INDEPENDENT EQUITY RESEARCH

Stock Exchange TASE Symbol ENLT Sector Technology Sub-sector Renewable Energy Stock price target NIS 7.58 Closing price NIS 6.67 Market cap NIS 6.3 Mn No. of shares 919.2 Mn Average Daily Trading Volume 14,202 stocks Stock Performance (Since January 2021) 2.2% Year Revenues (000 NIS) Operating profit (000 NIS) 2021E 415,000 340,000

Enlight – Update Report September 4, ²⁰²¹

Enlight is positioning itself as an international company in the field of renewable energy with a significant acquisition in the U.S. market as part of an organized strategy; Improvement in financial results with an increase in revenue in the first half, along with improved profitability indices. Target price updated to 7.58 NIS.

Enlight showed further growth in its operations in line with our expectations, along with growth in revenues and profits. Enlight ended the first half with revenues of approximately NIS 200 million and an EBITDA of NIS 143 million, according to non-GAAP data. The company showed an significant increase in its portfolio to approx. 17 GW, of which 2.2 GW are due (in development, under construction, or expected to start construction within 12 months).

It should be noted that in June 2021, the company completed the connection of the Picasso facility to the electrical grid, thereby increasing the ARR (annual recurring revenue) to approx. NIS 400 million. The company is expected to connect the Weeping Valley (109 MW), Selac (105 MW), and floating solar (17 MW) projects to the electrical grid later this year, thus further increasing the ARR to over NIS 600 million by the end of the year.

Acquisition in the U.S. – Enlight paid USD 158 million upon the completion of the transaction and will pay up to USD 232 million in a success-based mechanism of realizing the projects in the portfolio. Among its various projects around the world, Enlight expects the first two facilities with a combined capacity of 180 MW will begin construction in Q4 2021 / Q1 2022.

Other significant events in the quarter:

557 MW of electricity purchase agreements in the U.S. through Clenera
Full commercial operation of the Picasso project in Sweden (113 MW)
Start of the electrification process and start of commercial operation in the Kosovan project (Selac) – 105 MW
Acquisition of a 490 MW solar development portfolio in Spain
Raising funds of approx. NIS 700 million in two rounds

Recall that global growth potential is far from saturated. Investments in renewable energy reached a peak of USD 350 billion in 2020, of which solar energy and wind energy accounted for USD 290 billion.

We are updating the economic model after full commercial operation of the project in Sweden; commencement of commercial operation in Kosovo and expected operation of the Weeping Valley at the end of 2021, raising the probability of realization to 100%; updating the existing project in Spain to 329 MW; add the purchase in the U.S. to the portfolio and update the amount of cash and debt of the company. We do not take into account for the time being the additional purchase in Spain. In light of this, we update the target price for Enlight to 7.58 NIS.

On the next page, we present the main events in the second quarter and passing months of 2021.

Year	Revenues (000 NIS)	Operating profit (000 NIS)
2021E	415,000	340,000
2022E	830,136	680,712
2023E	1,198,852	971,070	*The numbers shown are by 100% holding in all projects. Non-GAAP data

P a g e | 1

September 4, 2021

Enlight

Key events in the second quarter and the passing months of 2021:

Commercial operation of the Picasso project in Sweden. On June 21, the company reported the full launch of the Picasso project in Sweden with a capacity of 113 MW
In May 2021, Enlight announced the signing of financial closure agreements to fund the Bjorenberget wind energy project with a leading group of European lenders. The project's capacity is about 372 MW. Enlight will hold a 57% stake, alongside a European fund specializing in energy infrastructure. Revenues in the first year are expected to be around EUR 30 million and around EUR 60 million a year on average. EBITDA of approx. EUR 50 million on average.
In April 2021, Enlight announced the completion of the acquisition of a 25 MW solar project in Hungary that won a guaranteed tariff tender for 15 years form the date of connecting the project to the electrical grid and is in advanced stages of development. Its commercial operation is expected during the second half of 2022, with the expected revenue from the electricity receipts at approx. EUR 1.6 million per year. At the same time, the company is continuing the process of examining additional solar projects in Hungary as part of a joint development agreement signed with the sellers with a total capacity of approx. 300 MW.
During this period, Clenera signed PPA agreements in projects with a capacity of 557 MW. As of the date of this report, 853 MW with signed PPAs, 180 MW for projects under construction, Solar Apex and North Babacomari, 465 MW for projects under advanced development, and another 208 MW for projects under development. All the agreements are for the sale of the full electricity generation of the projects for a period ranging from 18-20 years.

