Is that in the EBITDA guidance for the year?

So yes, so for the first question, none of the new projects is included in the guidance as we anticipate COD of the first project by the end of '25. So the guidance is based on the projects that are either connected by the end of '24 and thus contributed to the growth in '24 or will be connected during early '25. So, no dependence on the new project in construction. Regarding the profit from the sell-down, so about $41 million are attributed to the guidance of the EBITDA from these sell-downs. We anticipate to recognize this profit in our EBITDA in the first quarter of '25.

Okay. Got it. That's helpful. And then I was just looking at Slide 13 that shows the ramp to the more than $1 billion run rate in revenues for 2027. And it shows enlight share at 88%. So, I was wondering how the -- how that slide contemplates future sell-downs. Do you anticipate any minority sell-downs in these projections? And then just how large a role do you think asset sales are going to play going forward? And maybe you could speak to the capital needs in order to get to the projections here.

Yes. Again, a great question. Thanks. So, this relates exactly to the strategy we announced in the past that enlight will remain primarily an IPP and, of course, greenfield developer. It means that we expect to hold at least 70% of the stake in our portfolio long term. So, the fact that currently we are growing to 88% means that we have submit in order to perform some sell-downs to accelerate some of our growth, the equity resources for that and still maintain our strategy to hold the majority of at least 70% of our portfolio. I'd like to remind that the sell-down that we did right now was in a very high valuation with a premium of about $380,000 per factored megawatts and it attributed only 1% of our portfolio.

Got it. Got it. Okay. And then, I guess just wanted to check in on the financing environment. With the new administration in the U.S., there's some uncertainty as to whether or not there will be changes to the IRA. Is that affecting the availability or the cost of either debt or tax equity? Maybe just speak to how the environment is evolving here.

Yes. So, I can start and, of course, Nir can complement me or Adam, of course, regarding the U.S. policies. So, in general, the current executive orders do not have impact on our project, except for the tariffs on goods coming from China, the 10% tariff that may have a very minor impact that can reach between 0% to 2% or 3% on the total cost of our new projects. And most likely, this will be offset against the other trends of equipment costs. So, currently, we see a very minor or no impact. And, of course, we continue to follow the policies and are doing the steps that are required in order to hedge and to substantiate the strength in the projects such as the safe harboring and so forth.

Our next question comes from Maheep Mandloi of Mizuho.

Firstly, just on the guidance and clarity on the adjusted EBITDA for the full year. You talked about the $41 million coming from the asset sale. Could you just clarify how much of it is coming from the tax benefit? And then just to clarify, the tax benefit is mostly the upfront tax incentive sales in the U.S., right? Or does that include something else as well?

Yes. So, within the guidance to '25, the adjusted EBITDA guidance between $60 million to $80 million are attributed to tax incentive revenues. So, the one that we intend to basically to sell.

Got it. And then maybe just on that -- on the tax credit aspect, the tax credits includes the adders as you lay out in the project slides. As you kind of look at construction financing, are you able to get construction financing for the whole -- for all of the tax credit adders or just the tax credit itself? Just a background, we heard from some developers that construction in financing is mostly limited to the 30% ITC and does not include the adders. So, I just want to clarify if you're getting favorable terms or similar process.

Again, I'll start with answering and then, of course, Nir can complement me. But, in general, we don't see a change in the policy of our lenders. So, if you look at the last financial close we performed Roadrunner, about 52% of the total CapEx was included in the tax incentive that we got of tax benefit. So, 52% was attributed to that. So, net cost of the project was basically 48%. So currently, we don't see change in the policy. And we are, of course, waiting to upsides that are still not included in our guidance. Hopefully, we will get them on domestic content on some of the project.

Got you. And maybe just one last one on policy. Any insights as to when you expect any changes to the IRA in the U.S.?

We are following like everybody, the policy of the new administration. And what we see currently is at least we cannot interpret, but we believe that there is a growing demand for electricity in the U.S., the fact that we have project that are ready to connect to the grid and to provide very much needed electricity by our customers, the utilities, we believe is what is driving currently the need for our projects in the market. And of course, we follow and we understand that this administration would like to promote also other form of electricity from fossil fuels. We do not see this underlines the demand for our projects as we see a soaring growth for electricity and specifically for our project in the U.S. states.

[Operator Instructions] Our next question comes from Mark Strouse of JPMorgan.

This is Michael Fairbanks on for Mark. Congrats to everyone on the strong result. Maybe first, can you guys just help us think about 4Q results versus the guidance from the 3Q call? I think you had a $15 million asset sells gain assumed in the guide, which didn't come during the quarter. Can you still beat by a large amount? So just trying to understand what the big beat was driven by there.

We performed the deal. We signed it by the end of '24, but there was a CP for approval of the deal by the Israeli regulator that, by the way, approved the deal this quarter. So it will be recognized in terms of the accounting this year. It will be 3x the goal. So I think we are very happy with the result. And primarily, we are on track regarding the sell-down that we have.

Yes. Maybe just on the core operations. So what drove the strong results versus the original expectations on the guidance?

So I think we had very good operational performance across our sites in the multiple geographies. And also, we've been able to advance some of the CODs, which is very important to us in terms of the execution, being able to construct a complicated and large project ahead of schedule. So this, together with good performance on the operational side, brought the result.

Okay. Great. And then maybe just one more. On the U.S. advanced development portfolio, you guys mentioned in the release a few large projects, Cedar Island, Snowflake B and Atrisco 2. Could you maybe help us think about where each of those projects are in the development process and maybe a timeline of when you would expect those to move into the mature portfolio?

Sure. Adam, would you like to take this question?

In terms of these projects, these individual projects are moving forward as planned. I don't have anything specific to add in terms of dates on those.

Our next question comes from [ Adiel Hasidim ] of Bank Leumi.

I wonder if you can shed some light about your collaboration with NewMed Energy in Morocco. We did see it in the portfolio. If you can shed some light about this project.

Thank you, Adiel. So we believe there is a big opportunity today for projects in Morocco because of the very strong wind and solar resource that is -- that we have in Morocco, the big -- the lands availability and also the proximity of Morocco to Europe. So the ability of export, not only using the electricity in Morocco, but also exporting the energy to Europe, either through interconnection that are being built and planned between Morocco and the continent, but also through what we call Power-to-X. So exporting the energy in other ways such as green hydrogen or ammonia and then marine transportation to Europe to different uses. So we are now originating activities in this regard in Morocco together with NewMed, as you highlighted. And this is an activity that is, of course, in the beginning early stage. It will take several years, but this is part of our being greenfield developer and growth in the future.

Our next question comes from David Paz of Wolfe Research.

Just to clarify what you said earlier about the U.S. tax credits. How much is in your '25 EBITDA guidance? Is it the $60 million to $80 million that you referenced?

Yes, $60 million to $80 million.

Okay. If we -- do you have that number or do you have what U.S. tax credits were for the year 2024? How much of EBITDA?

$21 million.

Okay. So when you came out with your '24 guidance of $235 million to $255 million last year, was that embedded in there, the U.S. tax credit number?

No, it was not embedded. So you need to add to that the $21 million.

Got it. Okay. And going forward, we should expect you now to include tax credits -- U.S. tax credits in your adjusted EBITDA guidance. Is that the way to think about it?

That is right.

Thank you. I would now like to turn the conference back to Yonah Weisz for closing remarks. Sir?

Thank you, everyone, for joining us, and we'll speak with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.