Econergy paves its own way

Global Energy Report
14 min read

Econergy England has geared itself with significant cash, a sound revenue strategy and a pan-European outlook as it prepares to rebrand itself from developer to fully fledged IPP. By Cristiana Sandeva.

Tel Aviv-listed renewables company Econergy operates in Europe via subsidiary Econergy Renewable Energy, which is registered in the UK and is active in Great Britain, Italy, Spain, Poland, Romania and Greece. CEO Eyal Podhorzer leads the business, working from the various European offices as well as Tel Aviv.

The developer operates more than 150MW currently in Europe and is set to connect 350MW of new renewable capacity and 102MWh of storage to various grids by year-end. The company’s pipeline includes 1.1GW/484MWh of projects ready to start construction, 3.7GW/204MWh of licensed projects and 1.6GW/153MWh of projects in early development.

The company is set to make a name for itself in the UK battery market as well as with merchant renewables projects in its other countries of presence.

It has a British battery pipeline nearing 1GWh, of which the 51MW/102MWh Swangate battery storage project in Yorkshire is due to close financing in the coming months. The £35m standalone scheme will be refinanced by Goldman Sachs using a facility that is likely to resemble that of Nofar’s Goldman project financing for the Buxton battery project.

Israeli developer Nofar closed a £16.5m seven-year facility with Goldman last year backing Buxton, which pays three-month Sonia plus 250bp–350bp. The Swangate battery is a standalone grid support BESS that will receive T-4 capacity market availability payments of £8.4m before indexation for 15 years. Construction is at an advanced stage thanks to bridge debt financing from French fund RGreen, which holds a 20% stake in Econergy Renewable Energy. The scheme will come online in Q2. The engineering procurement and construction contractor is Trina Solar. Econergy acquired the Swangate facility in January 2022 from London-based developer Yoo Energy.

French asset manager RGreen holds its stake in Econergy Renewable Energy following an investment it made in the company in 2022, when it provided a €250m debt package. RGreen’s financing included a seven-year €163.3m loan backing Econergy's pipeline in Europe and a €87.5m equity increase in the company. The agreement bound RGreen to invest in each project developed by Econergy Renewable Energy. RGreen's investments are structured as seven-year loans to Econergy's special purpose project companies covering up to 50% of project costs, to be repaid with an average annual 8% interest rate and a ceiling rate set at 14.9%.

As part of the agreement, RGreen has an exclusive right to invest in wind and solar ahead of other potential investors when projects reach ready-to-build status, except for the projects in which Econergy's previously existing investor Phoenix Insurance is already involved. Israeli insurer Phoenix committed €150m of debt to Econergy in early 2022, financing the construction costs of Econergy’s projects in Romania and Poland.

RGreen and Econergy often share ownership on a 50:50 basis for SPCs in most jurisdictions where Econergy operates except for Italy. Earlier this year, Econergy bought stakes in 42 renewables development projects with a combined capacity of 440MW in Italy from UBS Asset Management for €7.97m. The projects are being developed by subsidiary Econergy Archmore and are part of a pipeline originally being developed in a joint venture with UBS AM, which signed a 1.1GW renewables development agreement in Italy with Econergy in 2020.

The pipeline includes 241MW of projects nearing ready-to-build stage, 17MW under construction and 181MW going through licensing. UBS held 80% of Econergy Archmore, which owns 50% of the pipeline project rights in PV technology and 100% in wind technology, while Econergy held 10% of Econergy Archmore. In the acquisition, Econergy bought UBS’s 80% stake in Econergy Archmore and now holds 90%. Econergy’s Italian pipeline is still nascent but promising with 139 schemes in total, of which 4MW are connected, 17MW are ready to connect, 262MW are projects due to start construction and 513MW are projects in early development, with more than 1.5GW of projects being licensed.

After RGreen’s debt commitment in 2022, which is still being drawn down, another French investor stepped in to boost Econergy’s next phase in 2024. Paris-based private debt fund Rivage made a €150m corporate loan to Econergy in February to finance development of solar, wind and storage projects in the UK, Italy, Romania and Poland. And that’s when the company’s CEO Eyal Podhorzer confirmed that Econergy was paving its way to transition from developer to independent power producer.

No more than €82.5m from Rivage’s commitments should be used to finance activities in any single country, according to the debt arrangement published by Econergy in a stock exchange filing. Up to €20m can be used for acquisitions of ready-to-build schemes while the remaining €130m is to be used for development of Econergy's European pipeline, which comprises merchant projects with medium-term PPA targets.

The loan has an initial five-year tenor that is subject to extensions. The debt will be disbursed in two tranches: the first €100m is available for drawdown for 24 months immediately after financial close on February 7 and €90m has already been drawn. The first €100m is at a fixed interest rate between 9% and 9.5%. Interest on any delayed payments will increase by 200bp per year. The debt agreement includes a 2% commission fee on the first tranche and a credit allocation fee of 2%.

The second tranche of €50m will be available for two years from June 30 if both Econergy and Rivage decide to stay in the deal. The borrower and lender have the option to withdraw from the second tranche if Econergy finds a substitute lender. Any new lender would receive a proportional share as collateral from the guarantees given to Rivage for the first tranche by RGreen as a minority shareholder in Econergy. The second tranche is priced at mid-swaps plus 600bp–650bp if it comes from Rivage and at market conditions if another lender is approached. The upfront fee for the second tranche is 1% and the credit allocation fee is 2%.

