Following an unsuccessful attempt at a Nasdaq IPO for IC Power, subsidiary OPC Energy (formerly IC Power Israel) is nearing an IPO on the Tel Aviv Stock Exchange (TASE). The company yesterday published a prospectus for the offering, in which it says it is planning to raise $100 million (NIS 353 million) at a minimum valuation of $355 million (NIS 1.253 billion), before money. At the same time, if demand for the proffered shares is strong, the volume of the offering and the company valuation are likely to go up.
OPC Energy, fully owned by IC Power, builds and operates private power stations in Israel powered by natural gas. IC Power also has extensive electricity production business in Latin America. Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), whose market cap is NIS 2.5 billion, fully owns IC Power. Kenon itself was split off from Israel Corporation (TASE: ILCO), and is controlled by Idan Ofer with a 63% stake.
OPC Energy raised NIS 320 million two months ago in a private bond placement for investment institutions. The company operates in Israel, and is therefore greatly affected by the electricity rates set by the Public Utilities (Electricity).
Owns 80% of the Mishor Rotem power station
OPC Energy's main asset is an 80% holding in the 466-megawatt OPC Rotem power station in Mishor Rotem, which has been operating since July 2013. The company's reports show that its revenue dropped 6% to NIS 1.16 billion in 2016, following the revision of electricity rates by the Public Utilities (Electricity). As a result, the company's EBITDA plummeted 57% to NIS 89 million. The company expects substantial improvement in its results in 2017, with EBITDA from the Mishor Rotem plant slated to grow 17% to NIS 297 million.
OPC Energy finished the first quarter of 2017 with its revenue growing 8% to NIS 327 million, following an increase in the amount of power sold and a higher electricity rate. EBITDA in the quarter was up 20% to NIS 104 million, but net profit was down 14% to NIS 43 million, due to higher financing expenses and taxes.
In addition to the OPC Rotem power station, OPC Energy is developing other power stations in order to consolidate its standing as Israel's leading private power producer. Construction of a 148-megawatt power plant in Hadera, acquired two years ago from Hadera Paper Ltd. (TASE: AIP; Pink Sheets: HAIPF), has reached the advanced stages, and the plant is scheduled to begin operating in early 2019, with NIS 1 billion having been invested in it.
OPC Energy signed an agreement in April to acquire 95% of Zomet Energy, which owns the franchise to operate a 396-megawatt natural gas-powered private power station at Plugot Intersection, near Kiryat Gat. The National Infrastructure Committee has already approved this project, whose cost is estimated at NIS 1.3 billion. OPC Energy's future plans include expansion of the Mishor Rotem and Hadera power stations.
$3.7 million underwriting fee
A look at the prospectus shows that the OPC Energy IPO is has a full underwriting guarantee, meaning that the underwriters participating in the IPO are committed to buying all the shares issued at the minimum price set for the IPO.
The commitment was made by the four underwriters leading the IPO: Leumi Partners Ltd., which has undertaken to buy up to half of the offered shares for $50 million; Poalim IBI Underwriting and Investments (TASE: PIU), which has undertaken to buy up to one quarter of the shares for $25 million; and Barak Capital and Menorah Mivtachim Holdings Ltd. (TASE: MORA), which have each undertaken to buy up to one eighth of the shares for $12.5 million. The underwriters' fee will be 3.75% of the net proceeds, amounting to at least $3.75 million.
Published by Globes [online], Israel Business News - www.globes-online.com - on July 13, 2017
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