Dalia Energies Nears Closing of a NIS 3.2 Billion Refinancing

March 18, 2015 | The Marker

The largest private power plant in Israel will be financed by a group headed by Bank Leumi.  As a result of the refinancing, Dalia’s financing expenses will decrease by 1.5% annually and its value is expected to surpass one billion shekels.

Dalia Energies, currently building the largest private power plant in Israel in Tel Tzafit, near Kiryat Malachi, received approval from a consortium – headed by Bank Leumi – to refinance NIS 3.2 Billion in debt.

The Company, headed by Eitan Meir, is refinancing in order to reduce costs in the economy’s current low-interest environment.  In accordance with the original financing agreement, closed in November 2012, the debt bears an annual CPI-linked interest of 5%.

Dalia Energies agreed with Bank Leumi and the other financiers that the annual interest borne by the debt will be based on a margin of approx. 2.5% above government bonds having similar characteristics and a 7-year WAM (weighted average to maturity).  Accordingly, upon the closing, annual interest will be 3%, CPI-linked, so that the financiers will absorb an interest cut of 2% annually.

However, this decrease will be partially offset, since the original financing agreement stipulated that if there is early repayment of the debt, the lenders are entitled to charge a fee, estimated at 1.2%-1.3%, for every WAM year – i.e. a penalty of NIS 40 Million per year, with a total of NIS 300 Million.  Essentially, the financiers will absorb a 1% -1.5% decrease in interest annually and Dalia Energies will be able to save NIS 30-40 million in finance expenses annually.  In the coming weeks, Bank Leumi, together with Dalia Energies, will decide on an updated apportionment of the debt among the original financiers.  Giza Singer Even is advising Dalia in the refinancing.

The shareholders of Dalia are Mishkey Hakibbutzim Group (47.7%); Israel Infrastructure Fund (20%); Sigma Epsilon of Dr. Eli Barnea, Moshe Lasri and Yigal Porat (19.8%); as well as Ron Tirah and the Jezreel Valley Economy Purchasing Organization (12.5%) – which acquired the shares from the Landau Family for NIS 650 million during the summer of 2013.  In the original financing agreement, Bank Leumi provided credit of NIS 700 million, and enjoyed fees for formation and management of a consortium of six institutional investors: Amitim Old Pension Funds (NIS 540 million), Clal and Harel (NIS 500 million each), Psagot and Menora (approx. NIS 400 million each), and Migdal, which joined at the last minute and provided NIS 200 million in credit.

In the initial financing, the project’s closing contained an alternate model for providing half of the required equity from the Project’s founders (20% of its value).  In this model, Dalia issued preferred shares (shares that do not confer a share in equity and enjoy preference in dividend distributions) valued at NIS 400 million to the financing institutions, in a type of mezzanine financing (a CPI-linked loan bearing annual interest of 13%), thereby saving its owners from raising equity at that time.  Participating in the current financing are Leumi Partners, Harel, Israel Infrastructure Fund (IIF), Bank Leumi Employees Fund and First International Bank of Israel, Teachers and Kindergarten Teachers Fund and Agricultural Insurance of Mishkey Hakkibutzim Group.

The power plant, which will operate with an 870-megawatt capacity, was built by the French company Alstom, and will provide electricity to the Israel Electric Corporation (70%) and most of the balance to various kibbutzim.  The plant is scheduled to begin operating toward June 2015 – about half a year ahead of schedule.  After trimming finance expenses and reducing the risk, and the once the plant begins operating, which should generate cash flows of more than NIS 100 Million, the partners expect to revalue the power plant at NIS 1-1.5 Billion – which should also benefit the preferred shareholders.

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