Quarterly Report • Dec 10, 2024
Quarterly Report
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This report is a translation of Keystone Infra's Hebrew-language interim financial information, prepared solely for convenience purposes. Please note that the Hebrew version is the binding version, and in any event of discrepancy, the Hebrew version prevails.
| Independent Auditors' Review Report…………………………………………………………………… | 1-2 |
|---|---|
| Condensed Financial statements – in New Israeli Shekels (ILS): |
|
| Statements of Financial Position……………………………………………………………………………… | 3 |
| Statements of Comprehensive Income………………………………………………………………………. | 4 |
| Statements of Changes in Equity………………………………………………………………………. | 5-6 |
| Statements of Cash Flows………………………………………………………………………………………… | 7-8 |
| Notes to the Financial Statements……………………………………………………………………………… | 9-33 |
Page
We have reviewed the accompanying financial information of Keystone Infra Ltd. which includes the Condensed Statement of Financial Position as of 30 September 2024 and the Condensed Statements of Comprehensive Income, Changes in Equity and Cash Flows for the nine- and three-month periods then ended. The board of directors (the "Board") and management are responsible for the preparation and presentation of the financial information for these interim periods in accordance with IAS 34 "Interim Financial Reporting", and they are responsible for the preparation of information for these interim periods under Chapter D of the Securities Regulations (Periodic and Immediate Reports), 5730-1970. Our responsibility is to express a conclusion on these interim financial information, based on our review.
We conducted our review in accordance with Review Standard (Israel) 2410 of the Institute of Certified Public Accountants in Israel – "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Generally Accepted Auditing Standards in Israel, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the aforementioned financial information has not been prepared, in all material respects, in accordance with IAS 34.
In addition to the statements in the previous paragraph, based on our review, nothing has come to our attention which causes us to believe that the aforementioned financial information does not meet, in all material respects, the disclosure provisions under Chapter D of the Securities Regulations (Periodic and Immediate Reports), 5730-1970.
Tel Aviv, KESSELMAN & KESSELMAN 26 November 2024 Certified Public Accountants A member firm of PricewaterhouseCoopers International Limited
26 November 2024
To: The Board of Directors of Keystone Infra Ltd.
4 Ariel Sharon, Givatayim
Dear Sir/Madam,
We hereby notify you that we agree to the inclusion (including by way of reference) of our report which is specified below in a shelf offering to be published by the Company, if any, by virtue of the Company's May 2024 shelf prospectus:
The auditor's review report as of 26 November 2024 on the Company's condensed financial information as of 30 September 2024 and the nine- and three-month periods then ended.
Sincerely,
KESSELMAN & KESSELMAN Certified Public Accountants A member firm of PricewaterhouseCoopers International Limited
| 30 September 2024 2023 |
December | ||||
|---|---|---|---|---|---|
| (Unaudited) | 2023 (Audited) |
||||
| Note | ILS in thousands | ||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | 103,607 | 110,407 | 80,904 | ||
| Accounts receivable | 39,888 | 3,098 | 5,820 | ||
| 143,495 | 113,505 | 86,724 | |||
| Non-current assets | |||||
| Investments in investees and loans | 4A | 2,902,760 | 2,748,853 | 3,006,740 | |
| Pledged deposit | 5,300 | 32,998 | 33,000 | ||
| Accounts receivable | 1,150 | - | - | ||
| Property, plant and equipment, net | - | 6 | - | ||
| 2,909,210 | 2,781,857 | 3,039,740 | |||
| Total Assets | 3,052,705 | 2,895,362 | 3,126,464 | ||
| Liabilities and equity | |||||
| Current liabilities | |||||
| Commercial papers and short-term loans | 187,500 | 370,000 | 187,500 | ||
| Current maturities of bonds | 56,594 | 35,326 | 54,670 | ||
| Accounts payable | 29,670 | 25,064 | 21,882 | ||
| 273,764 | 430,390 | 264,052 | |||
| Non-current liabilities | |||||
| Bonds | 644,191 | 656,567 | 620,682 | ||
| Long-term loans | - | - | 187,500 | ||
| Accounts payable | 6,771 | 6,771 | 6,771 | ||
| Deferred taxes | 156,718 | 118,951 | 189,348 | ||
| 807,680 | 782,289 | 1,004,301 | |||
| Total liabilities | 1,081,444 | 1,212,679 | 1,268,353 | ||
| Equity | |||||
| Share capital | 1,495,664 | 1,331,536 | 1,331,536 | ||
| Proceeds on account of options | 9,036 | - | - | ||
| Share-based payment capital reserve | 21,341 | 18,547 | 18,547 | ||
| Retained earnings | 445,220 | 332,600 | 508,028 | ||
| 1,971,261 | 1,682,683 | 1,858,111 | |||
| Total Liabilities and Equity | 3,052,705 | 2,895,362 | 3,126,464 |
Date of approval of the Financial Statements by the Company's Board: 26 November 2024
| Aharon Biram | Navot Bar | Rachel Segal |
|---|---|---|
| Chairman of the Board | CEO | Chief Financial Officer |
| 9 months ended 30 September |
3 months ended 30 September |
Year ended 31 Dec. |
|||||
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | 2023 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||||
| Note | ILS in thousands | ||||||
| Revenue | 4B | ||||||
| Net change in fair value of investments in investees measured at fair value through profit or loss, net of income from dividend, interest and loan proceeds |
)134,980( | 166,724 | )35,982( | 40,425 | 406,767 | ||
| Income from dividend, interest and | |||||||
| loan proceeds | 175,159 | 211,989 | 27,673 | 36,319 | 252,597 | ||
| Total revenue | 40,179 | 378,713 | )8,309( | 76,744 | 659,364 | ||
| Operational expenses | |||||||
| Management fees | 26,066 | 23,053 | 9,303 | 7,995 | 31,058 | ||
| Share-based payment expenses | 2,794 | - | - | - | - | ||
| Transaction costs due to acquisition | |||||||
