OPC's revenues in Q2 grew by 18% to NIS 405 million - Operations in the US rose by 24%

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by Ifi Reporter Category:Health Aug 26, 2022

Prolonged shutdown of three power plants, for the purpose of carrying out maintenance and renovation work, resulted in a decrease in the operating profit of the OPC company controlled by the Canon company of the Idan Ofer group.
OPC, which is managed by Giora Almogi, lost NIS 11 million in the second quarter of 2022, an 85% decrease in loss compared to the corresponding quarter in 2021. The second quarter, which is a transition season in Israel and the US, is the seasonally weakest quarter in OFC's operations. The company operates two power plants in Israel and controls (70%) the American company CPV, which owns gas-fired power plants and wind and solar energy plants in the US "B.

OPC's revenues grew by 18% in the second quarter of 2022 compared to the corresponding quarter in 2021 and amounted to NIS 405 million. Its revenues in Israel from the operation of the Rotem power plants in the Rotem plain and the Hadera power plant increased by 18% in the second quarter of 2022 compared to the corresponding quarter in 2021, and amounted to NIS 353 million.
A 9.4% increase in the electricity tariff in the past quarter increased revenues by NIS 28 million. Additional revenue of NIS 16 million came from customer consumption as a result of the company starting operations as a virtual supplier.
OPC's revenues from the operations of its subsidiary CPV in the USA grew by 24% in the past quarter compared to the corresponding quarter in 2021, and amounted to NIS 52 million. This is as a result of an increase in revenues from power plant management services and an increase in revenues from the sale of electricity at the power plant in Energy Spirit of Keenan in the USA.
OPC's gross profit decreased by 30% in the second quarter of 2022 compared to the corresponding quarter in 2021, and amounted to NIS 28 million. The operating profit flow (Ebitda) decreased by 53% in the second quarter of 2022 compared to the corresponding quarter in 2021 and amounted to NIS 15 million.
The sharp drop in gross profit and Ebitda is due to the shutdown of the Rotem power plant that supplied 466 megawatts for a period of 26 days, and maintenance work being done on the steam turbine and the gas turbine at the Hadera power plant. The repair of the gas turbine has been completed, while the steam turbine is expected to return to operation in October 2022, so the negative impact on the station's results is also expected in the third quarter of the year.
The power plants in Rotem and Hadera, which sell the electricity they produce according to bilateral agreements with customers, had to purchase electricity from the electricity grid to meet their obligations, a fact that increased their expenses by NIS 54 million in the past quarter and reduced Rotem's Ebitda by 35% in the quarter The second of 2022 compared to the equivalent in 2021, for NIS 31 million.
OPC's share in the losses of companies included in the US doubled in the second quarter of 2022 compared to the corresponding quarter in 2021, and amounted to NIS 29 million. The increase in OPC's share in the losses of included companies and the decrease of 15% in the current operating profit (Ebitda) of the US companies to NIS 67 million in the second quarter of 2022 resulted from a decrease in the profits of the held company Valley, which operates a power plant in New York. This is as a result of receiving a one-time compensation of NIS 31 million in the second quarter of 2021 as well as a NIS 20 million damage to the Ebitda of the Towantic power plant, as a result of maintenance work for 42 days.
These factors offset an increase of NIS 43 million in net Ebitda of the American holding companies as a result of a sharp increase in the energy margin, and as a result of the increase in natural gas and electricity prices. This is offset by spending on hedging the energy gains.
OPC's net profit increased in the past quarter, despite the decrease in operating profit and the increase in part of the losses of the held companies, as a result of a shift to net financing income of NIS 29 million in the second quarter of 2022 compared to net financing expenses of NIS 96 million in the corresponding quarter in 2021.

OPC, like other Israeli energy companies operating in the US, estimates that the enactment of the law to reduce inflation will have a positive effect on its operations and financial results. Almogi points out that the US government provides significant tax benefits for natural gas projects that incorporate the capture of 75% of CO2 emissions. The administration will pay $85 per ton for carbon burial and $60 per ton for carbon injection into gas and oil reservoirs. In addition, it will pay the tax benefit in cash to the energy producer and not to a tax partner for the first five years after establishment. Almogi adds that the technology for carbon capture exists, but so far no was economically viable because the benefit was $50 for the landfill of a ton of carbon.
The law to reduce inflation stated that the benefit will be given for 10 years. Almogi said the CPV subsidiary is developing two carbon-free natural gas projects with an aggregate capacity of 2 gigawatts, which combine carbon capture and storage as well as hydrogen-based operation. These projects are developed together with General Electric. In his estimation, the benefits offered by the American government embody the potential to make CPV's fleet of gas-powered power plants emission-free.
In a presentation published at the same time as the financial reports, OFC illustrated the business potential of the tax benefits associated with carbon capture. For example, a 1,000 megawatt natural gas-fired power plant that will be built at a cost of $2 billion will capture and deposit carbon to the extent of 2 million tons per year, and you will receive a return of 170 million dollars per year.
OPC's results in the second half of 2022 will be positively affected by the 14% increase in the electricity tariff in Israel in August 2022, from the hedging of 76% of the gross margin of electricity production in the US - currently at the level of $20 per megawatt hour - from the completion of maintenance work and the high electricity margins in the USA in the third quarter, as well as the doubling of installed capacity in Israel from 600 megawatts to 1,300 megawatts through stations under construction and purchases.

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