Corporate Responsibility

In March 2021, the company first published a corporate responsibility report with the aim of maximizing the positive impact and producing long-term value for all stakeholders. Enlight is expected to enter 3 ESG rankings: the Israeli Ma'aleh rankings and two other international rankings.

As part of the report, the company shows the significant environmental impact of its mature facilities:

The company's full corporate responsibility report:

https://enlightenergy.co.il/wp-content/uploads/2021/03/ESG\_enlight230321Digital.pdf

Executive Summary

Investment Thesis

Globally, the renewable energy sector is in a growth momentum in most countries as a result of government decisions and organizations to reduce dependence on polluting fuels and reduce greenhouse gas emissions, which are reflected in governments' actions to meet renewable energy targets they are committed to according to the Paris 2015 agreement.

The implementation of government decisions translates into policies, regulations and licensing processes of companies that build renewable energy electricity generating facilities that are supposed to provide electricity over many years in a reliable, safe and economical manner.

Enlight is well respected in its industry, both locally and globally. Their reputation extends across the renewable energy value and supply chains, as well as within their specific business ecosystem. This is demonstrated by the list of Enlight's institutional investors, financing partners and equipment suppliers.

The company has a record of success across all steps and stages of renewable energy projects, including initiation, development, financing, construction, management, operation, ownership and sale of assets.

The company aims to continue creating value by leveraging its proven expertise and experience in identifying, quickly evaluating and exploiting 'under the radar' market opportunities, both through "Greenfield" development in Israel and co-development in international markets. The company's strategy is to select and operate in markets that demonstrate a combination of factors with specific emphasis on; supportive policy, regulations, favorable natural resources, an opportunity to optimize the development, and market size that supports future growth. In international markets the company partners with local entities that provide advantages in the initial early stages of development.

Below is the strategic landscape the company operates in:

Source: Frost & Sullivan

Value proposition to investors, partners and suppliers include:

Experience in evaluating projects and uncovering upside opportunities.
Focus on markets that are mature or maturing in terms of renewable energy policy and regulation, and such markets where renewable energy sources provide competitive electricity prices without the need for subsidies.
Identify opportunities to optimize projects' capacity or timetables immediately and/or in the long term.
High likelihood to secure financing due to corporate reputation and industry relations.
Leveraging experience to generate margins from optimization, development and construction.

Enlight met our expectation for 2020 revenues. We assume Enlight's revenues from projects (representing 100% holdings in projects) would reach NIS 415 million in 2021, and NIS 1.25 billion in the first full year after the completion of establishing the portfolio in development.

We emphasize that the field of storage in which the company enters is a large and growing market that constitutes additional potential. We estimate that the storage market is about 25,000 megawatts in 2020, with an estimated annual growth rate at the global level of about 32.9%. In a broad examination of the

storage market, today's main reliance is on a combination of batteries. Still, Enlight is also expected to understand that we will combine forces with other players in the market and combine additional new technologies to increase the return on projects at various stages.

We already identify a significant growth rate in the field of storage, especially in the United States, Germany

and East Asia.

The following is the scope of the company's expected pipeline portfolio as of August 2021:

Source: Company investor presentation from August 2021.

Global Renewable Market Introduction

Historically, global power generation was dominated by centralized energy sources such as coal, nuclear, oil, and large hydropower plants. These plants were usually state-owned, and the electricity generated would be transmitted across the country via a centralized grid. There was a minimal competition within the market, and the environmental impact was hardly considered. This situation has gradually changed over the past two decades, mainly driven by market decentralization and favorable regulatory frameworks (which boosted competition), concerns over the impact of climate change, and supportive renewable incentive programs.

Driven by the transformation across the energy sector, renewable energy sources (RES), primarily wind energy and solar energy, have become well established low-carbon energy sources to meet global energy demand because of their widespread availability, cost-effective nature, and flexibility compared to other RES. An increase in the adoption of wind and solar energy technologies would significantly mitigate and alleviate issues associated with energy security, climate change, unemployment, etc. and help in reducing global CO2 emissions by more than 50% between now and 2050.

The impact of the renewable revolution has been felt in many global markets, but European nations and the US have been at the forefront, later joined by China. Although the incentives schemes for renewable energy in many markets have gradually become less generous, this has largely been offset by consistent declines in renewable energy technology and project costs, construction and service innovation, and the continuation of favorable regulatory frameworks that ensure renewables have priority access to the grid. Once a wind or solar plant is online it is basic common sense anyway to ensure that the power generated is given priority, as the fuel cost is zero.

