Keystone Launches Egged IPO Targeting 8 Billion Shekel Valuation Amid Profit Drop

Keystone Infrastructure Fund is initiating the public offering of Egged, Israel's largest bus company, aiming for a valuation of 8 billion shekels. This target is 2 billion shekels higher than the post-money valuation when investment firm Meitav bought 10% of Egged's shares in March. Keystone currently holds 63.3% of Egged, with a book value of 2.7 billion shekels. The fund's quarterly reports mention preparations for capital raising or listing shares of Egged or its controlled entities.

Keystone's other main asset is Keystone Power, which operates power stations including Hagit Mizrach and Neot Hovav, and the IPM station, with a total capacity of 2,300 megawatts plus 2,650 megawatts under development. The energy holdings are valued at 1.382 billion shekels. However, Keystone Power reported a sharp profit decline in the first half of 2026, dropping to 43 million shekels from 125 million shekels in the same period in 2025, influenced by the Electricity Authority's decision to cap supplementary tariffs.

Overall, Keystone's revenues and profits fell significantly in both Q2 and the first half of 2026. Q2 revenues decreased to 73 million shekels from 203 million shekels in Q2 2025, and half-year revenues dropped to 140 million shekels from 287 million shekels. The decline was due to a smaller increase in asset fair value and a steep fall in dividends from subsidiaries, which fell by about two-thirds to 42 million shekels. Net profit fell 77% in Q2 to 32 million shekels and by two-thirds in the half-year to 64 million shekels.

Despite profit declines, management fees paid to the fund's management company rose from 18 million shekels to 26 million shekels in the first half of 2026. Keystone, now a company, set a new equity target of 6 billion shekels by 2030, up from 4 billion shekels, based on unlocking value in existing assets like Egged and developing new assets such as the Sorek power station and a new power plant at the IPM site. Equity at the end of Q2 stood at 3.1 billion shekels, aiming to double in about three and a half years.

Keystone's annualized return on equity before tax rose 71% to 31.2%. Liquidity balances were 316 million shekels, with net financial debt at 1.237 billion shekels. The fund has distributed 71 million shekels in dividends since early 2026. It is also awaiting Communications Ministry approval for a major deal acquiring a 40% stake in the consortium that purchased cellular company HOT Mobile for 1.2 billion shekels. Keystone's market value fell 19% in the past three months but rose 88% over the past year to 3.75 billion shekels.