| of investees (primarily professional | |||||||
| services) | 1,207 | 957 | 1,132 | 747 | 1,161 | ||
| Other operational expenses | 7,491 | 4,696 | 2,483 | 1,509 | 6,773 | ||
| Total expenses | 37,558 | 28,706 | 12,918 | 10,251 | 38,992 | ||
| Operating income (loss) | 2,621 | 350,007 | )21,227( | 66,493 | 620,372 | ||
| Financing income | 4,590 | 5,224 | 1,335 | 1,759 | 6,276 | ||
| Financing expenses | )43,349( | )50,581( | )16,047( | )14,254( | )61,173( | ||
| Profit (loss) before income taxes | )36,138( | 304,650 | )35,939( | 53,998 | 565,475 | ||
| Tax expenses (income) - deferred | )32,630( | 51,197 | )20,673( | 4,506 | 121,594 | ||
| Total comprehensive income (loss) | |||||||
| attributable to the Company's | )3,508( | 253,453 | )15,266( | 49,492 | 443,881 | ||
| shareholders | |||||||
| Basic and diluted earnings (loss) per share attributable to the Company's shareholders (in ILS) |
)0( | 1.7 | )0.1( | 0.3 | 2.9 |
The accompanying notes are an integral part of the Financial Statements
| Attributable to the Company's shareholders | |||||
|---|---|---|---|---|---|
| Share based |
|||||
| Share capital |
Proceeds on account of options |
payment capital reserve |
Retained earnings |
Total capital |
|
| ILS in thousands | |||||
| Balance as of 1 January 2024 (audited) |
1,331,536 | - | 18,547 | 508,028 | 1,858,111 |
| Issue of capital | 164,128 | 9,036 | - | - | 173,164 |
| Share-based payment | - | - | 2,794 | - | 2,794 |
| Loss for the period | - | - | - | )3,508( | )3,508( |
| Dividend | - | - | - | )59,300( | )59,300( |
| Balance as of 30 September 2024 (unaudited) |
1,495,664 | 9,036 | 21,341 | 445,220 | 1,971,261 |
| Balance as of 1 January 2023 (audited) |
1,320,388 | 11,148 | 18,547 | 124,147 | 1,474,230 |
| Income for the period | - | - | - | 253,453 | 253,453 |
| Expiration of options | 11,148 | )11,148( | - | - | - |
| Dividend | - | - | - | )45,000( | )45,000( |
| Balance as of 30 September 2023 (unaudited) |
1,331,536 | - | 18,547 | 332,600 | 1,682,683 |
| Attributable to the Company's shareholders | |||||
|---|---|---|---|---|---|
| Share capital |
Proceeds on account of options |
Share based payment capital reserve ILS in thousands |
Retained earnings |
Total capital |
|
| Balance as of 1 July 2024 (unaudited) | 1,495,664 | 9,036 | 21,341 | 501,286 | 2,027,327 |
| Loss for the period | )15,266( | )15,266( | |||
| Dividend | - | - | - | )40,800( | )40,800( |
| Balance as of 30 September 2024 (unaudited) |
1,495,664 | 9,036 | 21,341 | 445,220 | 1,971,261 |
| Balance as of 1 July 2023 (unaudited) | 1,331,536 | - | 18,547 | 298,108 | 1,648,191 |
| Income for the period | - | - | - | 49,492 | 49,492 |
| Dividend | - | - | - | )15,000( | )15,000( |
| Balance as of 30 September 2023 (unaudited) |
1,331,536 | - | 18,547 | 332,600 | 1,682,683 |
| Attributable to the Company's shareholders | ||||||
|---|---|---|---|---|---|---|
| Share capital |
Proceeds on account of options |
Share based payment capital reserve |
Retained earnings |
Total capital |
||
| ILS in thousands | ||||||
| Balance as of 1 January 2023 (audited) |
1,320,388 | 11,148 | 18,547 | 124,147 | 1,474,230 | |
| Income for the year | - | - | - | 443,881 | 443,881 | |
| Expiration of options | 11,148 | )11,148( | - | - | - | |
| Dividend | - | - | - | )60,000( | )60,000( | |
| Balance as of 31 December 2023 (audited) |
1,331,536 | - | 18,547 | 508,028 | 1,858,111 |
The accompanying notes are an integral part of the Financial Statements
| 9 months ended 30 September |
3 months ended 30 September |
Year ended 31 Dec. |
||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | 2023 | ||
| (Unaudited) | (Unaudited) | |||||
| ILS in thousands | (Audited) | |||||
| Cash flows from operating activities | ||||||
| Income (loss) for the period | )3,508( | 253,453 | )15,266( | 49,492 | 443,881 | |
| Adjustments required for presenting cash flows from operating activities: |
||||||
| Adjustments to profit and loss items - Depreciation and amortizations |
- | 10 | - | 4 | 16 | |
| Deferred taxes | )32,630( | 51,197 | )20,673( | 4,506 | 121,594 | |
| Change in fair value of investments in investees |
134,980 | )166,724( | 35,982 | )40,425( | )406,767( | |
| Income from dividend, interest and loan | ||||||
| proceeds | )175,159( | )211,989( | )27,673( | )36,319( | )252,597( | |
| Share-based payment expenses | 2,794 | - | - | - | - | |
| Financing expenses, net | 38,759 | 45,357 | 14,712 | 12,495 | 54,897 | |
| )31,256( | )282,149( | 2,348 | )59,739( | )482,857( | ||
| Changes in the Company's asset and liability items - |
||||||
| Decrease (increase) in accounts | ||||||
| receivable | )10,727( | 25,231 | )13,591( | )1,002( | 22,509 | |
| Increase (decrease) in accounts payable | 3,214 | 3,150 | 8 | )1,375( | 1,188 | |
| )7,513( | 28,381 | )13,583( | )2,377( | 23,697 | ||
| Cash paid and received during the period by the Company for: |
||||||
| Interest paid Dividend, interest, and proceeds due to |
)14,052( | )18,353( | - | )4,272( | )27,264( | |
| loans received | 175,159 | 211,989 | 27,673 | 36,319 | 252,597 | |
| 161,107 | 193,636 | 27,673 | 32,047 | 225,333 | ||
| Net cash provided by operating activities | 118,830 | 193,321 | 1,172 | 19,423 | 210,054 |
| 9 months ended 30 September |
3 months ended 30 September |
Year ended 31 Dec. |
||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | 2023 | ||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| Cash flows from investing activities | ||||||
| Acquisition of investees, net | )31,000( | )61,710( | )6,592( | )1,524( | )79,554( | |
| Loan to related company | )24,491( | - | )22,496( | - | - | |
| Release (creation) of bank deposits | 27,700 | )1,319( | 24,406 | )379( | )1,321( | |
| Net cash used in investing activities | )27,791( | )63,029( | )4,682( | )1,903( | )80,875( | |
| Cash flows from financing activities | ||||||
| Proceeds from issue of shares | 176,237 | - | - | - | - | |
