UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM20-F
(Mark One)
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report……
For the transition period from __________________ to __________________
Commission File Number 001-35284
ELLOMAY CAPITAL LTD.
(Exact Name of Registrant as specified in its charter)
ISRAEL
(Jurisdiction of incorporation or organization)
18 Rothschild Boulevard, 1st floor
Tel Aviv 6688121, Israel
(Address of principal executive offices)
Kalia Rubenbach, Chief Financial Officer
Tel: +972-3-797-1111; Facsimile: +972-77-344-6856
Tel Aviv 6688121, Israel(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Title of Class
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 13,781,2301 ordinary shares, NIS 10.00 par value per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☑
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☑
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
EXPLANATORY NOTE
Note 18A (Details of the Statements of Profit or Loss and Other Comprehensive Income – Revenues) of the financial statements included in this Report, contains a reclassification of comparative amounts for the year ended December 31, 2024 due to separate presentation of revenues from subsidies.
This amendment only relates to the separate presentation of revenues and therefore the aggregate revenues reported for the year ended December 31, 2024 remain unchanged.
Table of Contents
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INTRODUCTION
The following is the Report on Form 20-F of Ellomay Capital Ltd., or the Report. Unless the context in which such terms are used would require a different meaning, all references to “Ellomay,” “us,” “we,” “our” or the “Company” refer to Ellomay Capital Ltd. and its consolidated subsidiaries.
All references to “€,” “euro” or “EUR” are to the legal currency of the European Union, or EU, all references to “NIS” or “New Israeli Shekel” are to the legal currency of Israel and all references to “$,” “dollar,” “US$,” “USD” or “U.S. dollar” are to the legal currency of the United States of America. Other than as specifically noted, all amounts translated into a different currency were translated based on the relevant exchange rate as of December 31, 2025.
We prepare our consolidated financial statements in accordance with IFRS® Accounting Standards, as issued by the International Accounting Standards Board, or IASB.
All trademarks, service marks, trade names and registered marks used in this Report are trademarks, trade names or registered marks of their respective owners.
Statements made in this Report concerning the contents of any agreement, contract or other document are summaries of such agreements, contracts or documents and are not complete description of all of their terms. If we filed any of these agreements, contracts or documents as exhibits to this report or to any previous filing with the Securities and Exchange Commission, or SEC, you may read the document itself for a complete understanding of its terms.
INDUSTRY AND MARKET DATA
This Report contains and incorporates by reference market data, industry statistics, and other data that have been obtained from, or compiled from, information made available by third parties. Although we believe these third-party sources are reliable, we have not independently verified the information. Except as may otherwise be noted, none of the sources cited in this report has consented to the inclusion of any data from its reports, nor have we sought their consent. In addition, some data are based on our good faith estimates. Such estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as our own management’s experience in the industry, and are based on assumptions made by us based on such data and our knowledge of such industry and markets, which we believe to be reasonable. However, none of our estimates have been verified by any independent source. See “Forward-Looking Statements” below.
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this report on Form 20-F contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Some of the statements under “Item 3.D: Risk Factors,” “Item 4: Information on Ellomay,” “Item 5: Operating and Financial Review and Prospects” and elsewhere in this Report, constitute forward-looking statements. Forward-looking statements reflect our current view about future plans, intentions or expectations. These statements relate to future events or other future financial performance, plans strategies and prospects, and are identified by terminology such as “may,” “will,” “should,” “expect,” “scheduled,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “aim,” “potential,” or “continue” or the negative of those terms or other comparable terminology, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and the potential effects on our business. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
Assumptions included in this Report involve judgment with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. Factors that could cause actual results to differ from our expectations or projections include the risks and uncertainties relating to our business described in this Report under “Item 3.D: Risk Factors,” “Item 4: Information on Ellomay,” “Item 5: Operating and Financial Review and Prospects” and elsewhere in this Report. In addition, new factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof, except as required by applicable law. In addition to the disclosure contained herein, readers should carefully review any disclosure of risks and uncertainties contained in other documents that we file from time to time with the SEC.
To the extent that this Report contains forward-looking statements (as distinct from historical information), we desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and we are therefore including this statement for the express purpose of availing ourselves of the protections of the safe harbor with respect to all forward-looking statements.
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SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Item 3.D “Risk Factors.” You should carefully consider these risks and uncertainties when investing in our ordinary shares. Principal risks and uncertainties affecting our business include the following:
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PART I
ITEM 1: Identity of Directors, Senior Management and Advisers
Not Applicable.
ITEM 2: Offer Statistics and Expected Timetable
ITEM 3: Key Information
Investing in our securities involves significant risk and uncertainty. You should carefully consider the risks and uncertainties described below as well as the other information contained in this Report before making an investment decision with respect to our securities. If any of the following risks actually occurs, our business, financial condition, prospects, results of operations and cash flows could be harmed and could therefore have a negative effect on the trading price of our securities.
The risks described below are the material risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations in the future.
Risks Related to our Business
Risks Related to our Renewable Energy Operations
In recent years, we entered the development and entrepreneurship renewable energy market. These operations are exposed to regulatory and other development risks that may cause such projects not to enter the construction phase and other risks that may cause damages, delays and interruptions during the construction phase, and thereby cause the total or partial loss of the project development funds invested in the project. We are currently active in several projects in various development and construction stages, including the construction of a 156 Mega Watt, or MW, pumped storage project in the Manara Cliff in Israel, or the Manara PSP, and the development of various solar projects in Italy, the United States, and Israel. Projects in the development stages are exposed to various risks, including the inability to obtain or maintain regulatory permits and approvals, inability to enter into agreements with EPC contractors under favorable terms and the inability to obtain financing or to utilize the benefits of regulatory incentives (such as the ability to sell tax credits in the United States), upon terms economically beneficial or at all. Projects in the construction stage are exposed to various risks, including delays in the construction, interferences from third parties such as adjacent plot owners, residents living in the vicinity, governmental, municipal, environmental and other authorities, malfunctions in construction equipment, shortage in equipment or personnel required for the construction and damage caused by weather conditions and other factors that we cannot control. All projects in the development and construction stages are subject to additional risks, including changes to existing regulation that could reduce the potential profitability of such projects, potential disagreements and conflicts with partners, dependency on technical consultants, and risks associated with operations in foreign countries, as applicable. If any of these risks materialize, the entire project may be delayed or cancelled altogether, causing the loss of all part of the funds invested in the project development efforts and the impairment of some or all of the capitalized investments we made in connection with the project. Such impairment would have an adverse impact on our financial position. Even if we succeed in selling our rights in a project to third parties, the return of our project development expenses will likely be conditioned upon the continued development of the project by such third parties.
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Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers and restrictions to the construction and operation of renewable energy plants, which may adversely affect our operations. The installation and operation of renewable energy plants is subject to oversight and regulation in accordance with international, European (to the extent applicable), national and local ordinances, building codes, zoning (or permitting), environmental protection regulation, including waste disposal regulations, utility interconnection requirements, security requirements, regulation in connection with the presence or discovery of archaeological, historical, religious, or cultural artifacts at project sites, regulation in connection with foreign ownership of assets, especially infrastructure and energy facilities (whether specifically aimed at Israeli companies or at foreign investors in general, such as the potential requirement for approval from the Committee on Foreign Investments in the Unites States) and other rules and regulations. Any changes in applicable regulations that increase the burdens or restrictions on the operation of our renewable energy plants could increase our costs of operation and, as a result, adversely affect our results of operations. In addition, various governmental, municipal and other regulatory entities require the issuance and continued effectiveness of relevant permits, licenses and authorizations for the construction and operation of renewable energy plants. If such permits, licenses and authorizations are not timely issued, it could result in the interruption, cessation or abandonment of a newly constructed renewable energy plant or may require significant changes to such renewable energy plant, any of which may cause severe losses. In addition, if issued, these licenses and permits may be revoked by the authorities following their issuance in the event the authorities discover irregularities or deviations from the scope of the license or permit. Any revocation of existing licenses may obligate us to cease constructing or operating the relevant renewable energy plant for the period required to renew the relevant license or indefinitely and therefore will adversely affect our business and results of operations.
Government interventions in response to high energy prices may negatively impact revenues or increase our tax burden. European countries responded, during 2021 and 2022, to the increased energy prices experienced by adopting several measures aimed at reducing or limiting the profits of renewable energy manufacturers through taxes or other regulatory arrangements. For example, Spain introduced a reduction mechanism for excess remuneration resulting from the high price of natural gas during 2021-2022. This Spanish regulation mainly impacted our operating profit from the 300 MW photovoltaic plant in the municipality of Talaván, Cáceres, Spain, which was connected to the Spanish national grid in December 2020, or the Talasol Plant (with respect to the portion of revenues not subject to the financial power swap executed in connection with the Talasol Plant, or the Talasol PPA), and from our Spanish 28 MW photovoltaic plant, or the Ellomay Solar Plant. Although the electricity prices in Spain and Italy decreased during 2025, future changes and increases in electricity prices in Spain, Italy and other countries or areas in which our plants are located could cause local regulators to adopt new measures aimed at limiting the profitability of renewable energy manufacturers. These measures may include caps on energy prices, changes to price formulations and the proposal of windfall taxes on energy companies, including companies that generate renewable energy. It is possible these measures may intensify and be adopted by other countries in which we operate or will operate in the future in which case it could materially affect our financial results.
