Enlight Renewable Energy Ltd.

Good morning, everyone, and thank you for joining our third quarter 2023 earnings conference call for Enlite Renewable Energy. Before beginning this call, I would like to draw participants' attention to the following. Certain statements made on the call today, including but not limited to statements regarding business strategy and plans, our project portfolio, market opportunity and potential growth, discussions with commercial counterparties and financing sources, progress of company projects, including anticipated timing of related approvals and anticipated production delays, expected impact from various regulatory developments, completion of development, the potential impact of the current conflict in Israel on our operations and financial condition, and company actions designed to mitigate such impacts, and the company's future financial and operational results and guidance, including revenue and adjusted EBITDA, are forward-looking statements within the meaning of U.S. federal securities law, which reflect management's best judgment based on current available information. We reference certain project metrics in this earnings call and additional information about such metrics can be found in our earnings release. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our annual report filed with the SEC on March 30, 2023, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward-looking information. Although we believe these expectations are reasonable, We undertake no obligation to revise any statements to reflect changes that occur after this call. Additionally, non-IFRS financial measures may be discussed on the call. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from our results prepared in accordance with IFRS. Reconciliations to the most directly comparable IFRS financial measures are available in the earnings release and the earnings presentation for today's call. which are posted on our investor relations website. With me this morning are Gilad Yavetz, CEO and co-founder of Enlite, Nir Yehuda, CFO of Enlite, and Jason Ellsworth, CEO and co-founder of Clonera. Gilad will provide some opening remarks and will then turn the call over to Jason for a review of our U.S. activity and then to Nir for a review of our financials. Our executive team will then be available to answer your questions.

Thank you, Yusuf, and thank you all for joining us today. Before talking about the business and our quarterly performance, I would like to address the current situation in Israel. Over a month ago, Israel was brutally attacked by a terrorist organization and now finds itself in a state of war with the aim to defend its civil population as well as the values of freedom and democracy. Given all the extreme events taking place in our country, we are quite proud that Enlight has succeeded in maintaining its normal operations and in parallel, engaging in support for society with extensive community outreach and acts of goodwill during this difficult period. It's a tribute to our employees and our company's values that we are able to maintain our commercial growth and success while at the same time looking after families and small businesses that have been affected by the war. In terms of our operational projects in Israel, all are producing power hardly without interruption. Moreover, our geographically diversified portfolio is a source of strength for our company. In the first nine months of 2023, 74% of our revenues were generated in Europe and in the US, with the remaining 26% in Israel. Moving on to a discussion of our business, and light results for the third quarter and nine months were solid. Third quarter revenue grew 3% year-over-year to 58 million, Net income grew 35% to $26 million, and adjusted EBITDA grew 32% to $47 million in the quarter. Revenue for the first nine months of 2023 grew 39% year-over-year to $182 million. Nine-month net income grew 201% to $82 million, and adjusted EBITDA grew 64% to $142 million for the nine-month period. We also saw significant growth in our operating cash flow, which reached $31 million during the quarter and $126 million for the first nine months of 2023, and increased year-over-year of 57% and 135% respectively. Continuing our momentum from last quarter, we are pleased with the progress made on Project Beyond Birgit in Sweden, which has reached full production. On the back of solid third quarter results, we reaffirm our full year 2023 guidance. Before Jason and Nir go deeper into our project and results, I would like to focus on our company's two main objectives, delivering above-market product returns and delivering above-market growth. First, let's discuss returns. In recent months, there has been a growing debate amongst investors as to whether project returns are high enough to withstand rising interest rates. This concern has grown in light of recent announcements from several major companies in the renewable energy sector, cutting their outlooks, whether across offshore wind, residential solar, or utility income. I would like to tackle these concerns head-on and be very direct. Project returns that in light remain robust and are increasing. This has been achieved through our clear and defined strategy, which includes, one, amending existing PPA pricing higher, while driving pricing significantly higher on newly signed PPAs, two, remaining nimble on supply chain, enabling us to capture the value of rapidly easing costs across solar panels and batteries, and three, reaping the benefit of the IRA, which uniquely favor our portfolio. I will now provide details on each of these points. First, we amended over 1.8 gigawatts of legacy PPAs in the past 18 months, with price increases on average of 25 percent. There are several more amendments currently under negotiation. Moreover, on newly contracted projects, PPA pricing has moved higher, During the third quarter, we signed PPAs in the U.S. at prices on average 25% higher than what we were seeing a year