| Proceeds from issue of bonds | - | - | - | - | 18,080 | |
| Issue expenses | )3,073( | - | - | - | )58( | |
| Issue of commercial paper | - | 40,000 | - | - | 37,500 | |
| Long-term loans received from a financial institution |
- | - | - | - | 187,500 | |
| Long-term loans repaid to financial institution |
)187,500( | )170,000( | - | )30,000( | )350,000( | |
| Dividend paid | )54,000( | )30,000( | )20,500( | )10,000( | )45,000( | |
| Repayment of bonds | - | - | - | - | )36,412( | |
| Net cash provided by (used in) financing activities |
)68,336( | )160,000( | )20,500( | )40,000( | )188,390( | |
| Increase (decrease) in cash and cash equivalents |
22,703 | )29,708( | )24,010( | )22,480( | )59,211( | |
| Cash and cash equivalents at the beginning of the period |
80,904 | 140,115 | 127,617 | 132,887 | 140,115 | |
| Cash and cash equivalents at the end of the period |
103,607 | 110,407 | 103,607 | 110,407 | 80,904 | |
| Information about investing activities not involving cash flows: Declared dividend |
20,300 | 15,000 | 20,300 | 15,000 | 15,000 |
The accompanying notes are an integral part of the Financial Statements
Keystone Infra Ltd. (the "Company") was incorporated in Israel on 18 February 2019 at which time it started its operations. The address of the Company's registered office is 4 Ariel Sharon, Givatayim.
In May 2021, the Company released an initial public offering prospectus together with a listing prospectus and a shelf prospectus, and on 1 June 2021, upon completion of an initial public offering (IPO), the Company became a public company whose securities are traded on the Tel Aviv Stock Exchange Ltd. ("TASE").
In the reporting period, the Company completed a capital raising by way of public offering of shares and Series 2 Warrants in the amount of ILS 176 million, see Note 6.D below.
On 23 October 2023, the Company changed its name from Keystone REIT Ltd. to Keystone Infra Ltd. The primary objective of the Company is to generate a return for investors by means of investment in infrastructure assets, while mitigating risk by diversifying investments in different segments within the infrastructure sector, primarily in Israel. The goals of the Company are to generate a return for investors from value increases and dividend distribution.
In 2014 a committee was formed to promote the establishment of listed infrastructure investment funds (the "Committee"), in order to examine and recommend means and measures to encourage the establishment of tradable infrastructure investment funds, for the purpose of expanding the sources of finance available for infrastructure projects in Israel, reducing their capital and credit costs and supporting the State's ability to implement projects of national importance, as well as opening up a new investment channel for the public and enabling it to directly partner in the investment in such projects.
According to the recommendations of the Committee, the funds will benefit from a special tax regime; see Note 11E to the financial statements as of 31 December 2023. The Committee released its final recommendations in June 2019, but has not yet been passed as legislation.
The Company is defined as an investment entity under IFRS 10, and accordingly measures its investments at fair value, as specified in Note 3 to the financial statements as of 31 December 2023. The Company has entered into an agreement with a management company (MC) for sourcing management services, with the management fees paid to the MC calculated based on the fair value of the Company's assets. Furthermore, the MC is entitled to options for 5% of the total shares allotted in every issue, at an exercise price equal to the issue price; see Note 12A1 to the financial statements as of 31 December 2023.
Given the mechanisms currently established in the agreement between the Company and the MC, the MC and the controlling shareholders thereof – Gil and Esther Deutsch, Aharon Naftali Biram and Navot Bar, are deemed controlling shareholders of the Company.
While the MC continues to be deemed as the controlling shareholder of the Company, the agreement with the MC will be approved from time to time according to the law, and, inter alia, in accordance with the provisions of Chapter V of the Companies Law and the regulations promulgated thereunder.
The agreement for acquisition of 60% of Egged's shares included the grant of a put option to the shareholders for purchase of the remainder of their shares after two and three years have passed after the transaction closing date (as specified in Note 7.C.9 to the financial statements as of 31 December 2023). The first exercise date is in October 2024, when the sellers were required to deliver exercise notices to Keystone Fund – Egged Partnership, Limited Partnership ("Egged Partnership") by 4 August 2024, and the payment date for the first exercise of the option is scheduled for February 2025. The dates related to the second exercise are the same, respectively,to those of the first exercise, only in 2025 and 2026.
On 29 July 2024, the Egged Partnership was informed that notices were given about the exercise of the put option for an aggregate approx. 18% of Egged's issued capital, such that the holdings of the Egged Partnership in Egged following the first exercise are expected to increase to approx. 78%. As of that date, the consideration estimated for the closing of the purchase indicated in the exercise notices, is approx. ILS 850 million, with this amount subject to adjustments for CPI, dividend distributions and indemnification claims according to the terms and conditions of the purchase transaction. As of reporting date, the Egged Partnership is working to exercise its rights under the agreement, including, if necessary, appropriate legal proceedings. As of reporting date, the parties are acting to appoint an arbitrator.