A drop in the price of energy may negatively impact our results of operations. The revenue from the sale of energy produced by renewable energy plants is based on proceeds from the sale of electricity and gas produced in the electricity and gas market at market price and sometimes also includes incentives in the form of governmental subsidies or fixed tariffs. Previous revisions to the governmental subsidies’ regime in several countries, including Spain, Italy and Israel, which reduced or eliminated the scope of the incentives paid by governments, increased the exposure of renewable energy plants to market prices or to tariffs determined in a public bid process. Many factors impact the prices of electricity, including demand, supply, the cost of alternative energy, such as natural gas and fuel, introduction of competing manufacturers and technologies and regulatory changes imposing caps on prices or otherwise impacting the profitability of energy manufacturers. A decrease in the price of electricity and gas, particularly in the countries in which we operate and in which some of our revenues are based on the market price of electricity and gas, may negatively impact our profitability and our ability or interest to expand our renewable energy operations. For example, during the first half of 2024 the electricity prices in Spain declined significantly due to excess generation of hydro power in Spain and were on occasion negative. This decrease impacted the revenues from our Spanish facilities that are not subject to subsidy or covered by a financial power swap (the Talasol PPA) and reduced our 2024 revenues.
The success of our renewable energy plants, from their construction through their commissioning and ongoing commercial operation, depends to a large extent on the cooperation, reliability, solvency, and proper performance of the contractors we engage for the construction, operation and maintenance of our renewable energy plants, or the Contractors, and of the other third parties involved in the construction and operation of the plants, including technical consultants, subcontractors, local advisors, financing entities, landowners, suppliers of feedstock, suppliers of solar panels and other components of a solar system, the energy grid regulator, governmental agencies and potential purchasers of electricity. The construction and operation of a renewable energy plant requires timely input, often of a highly specialized technical nature, and cooperation from several parties, including the suppliers of the various system components (such as solar panels or CHP engine) and plant operators, other suppliers of relevant parts and materials (including replacement parts), feedstock suppliers, suppliers of solar panels and other components of a solar system, land owners, subcontractors, electricity brokers, financing entities, tax equity partners or purchasers of tax credits and governmental and related agencies (as subsidizers and as regulators). If we fail to obtain such input or cooperation, or fail to locate suitable suppliers, equipment, land or other components required to efficiently and timely construct or operation a renewable energy plant, the specific project and our results of operations may be materially adversely affected. In addition, as we use Contractors to construct and thereafter operate and maintain our renewable energy plants, we depend on the Contractors’ expertise and experience, representations, warranties and undertakings regarding, inter alia: the construction quality, schedule of construction, operation, maintenance and performance of each of the plants, the use of high-quality materials, strict compliance with applicable legal requirements and the Contractors’ financial stability. If the Contractors’ representations, warranties or undertakings are inaccurate or untrue, or if any of the Contractors or other entities fail to perform their obligations properly, this could result in the interruption or cessation of construction or operations or abandonment of the relevant plant, or may require significant expenses to mitigate the damages or repair them, any of which may cause us severe losses. In addition, we depend on the grid regulator for an approval of connection to the grid and for the ongoing ability to transmit electricity to the grid. In recent years, due to increased production and energy manufacturing facilities, the availability of connections to the grid has decreased and interruptions due to works performed on the grid or by other manufacturers have increased. For example, in June 2023 a curtailment of the electricity supply from our facilities to the grid resulted from maintenance and upgrade work on the main transmission line between Spain and Portugal, which led to a reduction in our revenues for the period.
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Our business is affected by the availability of financial incentives and supporting regulation. The reduction or elimination of government subsidies and economic incentives could reduce our profitability and our revenues. Many countries, such as Spain, Italy, the Netherlands, Israel and the United States, previously introduced substantial incentives to offset the cost of renewable energy facilities, including photovoltaic power systems and WtE technologies, in the form of Feed-in-Tariff, or FiT, regulatory tenders for fixed tariffs, green certificates, tax credits or other incentives aimed at promoting the use of clean energy (including solar energy and biogas) and reducing dependence on other forms of energy. In addition, several countries encourage manufacturers and farmers to choose environmentally-friendly waste management methods, either by establishing fines on non-environmentally friendly waste management methods or by payment of incentives. Certain of these government incentives were reduced or eliminated in the past years (for example with respect to solar installations in Italy and Spain) and the remaining incentives could potentially be reduced or eliminated in the future. In addition, on January 20, 2025, President Trump signed two executive orders: “Declaring a National Energy Emergency” and “Unleashing American Energy,” imposed a regulatory freeze and announced a withdrawal from the Paris Climate Agreement. Although the executive orders, calling, among other things for an immediate pause on clean energy-related federal disbursements do not impact tax credits granted to clean energy facilities such as our US solar projects, future actions of the Trump Administration could impact the availability, implementation and scope of tax credits and the development, construction and operation of clean energy facilities in the United States. If the governments in the countries in which we operate facilities entitled to incentives revise the existing incentive schemes to reduce incentives, or in case of future deterioration in the financial position of the local governments resulting in partial or no payment or in regulatory changes, it may adversely affect our profitability from projects that receive incentives.
The performance of our renewable energy plants depends on the quality of the equipment installed in such plants and on the reliability of the suppliers of spare and replacement parts. The performance of our renewable energy plants depends on the quality of the components of the plants and the equipment installed in the plants. Any defects or deterioration in the quality of such components and equipment could harm our results of operations, and if we will not be able to quickly locate quality replacement parts or perform repairs, our results of operations could be adversely affected for a long period of time. For example, the performance of our photovoltaic plants, or the Solar Plants, depends on the quality of the solar panels installed. Degradation in the performance of the solar panels above a certain level is guaranteed by the panel suppliers and we generally receive undertakings from the Contractors with respect to minimum performances. Therefore, a critical factor in the success of our Solar Plants is the existence of reliable solar panel suppliers, who guarantee the performance and quality of the solar panels supplied and their ability to provide us with replacement and spare parts of sufficient quality. If the suppliers of solar panels do not meet their undertakings under the guarantees and no replacement panels are available at a reasonable price, it could result in the interruption, cessation or abandonment of the relevant Solar Plant, or may require significant expenses to mitigate the damages or repair them, any of which may cause us severe losses.
In the event we are unable to comply with the obligations and undertakings, including with respect to financial covenants, which we undertook in connection with the project financing of our renewable energy plants, our results of operations may be adversely affected. In connection with the financing of some of our Solar Plants, our WtE plants, and the Manara PSP, we entered into long-term agreements with various financing entities and may in the future enter into additional project finance agreements in connection with projects currently under development. The financing agreements include, and future project finance agreements are expected to include, inter alia, undertakings and financial covenants, the majority of which are based on the ongoing cashflows derived from the relevant plant, which may be adversely affected by the various risks detailed herein. If we fail to comply with any of these undertakings and covenants, we may be subject to penalties, future financing requirements, and the acceleration of the repayment of debt. These occurrences would adversely affect our financial position and results of operations and our ability to obtain outside financing for other projects.
As a substantial part of our business is currently located in Europe, we are subject to additional risks that may negatively impact our operations. We currently have substantial solar operations in Spain and in Italy and WtE operations in the Netherlands and may make additional investments in projects located in Europe, such as the development and construction of additional solar plants in Spain and Italy. Due to these existing operations and any additional future investments, we are subject to special considerations or risks associated with companies operating in other jurisdictions, including rules and regulations, cross currency movements, different payment cycles, tax issues, such as variations in tax laws as compared to Israel, tariff, cultural and language differences, crime, strikes, riots, civil disturbances, terrorist attacks and wars and deterioration of political and economic relations with Israel, especially since the commencement of the Iron Swords war and the ongoing hostilities between Israel and Gaza, Lebanon and Iran. For example, the euro/NIS exchange rate has been volatile in recent years ranging from NIS 4.3168 for 1 euro in October 2023 to NIS 3.5 for 1 euro in April 2026. Our European operations subject us to a number of these risks, as well as the requirement to comply with the local laws, such as the Spanish, Italian, Dutch and EU laws, which could be burdensome to our operations. We cannot assure you that we would be able to adequately address some or all of these risks. If we were unable to do so, our operations might suffer.
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We may not be able to source land sufficient or suitable for the development of our projects. We do not own the land on which a substantial portion of the projects in our portfolio are located. The successful development of a renewable energy project requires obtaining rights, whether ownership or lease rights, to land suitable for the project, including among other features, its location, size, geological status and the ability to build, or proximity to, interconnection facilities and transmissions systems. Such land may not always be available to us at all or under acceptable terms and, if available, may require the execution of long-term leases or other long-term arrangements. The construction of our facilities requires substantial investments and efforts and as the majority of our projects are located on land owned by third parties, we are subject to risks in connection with such ownership, including disputes with landowners and with other third parties, such as creditors of the landowners. Any loss of rights to the land on which our projects are located or constructed could have a material adverse effect on our business, financial condition and results of operations. For example, in May 2024 the Italian government issued a new decree that prohibits the deployment of large-scale solar plants on productive agricultural land (the new provisions do not apply to projects currently undergoing the approval process).