ago. Similarly, in Europe, we signed an inflation-linked 15-year CFD at close to 70 euro per megawatt hour. How have we managed to amend existing PPAs and drive new PPA pricing higher? With our interconnection advantage. Put simply, we are uniquely positioned to deliver large-scale renewable energy projects to utilities who urgently need power now, and our customers are willing to pay. Second, we have secured a competitive advantage in supply chain. While many have opted to lock in module supply in the U.S. through long-term arrangement and a very high pricing, we chose to enter into flexible contracts that enable us to capture the value of way for price decline. As a result, today in the US, we can buy up to two gigawatts of panels at less than 30 cents a watt. We were modeling between 36 and 40 cents a watt across our US projects just a few months ago. In Europe, the decline has been more dramatic. We can acquire panels today in Europe at less than 20 cents a watt. Similarly, battery container pricing has come down dramatically in the last three months from $250 180 per kilowatt hours on average, and nearly 30 percent decline. In short, some in the sector have been dragged down by legacy PPAs, which have not been amended, coupled with take-or-pay equipment contracts at high pricing. On the other hand, we've been able to generate significant operating leverage from declining equipment costs while pushing PPA prices higher, driving robust project returns. Finally, we are reaping the benefits of the IRA in the U.S. in addition to the increased tax equity we can raise on projects under the PTC track, which benefits our West State-focused portfolio. We also stand to benefit from tax credit adders. Approximately one-quarter of our U.S. projects are eligible for the energy community adder. The most recent examples of this are Atrisco, Quail Ranch, and Rustic Hill, all of which are in our mature portfolio. Putting this all together, based on the above factors, we are now modeling a substantial improvement in the returns we expect to generate from our 3.6 gigawatts and 5.5 gigawatt hour of projects that are expected to COD between 2024 and 2026. This portfolio is now expected to generate an unlevered ratio of around 10% approximately 80 basis points higher than our expectation for models we prepared in the second quarter. Even in a higher base rate environment, with these unlevered returns, we expect to deliver healthy mid-teen levered project returns. And to be very clear, our focus on returns is a fundamental feature for a joint developer and IPP business model. The alignment of interest that results from both the developer and IPP being under one umbrella means that Enlight is focused on developing projects that our internal IPP can profitably hold. Driven by these strong project fundamentals, we aren't giving up on our growth. We are continuing to accelerate it. We reached commercial operation on 256 megawatts of generation and 90 megawatt hours of energy storage during the quarter. including Genesis Wind, the largest renewable energy project in Israel. We have thus completed the entirety of our plan to reach 1.8 gigawatts of operational generation by the end of 2023. We also made significant strides on the conversion of our development portfolio. We added 530 megawatts and 1.3 gigawatt hour to our mature project portfolio, including Country Acres, a new and substantial project in California, as well as Quail Ranch, the second phase of our flagship Atrisco project. Both projects, which have signed PPAs and signed interconnection agreements, are targeted for commercial operation in 26 and 25, respectively. I do want to note that we are now expecting a delay at Project COBAR, which is expected to COD in 26 versus our original expectation in 25. The delay has been driven by an interconnection queue reform being implemented by APS in Arizona, which will delay the receipt of our interconnection agreement. To compensate for the delay, we have been able to accelerate some of our other major projects from 26 to 25, highlighting the depth of our development engine. Jason will elaborate more on CO-BAR and our plans for 2025 and 2026 in the U.S. Finally, to deliver above-market growth and above-market project returns, we are working also to optimize the access to high-quality capital and debt. We are in the final stages of achieving financial close on two major projects. the solar portion of Atrisco in the U.S., as well as the solar plus storage cluster in Israel. In total, we expect to secure above $500 million of project finance. We hope to be able to update you in the coming weeks as we complete each of these transactions. Post-closing, we expect to recycle $300 million of excess equity invested in this project back to Enlighten. The capital recapped from this project plus the cash we have on hand and cash flow we expect from operational projects is expected to provide us with the equity required to deliver a total operational portfolio of 4.6 gigawatts and 3.6 gigawatt hour extended into 2026 CODs. To fund further growth thereafter, we expect to execute on our capital recycling strategy, selling down minority stakes in projects. We began to execute this capital recycling strategy during the third quarter. We sold off our 10% stake in Faraday, a 680 megawatts pre-NTP project in Utah for $190,000 per megawatt, obtaining 13 million of capital for future use. We also sold our 50% share in several small operation projects totaling 25 megawatts in Israel for six minutes. These transactions, while small, nevertheless illustrate the potential to unlock value and growth capital through sell-downs. In summary, we see attractive fundamentals in our business, pricing power for our projects, and easing supply chain and access to product finance, which will all enable us to deliver on our two-fold objective of above-market product returns and above-market growth. I will now hand it off to Jason, who will provide more details on some of our U.S. projects.