On 20 June 2024, the Egged Partnership entered into an agreement for a banking credit facility of up to ILS 1 billion for financing the acquisition of the shares associated with the exercise. The amount of the facility was determined assuming that the option will be exercised in full and be adjusted to the actual option exercise rate, but may not exceed 55.55% of the consideration for acquisition of the shares associated with the exercise. According to the exercise rate as stated above, the amount of the credit facility available for use by the Egged Partnership for financing the acquisition of the shares associated with the first exercise is approx. ILS 450 million, and the remaining capital for making the acquisition will come from the Egged Partnership's own capital (which is held approx. 81% by the Company and approx. 19% by the School and Preschool Teachers Fund). See Note 6.E below for further details regarding the credit facility. The Company's available capital, its unused credit facilities, and its debt-raising capabilities, as well as School and Preschool Teachers Fund's share in the capital required for the Egged Partnership, will be used to pay for the shares acquired in the context of exercise of the option, and the Company does not expect to be required to raise capital in order to fund the payment of the consideration in respect of the option.
The Swords of Iron War in Israel began on 7 October 2023. To the best of the Company's knowledge, until the date of issuing this report, operations of entities held by the Company have mostly continued as usual and have not been materially affected by the military campaign. See Note 1.C to the Company's financial statements as of 31 December 2023.
Additionally, in 2024, S&P, Moody's and Fitch announced the downgrading of Israel's credit rating. Moody's downgraded the credit rating from A1 to Baa1 with a negative outlook, S&P downgraded Israel's credit rating from AA- to A, and Fitch also downgraded Israel's credit rating from A+ to A- with a negative outlook. Because of the uncertainty as to the development, extent, continuation and effects of the war as of the report release date, the Company's management is unable to assess the future impact of the war on the results of operations, financial position, cash flows and financial soundness of the Company and the entities held by it as a result of the war.
In the reporting period, the Consumer Price Index (CPI) increased by 3.5% compared to an increase of 3.2% year-on-year. The Bank of Israel interest rate has not changed, at 4.5% since January 2024. See Note 1.D to the Company's financial statements as of 31 December 2023 for the impact of inflation and the interest rate on the Company's operations.
| The Company | Keystone Infra Ltd. |
|---|---|
| Interested Party | Within the meaning thereof in paragraph 1 of the definition of Interested Party in a Corporation in Section 1 of the Securities Law, 5728-1968. |
| Related Parties | As defined in IAS 24. |
| The MC | N. K. Keystone Ltd. |
| Investments in Investees | Investments in investees are measured at fair value through profit or loss in accordance with IFRS 10. |
The Company's condensed financial information as of 30 September 2024 and the nine- and threemonth periods then ended (the "Interim Financial Information") was prepared in accordance with International Accounting Standard No. 34 – "Interim Financial Reporting" ("IAS 34"), and includes the additional disclosure required in accordance with Chapter D of the Securities Regulations (Periodic and Immediate Reports), 5730-1970. The Interim Financial Information does not include all the information and disclosures required in the context of annual financial statements. The Interim Financial Information should be read in conjunction with the annual financial statements for 2023 and the accompanying notes thereto, which comply with the International Financial Reporting Standards, which are standards and interpretations released by the International Accounting Standards Board (IASB) ("IFRS") and include the additional disclosure required in accordance with the Securities Regulations (Annual Financial Statements), 5770-2010.
The preparation of interim financial statements requires the Company's management to exercise judgment and also requires the use of assumptions and accounting estimates, which affect the implementation of the Company's accounting policies and the amounts of the reported assets, liabilities, revenue and expenses. Actual results may differ from such estimates.
In the preparation of these interim financial statements, the significant judgments exercised by the management in the implementation of the Company's accounting policies and the uncertainty entailed by the key sources of the estimates were identical to the ones in the Company's annual financial statements for 2023.
The significant accounting policies and calculation methods applied in the preparation of the interim financial information are consistent with those used in the preparation of the Company's annual financial statements for 2023.
a. Amendment to International Accounting Standard 1 – "Presentation of Financial Statements" in the matter of "Classification of Liabilities as Current or Non-Current Liabilities" and "Non-Current Liabilities with Financial Covenants" (in this section: the "Amendments to IAS 1")
The Amendments to IAS 1 clarify the guidelines regarding the classification of liabilities as current or non-current in the statement of financial position. The amendments clarify, inter alia, as follows:
In accordance with the provisions of the Amendments to IAS 1, the Company applied the amendments retrospectively commencing on 1 January 2024. Initial application of the Amendments to IAS 1 had no material effect on the Company's financial statements.
In the Company's annual financial statements for 2023, information was provided regarding amendments to existing IFRS standards that have not yet taken binding effect and with respect to which the Company has not chosen early application.
As of the date of approval of these financial statements, there are no new standards or amendments to existing standards that were not presented in the Company's annual financial statements for 2023, with the exception of IFRS 18 Presentation and Disclosure in Financial Statements ("IFRS 18").
IFRS 18 replaces International Accounting Standard 1 Presentation of Financial Statements ("IAS 1"), where many requirements of IAS 1 have been transferred to IFRS 18, and to several other standards (without change or with certain changes). IFRS 18 is designed to improve the way information is transferred by companies to investors through their financial statements, and specifically to increase transparency and comparability between companies, focusing on information about financial performance in the statement of profit or loss. In addition, IFRS 18 is accompanied by amendments to International Accounting Standard 7 Statement of Cash Flows (IAS 7) (the most significant of which is regarding the classification of cash flows from interest and dividends), International Accounting Standard 33 Earnings per Share ("IAS 33"), and International Accounting Standard 34 Financial Reporting for Interim Periods (IAS 34).
The new key principles under IFRS 18 address the following:
In accordance with IFRS 18, items in the statement of profit or loss will be classified into one of 5 categories: operational, investment, financing, taxes on income and discontinued operations. IFRS 18 provides general guidelines for classification of the items among these categories.
Following is additional information with respect to the three main categories:
In addition, according to IFRS 18, companies will be required to present two new sub-summaries in the statement of profit or loss:
Many companies report on alternative performance indicators or on indicators that are not based on accounting standards (non-GAAP) as part of their various reports to the public. When these indicators meet the definition of "MPMs", IFRS 18 requires companies to disclose such indicators in the notes to the financial statements, along with a requirement to present a match between the indicator and other data in the financial statements.