Natural disasters, terrorist attacks, or other catastrophic events such as theft or fire could harm our operations. Our worldwide operations could be subject to natural disasters, terrorist attacks, public health events and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. Among others, fire, floods, storms, seismic turbulence and earth movements may damage our projects in operation or under construction. The insurance coverage we have for a portion of such risks may not cover the damage in full because these circumstances are sometimes deemed “acts of god.” In the event that an earthquake, fire, tsunami, typhoon, terrorist attack, or other natural, manmade or technical catastrophe were to damage or destroy any part of our plants or those of manufacturers on which we rely, destroy or disrupt vital infrastructure systems or interrupt our operations or services for any extended period of time, our business, financial condition and results of operations would be materially and adversely affected. For example, on July 20, 2024, a fire in the area between the Talasol Plant and the Ellomay Solar Plant, caused a short disconnection of parts of these facilities. These facilities gradually resumed operations, with the Ellomay Solar Plant currently operating at approximately a 100% level and the Talasol facility currently operating at an approximately 97% level. Although the main damages were covered by insurance, the fire and the repair process required significant management resources and the claim process with the insurance company is lengthy and proceeds for loss of revenues are paid only several months after the losses of revenues are incurred.
An increase in the prices or shortage of components of a renewable energy plant may adversely affect our projects under development, our future growth and our business. As the timing and progress of many of our projects depend upon the supply of photovoltaic cells and modules, the extent to which our operating results could be adversely impacted by these proceedings depends on (among other things) the demand for the components and materials, the type of materials, rates imposed and timing of the tariffs, and availability of alternative material sources and manufacturing locations. Installations of renewable energy plants have substantially increased over the past few years. The increased demand led to fluctuations in the prices of the components of the plants resulting from oversupply and undersupply. For example, the increased demand for solar panels resulted in substantial investments in solar panels production facilities, creating oversupply and a sharp continuing decrease in the prices of solar panels. However, a global crisis may effect global supply chains and put pressure on global supply chains with factory closures, import tariffs, shortages of raw materials and components, and shipping bottlenecks creating supply chain shortages and delays, thus may lead to price increases. Increased costs of replacing components in our existing plants and of constructing new plants, could potentially delay the commencement or completion of construction of new projects and may impact the profitability of constructing plants and our ability to expand our business. Also, shortages or delays to deliveries of vital components can result in construction and installations delays.
In addition, the price of components may be negatively affected by tariffs or adverse developments in trade relations among the United States, China, the European Union, Israel and other countries, including any actions that may be taken by other countries in retaliation. Tariffs, the adoption and expansion of trade restrictions, the occurrence or exacerbation of a trade war, or other governmental action related to tariffs, trade agreements or related policies could adversely affect our supply chain, access to equipment, costs and ability to economically serve certain markets. Further, pursuant to the America First Trade Policy and Reciprocal Trade and Tariffs memoranda under President Trump, several US agencies have been directed to review and identify unfair trade practices by other countries and recommend appropriate actions, and the outcome of such review could materially impact global trade relations, including the availability and prices of materials and components used in our facilities. Component and equipment prices could also be impacted by higher shipping and transportation costs, for example as a result of higher oil prices caused by the war in Iran.
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Moreover, any changes in government policy could result in a more aggressive posture towards international trade. Certain policies and statements of the prior and current US presidential administrations have given rise to uncertainty regarding the future of international trade agreements and the US’s position on international trade. For example, on April 2, 2025, President Trump issued an executive order (the Reciprocal Tariffs Executive Order or Executive Order) announcing a 10% baseline reciprocal tariff on nearly all US trading partners, effective April 5, 2025, and an additional individualized reciprocal tariff on 57 countries, effective April 9, 2025. On April 10, 2025, President Trump suspended the country-specific reciprocal tariff for all countries except China for a period of 90 days to allow for negotiations, leaving a 10% general tariff in place. The tariffs imposed on certain imports from China As by the Trump administration were up to 145%, which, when added to existing tariffs, amounted to a tariff of up to 245% on certain Chinese goods. In November 2025, the Trump administration executed a trade and economic deal with China that, among other things, extended the suspension of heightened reciprocal tariffs on Chinese imports and included an extension of the expiration of certain exclusions from the tariff obligations until November 2026. In addition, in July 2025, legislation commonly referred to as the One Big Beautiful Bill Act, or OBBBA, was enacted, which limits the ability to use components manufactured by certain foreign countries and entities in U.S. facilities.
While we do not believe that the tariffs will have a material adverse effect on projects under construction, new and existing tariffs could increase the price of raw materials or components required for our projects and materially impact the financial feasibility and profitability of our projects under development and projects we may seek to develop in the future.
The market for renewable energy is intensely competitive and rapidly evolving. The market for renewable energy attracts many initiatives and therefore is intensely competitive. The changes in the renewable energy field, such as the adoption of additional supporting legislation, combined with the impact of shortage of natural gas and other sources of energy, raised additional awareness and interest in the field by many market participants, including private and public companies, investment funds, institutional investors and others. For example, in recent years the Israeli Electricity Authority commenced issuing licenses to photovoltaic installations in tender processes resulting in a substantial decrease in prices per KWh in the newly issued licenses and our competitors, who strive to construct new renewable energy plants and acquire existing plants, may offer lower prices per KWh in future tender processes. Existing and future competition may also impact our ability to obtain project finance for our facilities. Our competitors may have established more prominent market positions, may have greater resources and may have more experience in this field than us. Extensive competition may adversely affect our ability to continue to acquire and develop new plants.
Undertakings to project lenders and financing third parties and indemnification claims by project lenders, tax credit buyers or other counterparties may restrict us or reduce our right to cash flows generated by a project and could result in a cross-default under project-level debt financing. Certain of our project companies that hold our operating or under-development projects may make representations, warranties and covenants to project lenders, tax credit buyers or other counterparties with respect to, among other things, fulfillment of obligations under construction contracts, schedule for construction and completion of projects, existence of permits, a project’s initial and continued eligibility for tax credits and the tax basis of those assets and accelerated tax depreciation. For example, to avoid the recapture of investment tax credits, we must keep the project in operational status for at least the first five years of operations and we cannot reduce our ownership of the project below a certain percentage during this period. These covenants and warranties may restrict our ability to execute certain actions that we would otherwise deemed to be for the benefit of the project company. In addition, if there is an excess credit transfer or recapture event, we may also be exposed to contractual indemnification obligations, guarantees, reimbursement undertakings or related claims. The potential exposure of the project companies in the event of a breach or claimed breach of such representations, warranties and covenants is significant. In certain cases, we or our subsidiaries provide guarantees or indemnification undertakings with respect to such breaches that could result in substantial liabilities. While we seek to secure project non-recourse debt for our projects, in certain cases we are unable to do so or unable to do so on favorable terms, and thus may obtain financing for such project company that includes full or partial recourse to us. Any such indemnity obligation by us or the project companies could impose material liabilities on us or our subsidiaries, and correspondingly have a material adverse effect on our business, financial condition and results of operations.
Our success depends in part on our senior management team and other key employees and our ability to attract, integrate and retain key personnel and qualified individuals. We depend on the expertise of our senior management team and other key employees to help us meet our strategic objectives. The inability to maintain our senior management team and other key employees or to attract highly skilled personnel, may materially adversely affect the implementation of our development business plan and could ultimately adversely impact our business.
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We do not wholly-own a few of our operating projects and projects under development. Although we currently control these projects, disagreements with our partners could cause delays in the construction or development of the projects or affect decisions made in connection with operating plants. We wholly-own all of our operating solar plants and the Netherlands’ WtE plants, except the Talasol Solar Plant, of which we hold 51%, and we own 83.333% of the Manara PSP. In June 2025, we sold 49% of a 198 MW Italian solar portfolio, or the Italian 198 MW Solar Portfolio to Clal Insurance Company Ltd., or Clal, and may in the future enter into projects that we do not wholly-own or introduce additional partners to the Manara PSP or other projects under development or to our operating plants. Although we control both the Talasol Solar Plant and the Manara PSP, and will control the Italian 198 MW Solar Portfolio, any disagreement with our partners could affect decisions made in connection with these projects and may require management resources and attention. Any damages caused due to such disagreements could adversely affect our business plans and results of operations.
We may be subject to disruptions or failures in information technology, telecommunication systems and network infrastructures that could have a material adverse effect on our business and financial condition. Our renewable energy business relies, among other things, on information technology and on telecommunication services as we remotely monitor and control our assets and interface with regulatory agencies and wholesale power markets. Disruptions or failures in such systems may result due to various causes, including internal malfunctions in our systems or in the systems of third parties such as suppliers, grid operators, governmental authorities, from employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents and may also result from cyber-attacks or other breaches of information technology security. The technological advancement, including the development of AI tools, has increased cybersecurity risks such as ransomware, phishing and social engineering attacks. Such disruptions could adversely affect our business operations, financial reporting, financial condition and results of operations.
