Opc Energy Ltd

Hello and welcome to OPC Energy Ltd's second quarter 2026 investor meeting. All participants are currently enlisting only one. Following management's presentation, instructions will be given for the question and answer session. For your convenience, this meeting is being recorded and will be uploaded to the company's website in a little bit of time. With us today are Mr. Yoan Mobi, CEO of OPC Energy Ltd, Mrs. Anna Bernstein, CFO of OPC Energy Ltd. Before I hand over the floor to Diora, I would like to point out that other than historical data that will be presented, some of the information discussed during this call may constitute forward-looking information as defined under the securities law. Such information includes, among other things, forecasts, estimates, and estimates regarding future events which are subject to risk and uncertainties. The company's actual results may differ materially from those anticipated due to various factors as detailed in the company's official e-group report file with the relevant authorities. This call does not replace the need to review the company's official e-group's immediate periodic reports, which include complete information including risk factors and forward-looking information in accordance with the securities law. Nothing stated during this call constitutes an offer or invitation to purchase or transact in the company's securities, nor shall it be considered investment advice. I will now turn the call over to Mr. Giora Almubi. Giora, please go ahead.

Thank you. Good morning. So, this morning in Tel Aviv, we reported our Q2 earnings. I'm happy to report it with very strong financial results. I will go briefly and Anna, of course, will go into in detail. But I think that maybe we'll start with an overview of, I think, the main three pillars of success that we are seeing that are driving the company forward. The first thing, of course, is the macro environment that we're operating in. Both in Israel and the U.S., we are seeing growing demand for power. We see that in the U.S. now in the second consecutive summer and winter. We are seeing actual peak loads and also absolute energy coming up. And that's, of course, triggering the regulatory actions, which have a very strong potential for us for growth, as I will describe in our project. Also, here, of course, there is growth that is driving the market forward. At the macro level, we have a very strong tailwind, both from the market itself and the regulators who are encouraging new builds of new generation into the system. In terms of our execution, I think the second pillar that is very strong demonstrated in this quarter is our actual execution. This quarter, we reported the financial closing of an 850 megawatt combined cycle in Israel. In the previous quarter, we reported Bayton Ranch construction financial closing of 1.4. So over the last few months, we've started construction of two large-scale projects, roughly 2.2 gigawatts, reflecting a capital investment of $3.5 billion. And that is, and I will describe later, out of an overall CapEx, development plan that we have of $13 billion over the next two years. So definitely we're seeing very strong growth in the future, but also actually executing our current plan. So as I said, Hadera reached commercial – financial closing and started construction. We also added Rosewind, reached commercial operation for a 114 megawatt wind project in the PJM. And on top of that, we are continuing our conservation efforts. We've been able to fully consolidate now a third asset to overall in the U.S. Today we have three fully owned assets reflecting 2.8 gigawatts of capacity. And also in Israel, this quarter we signed the PPA with a leading Israeli data center developer reflecting an increasing demand over the next three years of up to 460 megawatts. In terms of the growth opportunities, which are really a result of our continued development and, of course, the tailwinds and strong growth in the market, we see several very significant growth opportunities in the coming few months as a result of the regulatory reform in the PGM. One, and we'll dive deep later on on Shea, we have a 2.1 gigawatt project. that should be able to participate in the RBP in the 15-year capacity option opportunity that is coming actually in this September. Furthermore, we reported that we are negotiating a PPA with a leading global hyperscaler in the U.S. to sign a PPA for a 1.5 gigawatt combined cycle in Ohio in the U.S., a project named Walker. So both of these investments reflecting roughly or north of $7 billion of investment that we see as an immediate opportunity for growth as a result of the reform in the EGM and the requirement for more capacity in the system. Furthermore, we are continuing to develop our safe harbored renewal pipeline of 1.9 gigawatts. As I mentioned today, we've added this quarter 114 of wind. We have total operating 755s. and another Safe Harbor. Of course, we have also early development pipeline, but also 1.9 