Wind power and solar PV dominate global renewable investment (large hydropower, which is still a significant technology in a number of markets, is not considered truly renewable because of the potential environmental damage to the river networks). Global investments in renewable energies accounted for \$282 billion in 2019, with wind and solar energies accounting for ~97% of non-hydro renewable investment in 2019. A total of ~\$3 trillion is forecast to be invested across the next decade in renewable energy sources, with annual renewable energy investment exceeding ~\$300 billion in 2030. Further cost reductions mean that both technologies will reach grid parity (a situation where it is as cheap to build a solar plant as it is a coal plant) in an increasing number of markets over the coming decade, further supporting the business case for investing in renewables.

Figure: Annual Global Investments in Renewable Energies (Billion USD)

Continued Decline in Wind and Solar Technology and Project Costs

The decline in renewable energy project costs started around 2010, with solar PV leading the way. Solar module costs have declined by around 82% across the course of the decade (modules account between 35% and 45% of total project costs). Wind technology cost declines started later, but have also been substantial – the global average price per MW for an onshore wind has declined by 39% and offshore wind by 29% between 2010 and 2019.

Continued cost reductions are forecast for both wind and solar, through a combination of lower core technology costs (larger turbines and taller hub heights are a significant factor for wind projects); a reduction in total project costs (greater efficiencies in construction and commissioning), and lower servicing costs.

Israel Renewables Ecosystem

The growth engine behind renewables in Israel is the government's vision to utilize "natural gas or renewables only" for the production of energy by 2030. In order to realize this vision the government is putting major systems and regulations in place in order to completely replace the energy produced from coal with energy produced from solar sources. This transition is projected to produce a 6 fold increase in renewables and a 10 fold increase in energy storage capacity.

The four major drivers of the renewable energy market in Israel as stated in the Ministry of Energy's economic plan are: 1) the decreasing cost of solar technology 2) the global shift to electric vehicles 3) energy security 4) pollution regulations

These trends propel Israel into a reality that requires a heavy transition to renewable energy sources and therefore promotes the need for energy storage solutions.

Israel is exceptional in its high population growth rate as well as its high electricity consumption. Today, solar power is almost exclusively the country's renewable energy source and this will be true through 2030.

In 2030 Israel is positioned to be the world leader in solar energy dependency at a staggering 26% of energy produced by the country. By 2030, during the noon hours, 80% of the electricity generated in Israel will come from solar sources and this solar energy will surpass consumption demands during certain hours of the day.

Israel's Energy Source Composition

Renewables Will Replace Coal over the Next 10 Years

Appendices

Financial statements for Q2 2021

Non-Gaap Profit and Loss Report (in thousands of shekels)

לשנה שהסתיימה	לתקופה של שלושה חודשים שהסתיימה ביום:		לתקופה של שישה חודשים שהסתיימה ביום:
ביום 31.12.2020	30.06.2020	30.06.2021	30.06.2020	30.06.2021	מיליוני שייח
349	93	112	170	200	הכנסות
(53)	(12)	(17)	(23)	(30)	עלות המכר
(92)	(21)	(21)	(43)	(45)	פחת והפחתות (1)
204	୧୦	74	104	125	רווח גולמי
(29)	(7)	(8)	(14)	(16)	הוצאות תפעוליות
		(11)		(11)	עלויות עסקה בגין עסקת ארהב
(9)	(2)	(3)	(4)	(5)	פחת והפחתות (1)
166	51	52	કર્સ્	93	רווח מפעולות רגילות
	2	(13)	(4)	(15)	הוצאות מימון (8)
(1)	(2)		(6)	(2)	הפרשי שער
(111)	(27)	(21)	(54)	(40)	הוצאות ריבית (3)
7	1	4	2	8	הכנסות מימון
61	25	22	24	ਧੇ ਧੇ	רווח לפני מס ולפני עמלות פירעון מוקדם
(232)					עמלת פירעון מוקדם (9)
(171)	25	22	24	44	רווח (הפסד) לפני מס
267	74	76	133	143	2) EBITDA חברה
(4)	(1)	(2)	(2)	(4)	תשלומי מיסים שוטפים
152	વે રે	રિવે	77	110	(4) FFF) חברה

Source: Enlight's financial report, Q2 2021.

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