Fluctuations in energy prices and the resulting changes in the fair value of financial instruments and assets may impact our financial results. Renewable energy manufacturers, such as our company, may execute financial power swaps or other offtake arrangements that fix the price of the all or part of the electricity manufactured by a plant. These instruments and the related assets or liabilities are recorded at fair value in our financial statements. Changes in electricity market prices generally cause a significant change in the fair value of assets or liabilities recorded in connection with these instruments and may result in decreases in our shareholders equity. For example, due to the significant fluctuations in electricity prices in Spain over recent years, the fair value of the liability recorded in connection with the Talasol PPA increased significantly during the year ended December 31, 2022 and then decreased significantly during the year ended December 31, 2024, impacting our other comprehensive income (loss), our liabilities and our shareholders’ equity (although these changes do not impact our cash flow, as the revenues of Talasol Solar S.L.U, or Talasol, from the sale of electricity during the same period are expected to exceed its liability and payments to the PPA provider). Future material fluctuations in the market price of electricity could have a material adverse impact on our financial results and further decrease our shareholders’ equity.
Risks Related to our Solar Plants
Our ability to produce solar power depends upon the magnitude and duration of sunlight as well as other meteorological and geographic factors.Solar power production has a seasonal cycle and requires prolonged and strong exposure to sunlight to meet the maximum production capacity. Adverse meteorological conditions, including sever weather conditions such as storms, extensive rain and winds, can damage our photovoltaic plants or materially impact the output of photovoltaic plants and result in production of electricity below expected output, which in turn could adversely affect our profitability. Lower electricity output due to changes in meteorological conditions and other geographic factors may adversely affect our profitability.
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Risks Related to our WtE (“biogas”) Plants
In addition to the risks involved in the construction and operation of, and the regulatory risks applicable to, renewable energy plants in general, WtE plants are exposed to risks specific to this industry. In addition to the risks detailed above under “Risks Related to our Renewable Energy Operations,” WtE plants are exposed to risks specific to this industry, including:
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Risks Related to our Israeli Operations
The Dorad Power Plant is located in the southern part of Israel, in proximity to the Gaza Strip and within range of missile and mortar bombs launched from the Gaza Strip. The Manara PSP is located the northern part of Israel, in proximity to the border with Lebanon. Any continuation or resurgence of the war and hostilities in Israel, which commenced on October 7, 2023, may pose a risk to such operations. The Dorad Power Plant is located in Ashkelon, a town in the southern part of Israel, in proximity to the Gaza Strip. In recent years, there has been an escalation in violence and missile attacks from the Gaza Strip to Southern and Central Israel. The Manara PSP is constructed in close proximity to Israel’s border with Lebanon, in an area that has also been attacked by missiles in the past. Due to the location of the Dorad Power Plant, Dorad has implemented various security measures to enable continued operations of the Dorad Power Plant during attacks on its premises. However, any further attacks to the area surrounding the Gaza Strip or the northern border of Israel or any direct damage to the location of the Dorad Power Plant or the Manara PSP may damage it and disrupt their operations, and may cause losses and delays. On October 7, 2023, the “Iron Swords” war broke out in Israel following an attack in southern Israel by Hamas. The war and hostilities, including missile attacks, mainly on southern and northern Israel, have continued since then, further escalating with a drone and missile attack by the Iranian regime in early April 2024 and in October 2024 and by the Houthis from Yemen. As a result of the attacks in northern Israel, the construction works on the Manara PSP site were halted in October 2023. A ceasefire commenced in Israeli’s northern border on November 27, 2024 and in Israel’s southern border on January 19, 2025 and the works on the Manara PSP were resumed by the EPC contractor on April 7, 2025 entering into a ramp-up period. In June 2025, a 12-day war between Israel and Iran broke out. In addition, commencing February 28, 2026, Israel and the United States have been engaged in a large-scale military campaign against Iran and on March 2, 2026, Hezbollah formally joined the war against Israel, attacking mainly northern Israel with rockets and missiles. Due to the ongoing hostilities in the area of the Manara PSP works on the upper and lower reservoir have stopped, however tunneling works continue according to schedule. During April 2026, a temporary ceasefire was agreed between Iran and Israel and the United States and thereafter (on April 17, 2026) a 10-day ceasefire between Israel and Lebanon, however fighting has since resumed in southern Lebanon and mainly northern Israel. Although we expect to receive compensation for certain damages, there is no assurance that the compensation will be fully or timely received and, even if received, that it will cover all or most of our direct and indirect damages as a result of the delays. Any breaches or termination of the ceasefire and future escalation of the war and hostilities in southern and northern Israel, including potential direct damage due to missile attacks, temporary or permanents cessation of operations and potential inability to access the sites, could materially adversely impact our Israeli operations and projects under development and our results of operations. In addition, any operations in Israel are impacted by the general security and economic conditions in Israel, any deterioration in the security or economic condition in Israel, including, but not limited to, due to war, terrorist attacks, recession or any other events that may cause a decrease in electricity consumption or electricity prices, may damage the facilities or the transmission of gas to the Dorad Power Plant or may adversely impact customers and may cause losses or delays.
The electricity sector in Israel is highly regulated. Any changes in the tariffs, system charges or applicable regulations may adversely affect our operations and results of operations. In addition, failure to obtain and maintain electricity production and supply licenses from the regulator could materially adversely affect our operations and results of operations. The Israeli electricity sector is subject to various laws and regulations, such as the tariffs charged and paid by Noga – Electricity System Management Ltd., which is a newly-formed Israeli government company managing the national electricity system, or the System Manager, and the Israeli Electric Company, or IEC, and the licensing requirement that apply to private manufacturers, such as Dorad, in which we indirectly hold 16.875%. The tariffs paid by Dorad in connection with the Dorad Power Plant to the System Manager for system operation services provided to Dorad and the fees received by Dorad from the System Manager for electricity sold to the IEC and for providing the IEC with energy availability, are all based on tariffs determined by the Israeli regulator. The updates and changes to the regulation and tariffs required to be paid to the IEC and to the System Manager by Dorad, or from the System Manager to Dorad, may not necessarily involve negotiations or consultations with Dorad and may be unilaterally imposed on it. Any changes in the tariffs, system charges or applicable regulations may adversely affect our operations and results of operations. In addition, a manufacturer of electricity in Israel, such as Dorad, the Manara PSP, and any other plant we may wish to develop, promote, construct, operate or acquire, is required to hold permanent licenses for production and supply, issued by the Israeli Electricity Authority, which include terms and conditions that could be revised in the future by the Israeli Electricity Authority, and which could be revoked under certain circumstances. In the event any manufacturer does not meet its obligations set forth in the licenses or in the event the Israeli Electricity Authority decides to impose additional restrictions or materially change the terms of the licenses, then, subject to its right to a hearing, such manufacturer may lose one or all of its licenses (production and supply) or their terms may be materially revised. Failure to maintain such licenses or a material revision to the terms of the licenses could adversely affect our results of operations.
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The electricity sector in Israel is highly centralized. The IEC controls and operates the electricity system and all stages of the transmission of electricity. The electricity sector in Israel is dominated by the IEC, which controls and operates the distribution and transmission of electricity, and is also the largest manufacturer of electricity in Israel. The System Manager, entered into an agreement with Dorad for the purchase of availability and electricity. Similarly, it is currently expected that the sole customer of the Manara PSP will be the System Manager, who will be required to pay the Manara PSP for availability and electricity produced. The ability of the System Manager to pay the renewable energy manufacturers could be affected by financial instability of the System Manager. The inability of the System Manager to pay Dorad, Talmei Yosef, the Manara PSP or any energy project we may be involved in in Israel, may adversely affect our plan of operations and could have a material adverse effect on our profitability.
Risks Related to our Investment in Ellomay Luzon Energy
We have joint control in Ellomay Luzon Energy, who, in turn, holds a minority stake in Dorad. Therefore, we do not control the operations and actions of Dorad. We currently hold 50% of the equity of Ellomay Luzon Energy (f/k/a U. Dori Energy Infrastructures Ltd.), who, in turn, holds 33.75% of Dorad and accordingly our indirect interest in Dorad is 16.875%. Although we entered into a shareholders’ agreement, or the Ellomay Luzon Energy Shareholders Agreement, with Ellomay Luzon Energy and the other shareholder of Ellomay Luzon Energy, Amos Luzon Entrepreneurship and Energy Group Ltd. (f/k/a U. Dori Group Ltd.), or the Luzon Group, providing us with joint control of Ellomay Luzon Energy, should differences of opinion as to the management, prospects and operations of Ellomay Luzon Energy arise, such differences may limit our ability to direct the operations of Ellomay Luzon Energy. Moreover, Ellomay Luzon Energy holds a minority stake in Dorad and as of the date hereof is entitled to nominate only one director in Dorad, which, according to the Ellomay Luzon Energy Shareholders Agreement, we are entitled to nominate. As we have two representative on the Dorad board of directors, which has a total of seven directors, we do not control Dorad’s operations. Therefore, as we have joint control over Ellomay Luzon Energy and very limited control over Dorad, we may be unable to prevent certain developments that may adversely affect their business and results of operations. Dorad’s shareholders were involved in various legal proceedings that reached a conclusion during 2024 and Dorad and its shareholders were involved in legal proceedings in connection with the potential expansion of the Dorad Power Plant and the exercise of a right of first refusal to purchase Dorad’s shares, all as more fully described in “Item 4.B: Business Overview” below. For more information concerning the separation process with respect to Ellomay Luzon Energy see “Item 4.A: History and Development of the Company” under “Recent Developments.” In addition, to the extent our interest in Ellomay Luzon Energy is deemed an investment security, as defined in the Investment Company Act of 1940, or the Investment Company Act, we could be deemed to be an investment company under the Investment Company Act, depending on the value of our other assets. Please see “We may be deemed to be an “investment company” under the Investment Company Act of 1940, which could subject us to material adverse consequences” below.
