IIF to Establish a Wind Energy Farm to Generate Electricity in Poland with an Investment of €300 Million
29, November 2018

This is a tender for the supply of 220 megawatts, generated from wind energy, to the Polish electricity network The project will be funded by a consortium of foreign banks at a rate of 60-70%, with the balance from the equity of IIF and its partners

Israel Infrastructure Fund (IIF) has won a huge contract in the Polish renewable energy market. This is a tender for the supply of 220 megawatts of wind energy to the Polish electricity network – as reported in an update to the Fund’s investors. The cost of the project is €300 million; and it will be funded by a consortium of foreign banks at a rate of 60-70%, with the balance from the equity of IIF and its partners.

IIF will execute this project through a designated company, in which it will control 85% of the shares, and the balance of the shares will be held by the Helios Fund and a private Israeli investor. IIF will build the farm with 81 wind turbines at the Potegowo site in Poland, which is situated 40 kilometers from the shore of the Baltic Sea. The annual revenue forecasted for the project – based on the wind regime at the construction site, the number of turbines and their output – is €35 million. IIF, managed by Yaron Kestenbaum, is considering adding institutional investors as partners in the project, in order to help finance the equity component.

IIF has won a significant share of the Polish electricity network’s tender with a total output of 1 gigawatt, which was run in accordance with the new Polish energy regulation. The new regulation is based on a secured tariff – known as a feed-in tariff – offered to the winner of the tender for a period of 15 years, after which the winner can sell the electricity on the Polish Power Exchange at an unsecured price.

The new regulation replaced the previous regime of generating electricity from renewable energy, whereby the winner sells the electricity it generates on the power exchange; and in addition to the consideration for the sale of the electricity, it receives a green certificate for the production of every megawatt of electricity from renewable energy, which it can sell on the designated power exchange. The new regime protects IIF from exposure to severe fluctuations in the prices of energy and green certificates in Poland, which was expressed in the green certificate price crash, when prices dropped by 35% in the second quarter of 2017, as compared to the same quarter in 2016, to a level of 177 zloties (approximately NIS 177) per megawatt, and a jump of 128% in the price of the green certificate in November 2018, as compared to the second quarter in 2017, to 405 zloties.

IIF’s management company is owned by Kestenbaum, Harel Insurance (2,890-1.4%) and attorney Yehuda Raveh. IIF is a private equity fund that specializes in companies engaged in the fields of infrastructure, energy, transportation, services, logistics and communications. IIF manages $2 billion in three active funds. Among its investors are leading Israeli and international financial institutions. One of IIF’s significant holdings is 20% of shares in Veridis, which it acquired in July 2017, based on a working value (shares plus a net financial debt) of $500 million.

Veridis, owned by Delek Automotive (70%) (2,019 + 0.65%) is active in the energy industry through its holdings in the OPC Power Plant located in the Rotem Plain (20%); in the field of water desalination through its holdings (50%) in VID, which is the concessionaire of the Ashkelon Desalination Plant; in the landfill market, through its holdings in Efeh , Evron and Ganei Hadas; and in RDF Ltd., which produces fuel from recycled refuse for Nesher Israel Cement Enterprises.