Thank you, Gilad. In the U.S., project fundamentals remain strong, PPA prices are increasing, and equipment pricing is falling. At the same time, we are making steady progress in growing and advancing our project portfolio. Against that positive backdrop, it is likely that our flagship CO bar project will be delayed approximately one year due to an interconnection queue reform by Arizona Public Services. Construction on the solar portion of Atrisco in New Mexico, comprising 364 megawatts, remains on schedule. All major equipment is on site, our project racking is 99% complete, and 96% of modules are installed. We plan to achieve COD at the beginning of the third quarter of 2024. As Gilad mentioned, we've materially finalized the definitive documents required for project finance on the solar portion of Atrisco, including term debt and tax equity, and closing is expected imminently. However, the storage portion of Atrisco, comprising 1.2 gigawatt hours, is now delayed due to supplier issues. COD is expected during the fourth quarter of 2024. We are evaluating the possibility of a change of storage supplier to meet project timelines and bank financing requirements. In parallel, we are expanding the potential of our Atrisco complex under our land and expand strategy. We are pleased to announce that in October 2023 we signed a PPA with PNM, the current offtaker of Atrisco, for an expansion of Atrisco. The new project, called Quell Ranch, is sized at 120 megawatts of solar and 400 megawatt hours of storage. The project will benefit from Atrisco's completed development status and therefore has been added to our mature project portfolio this quarter. Moreover, like Atrisco, Quell Ranch will benefit from an energy community tax credit adder. Under our land and expand strategy, we can reduce risk and compress development timelines while increasing returns. We plan to start construction in 2024 and achieve COD in 2025. In addition to Quell Ranch, we also added a large new project to the mature portfolio this quarter called Country Acres. Located in California, it is sized at 392 megawatts of solar and 688 megawatt hours of storage. We recently executed a PPA and interconnection agreement with Sacramento Municipal Utility District. The solar is contracted for 30 years and storage for 20 years under bus bar agreements. Clean Era has a long history of project development in California and we are excited about this new major project and the quality of our partner. We expect construction on country acres to begin in 2024 and commercial operations in 2026. Finally, We expanded our Roadrunner project with Arizona's APCO by additional 44 megawatts of solar and 140 megawatt hours. We continue to work with APCO to meet their growing need for clean and reliable power and capacity. In total, between Quail Ranch, Country Acres, and the Roadrunner expansion, we added 556 megawatts of solar, and 1,228 megawatt hours of storage to our mature portfolio in the U.S. during the quarter. On COBAR, our 1.2 gigawatt solar and 800 megawatt hour storage project located in Arizona, we expect to see a one-year delay. As Gilad mentioned in September, Arizona Public Services enacted a reform of its interconnection queue process. The reform changes APS interconnection study review from a first-come, first-served basis to a first-ready, first-served approach. While COBAR's real estate permitting, offtake, and system impact study are already secured, it is expected that the revised process will cause an approximate one-year delay to the project. As a result, we have moved the project's expected COD from 2025 to 2026. We are working with our partners in the state to try and shorten this delay, given the project's advanced status. To help offset the impact of the CO bar delay, we are accelerating the scheduled COD for Roadrunner, that's 294 megawatts of solar and 940 megawatt hours of storage, from a 2026 to a 2025 COD. As I mentioned a moment ago, Quell Ranch, including 120 megawatts and 400 megawatt hours, entered the mature project portfolio and is also expected to reach COD in 2025. These projects are both mature and well-suited for 2025 completion. While we are disappointed with the delay to COBAR, the depth of our development portfolio affords us the ability to be nimble. Recapping, we are encouraged by our team's progress in the development and construction of our U.S. portfolio. Where there are delays, we are advancing other portfolio projects to fill our schedule and continue to deliver strong results. Our projects are well-sighted and well-developed, evoking strong demand from off-takers, and we are benefiting from falling equipment prices. Overall project returns are robust, and we are encouraged by the strength of the U.S. market. With that, I'll turn it over to Nir to review the company's financials.