The Ellomay Luzon Energy Shareholders Agreement contains restrictions on our right to transfer our holdings in Ellomay Luzon Energy, which may make it difficult for us to terminate our involvement with Ellomay Luzon Energy. The Ellomay Luzon Energy Shareholders Agreement contains several restrictions on our ability to transfer our holdings in Ellomay Luzon Energy, including a right of first refusal. The aforesaid restrictions may make it difficult for us to terminate our involvement with Ellomay Luzon Energy should we elect to do so and may adversely affect the return on our investment in Ellomay Luzon Energy.
Our holdings in Ellomay Luzon Energy are pledged to the holders of our Series E Secured Debentures, which may limit our ability to sell such holdings or perform other actions that may be beneficial to us. On February 1, 2023, we issued a new series of secured nonconvertible debentures due March 31, 2029, or the Series E Secured Debentures. The Series E Debentures are secured by pledges on the shares of Ellomay Luzon Energy held by Ellomay Clean Energy Limited Partnership, or Ellomay Energy LP, a limited partnership directly and indirectly wholly-owned by us that holds Ellomay Luzon Energy’s shares, or Ellomay Energy LP, and on Ellomay Energy LP’s rights and agreements in connection with shareholder’s loans (and capital notes) provided by Ellomay Energy LP to Ellomay Luzon Energy. The Deed of Trust governing the Series E Secured Debentures includes several limitations and requirements applicable to our holdings in Ellomay Luzon Energy and additional provisions that may limit our ability to sell our holdings in Ellomay Luzon Energy or to revise arrangements with Ellomay Luzon Energy. For further information concerning the Deed of Trust governing our Series E Secured Debentures, issued on February 1, 2023, see “Item 5.B: Liquidity and Capital Resources” under “Series E Secured Debentures” and “Item 10.C: Material Contracts.”
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Dorad, which is the only substantial asset held by Ellomay Luzon Energy, operates the Dorad Power Plant, whose successful operations and profitability depends on a variety of factors, some of which are not within Dorad’s control. Dorad’s only substantial asset is the Dorad Power Plant, situated on the premises of the Eilat-Ashkelon Pipeline Company Ltd., or EAPC, located south of Ashkelon, Israel. The Dorad Power Plant is subject to various complex agreements with third parties (the IEC, the operations and maintenance contractor, suppliers, private customers, etc.) and to regulatory restrictions and guidelines in connection with, among other issues, the tariffs to be paid by the IEC to Dorad for the energy it produces. Various factors and events may materially adversely affect Dorad’s results of operations and profitability and, in turn, have a material adverse effect on Ellomay Luzon Energy’s and on our results of operations and profitability. These factors and events include:
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Risks Related to the Manara PSP
The Manara PSP currently holds a conditional license. Such conditional license may be revoked for various reasons, such as non-compliance with milestones stipulated in the conditional license. The Manara PSP currently holds a conditional license for the construction of a 156 MW pumped storage project, or the Manara PSP Conditional License, issued to it on June 17, 2020. Conditional licenses issued by the Israeli Electricity Authority include several milestones, and deadlines for completing such milestones, including the completion of the construction works of the pumped storage power plant. The Israeli Electricity Authority could revoke the Manara PSP Conditional License if Ellomay Pumped Storage (2014) Ltd., the project company of the Manara PSP, or Ellomay PS, does not timely meet the milestones included in it. Any such attempted revocation is subject to a written notice from the Israeli Electricity Authority, which is required to include the reasons for the proposed revocation, and to a hearing of Ellomay PS before the Israeli Electricity Authority. If the Manara PSP Conditional License is revoked in the future, it could prevent the completion of the Manara PSP, resulting in a loss of some or all the funds invested in the Manara PSP.
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The construction of the Manara PSP is a complex and unique engineering challenge. The construction process of the Manara PSP includes planning and conducting a comprehensive investigation to characterize the variety of soils and rocks at the construction sites. In accordance with the infrastructure characteristics and the seismic risks that exist on site, stability calculations need to be performed on the basis of which instructions are given for the planning and execution of the reservoirs. Any complications during the construction period of the Manara PSP could cause delays in the construction and could expose the Manara PSP to non-compliance with the terms of the Manara PSP Conditional License issued to it by the Israeli Electricity Authority and could otherwise materially adversely affect our results of operations in connection with the Manara PSP.
Risks Related to our Operations and our Structure
We depend on the Talasol Solar Plant for a substantial portion of our revenues and cash flows. We depend on the Talasol Solar Plant, and expect to continue to depend on the Talasol Solar Plant and other relatively large projects, for a substantial portion of our revenues and cash flows. The Talasol Solar Plant accounted for approximately 40.5% and 45.4% of our revenues for the years ended December 31, 2025 and 2024, respectively. As new projects reach commercial operation, our dependency on the Talasol Solar Plant is expected to reduce. However, this project, as well as other large projects such as the Manara PSP, are still expected to account for a substantial portion of our revenues and cash flows in the foreseeable future. Consequently, any damage or loss in connection with the Talasol Solar Plant could materially reduce our revenues and cash flows and, as a result, have a material adverse effect on our business, financial condition and results of operations.
Our ability to leverage and increase our operations depends, inter alia, on our ability to obtain attractive project and corporate financing from financial entities or to enter into other financing arrangements, including tax credit arrangements. Our ability to obtain attractive financing and the terms of such financing, including interest rates, equity to debt ratio requirement and timing of debt availability will significantly impact our ability to leverage our investments and enhance our operations and to fulfill our development plans. Although we have financing agreements with respect to several of our Solar Plants, WtE plants and the Manara PSP and although we raised significant funds in Israel through the issuance of debentures, there is no assurance we will be able to procure additional project financing, as applicable, for projects under development or any operations we will acquire or projects we wish to advance in the future, or to obtain additional corporate financing, on terms favorable to us or at all. In recent years, Israel and global markets experienced significant increases in interest rates, which impact the interest rates applicable to public and private debt financings. In addition, adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to bank failures and market-wide liquidity problems. The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our ability to obtain financing, and on our current and projected business operations and our financial condition and results of operations. Any instability in the banking and financing markets could limit the availability of funds for financing activities or result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. An increase in interest rates may also adversely impact the profitability and return on projects we consider, and may cause us to decide not to pursue certain business opportunities. In addition, we recently entered into the US solar market. We expect that our US solar projects will rely on third-party tax equity or tax credit funding, obtained through the sale of available tax incentives. No assurance can be given that tax equity investors or tax credit purchasers will be available or willing to acquire the tax credits on acceptable terms, that we will be able to sell the tax incentives through other markets or that the tax incentives and benefits will remain in place, especially following certain executive orders executed by President Trump. Our inability to obtain additional financing, through financing entities, or tax credit funding or otherwise, on favorable terms, or at all, may adversely affect our ability to leverage our investments and to procure the equity required in order to execute one or more projects or increase and further develop our operations and execute our business plan.
Our ability to freely operate our business is limited due to certain restrictive covenants contained in the deeds of trust of our Debentures.The deeds of trust governing our Series D Convertible Debentures, Series E Secured Debentures, Series F Debentures and Series G Debentures, or, together, the Deeds of Trust and the Debentures, respectively, contain restrictive covenants that limit our operating and financial flexibility. These covenants include, among other things, a “negative pledge” with respect to a floating pledge on all of our assets. The Deeds of Trust also contain covenants regarding maintaining certain levels of financial ratios and criteria, including as a condition to the distribution of dividends, as a trigger for an obligation to pay additional interest and as a cause for immediate repayment, and other customary immediate repayment conditions, including, under certain circumstances, in the event of a change of control, a default under the deed of trust of the other debentures issued by us, a change in our field of operations or a disposition of a substantial amount of assets. Our ability to continue to comply with these and other obligations depends in part on the future performance of our business. Such obligations may hinder our ability to finance our future operations or the manner in which we operate our business. In particular, any non-compliance with performance-related covenants and other undertakings of the Debentures could result in increased interest payments for some or all of the Debentures or a demand for immediate repayment of the outstanding amount under the Debentures and restrict our ability to obtain additional funds, which could have a material adverse effect on our business, financial condition or results of operations.
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Our debt increases our exposure to market risks, may limit our ability to incur additional debt that may be necessary to fund our operations and could adversely affect our financial stability. As of December 31, 2025, our total consolidated indebtedness in connection with corporate, project and other financing (including the total indebtedness of Talasol Solar Plant and the Italian 198 MW Solar Portfolio, of which we hold 51%, and of the Manara PSPs, of which we hold approximately 83.33%) was approximately €613.8 million, including principal and interest expected repayments, financing related swap transactions and excluding any related capitalized costs. The Deeds of Trust permit us to incur additional indebtedness, including by issuing additional debentures of the existing series of Debentures and issuing additional series of debentures, subject to maintaining certain financial ratios and covenants. Our debt, including the Debentures, and any additional debt we may incur, could adversely affect our financial condition by, among other things:
We may incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.Although the Deeds of Trust governing our Debentures contain conditions that may affect our ability to incur additional debt, mainly in connection with the issuance of additional debentures of the existing series of the Debentures and due to the potential impact of the additional debt on our compliance with the financial covenants included in the Deeds of Trust, these conditions are limited and we should be able to incur additional debt and enter into leveraged transactions, so long as we do not breach the financial covenants and meet these conditions. If new debt is added to our existing debt levels, the related risks that we face would intensify and we may not be able to meet all our debt obligations, including the obligations in connection with repayment of the Debentures.