gigawatt of Safe Harbor status. That, on top of Ramat Bekal, which I've described in a few slides, create a very strong growth opportunity beyond the two projects we just started construction next few months. So to the numbers, and again, Anna will go in in detail, but if you see the increase in EBITDA from $90 to $131 million over the quarter, a 46% increase, our consolidated adjusted net income rose from $5 million to $34 million, and consolidated SFO from $57 to $90 million. Sorry? Sorry? Okay. So this is our capital plan. I'm going to describe it as I would say a development conveyor belt. If you see on the left-hand side, Bayton Ranch and Chatea Expansion are projects that a few, I would say last year, were in the advanced development stage. We have been able, through our very strong execution capabilities, to bring these projects into construction mode. And the first project, Bayton, will be in operation in 29. in 2013. Ramat Dedeca, also a project which was early, went to advanced development, and we're really now a week or a month away. We expect the site construction of this project by the end of this year. Another roughly 550 with a very large storage, 3.9 gigawatt hour of a base system, so that's the next project. Shea and Walker Intel are the next wave of our construction and Shea and Walker are describing going more details. Intel is also a project we're developing in Israel and we expect to start construction by the end of 27 and of course the Safe Harbor project. So if I look at the overall plan, we're talking about a capital plan of $13 billion, roughly three and a half already under execution. which will increase our overall capacity from currently roughly 4 gigawatts of operating to 13 including the design gigawatts by the year 2030. Diving into Israel, so Israel is a market that is growing constantly. We are seeing now an accelerated growth as a result of electrification of many aspects, but also now data centers playing a center stage in the group in Israel. actual growth and the projections to go from 3.4% to 3.7% a year, even higher than that. And a very big push to new data centers there today in the system. The peak load of the system today in Israel is roughly 15 gigawatts. We have interconnection requests from data centers of 27 gigawatts, similar to the U.S., The system operator and the regulator stopped to review and understand what can be done in order to eliminate some of, or I would say, to filter some of these projects, but also in order to increase demand. We believe that ultimately, like in the States, there will be two pushes. One for new projects, similar to Hadera. which enjoy a fixed capacity payment and that's selling to the system operator but also we believe that and there is this discussion now that it will be the same bring your own generation as in the US meaning that new data centers will need to bring their own generation bring their own capacity in that sense I think OPC has a very unique position and experience we already have behind the meter I would say within the premises experience of building power stations both in Hadera, Sorek, Intel. So our existing sites and new sites are definitely a very strong growth engine for us in the coming years to develop beyond what our existing current pipeline. We also reported this quarter One we signed, as I mentioned, the PPA with the leading Israeli data center developer. So we'll start selling power from until 2030, we'll increase to roughly 460 megawatts of actual PPAs. Furthermore, in order to start increasing our sales as we build Ramat Beka and Intel, which will sell to end users, we've been awarded a capacity tender to buy 200 megawatts of capacity, which we ultimately sell to end users. that will create an immediate revenue source for us and also lead the head to the future, lead the customer base for the new generation projects that I mentioned. So on this graph, Hadera, we'll talk in a second, but really the next stage is Ramat Beka. Ramat Beka is at least 550 megawatts solar project. We've been able to approve the zoning plan at the government. We signed key equipment and EPC and also finance or some of them are fully signed, some are under advanced negotiations. We have received a positive grid connection study and secured our grid connection and we expect to start the construction of this roughly one or all in roughly one and a half billion dollar project by the end of 26. This project should be in commercial operation by the end of 28. hence we are starting to increase our sales to end users. This project will sell to long-term PPAs, hence the award of the virtual capacity and increasing our sales to end users. Intel is also a 600 megawatt project. Within the premises of Intel, we are now in advancing the zoning process and in advanced negotiations with Intel for PPA. We believe this project will start construction towards the end of 27. A data which will reach commercial financial closing is an 850 megawatt combined cycle. A construction cost of 1.3 