MPMs are sub-summaries of revenue and expenses that are released to the public in order to convey the management's perception of the financial performance of the company as a whole.
IFRS 18 establishes requirements that will help companies determine whether information about items should be provided in the main financial statements (statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows) or in the notes, and provides principles for determining the required level of detail. In addition, IFRS 18 includes requirements for presentation of operating expenses in the statement of profit or loss, disclosure of certain expenses by substance, and additional information on items grouped together in the "other" item.
In the initial application year, IFRS 18 requires presenting a match between the method of presentation of the comparison numbers had IAS 1 been applied, and the method of presentation in the same year according to IFRS 18.
In accordance with the provisions of IFRS 18, the standard will be implemented by the Company, regarding annual reporting periods beginning on 1 January 2027, retrospectively. The Company has begun to examine the impact of the implementation of IFRS 18 on the financial statements, but at this stage the impact of the first-time adoption cannot yet be reasonably estimated.
| Balance as of 30 September 2024 | ||||||
|---|---|---|---|---|---|---|
| Company name | Comment | Original investment amount |
Aggregate investment proceeds |
Fair value | Fair value level |
Holding rate |
| ILS in Thousands | ||||||
| Egged Partnership | 2 | 1,053,693 | 18,125 | 1,360,957 | Level 3 | 48.6% |
| Drive Group (formerly the Operator companies) |
1 | 69,247 | 54,799 | 95,170 | Level 3 | 21.3% |
| Eranovum | 5 | 101,773 | - | 246,975 | Level 3 | 49% |
| Ashkelon Desalination Plant | 1 | 218,660 | 122,500 | 145,953 | Level 3 | 50% |
| IPM Be'er Tuvia Power Plant | 2 | 585,582 | 198,218 | 385,190 | Level 3 | 32.1% |
| G.P. Global | 3 | 22,309 | - | 35,013 | Level 1 | 10.6% |
| Ramat Hovav Power Plant | 4 | 174,641 | 193,422 | 382,929 | Level 3 | 16.3% |
| Hagit Power Plant | 4 | 107,596 | 95,399 | 125,348 | Level 3 | 16.33% |
| Sunflower Sustainable Investments |
3 | 179,165 | - | 107,752 | Level 1 | 53.24% |
| Cinturion | 6 | 17,473 | - | 17,473 | Level 3 | 30% |
| Total investments in investees and loans |
2,530,139 | 682,463 | 2,902,760 |
(*) The Company holding 81.1% of the Egged Partnership, which in turn is holding 60% of Egged.
| Balance as of 30 September 2023 | |||||||
|---|---|---|---|---|---|---|---|
| Company name | Original investment amount |
Aggregate investment proceeds |
Fair value | Fair value level |
Holding rate | ||
| ILS in Thousands | |||||||
| Egged Partnership | 1,053,693 | - | 1,251,666 | Level 3 | 48.6% )*( | ||
| Drive Group (formerly the Operator companies) |
69,247 | 37,850 | 88,843 | Level 3 | 21.33% | ||
| Eranovum | 65,266 | - | 184,515 | Level 3 | 39.10% | ||
| Ashkelon Desalination Plant | 218,660 | 91,000 | 169,860 | Level 3 | 50.00% | ||
| IPM Be'er Tuvia Power Plant | 583,314 | 170,396 | 455,858 | Level 3 | 32.08% | ||
| G.P. Global | 22,309 | - | 27,762 | Level 1 | 10.59% | ||
| Ramat Hovav Power Plant | 174,641 | 125,999 | 350,018 | Level 3 | - | ||
| Hagit Power Plant | 107,596 | 41,451 | 99,452 | Level 3 | - | ||
| Sunflower Sustainable Investments |
169,097 | - | 103,406 | Level 1 | 50.15% | ||
| Cinturion | 17,473 | - | 17,473 | Level 3 | 30.00% | ||
| Total investments in investees and loans |
2,481,296 | 466,696 | 2,748,853 |
(*) The Company is holding 81.1% of the Egged Partnership, which in turn is holding 60% of Egged.
| Balance as of 31 December 2023 | |||||
|---|---|---|---|---|---|
| Company name | Original investment amount |
Aggregate investment proceeds |
Fair value | Fair value level |
Holding rate |
| ILS in Thousands | |||||
| Egged Partnership | 1,053,693 | - | 1,290,504 | Level 3 | 48.6% )*( |
| Drive Group (formerly the Operator companies) |
69,247 | 38,044 | 104,200 | Level 3 | 21.3% |
| Eranovum | 77,365 | - | 203,047 | Level 3 | 42.8% |
| Ashkelon Desalination Plant | 218,660 | 91,000 | 168,000 | Level 3 | 50% |
| IPM Be'er Tuvia Power Plant | 585,582 | 188,772 | 437,657 | Level 3 | 32.1% |
| G.P. Global | 22,309 | - | 28,941 | Level 1 | 10.6% |
| Ramat Hovav Power Plant | 174,641 | 148,038 | 444,179 | Level 3 | - |
| Hagit Power Plant | 107,596 | 41,450 | 190,391 | Level 3 | - |
| Sunflower Sustainable Investments |
172,573 | - | 122,348 | Level 1 | 51.85% |
| Cinturion | 17,473 | - | 17,473 | Level 3 | 30% |
| Total investments in investees and loans |
2,499,139 | 507,304 | 3,006,740 |
(*) The Company is holding 81.1% of the Egged Partnership, which in turn is holding 60% of Egged.