Repayments on both tranches will be due every three months, with the first instalment fixed at €25m. Both tranches are subject to an early repayment fee. The debt agreement carries certain additional conditions, including that Econergy maintains a loan-to-value ratio of 50% or less for the first tranche and less than 65% for the second tranche.

Econergy is planning on adding extra cash to its balance sheet from divestment of some fully permitted projects from its pipeline in Romania, to further boost liquidity and lighten up on the total capacity it sets itself to develop in a single country. Its Romanian pipeline includes Romania’s largest operational solar park, the 155MW Ratesti solar scheme and the recently connected 92MW Parau solar plant. It has over 200MW of projects under construction, 600MW ready for construction and 1.2GW due for licensing.

The company is in advanced stage of negotiations for the sale of its 177MW Niculesti scheme, for which it picked Kommunalkredit as financial adviser earlier in the year, and is negotiating the sale of three more ready-to-build projects in Romania with combined capacity 132MW. The asset sales are due to close by the end of Q3, cashing in at least €35m to boost Econergy's equity. Development costs for the projects for Econergy have been about €10,000 to €20,000 per MW and the estimated sale price is around €150,000 per MW.

The Romanian pipeline counts the freshly connected 92MW Parau project and several schemes under construction including the 87MW Oradea and the 55MW Scurtu Mare project. All projects will rely on merchant revenues and have been pre-financed with bridge equity or debt. They are being project-financed as they approach their commissioning dates, with Parau first on the list, to be followed by Oradea shortly after. Parau was initially financed with €59m of debt from RGreen Infragreen 4 fund.

“The structuring of the financing for Parau will be very similar to that of Ratesti,” Podhorzer told PFI.

Econergy partnered on the development of Ratesti with Israeli peer Nofar. In Q1 2024, Raiffeisen Bank provided a 10-year €60m project financing for the €100m scheme. The margin is between 300bp and 400bp over three month Euribor. The debt coverage ratio is below 1.2x. The project is developed on a 50:50 basis by the two Israeli companies but the sole borrower is Econergy Renewable Energy. In addition to the loan, the parties have agreed on a €8.5m total cash sweep that will be distributed yearly throughout the tenor of the loan.

For Oradea, the company has drawn €44.16m from a debt facility it signed in 2023 with Israel’s Phoenix Insurance and is in talks with a large bank to secure a €100m construction loan with a tenor of between three and five years. Scurtu Mare has also been backed by Phoenix with a €16m convertible loan and a €6m fixed loan covering about half of the project’s costs. In January 2023, Israel's largest insurer Phoenix Insurance committed a two-year €110.25m convertible loan and two-year €39.75m term loan to Econergy for 515MW of developments in Poland and Romania. That was added to Phoenix’s 2022 €100m equity commitment, making Phoenix a core investor in Econergy.

On the Romanian front, the upcoming contracts-for-difference (CfD) mechanism to be initiated by the country’s Ministry of Energy is likely to play a part in Econergy’s local revenue stream strategy. The country's first CfD auction is due to start soon, with attractive ceiling prices offered for wind and solar of €93/MWh and €91/MWh, respectively.

"At this stage, we are minded to bid on some of the projects but we are continuing to assess the draft schemes – which contain a ceiling price seen as broadly competitive – and reviewing the detailed provisions before making a final decision," Econergy's Romania country manager Bogdan Asanache told PFI. "These tenders are potentially very positive for Romania’s energy industry, and both financial institutions and producers have shown a real appetite for taking up these contracts."

Econergy is planning to install 968MW of solar capacity in Poland across 29 projects. The company is set to close project financing for its 51MW Resko solar project in Poland, which has recently completed construction in the Zachodnio-Pomorskie municipality and is preparing to be connected. The EPC contractor is “a major player in the European market with operations in 12 countries and a 1.7GW pipeline under construction”,but remains undisclosed.

As Oradea, Resko was initially funded via the debt from Phoenix Insurance with a €28.3m tranche. Phoenix’s debt funding package was split into €100m for projects in the Romanian pipeline and €50m for the Polish pipeline. The insurer also agreed to provide up to €11.66m of additional financing to specifically back completion of the Resko and Oradea PV plants.

Econergy is looking to double its current consolidated equity of €140m to roughly €280m by year-end. It plans to achieve this by converting €56m of the Phoenix debt into equity, up to €40m from the sales of assets in Romania, a €38m equity increase to come from the boost to its presence in Italy via the UBS acquisition and up to €15m from projected net profits from electricity and services sales.

Econergy expects total revenues of €121m across the UK, Italy, Romania and Poland by year end. Its 2024 revenue forecasts are based on expectations of lower electricity prices in all its activity markets.

“European electricity prices are expected to decrease in the coming decade due to continued price reductions in gas and coal, as well as a significant increase in renewable energy penetration,” the company said in its year-end report for 2023 and 2024 forecast. “The combination between the decline in equipment prices and the expected decrease in financing costs over time will improve project yields and profitability”, Econergy added.

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