We cannot assure you that our business will generate cash flow from operations or future borrowings from other sources in an amount sufficient to enable us to service our indebtedness, including the Debentures, or to fund our other liquidity needs. To service our indebtedness, we require a significant amount of cash. Our ability to make payments on, and to refinance our indebtedness, including the Debentures, to fund planned capital expenditures and to maintain sufficient working capital depends on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control. As such, we may be unable to generate sufficient cash to service the Debentures or our other indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, such as reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance all or a portion of our indebtedness, including the Debentures, on or before the maturity thereof. These efforts may not be successful and such failure could have a material adverse effect on our operations. We cannot assure you that we will be able to refinance any of our indebtedness, including the Debentures, on commercially reasonable terms or at all, or that the terms of that indebtedness will allow any of the above alternative measures or that these measures would satisfy our scheduled debt service obligations. If we are unable to generate sufficient cash flow to repay or refinance our debt on favorable terms, it could significantly adversely affect our financial condition, the value of our outstanding debt, including the Debentures, and our ability to make any required cash payments under our indebtedness, including the Debentures. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at that time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
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Our business results may be affected by currency and interest rate fluctuations and the hedging transactions we enter into from time to time in order to manage currency and interest rate related risks. We hold cash and cash equivalents, deposits and restricted cash and mainly in euro and NIS. Our holdings in our Solar Plants located in Spain and Italy and in the WtE plants located in the Netherlands are denominated in euro and our holdings in Ellomay Luzon Energy and in the Manara PSP are denominated in NIS. Our Debentures and the project finance obtained in connection with the Manara PSP are denominated in NIS and the interest and principal payments are to be made in NIS and the project finance obtained in connection with our projects in Europe (Spain and Italy) is denominated in euro. The financing for several of our Solar Plants bears interest based on EURIBOR rate. In addition, our holdings in our US solar projects is denominated in USD. Therefore, our repayment obligations and undertakings may be affected by adverse movements in the exchange and interest rates. We attempt to manage some of these risks by executing various swap interest and currency transactions as more fully explained in “Item 11: Quantitative and Qualitative Disclosures About Market Risk” below, therefore we do not eliminate these risks in their entirety. Swap transactions executed in an attempt to eliminate certain risks may also impact the results of our operations due to fluctuations in their value based on changes in the relevant exchange or interest rate.
We are incorporated and headquartered in Israel, and some of our projects under development are located in Israel, and therefore we are subject to potential adverse impact of political, economic and military instability in Israel and its region.
We are incorporated under the laws of the State of Israel, our principal offices are located in central Israel and our headquarters, management and most of our employees are located in Israel. In addition, the funding raised by us through equity or debt issuances was raised in the Israeli market and from Israeli investors and several of our projects under development, including the Manara PSP, are located in Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and prospects. Any armed conflicts, terrorist activities or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
In addition to the impact of the Iron Swords war and ongoing wars and hostilities in our region on our operating facilities and projects under development as set forth above under “Risks Related to our Israeli Operations,” we may be exposed to other risks related to the war due to the location of our headquarters in Israel, including the impact of the war on currency exchange rates, interest rates, the Israeli economy and consumer price index and potential trade curtailments, reputational damage, the labor market in Israel and adverse impact on our business relationship with foreign contractors, suppliers, partners, financing entities and other third-parties.
In addition, prior to the commencement of the hostilities and war in Israel, the Israeli government was pursuing extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed judicial changes, if adopted, may negatively impact the business environment in Israel, including due to reluctance of foreign investors to invest or conduct business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. In addition, since the announcement of the proposed changes, large protests have taken place and continue to take place in many cities in Israel. The proposed judicial changes may also adversely affect the labor market in Israel or lead to political instability or civil unrest. At this stage, where the proposed legislation has not become effective, and its scope is not fully determined, we cannot assess the possible impacts of these changes and their likelihood, however, to the extent that any of these negative developments do occur, they may have an adverse effect on our business, financial condition, results of operations and prospects and the market price of our shares, as well as on our ability to raise additional capital.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions. The Ukraine-Russia war led to global sanctions that have impacted the international economy, to a shortage and ensuing increase in price of natural gas and other forms of energy and electricity, shortages in raw materials, including in the materials comprising the feedstock used by our WtE plants, supply chain delays and an increase in the cost of transportation, impacting the cost of operations of our WtE plants, which depend on transportation of feedstock and residues. We cannot anticipate the length and continued impact of the ongoing military conflict. We are continuing to monitor the situation globally and assessing its potential impact on our business.
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Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreements to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
The continued military conflict between Russian and the Ukraine may adversely impact our operations in the future, including through the implementation of new regulation in the countries in which we operate, changes in the financial markets and availability of funds in Europe, shortages in raw materials and continued increase in delivery prices.
Our inability to effectively hedge interest rate, currency, electricity prices and other market-related risks may adversely affect our profitability.As noted above under “Our business results may be affected by currency and interest rate fluctuations and the hedging transactions we enter into from time to time in order to manage currency and interest rate related risks,” we are exposed to interest rate and exchange rate fluctuations and other risks. We use hedging instruments from time to time to manage interest rate, currency, exposure to electricity prices and other market-related risks. If any of the variety of instruments we use to hedge our exposure to these various types of risk is not effective, we may incur losses, which may have an adverse effect on our financial condition. The majority of our derivative contracts are OTC derivatives, i.e., derivative contracts that are not transacted on an exchange. These derivatives are entered into under ISDA Master Agreements. If a counterparty defaults on these contracts, the underlying exposure would no longer be effectively hedged, which could result in losses. In addition, there can be no assurance that we will continue to be able to hedge risks related to current or future assets or liabilities in an efficient manner or at all. Disruptions such as market crises and economic recessions may put a strain on the availability and effectiveness of hedging instruments.
Our corporate structure and intercompany arrangements are subject to increasingly complex tax laws of various jurisdictions and expose us to the enactment of legislation implementing changes in taxation of international business activities, or other changes in tax legislation or policies, which could adversely affect our business, financial condition, and results of operations.
We are an Israeli company and therefore subject to Israeli corporate income tax. Our operating subsidiaries are mostly registered outside of Israel. Therefore, we are also subject to taxation in several other jurisdictions around the world.
Tax laws in Israel and these other jurisdictions have grown increasingly complex, and the application thereof can be uncertain. In addition, we are subject to a variety of bilateral and multilateral tax treaties, which can change at any time, eliminating or reducing the tax treatment we currently enjoy. We utilize a variety of tax planning services to address this complexity, but there can be no assurance that we will remain in compliance in the jurisdictions in which we operate, which could subject us to the risk of tax enforcement actions.
The amount of taxes we pay in these jurisdictions could also increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. For example, the Organization for Economic Co-operation and Development (OECD), has put forth two proposals - Pillar One and Pillar Two, which revise the existing profit allocation and nexus rules (profit allocation based on location of sales versus physical presence) and ensure a minimal level of taxation, respectively. As of the date of this Report, more than 140 countries, including Israel and other countries in which we operate, have agreed to enact legislation on Pillar Two and to enforce a minimum global tax rate of 15%. During 2024, several countries adopted legislation based on Pillar One and Pillar Two, for example, on December 22, 2024, Spain enacted Law 7/2024 establishing a Global Minimum Corporation Tax in alignment with Pillar Two. In July 2024 the Israeli Ministry of Treasury published its intention to apply the Qualified Domestic Minimum Top-up Tax on the income of multinational companies with a residence in Israel and aggregate revenues of €750 million or more. These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. As the Pillar Two solution is subject to implementation by each member country, the timing and ultimate impact of any such changes on our tax obligations is uncertain.
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These and other legislative initiatives may materially and adversely affect our plans to expand and further develop our operations and may increase our tax liability and administrative expenses and may materially adversely affect our financial condition and results of operations.
Increased attention to, and evolving expectations for, environmental, social, and governance, or ESG, initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business. Companies across various industries are facing increasing scrutiny from a variety of stakeholders related to their ESG and sustainability practices. Expectations and requirements regarding voluntary ESG initiatives and disclosures and consumer demand for alternative forms of energy may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting and insurance), enhanced compliance or disclosure obligations, increased requirement for management attention, some or all of which could adversely impact our business, financial condition, or results of operations.