| 9 months ended 30 September 2024 |
|||
|---|---|---|---|
| Company name | Net change in value of the investments measured at fair value net of revenue from dividend, interest and loan proceeds |
Revenue from dividend, interest and loan proceeds |
Total |
| ILS in Thousands | |||
| Egged Partnership Drive Group (formerly the Operator |
70,453 | 18,125 | 88,578 |
| companies) | )9,030( | 16,755 | 7,725 |
| Eranovum | 19,520 | - | 19,520 |
| Ashkelon Desalination Plant | )22,047( | 31,500 | 9,453 |
| IPM Be'er Tuvia Power Plant | )52,467( | 9,446 | )43,021( |
| G.P. Global | 6,072 | - | 6,072 |
| Ramat Hovav Power Plant | )61,250( | 45,384 | )15,866( |
| Hagit Power Plant | )65,043( | 53,949 | )11,094( |
| Sunflower Sustainable Investments | )21,188( | - | )21,188( |
| Total | )134,980( | 175,159 | 40,179 |
| 9 months ended 30 September 2023 |
|||
|---|---|---|---|
| Net change in value of the investments measured at fair value net of revenue from dividend, interest and loan |
Revenue from dividend, interest and loan proceeds |
||
| Company name | proceeds | (*) | Total |
| ILS in Thousands | |||
| Egged Partnership | 168,267 | - | 168,267 |
| Drive Group (formerly the Operator | |||
| companies) | )5,157( | 12,400 | 7,243 |
| Eranovum | 119,249 | - | 119,249 |
| Ashkelon Desalination Plant | )19,640( | 30,500 | 10,860 |
| IPM Be'er Tuvia Power Plant | )51,737( | 81,774 | 30,037 |
| G.P. Global | )5,771( | - | )5,771( |
| Ramat Hovav Power Plant | )19,118( | 45,864 | 26,746 |
| Hagit Power Plant | )32,461( | 41,451 | 8,990 |
| Sunflower Sustainable Investments | 13,092 | - | 13,092 |
| Total | 166,724 | 211,989 | 378,713 |
(*) Reclassified
| 3 months ended | |||||
|---|---|---|---|---|---|
| 30 September 2024 | |||||
| Company name | Net change in value of the investments measured at fair value net of revenue from dividend, interest and loan proceeds |
Revenue from dividend, interest and loan proceeds |
Total | ||
| ILS in Thousands | |||||
| Egged Partnership | 40,957 | - | 40,957 | ||
| Drive Group (formerly the Operator companies) |
2,283 | 227 | 2,510 | ||
| Eranovum | - | - | - | ||
| Ashkelon Desalination Plant | )14,876( | 18,000 | 3,124 | ||
| IPM Be'er Tuvia Power Plant | )286( | 9,446 | 9,160 | ||
| G.P. Global | - | - | - | ||
| Ramat Hovav Power Plant | )36,313( | - | )36,313( | ||
| Hagit Power Plant | )19,738( | - | )19,738( | ||
| Sunflower Sustainable Investments | )8,009( | - | )8,009( | ||
| Total | )35,982( | 27,673 | )8,309( |
| 3 months ended | ||||
|---|---|---|---|---|
| 30 September 2023 | ||||
| Company name | Net change in value of the investments measured at fair value net of revenue from dividend, interest and loan proceeds |
Revenue from dividend, interest and loan proceeds (*) |
Total | |
| ILS in Thousands | ||||
| Egged Partnership | 37,665 | - | 37,665 | |
| Drive Group (formerly the Operator companies) | 2,148 | 228 | 2,376 | |
| Eranovum | 5,512 | - | 5,512 | |
| Ashkelon Desalination Plant | )8,432( | 12,000 | 3,568 | |
| IPM Be'er Tuvia Power Plant | 9,175 | - | 9,175 | |
| G.P. Global | )5,299( | - | )5,299( | |
| Ramat Hovav Power Plant | )15,135( | 24,091 | 8,956 | |
| Hagit Power Plant | 2,449 | - | 2,449 | |
| Sunflower Sustainable Investments | 12,342 | - | 12,342 | |
| Total | 40,425 | 36,319 | 76,744 |
(*) Reclassified
| Year ended 31 December 2023 | ||||
|---|---|---|---|---|
| Company name | Net change in value of the investments measured at fair value net of revenue from dividend, interest and loan proceeds |
Revenue from dividend, interest and loan proceeds (*) |
Total | |
| ILS in Thousands | ||||
| Egged Partnership | 207,106 | - | 207,106 | |
| Drive Group (formerly the Operator | ||||
| companies) | 10,200 | 12,594 | 22,794 | |
| Eranovum | 125,682 | - | 125,682 | |
| Ashkelon Desalination Plant | )21,500( | 30,500 | 9,000 | |
| IPM Be'er Tuvia Power Plant | )72,206( | 100,150 | 27,944 | |
| G.P. Global | )4,592( | - | )4,592( | |
| Ramat Hovav Power Plant | 75,042 | 67,903 | 142,945 | |
| Hagit Power Plant | 58,477 | 41,450 | 99,927 | |
| Sunflower Sustainable Investments | 28,558 | - | 28,558 | |
| Total | 406,767 | 252,597 | 659,364 |
(*)Reclassified
In the reporting period, a net positive change in fair value of approx. ILS 19,520 thousand was measured, according to an external valuation as of 30 June 2024. The fair value of the investment in Eranovum was estimated using a valuation performed by an independent external valuer from BDO Consulting Group, with recognized professional qualifications and extensive experience in the infrastructure sector. The valuation was conducted using the Discounted Cash Flow (DCF) method. The valuation was based on a multi-year forecast provided by Eranovum's management up to 2034, after which a representative year was assumed, from which the terminal value was derived. The discount rate used to measure the fair value of the investment is 17.5% (previous valuation as of 30 September 2023 - 18.75%).
The valuation that was attached to the financial statements as of 30 June 2024 was based on the forecasts provided by the Company's management and IPM of the projected revenue, expenses, and investments. The operation period that was used for the valuation is 20 years, according to the power plant's license period, with the assumption that at the end of the term of the project, the plant will be left with a scrap value. The cost of equity (Re) used for the valuation is 10.2% (previous valuation as of 31 December 2023 – 9.2%).
The fair value of the loan to Global and A.Y.A. Paris as of 30 June 2024 was assessed using the DCF method with a normative discount factor, according to the loan's implied rating, according to the conditions of the loan on the date of the valuation. The discount factor used for the valuation is 7.6% (previous valuation as of 31 December 2023 – 7.3%). In the third quarter, the fair value of the investment and the loan was updated to reflect the projected return on investment for the owners (as determined in the valuation as of 30 June 2024), net of dividends, loan repayments and interest received in the period.