billion. On top of that, we bought the land. This is a single complex. The land which we have already, the existing co-gen plant, will be a single complex of roughly a gigawatt. We started construction in June of this year. COD is expected in 2030. The economics of this project are underpinned by two revenue streams. One is a fixed capacity payment, which is 3.31 agros kilowatt hour, roughly $330 a megawatt day. And that is indexed to the CPI and applicable for 25 years from commercial operation. And on top of that, a revenue stream from sending energy to the spot. Our estimates, that once the capacity limitations are removed, the first few years we're limited to 670 and then up to 850. So full year EBITDA when the capacity limitations are removed is approximately $204 million for OPC. In the U.S., before going into our projects, the macro, you can see the macro picture, which is really a reflection of the growth in the market, growth in peak demand and growth in energy. So energy margins or the spark spread has increased dramatically, roughly 50% from last year. This is a result of increasing demand, very limited increase in generation, and stable gas prices, which result in a very high spark spread. So the realized spark spread that we're estimating, half of that is already behind us in Q2 results. A significant portion is hedged. and remaining is our estimate for the future of the market until the end of this year. So you could see a very large jump in our energy revenues. On the right-hand side is the capacity. We just recently in June, there were the results of the latest capacity option. As you can see from 28 or 27 actually, these options are all hitting the cap. but what is increasing is the uncapped price, theoretical price, so this auction without the cap would have ended at $555 per megawatt per day, and also the PGM was unable to clear roughly 6.8 gigawatts of UCAP capacity, which means that the market is short in 2029, and that shortage is expected to increase as demand picks up and as I mentioned capacity is not enjoying the market so we see in any case this margin increasing but of course that is the basic trigger that pushed the PGM to the reform that I mentioned before and we'll talk about it in a second. Those are the results to OPC and to CPV. First of all, our growth is focused on the growth of our new projects, which I mentioned, Bays and Ranch were coming in on 29 and the future projects. Our growth is also coming from buying out minority interests. We were able to reach 100% ownership Insuring Melanie operating projects and also based in lunch. That's a source of growth Of course the growth of the system is pushing up the energy and the capacity prices and all of that is resulting in in EBITDA in the 6.6 months, EBITDA a jump of roughly 25% versus the first 6 months of last year, and you can see the trend of both energy and capacity adding as capacity prices increase next year or for mid of this year, we can definitely see a continued growth of our revenues in EBITDA in the US in the coming years. Talking about the proposed pathways to really solve this issue of growing demand, increasing prices, and a shortage of generation, PGM basically took, there's three links to this dealing with this issue. The first, I think, is a fundamental one, is the interim resource adequacy service, which basically says that new loads coming from June 2027 will need to bring their own generation. That results and we have reported this quarter that we are now negotiating 15-year PPA with a large international hyperscaler. to, for our Walker project, basically, the self-esteem years, the energy and the capacity to the cycle scale, which really will allow them to build the data centers they're looking at. This is a project that we are progressing with, and this quarter we have already disclosed that we have signed a slot reservation agreement for the equipment as we progress with the project. The second push is for the load, as I mentioned, is increasing regardless of the data centers and the PGM needs to fill in this gap. So it went out for the reliability backstop procurement process. This is a one-time procurement that is expected to happen in September, procuring 6.8 gigawatts, which translating into combined cycles is roughly 10 gigawatts of new combined cycles. Eligible resource could be new generation BES or demand response. Shea, and we'll talk in a second, is in a very good position to participate in this tender, in this auction, and the overall capacity and the capped auction price is roughly $565 per megawatt day, with the auction targeted for September and announcement by the end of this year. So these are the projects that I mentioned, Basin already, as I said, as Texas maybe identified or acted first in terms of responding to the increasing growth and we were able to start construction late last year of Basin Ranch, the largest project in Texas, and now in the new processes, both in the reliability backstop and the bilateral, a matchmaking between demand and generation. We have two very significant projects, 3.6 gigawatts more than $7 billion of investment. In the coming, I would say, by the end of, by 2027, 2028, we should be already in construction of these projects, on top of the 1.9 gigawatts of Safe Harbor projects, which will add to our existing 750 megawatts of renewable power that we are operating in the States. So a few details, or more details into SHEA. SHEA, we own 70%. 