If we do not conduct an adequate due diligence investigation of a target project or if certain events beyond our control occur, we may be required to subsequently take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price. We must conduct a due diligence investigation of target projects that we intend to acquire or purchase an interest in. Intensive due diligence is time consuming and expensive due to the cost of the technical, accounting, finance and legal professionals involved in the due diligence process. Even if we conduct extensive due diligence on a target business, we cannot assure you that this due diligence will reveal all material issues that may affect a particular target project, or that factors outside the control of the target project and outside of our control will not later arise. If our due diligence review fails to identify issues specific to a target project, industry or the environment in which the target project operates, or if certain events or circumstances occur that are beyond our control, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in losses. Even though these charges may be non-cash items and may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our ordinary shares.
We are subject to organizational and legal risks associated with our complex corporate structure and global operations. Our corporate structure and operating model require coordination of business activities with multiple subsidiaries, joint ventures and partnerships across various jurisdictions as described elsewhere in this Annual Report. Failure to properly manage such business activities could have a material adverse effect on our business. In addition, our operations are subject to risks inherent in conducting business globally. In addition to the cross-border regulatory and legal risks described elsewhere in this Annual Report, our business is subject to risks associated with management communication and integration problems resulting from cultural and geographic dispersion. Compliance with laws and regulations applicable to our global operations also substantially increases our cost of doing business in foreign jurisdictions. If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, results of operations and financial condition may suffer. We may be unable to comply with changes in government requirements and regulations, which could harm our business.
Tax audits may result in an obligation to make material payments to tax authorities at the conclusion of these audits. We conduct our business globally (currently in Israel, Luxembourg, Italy, Spain, the Netherlands and the USA). Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable laws in the jurisdictions in which we file. Not all of the tax returns of our operations in other countries and in Israel are final and we may be subject to further audit and assessment by the applicable tax authorities. Such audits often result in proposed assessments and any estimation of the potential outcome of an uncertain tax issue is a matter for judgment, which can be subjective and highly complex. While we believe we comply with applicable tax laws and that we provided adequately for any reasonably foreseeable outcomes related to the tax audit, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes, as a result of which our future results may be adversely affected. Although we believe our estimates to be reasonable, the ultimate outcome of such audits, and of any related litigation, could differ materially from our provisions for taxes, which may have a material adverse effect on our consolidated financial statements.
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Our failure to maintain effective internal controls over financial reporting could materially adversely affect our reported financial information and the market price of our ordinary shares. We are characterized as an “accelerated filer” under the US Securities Law. Among other things, this characterization imposes a requirement that our registered public accounting firm issue an attestation report as to our internal control over financial reporting in connection with the filing of the Annual Report on Form 20-F for each fiscal year. Our efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 have resulted in increased general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of resources. We cannot predict the outcome of our testing in future periods. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we or our registered public accounting firm can conclude on an ongoing basis that we have effective internal controls over financial reporting. Failure to maintain effective internal controls over financial reporting could result in investigation or sanctions by regulatory authorities, and could have a material adverse effect on our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.
We are subject to risks associated with legal or administrative proceedings that could materially affect us. We are subject to risks and costs associated with lawsuits, claims or administrative proceedings. The result and costs of defending any such proceedings or claims, regardless of the merits and eventual outcome, may be material. Any such proceedings or claims could also materially delay our ability to complete construction of a project in a timely manner or at all, or could otherwise materially adversely affect a completed project’s operations. Further, we have little control over whether third-party claims will be brought by one or more third parties, including public and private landowners, purchasers of electricity or green certificates, equipment suppliers, construction firms, labor unions, and O&M and other service providers or their employees or contractors. Defending litigation, delays caused by litigation, and the costs of settling or other unfavorable outcomes, including judgments for monetary damages, injunctions, or denial or revocation of permits, could have a material adverse effect on our business, financial condition and results of operations.
We could be negatively impacted by violations of applicable anti-corruption laws or violations of our internal policies designed to ensure ethical business practices. We operate in a number of countries throughout the world. We are subject to the risk that we, any of our employees or any of our consultants located in various jurisdictions, or any third parties that provide us services may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the U.S. Foreign Corrupt Practices Act, or FCPA. The FCPA generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments, offers or promises to foreign officials for the purpose of obtaining or retaining business or other advantages. In addition, the FCPA imposes recordkeeping and internal controls requirements on publicly traded corporations and their foreign affiliates, which are intended to, among other things, prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. We will face significant risks if we fail to comply with the FCPA and other laws that prohibit improper payments, offers or promises of payment to foreign governments and their officials and political parties by us and other business entities for the purpose of obtaining or retaining business or other advantages. Any violation of the FCPA or any similar anti-corruption law or regulation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and might harm our business, financial condition, or results of operations.
We may be deemed to be an “investment company” under the Investment Company Act of 1940, which could subject us to material adverse consequences. We could be deemed to be an “investment company” under the Investment Company Act if we invest more than 40% of our assets in “investment securities,” as defined in the Investment Company Act. Investments in securities of majority owned subsidiaries (defined for these purposes as companies in which we control 50% or more of the voting securities) are not “investment securities” for purposes of this definition. As our interest in Ellomay Luzon Energy is not considered an investment in majority owned securities, unless we maintain the required portion of our assets under our control, limit the nature of the requisite portion of our investments of our cash assets to cash and cash equivalents (which are generally not “investment securities”), succeed in making additional strategic “controlling” investments and continue to monitor our investment in Ellomay Luzon Energy, we may be deemed to be an “investment company.” We do not believe that our holdings in our Solar Plants or WtE plants would be considered “investment securities,” as we control our Solar Plants (other than the Talasol Solar Plant) and our WtE plants via wholly-owned subsidiaries. In addition, despite minority holder protective rights granted to the minority shareholders of the Talasol Solar Plant and the Manara PSP, including several rights which effectively require the unanimous consent of all shareholders, we believe that our interests in the Talasol Solar Plant and the Manara PSP do not constitute “investment securities” given, among other things, our majority shareholder and board membership status in the project companies. We do not believe that the current fair value of our holdings in Ellomay Luzon Energy (all as more fully set forth under “Business” below) and other relevant assets, all of which may be deemed to be “investment securities,” would result in our being deemed to be an “investment company.” If we were deemed to be an “investment company,” we would not be permitted to register under the Investment Company Act without an order from the SEC permitting us to register because we are incorporated outside of the United States and, prior to being permitted to register, we would not be permitted to publicly offer or promote our securities in the United States. Even if we were permitted to register, it would subject us to additional commitments and regulatory compliance. Investments in cash and cash equivalents might not be as favorable to us as other investments we might make if we were not potentially subject to regulation under the Investment Company Act. We seek to conduct our operations, including by way of investing our cash and cash equivalents, to the extent possible, so as not to become subject to regulation under the Investment Company Act. In addition, because we are actively engaged in exploring and considering strategic investments and business opportunities, and in fact the majority of our investments to date (mainly in the Italian, Spanish, US and Israeli photovoltaic power plants markets, in the Netherlands’ WtE market and in the Israeli pumped hydro storage market) were made through a controlling investment, we do not believe that we are currently engaged in “investment company” activities or business. These strategies may force us to pursue less than optimal business strategies or forego business arrangements and to forgo certain cash management strategies that could have been financially advantageous to us and to our financial situation and business prospects.
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We may be characterized as a passive foreign investment company. Our U.S. Holders may suffer adverse tax consequences. Under the passive foreign investment company or “PFIC” rules, for any taxable year that our passive income or our assets that produce passive income exceeds specified levels, we will be characterized as a PFIC for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences for our U.S. Holders (as defined below), which may include having certain distributions on our ordinary shares and gains realized on the sale of our ordinary shares treated as ordinary income, rather than as capital gains income, and having potentially punitive interest charges apply to the proceeds of sales of our ordinary shares and certain distributions.
Certain elections may be made to reduce or eliminate the adverse impact of the PFIC rules for our U.S. Holders, but these elections may be detrimental to such U.S. Holders under certain circumstances. The PFIC rules are extremely complex and U.S. Holders are urged to consult independent tax advisers regarding the potential consequences to them of our classification as a PFIC.
Based on our income and/or assets, we believe that we were a PFIC with respect to any U.S. Holder that held our shares in 2008 through 2012. We also believe, based on our income and assets, that it is likely that we were not a PFIC with respect to U.S. Holders that initially acquired our ordinary shares in 2013-2025. However, the Internal Revenue Service may disagree with our determinations regarding our prior or present PFIC status and, depending on future events, we could become a PFIC in future years.
Our PFIC status is a factual determination that must be made annually, and U.S. Holders that held our ordinary shares during any year in which we were or may have been classified as a PFIC should generally be subject to different tax consequences than U.S. Holders that acquired our ordinary shares in later years. For a more detailed discussion of the consequences of our being classified as a PFIC, see “Item 10.E: Taxation” below under the caption “U.S. Tax Considerations Regarding Ordinary Shares.”
Risks Relating to our Ordinary Shares and Ownership Structure
We are controlled by one controlling shareholder, who may make decisions with which you may disagree and which may also prevent a change of control via purchases in the market. On March 4, 2026, shareholders holding an aggregate of approximately 45.85% of our outstanding ordinary shares sold their holdings to O.Y. Nofar Energy Ltd., an Israeli public company traded on the Tel Aviv Stock Exchange, or Nofar. Due to its holdings, Nofar could exercise significant influence over our business, including with respect to the election of our directors and other material transactions and issues presented to our shareholders for approval. This concentration of control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interest.