Conversion of a convertible loan at Ramat Hovav - In March 2024, conversion was completed of a convertible loan that had been provided by the Company in connection with the Ramat Hovav Power Plant into 32.665% of the equity interests in the interim partnership, which holds 50% of the Ramat Hovav Power Plant, constituting (indirectly) approx. 16.33% of the plant. The conversion of the loan had no impact on the fair value of the investment.
Draft resolution for public comments issued by the Electricity Authority and a proposed initiative of the System Operator – On 27 August 2024, the System Operator released an expert report with recommendations for making corrections in the methodology for calculating the System marginal Price (SMP), and on 4 September 2024, the Electricity Authority released a draft resolution for public comments on a proposed mechanism for setting supplementary rates applicable to electric power companies connected to, or integrated into the transmission network, and are covered by Articles C1 and E1 of the Criteria. In the draft resolution, the Authority is seeking to set a cap on the supplementary rate that power plants can charge when the SMP does not cover all of their costs. According to recommendationsin the expert report, after correcting the methodology, SMP is expected to increase, while payments for the supplementary rates is expected to decrease.
In response to the release of those initiatives, the Ramat Hovav and Hagit partnerships carried out preliminary assessments of possible impact in the event that the Electricity Authority resolution and the System Operator initiative (hereinafter together: the "Regulatory Initiatives") are approved and become mandatory.
The Ramat Hovav and Hagit partnerships, with the assistance of economic and legal advisors, have recently filed their response to the Electricity Authority's draft resolution for public comments. In their response, the partnerships pointed to a series of economic and legal shortcomings in the Regulatory Initiatives, including regarding their underlying methodology. It was claimed, among other arguments, that it would not be appropriate to adopt the proposed resolution before revising the methodology for calculating the SMP, and that any cap imposed must allow for recouping the full capital investment and fixed costs not covered by the availability rate, as well as fully cover all variable costs associated with power generation. The partnerships are also diligently working on a response to the System Operator's initiative, and intend to exhaust all options available to them.
The Ramat Hovav and Hagit partnerships believe that capping the supplementary rate, as contemplated in the Electricity Authority's draft regulation and the update of the market price contemplated in the System Operator's initiative will not be approved in the versions released, and are expected to be modified (including dropping or revising the retroactive applicability provision).
Therefore, the partnerships believe that the cumulative effect of the Regulatory Initiatives on the partnerships and their results of operations will ultimately be mitigated.
If the Regulatory Initiatives are approved with no modification to the proposed versions, the assessments and estimates made by the managements of the partnerships lead to a conclusion that the estimated average annual revenue of the power plants will be adversely affected. The projected decrease in revenue is expected to correspondingly reduce the expected free cash flow of the Ramat Hovav and Hagit partnerships before and after debt servicing, the debt service coverage ratios as calculated according to financing agreements of each of the power plants, and the amounts that the Ramat Hovav and Hagit partnerships will pay their owners (including, indirectly, to the Company), compared to the actual related figures recorded to date over the period in which the power plants have been operational. In addition, if the Electricity Authority's draft resolution is eventually approved without any
revisions, this will adversely affect the ability of the partnership holding the Hagit East power plant to comply with the financial covenants under its financing agreement.
The value of the non-convertible loan was estimated using the DCF method with a normative discount rate, according to the loan's implied rating, and the terms and conditions of the loan on the date it was received. The discount rate used in the valuation is 8.05% (the previous valuation as of 31 December 2023 – 8.35%).
The valuation is attached to the Company's financial statements as of 30 September 2024, presenting a net negative change in fair value of ILS 15,866 thousand in the reported period, with ILS 61,250 thousand coming from a negative change in fair value according to the valuation, net of ILS 45,384 thousand dividend revenue, interest and loan proceeds. The reduced value mainly comes from anet decrease in revenue following the release of the Electricity Authority's draft resolution and the System Operator's proposed decision, significant distributions in the reporting period and an increase in the discount rate. The lower value was offset by better-than-anticipated results of power plants in the reporting period.
A 0.5% increase in the discount rate (Ke) would have reduced the value of the investment as of the date of the valuation by approx. ILS 10.5 million, a 0.5% decrease in the discount rate (Ke) would have increased the value of the investment as of the date of the valuation by approx. ILS 11.1 million.
A 0.5% increase in the discount rate of the non-convertible loan would have reduced the value of the investment as of the date of the valuation by approx. ILS 0.5 million, while a 0.5% decrease in the discount factor would have increased the value of the investment as of the date of the valuation by approx. ILS 0.5 million.
Conversion of a convertible loan at Hagit East
The value of the non-convertible loans was assessed using the DCF method with a normative discount rate, according to the loan's implied rating, and the terms and conditions of the loan on the date it was received. The discount rate used in the valuation is 7.7%-9.2% (previous valuation as of 31 December 2023 – 8%-9.38%).
A net negative change of ILS 11,094 thousand in fair value was recorded in the reported period, with ILS 65,043 thousand coming from a downward adjustment in fair value according to the valuation, net of ILS 53,949 thousand in dividend revenue, interest and loan proceeds. This decrease in fair value mainly comes from a net decrease in revenue following the release of the Electricity Authority's draft resolution and the System Operator's proposed decision, significant distributions in the reporting period and an increase in the discount rate. The lower value was offset by better-than-anticipated results of power plants in the reporting period.
A 0.5% increase in the discount rate (Ke) would have reduced the value of the investment as of the date of the valuation by approx. ILS 2.8 million, while a 0.5% decrease in the discount rate (Ke) would have increased the value of the investment as of the date of the valuation by approx. ILS 2.9 million.
