Ellomay Capital Ltd (ELLO) 2014 Q3 法說會逐字稿

Good day and welcome to the Ellomay Capital nine-month update call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Matthew Selinger, Investor Relations. Please go ahead, sir.

Thank you very much and good afternoon, everyone. We'd like to thank everyone for joining us today for Ellomay Capital's nine-month update call. Joining us on the call are Mr. Ran Fridrich, CEO, and Kalia Weintraub, the CFO.

The press release detailing the nine-month update crossed the wire on December 31 and is available on the Company's website at www.Ellomay.com, where you can also find additional information on the Company's assets and management team. After management's prepared comments, we will open the floor for your questions.

Before we begin, we'd like to remind everyone that the prepared remarks contain forward-looking statements that involve substantial risks and uncertainties including statements that are based on current expectations and assumptions of the Company's management. All statements other than statements of historical facts regarding the Company's plans and objectives, expectations and assumptions of management are forward-looking statements. The use of certain words including the words estimate, project, intend, expect, believe, and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The Company may not actually achieve the plans, intentions or expectations disclosed in the forward-looking statements and you should not place undue reliance on the Company's forward-looking statements. Various important factors that could cause actual results or events to differ materially from those that may be expressed or implied by our forward-looking statements including changes in regulation, seasonality of the PV business and market conditions. These and other risks and uncertainties associated with the Company's business are described in greater detail in the filings the Company makes from time to time with the Securities and Exchange Commission including its annual report on Form 20-F.

The forward-looking statements are made as of this date and the Company does not undertake any obligation to update forward-looking statements whether as a result of new information, future events or otherwise.

So with that I would now like to turn the call over to Mr. Ran Fridrich, CEO of Ellomay Capital.

Thank you. Good day, everybody. Thank you for joining the call. I would like to go over the third-quarter highlights and then discuss the financial results and with the business update and I would be happy to answer questions if there are any.

So the main highlights for the third quarter our first of all, Dorad power plant successfully began commercial operation in May 2014 and reported sales publication of financial results at the end of this quarter.

We have completed the acquisition of a 5.6 megawatts power plant in Spain and we expanded our -- actually tripled our current production in Spain and these are the main I would say highlights for the quarter.

We have also decided -- I don't know if you remember from the last call -- about the new regulation in Italy so we have chosen the program which we decided to take which means 8% cut in the FiT. 6% net cut in the FiT and this is what we had been talking about in our last call. So we are according to plan.

And as you can see in the results, basically it's the impact of this cut is around EUR430,000 per annum and the Company did some saving and actions to offset this cut and to keep the net income as before.

Now as to the third quarter financial results, we see revenue of approximately $5.2 million and a total $12.7 million for the nine months, a record operating income of $7.4 million and $9.4 million for the nine months. Net income of $5.4 million and $4.9 million for the three months. Of them, $1.9 million and $1.7 million -- $[1.79] million (sic -- see press release, "$1.7 million") is due to Dorad. Adjusted EBITDA of $5.1 million and for the quarter and $10.4 million for the three months.

About a business update, the Manara project which is a pump storage, PSP project, is actually start moving. We are now in I would say in high-speed or full-steam ahead with project development. Dorad is actually operating at full capacity. It's an 840 megawatt power plant but at the last few weeks they actually operated it at 870 megawatt peak because the low temperature outside is allowing to make the production better.

We are working on a few more acquisitions in the PV section, mainly in Spain, which will be at the same I would say same type or same character like the purchase we have made last year -- or actually yes, last year, last year.

One thing that I want to elaborate is actually the seasonal effect on the PV and on Dorad as well. We have to remember that PV, the income in the summer is higher than in the winter. This is normal and everybody understands it but also Dorad is actually acting more or less like a photovoltaic because in Israel the price of electricity in the summer is high, in the midseason it is low and in the winter I would say it's a medium to high prices. So there is a volatility in the income not a volatility in the production actually and this is something to take into consideration while actually looking at the results and to understand better the Company and the expectation of the Company.

Kalia, do you have anything to add about --?

No, actually those are the main issues that involve the third quarter which is I think the main highlight was the new acquisition that we recorded as being a bargain as you presented. You can see the foreign exchange that affected us materially this quarter recorded in the reserves as part of the equity which is the result of the exchange between the euro and the US dollar.

Euro, shekel and US dollar.

No, no. The euro and the US dollar. These are the ones that are recorded as the reserve. Every difference between the shekel and the euro is recorded as financial income or loss.

These are actually the main highlights. I think all others are quite as we expected and according to our budget the revenues, the expenses, we do not have any immaterial -- there are not any exceptional expenses that were recorded this quarter. Everything seems to be going smoothly.

Okay, so I think we have covered the main topics.

So I think with that, operator, we will open it up for questions if we could.

(Operator Instructions).

Operator, I'm going to go ahead and read a question of the webcast if that works. So the person says net income was quite a bit up in Q3. Can we model that going forward or how should we look to model that going through Q4 and then into 2015?

As I mentioned before, there is volatility in the income because of the seasonal -- I would say factor of our income as I say summer, winter. So the best advice that I can give you is to look at what happened a year ago and you will have the factor or the understanding. The third quarter is actually the strongest quarter of the year.

And as we need to look at -- take a look at the gain on bargain purchase which is an exceptional item, it's not included every quarter.

But generally speaking there is a seasonality Dorad and the PV, their best quarter is the summer quarter and as I say, Dorad did the first -- the fourth quarter and the first quarter are relatively good. The second quarter is a very weak one because the prices are very low. There is not any month in Israel it's not hot not cold so using of air conditioning or heating is very low. And I wouldn't suggest or multiply by four this quarter because this is not the way to see the Company. You have to understand the seasonality of the cash flow and the seasonality of the income.

And one additional comment, you need to remember that the new project was consolidated starting this quarter. So even if you take the nine months, it's not representing because the first six months did not include any P&L results for the new project which is (multiple speakers).

Yes, this is for the upside, yes.

Great. Operator, if there are no others from the phone, I have actually got another question from the webcast if possible. There was a K about a pump storage facility which in a sense you acquired for basically it said no consideration. Could you just expand on what the plans might be there?

It will be a 340 megawatt project of pump storage and pump storage basically is -- it's a power station but with a very unique way of working. It's operated by the electricity company by the manager of the system and I would say the biggest advantage of it is the ability to start from zero and to be fully operated in the grid in 90 seconds. This just to give you an idea. The regular gas turbine project or stations would take 18 minutes to 20 minutes to be fully operated. Carbon project or station would take half an hour and the system manager needs some kind of tool that can give him the possibility to react very quickly. And this is the pump storage idea. It's actually an hydro but you use the same water more and more. You don't waste water, you take the water uphill at night when the electricity is -- you have actually in excess capacity of electricity in the (inaudible) and you give the system manager a tool that he can use and usually during the day when there is a demand for electricity and actually you can operate in five minutes, 10 minutes, stop, 10 minutes, stop. It's like a very, very flexible tool for the system management.

Well, great. Operator, I think if -- I have no more questions on the webcast, so if we have no questions on the dial-in I think Ran, we'll put it back to you for closing.

Yes, so if there are no other questions, we can close the call, yes, absolutely.

Great. Well thank you everyone for participating and we look forward to you tuning in next time and with that please watch for our next announcements and we appreciate your time.

Thank you very much.

That does conclude today's conference. Thank you for your participation.