20% is owned by a leading global equipment manufacturer that has also reserved the project equipment for this project. The project is located in West Virginia. Three trains, roughly 2.1 gigawatts. Estimated construction costs before financing of roughly $4 billion. And we should start construction. I would say that in terms of the commercial structure of this project, We are making very good progress in the interconnection rate, a long lead item here, or the gating item is the connection. We expect to sign an interconnection agreement in early 2027. We have very good progress and results on this interconnection process. So that's definitely a critical path on this equipment I mentioned. Also land rights and licensing, so we are all on track. to start construction. In terms of the commercial structure, I talked about the 15-year capacity auction, but also on top of that, of course, there's energy. We reported this quarter we executed a gas 10-year gas debt-debt agreement with EQT, leading maybe the largest gas manufacturer in the U.S., and that will basically fully secure our energy payments for the first 10 years of the project. adding the gas capacity revenues. This will enable us to bring significant leverage to this project and, of course, create a significant value for the company. As I mentioned, the critical fact here is the auction expected in September, award expected by the end of the year, and then startup construction, signing the interconnection agreement and startup construction in 2027. Walker, the project we're now making significant progress under the matchmaking bilateral arrangements. So this is a project in Ohio. Same, we are 70% with a global equipment manufacturer that owns 30%. Also here, this quarter, we are reporting that we have signed a slot reservation agreement to secure the equipment. The commercialization of this project should be under a long-term 15-year PPA, setting the capacity and energy of this project. The project still has to move ahead and progress in the interconnection queue, of course, but overall, if you look at the combining Shea and Walker, these are the two large projects which we should start. an investment decision to start construction during 2027-2028, bringing the commercial operation of these projects by 2032. We have finished the commercial side and I hand it over to Anna for the financials.

Thank you, Giora, and good morning, everyone. We are very pleased to report a strong second quarter with EBITDA increasing by 46% to $131 million, adjusted net income of up by 580% to $34 million, and a very strong FFO rising by 58% to $90 million. The group's robust free cash flow generation, evidenced by our strong FFO, provides a solid foundation to fund and support our continuous growth, as Giora just presented. On slide 18, we can see our results in Israel. We continue to deliver stable and strong results. We are also seeing a gradual improvement in the operational availability of our Summit Power Plant, which is expected to turn to normalized availability levels by the end of this year. On slide 19, turning to our U.S. energy transition gas-fired assets. The EBITDA is increased by 39%, reflecting supportive TGA market conditions and the benefits for our portfolio and activities. The EBITDA bridge highlights three principal drivers. An energy margin increase net of our hedging activity increased by $13 million year over year. The capacity revenue contributed additional $14 million, and the increase in our ownership interest following the Shore and Maryland consolidation initiatives added additional $6 million to our results this quarter. These positive developments were partially offset, as you can see here, by a planned maintenance outage at our Maryland power plant, during the second quarter, which reduced our operational availability compared with prior quarter. Looking ahead, market fundamentals remain highly supportive, driven by growing power demand and constrained reliable generation capacity. The forward energy margins remain high, and the capacity pricing under the PGM price collar is providing increased visibility all the way through to 2030. As shown on the right hand of the slide, Our hedge position for 2027 remains relatively light at 33%, preserving meaningful exposure to the strong forward market, while allowing us to continue adding hedges selectively. We remain very disciplined in optimizing the timing and volume of our hedging activity, balancing marketing opportunities with prudent risk management, particularly around weather-driven volatility