Electric cars have become very popular in Israel, with a flood of Chinese brands hitting the market. One in five cars sold in Israel last year was electric. However, power producer OPC, 55% owned by Idan Ofer's Kenon Holdings (TASE: KEN), has not derived much joy from the additional area it entered three years ago – electric vehicle charging. The company wrote its investment in Gnrgy, which develops, produces and installs electric vehicle charging stations, at a value of 44 million shekels.
The main reasons for the difficulties faced by Gnrgy and other companies in this field are that EV charging in Israel has become very competitive, the absence of government support, and burdensome regulations. Among the public companies that have entered this field in the past few years are Afcon (TASE: AFHL), controlled by the Schmelzer family, and Inter Industries Plus (TASE: ININ), controlled by Barak Dotan, along with a group of private companies. Holding companies.
OPC Energy, headed by Giora Almoji, bought 51% of Gnrgy in 2021 for NIS 67 million. In its 2022 financial statements, OPC recognized NIS 42 million of goodwill in Gnrgy, but in last year's financial statements, released in March, it wrote off NIS 23 million of the investment.
OPC auditors stated in their report that after examination, they concluded that the amount recoverable from the deal was less than its value recorded in the company’s books. OPC reported this week that it will take an additional write-down of NIS 21 million in its first-quarter 2024 financial statements, which in effect means writing off all goodwill recognized in the takeover deal.
Gnrgy was founded in 2008 by Ran Eluya, who still heads the company, which, according to its website, is active in six countries. It creates charging stations for individuals and business customers such as vehicle importers, malls, gas stations, technology companies, etc. Gnrgy also creates public charging points and provides energy management systems for multi-storey buildings.
In January this year, OPC signed a non-binding memorandum of understanding with Eloya under which it was able to buy the latter's 49% stake. If this right is not exercised, Eloya will have a specified period of time to purchase OPC's 51% stake.
Meanwhile, OPC has agreed with an unnamed third party to sell Gnrgy in exchange for an allocation of rights. This week, OPC reported that the memorandum of understanding did not result in a binding agreement, that Eloya now has the right to buy its shares, and that it will undertake an additional write-down of its investment.
For Ofer, this is not the first investment in electric vehicles that has caused him losses. Ten years ago, the Better Place project, led by Ofer and tech entrepreneur Shai Agassi, collapsed after accumulating NIS 3 billion in losses since its founding in 2007. Better Place was based on the concept of battery swap installations and curbside services. The Israeli company, controlled by Ofer, invested in the project, which included developing electric vehicles with Renault.
The investment in Gnrgy is much more modest, and the potential losses are correspondingly smaller. For OPC, which has a market capitalization of NIS 6.5 billion and whose share price has risen 11% in the past year, Gnrgy is a very small part of its business. The main activity of OPC is the construction and operation of power generation plants. In a recent investor presentation, OPC stated that its portfolio consists of the construction of natural gas-fired power plants, solar and wind projects, worth 10.1 gigawatts.
OPC generated revenues of NIS 2.55 billion in 2023, 32% higher than in 2022, and generated net profits of NIS 152 million, up 28% from the previous year.
Published by Globes, Israel Business News – en.globes.co.il – on May 9, 2024.
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