A 0.5% increase in the discount rate for the non-convertible loans would have reduced the value of the investment as of the date of the valuation by approx. ILS 0.6 million, while a 0.5% decrease in the discount rate would have increased the value of the investment as of the date of the valuation by approx. ILS 0.6 million.
| 9 months ended 30 September |
3 months ended 30 September |
Year ended 31 December |
||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | 2023 | ||||
| ILS in thousands | ||||||||
| Share-based payment – see Note 6.D |
2,794 | - | - | - | - | |||
| Management fees to the MC (*) | 26,066 | 23,053 | 9,303 | 7,995 | 31,058 | |||
| Commitment for additional consideration - Sunflower |
6,771 | 6,771 | 6,771 | 6,771 | 6,771 | |||
| Loan to a Related Party | 24,491 | - | 24,491 | - | - |
(*) The MC received from Sunflower, a company under its control, an additional amount of ILS 270 thousand in the reporting period and in the same period last year, and ILS 540 thousand in 2023, for the Company CEO's service as Chairman of the Board of Directors at Sunflower.
| 9 months ended 30 September |
3 months ended 30 September |
Year ended 31 December |
||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | 2023 | ||||
| ILS in thousands | ||||||||
| Salary to an interested party employed by the MC |
2,880 | 2,880 | 960 | 960 | 3,840 |
A. See Note 4.C above for events in connection with the Company's investments in the reporting period.
As of 30 September 2024, the Company has a working capital deficit of approx. ILS 130 million that derives from commercial paper of the Company in the amount of ILS 187.5 million, which are issued for a year and therefore classified as short-term. Conversely, the Company has unused credit facilities with financial institutions in the amount of ILS 375 million, effective until October 2025. The Company has an ongoing positive cash flow from operating activities which totaled approx. ILS 119 million in the reporting period. As of the date of this report, the Company's leverage ratio is approx. 27%. In light thereof, the Company's Board reviewed the Company's liquidity as detailed below, and determined that such working capital deficit does not indicate a liquidity issue for the Company. Such decision is based, inter alia, on an assessment of the Company's financial position, including the Company's liquid asset balance, unused credit facilities and the Company's projected cash flow under various scenarios and sensitivity analyses for the next two years, including preparations for exercising the Egged Partnership option, as well as an assessment of the Company's existing and anticipated liabilities, including the Company's liabilities to its bondholders and to banking corporations and their due dates, and assessment of the existing and projected sources for repayment of such liabilities.
To secure the repayment of credit borrowed by the Company from financial institutions and bonds it issued, the Company is bound by certain financial covenants. As of 30 September 2024, the Company is in compliance with its obligations and with the financial covenants stipulated in the loan agreements and in the deed of trust for its Series A Bonds.
5) On 28 October 2024, the Company distributed a dividend of ILS 20.3 million (the dividend was declared on 30 September 2024).
On 12 February 2024, the Company announced that it had completed a capital raising round by way of public offering of 34,556,200 common shares of the Company and 17,278,100 Series 2 Warrants exercisable into common shares of the Company, with each warrant exercisable into one common share, from the day of listing on TASE to their last date for exercise on 11 February 2026 (inclusive), against a cash payment of the strike price of ILS 6.1 (non-indexed), as specified in a shelf offering report, according to which the said offering was performed. Following the dividend distribution in October 2024, the strike price amounts to ILS 5.74048.
Total issue proceeds amounted to approx. ILS 176 million, of which total proceeds from the controlling shareholders are approx. ILS 78 million.
In accordance with the management agreement between the Company and the MC, whereby in a case where the Company allots shares, it will allot to the MC, for no additional consideration, options that are exercisable into shares of the Company, the Company allotted 1,149,648 non-marketable options to the MC and 578,162 non-marketable options to the employees of the MC.
On 20 June 2024, the Egged Partnership entered into an agreement for a banking credit facility of up to ILS 1 billion for financing the acquisition of shares resulting from exercise of the option granted to Egged shareholders, according to an agreement for the acquisition of Egged shares that was signed between the Egged Partnership and the sellers in June 2022. The amount of the facility was determined assuming that the option will be exercised in full (i.e., the Egged Partnership will acquire 40% of Egged's shares), and will be adjusted to the actual option exercise rate, but may not exceed 55.55% of the consideration for acquisition of the shares associated with the exercise. According to the exercise rate of the options as stated in Note 1B above, the amount of the credit facility available for use by the Egged Partnership for financing the acquisition of the above shares is approx. ILS 450 million. The credit facility will be available to the Egged Partnership until 3 February 2025. The Egged Partnership may take, out of the said credit facility, three loans:
The agreement prescribes financial covenants (DSCR and debt-to-EBITDA ratios), grounds for acceleration, commitments and restrictions, similar to the provisions in the loan provided to the Egged Partnership in the agreement for the current financing used for the acquisition of 60% of Egged's shares (the "Current Financing Agreement").
The payment schedule for the current loans will be determined shortly before the date of drawdown of the loans from the credit facility and will be adapted to the payment schedule of the loans by virtue of the Current Financing Agreement. The loans include cash sweep mechanisms, similarly to the Current Financing Agreement. A cash sweep mechanism has been added for the balloon loan up to the amount of ILS 100 million (principal).
To secure repayment of the loans and the Egged Partnership's other liabilities towards the lenders, the following collateral, inter alia, will be provided: a first-degree, unlimited pledge on the shares associated with the exercise, of the Egged Partnership's rights, under the agreement for the acquisition of Egged shares, in connection with those shares, and of the Egged Partnership's rights in the bank account to which the loans will be transferred; and letters of undertaking and subordination from the limited partners of the acquiring partnership. In addition, the Egged Partnership undertook to perform a valuation of Egged once a year, and insofar as there is a significant adverse change in its value relative to 30 June 2023, a partial remediation of the disparity will be performed by the provision of financial collateral or a partial repayment of loans provided under the facility.
See Note 1.B above for notices of exercise of the put option.
See Notes 4C, 5, 6 and 9 above for information about the Electricity Authority's draft resolution for public comments and the proposed decision of the System Operator, and the revaluation of the investments in Ramat Hovav and Hagit carried out by the Company following the release of those proposed regulations.
On 13 November 2024, the Company announced that it was exploring the possibility of issuing a new series of bonds (Series B) through a uniform public offering. Standard & Poor's Maalot announced a rating of ilA+ for the Series B bonds and reaffirmed the Company's ilA rating with a stable outlook.
The Company is studying the said claim and motion, and will file a detailed response on its behalf pursuant to the provisions of the law.
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