during winter and summer seasons. On slide 20, we can see our renewable energy segment. During this quarter, as Giora mentioned, we successfully completed the construction of Rogue's Wind project, 114 megawatts. With this milestone, we reached an important inflection point in our renewable strategy. The first phase is now completed, and we have established an operating asset platform with a total capacity of 755 megawatts. As shown on the right hand of this slide, we expect this segment to generate approximately $19 million of EBITDA as early as 2027. At the same time, we continue to accelerate the development of our next wave of growth with a focus on our 1.9 gigawatts of projects that are eligible for tax benefits under the applicable safe harbor rules. On slide 21, we can see the consolidated net income As you can see, we have increased significantly our adjusted net income from $5 million in the prior quarter to $34 million this quarter. This increase is driven primarily by the strong growth in EBITDA. The reported net income, the accounting one, for the quarter was affected by several items which are outside of the ordinary course of business. As you can see, $19 million of loss. The most significant of these resulted from the transition from the equity method accounting to the first time consolidation of the Maryland power plant. Slide 22, turning to our financial policy, leverage, and debt profile. As you can see, we remain very committed to prudent financial management. We continue to maintain substantial liquidity and diversify the funding sources available to support the growth strategy Yoram outlined, both in the U.S. and in Israel. During the quarter, we received strong vote of confidence from both rating agencies. S&P upgraded our rating to A-plus in Israel, and Midrub, the affiliate of Moody's, assigned a positive outlook to our A-1 rating. As shown on the slide, we currently maintain substantial liquidity reserves, while our leverage ratio remains below our long-term financial policy range of 4.5 to 5 times that to EBITDA. These liquidity reserves, together with our strong cash flow generation and the broad range of financing channels available to us in Israel and internationally, will support our planned investment in Ramat Beka and Shea over the coming quarters. With that, we will now open the call for questions.

Now we will move on to the Q&A session. To submit a question by chat, please use the chat button located at the bottom of your screen. Before asking a question, please write your full name and the name of your company. You can also use the red hand button located at the bottom of your screen. For participants joining us by phone, in order to ask a question, please press star 1. If you wish to cancel your request, please press star 2. The first question. Could you provide an update on SHEA and the key milestones to FID? How does it advance position in the PJM interconnection to support its potential participation in the RBP? And could you provide some color on timing, capex, and financing?

Sure. So in terms of the RBP, I think the critical question may be something to highlight. is that the precondition is that the commercial operation of the plant has to be by 2032. And in order to achieve that, there's several fundamental issues that have to be progressed, and that will basically, I would say, impose the timetable of who is qualified to participate. In order to be able to operate in 2032, maybe one of the top things is interconnection. In that sense, I mentioned we are in a very strong position We expect to sign an interconnection agreement by the beginning of 2027. We're in the TC2 process, a very strong indication on the cost and the timing of this interconnection. So that is a critical part which is, I would say, is funneling the construction or the participation in this project. Second is equipment. In today's environment, securing to the environment securing the equipment. The main equipment for a project like this is on a critical path. We were able, we signed a slot reservation agreement with the global equipment manufacturer a few months ago and that is on the, that should bring us to be able to operate this time to participate in the REOP with this timeline. On top of that, we have possession of the site. We have already, in terms of the commercial, that's our, of course, view, but our commercial arrangements, as I mentioned, we signed the gas net back agreement, so all geared in to be able to operate and to start construction of this plant by early 27 and reach commercial operation under the RBP timetable. I think that in this, looking at the other, I would say, There are no further questions. If your questions weren't addressed, please reach out to Anna Bernstein, OPC Energy CFO,

at Anna.Bernstein at OPC-Energy.com or Mary Segal of MSIR Investor Relations for OPC Energy in the U.S. at msegal at ms-ir.com This concludes the OPC Energy Ltd. Investor Meeting. Thank you for your participation and have a nice day.