Israeli Institutional Investors Plan Over NIS 1 Billion Investment in PowerGen Energy Acquisition

Israeli institutional investors Migdal, Amitim, and Harel are in advanced negotiations to invest over NIS 1 billion in PowerGen, the energy arm of Generation Capital. Concurrently, Phoenix Insurance will exercise an option to invest in approximately 10% of PowerGen's shares. Phoenix's investment values PowerGen at about NIS 3.25 billion before the acquisition of Shikun & Binui Energy and around NIS 7.7 billion after the deal. Each institutional investor is expected to invest between NIS 300 million and NIS 400 million, receiving roughly 6% to 7% of PowerGen's shares. This investment is contingent on the completion of the Shikun & Binui Energy acquisition and will occur afterward at the higher valuation.

The funds raised will finance the equity portion of the Shikun & Binui Energy transaction, supplementing cash recently raised by Generation Capital from leading institutional investors. Generation will also allocate approximately NIS 800 million from its own funds, with the remainder of the purchase price financed through bank loans or bonds. Phoenix announced its investment in PowerGen in January 2024, acquiring preferred shares that do not confer voting rights but yield 8.25% annual interest and include a right to purchase 10% of PowerGen's shares within three years. These shares are expected to dilute following the Shikun & Binui Energy deal.

The acquisition is structured as a reverse triangular merger, where PowerGen will create a special purpose vehicle to merge with Shikun & Binui Energy, preserving the latter's licenses, power purchase agreements, and financing contracts. Generation will pay Shikun & Binui NIS 4.3 billion plus NIS 150 million in interest accrued since the memorandum of understanding signed in May, converting a conditional payment of NIS 300 million into cash. The original deal included a base payment of NIS 4.05 billion, NIS 150 million for elapsed time, and a conditional NIS 300 million payment linked to project progress over five years.

PowerGen more than doubles its scale through this acquisition, gaining assets including gas-fired power plants, solar facilities, energy storage, thermal solar energy, and projects in Europe and the U.S. The company's portfolio totals 6.3 gigawatts, with 3.2 gigawatts in active projects. Since its recent fundraising, Generation's shares have risen about 10%, despite a 1.7% drop yesterday.