You may have difficulty enforcing U.S. judgments against us in Israel. We are organized under the laws of Israel and our headquarters are in Israel. All of our officers and directors reside outside of the United States. Therefore, it may be difficult to effect service of process upon us or any of these persons within the United States. In addition, you may not be able to enforce any judgment obtained in the U.S. against us or any of such persons in Israel and in any event will be required to file a request with an Israeli court for recognition or enforcement of any non-Israeli judgment. Subject to certain time limitations, executory judgments of a United States court for liquidated damages in civil matters may be enforced by an Israeli court, provided that: (i) the judgment was obtained after due process before a court of competent jurisdiction, that recognizes and enforces similar judgments of Israeli courts and according to the rules of private international law currently prevailing in Israel, (ii) adequate service of process was effected and the defendant had a reasonable opportunity to be heard, (iii) the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel, (iv) the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties, (v) the judgment is no longer appealable, and (vi) an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the foreign court. If a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency. You may not be able to enforce civil actions under U.S. securities laws if you file a lawsuit in Israel.
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We may rely on certain Israeli “home country” corporate governance practices which may not afford shareholders the same protection afforded to stockholders of U.S. companies. As a foreign private issuer for purposes of U.S. securities laws, NYSE American LLC rules allow us to follow certain Israeli “home country” corporate governance practices in lieu of the corresponding NYSE American LLC corporate governance rules. Such home country practices may not afford shareholders the same level of rights or protections in certain matters as those of stockholders of U.S. domestic companies. To the extent we are entitled to elect to follow Israeli law and practice rather than corresponding U.S. law or practice, such as with regard to the requirement for shareholder approval of changes to option plans, our shareholders may not be afforded the same level of rights they would have under U.S. practice. For more information see “Item 16.G: Corporate Governance.”
We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects. We are a foreign private issuer and, as a result, are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and/or less frequent than those of U.S. domestic reporting companies. For example, as a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements. While our officers and directors are, effective March 18, 2026, required to make insider reports under Section 16(a) of the Exchange Act, our principal shareholders are exempt from the reporting under Section 16(a) of the Exchange Act, and our directors, officers and principal shareholders continue to be exempt from the short-swing profit recovery provisions contained in Section 16(b) of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act. In accordance with the NYSE American Company Guide, as a foreign private issuer, we are required to submit on Form 6-K an interim balance sheet and income statement as of the end of the second quarter of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status or certain exemptions applicable to foreign private issuers in the future, which could result in significant additional costs and expenses. As noted above, we qualify as a foreign private issuer, and therefore, we are exempt from certain periodic disclosures and current reporting requirements under the Exchange Act. The determination of foreign private issuer status is made based on ownership of equity securities by US residents and certain other tests annually on the last business day of an issuer’s most recently completed second fiscal quarter. Furthermore, on June 4, 2025, the SEC published a Concept Release highlighting potential amendments to the foreign private issuer definition, such as updating eligibility requirements or adding foreign stock exchange trading volume and listing criteria. If we lose our status as a foreign private issuer due to new requirements adopted by the SEC or because we no longer meet the current definition, or if certain of the exemptions currently available to foreign private issuers will be cancelled or limited, we could be required to file periodic reports and registration statements with the SEC on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer and are required to be filed more frequently, on a quarterly basis. We would also have to mandatorily comply with U.S. federal proxy requirements and we would lose our ability to rely upon exemptions from certain corporate governance rules of the NYSE American. These additional reporting requirements will cause us to incur significant additional legal, accounting and other expenses that we do not incur as a foreign private issuer.
The rights and responsibilities of our shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law. We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our memorandum and articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, each shareholder of an Israeli company has a duty to act in good faith in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides that these duties are applicable in shareholder votes on, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and interested party transactions requiring shareholder approval. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. Because Israeli corporate law has undergone extensive revisions in recent years, there is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
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You may be diluted by the future issuance of additional ordinary shares, among other reasons, for purposes of carrying out future acquisitions, financing needs, and also as a result of our incentive and compensation plans. We have one series of warrants (Series 2), exercisable into 1,020,000 ordinary shares at a price of NIS 80 per share, and one series of convertible debentures (Series D), currently convertible into 375,757 ordinary shares at a price of NIS 165 per share, listed on the Tel Aviv Stock Exchange, or TASE. We also issued warrants to Clal in connection with its investment in the Italian Solar Portfolio and issued options to employees and directors under equity compensation plans. In the event some or all of our Series 2 Warrants are exercised, or some or all of our Series D Convertible Debentures are converted, or some or all of our other convertible securities are exercised, you may experience dilution of your percentage of holdings in our ordinary shares. We may also choose to raise additional equity capital in the future for various reasons and purposes. The issuance of any additional ordinary shares in the future, or any securities that are exercisable for or convertible into our ordinary shares, will have a dilutive effect on our shareholders as a consequence of the reduction in percentage ownership.
Our ordinary shares are listed on two markets, and this may result in price variations that could affect the trading price of our ordinary shares. Our ordinary shares are listed on the NYSE American LLC and on the TASE, both under the symbol “ELLO.” Trading in our ordinary shares on these markets is made in different currencies (U.S. dollars on the NYSE American LLC and New Israeli Shekels on the TASE), and at different times (due to the different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the trading price of our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other market.
We have not paid a cash dividend or executed a buyback of a substantial number of shares since 2016 and there is no assurance we will do so in the future. We have not paid any cash dividends or announced a share buyback plan since 2016. Future dividends or future share buyback plans will depend on our earnings, if any, capital requirements, general financial condition and applicable legal and contractual constraints in connection with distribution of profits, and will be within the discretion of our then-board of directors. There can be no assurance that any additional dividends will be paid or share buyback programs adopted, as to the timing or the amount of the dividends or share buyback programs, or as to whether our Board of Directors will elect to distribute our profits by means of share repurchases or a distribution of a cash or other dividend. In addition, the terms of the deeds of trust governing our Debentures restrict our ability to made “distributions” (as such term is defined in the Israeli Companies Law, 1999, as amended, or the Companies Law, which includes cash dividends and repurchase of shares). For more information see “Item 4.A: History and Development of Ellomay,” “Item 5.B: Liquidity and Capital Resources” and “Item 8.A: Financial Information; Consolidated Statements and Other Financial Information; Dividends” below.
Our stock price has been very volatile in the past and may in the future be volatile, which could adversely affect the market liquidity of our ordinary shares and our ability to raise additional funds. The market liquidity and analyst coverage of our ordinary shares is limited. Our ordinary shares have experienced substantial price volatility in the past, particularly during periods of very limited volume of trading in our ordinary shares resulting in every transaction performed significantly influencing the market price. Although our ordinary shares are listed both on the NYSE American LLC and on the TASE, there is still limited liquidity, and combined with the general economic and political conditions, these circumstances cause the market price for our ordinary shares to continue to be volatile. The continuance of such factors and other factors relating to our business may materially adversely affect the market price of our ordinary shares in the future and could result in lower prices for our ordinary shares than might otherwise prevail and in larger spreads between the bid and asked prices for our ordinary shares. These issues could materially impair our ability to raise funds through the issuance of our ordinary shares in the securities markets.
Provisions of Israeli law may delay, prevent or make difficult an acquisition of Ellomay or a controlling position in Ellomay, which could prevent a change of control and, therefore, depress the price of our shares. Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to some of our shareholders. These provisions of Israeli law may delay, prevent or make difficult an acquisition of Ellomay, which could prevent a change of control and therefore depress the price of our shares.
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ITEM 4: Information on Ellomay
Our legal and commercial name is Ellomay Capital Ltd. Our office is located at 18 Rothschild Boulevard, 1st floor, Tel-Aviv 6688121, Israel, and our telephone number is +972-3-7971111. Our registered agent in the United States is CT Corporation System, 111 Eight Avenue, New York, New York 10011.
We were incorporated as an Israeli corporation under the name Nur Advertisement Industries 1987 Ltd. on July 29, 1987. On August 1, 1993, we changed our name to NUR Advanced Technologies Ltd., on November 16, 1997 we again changed our name to NUR Macroprinters Ltd. and on April 7, 2008, in connection with the closing of the sale of our business to HP, we again changed our name to Ellomay Capital Ltd. Our corporate governance is controlled by the Companies Law.
Our ordinary shares are currently listed on the NYSE American LLC and are also listed on the Tel Aviv Stock Exchange under the trading symbol “ELLO” pursuant to the Israeli regulatory “dual listing” regime that provides companies whose securities are listed both in the NYSE American LLC and the TASE certain reporting leniencies.
Recent Developments
The “Iron Swords” War and Ongoing Wars and Hostilities in Israel
On October 7, 2023, the “Iron Swords” war broke out in Israel following an attack in Southern Israel by Hamas. The war and hostilities, including missile attacks, mainly on southern and northern Israel, have continued since then, further escalating with a drone and missile attack by the Iranian regime in early April 2024 and in October 2024 and by the Houthis from Yemen. A ceasefire commenced in Israeli’s northern border on November 27, 2024 and a temporary ceasefire commence in Israel’s southern border on January 19, 2025 but military actions have been resumed since then. In June 2025, a 12-day war between Israel and Iran broke out. In addition, on February 28, 2026, Israel and the United States commenced a large-scale military campaign against Iran and on March 2, 2026, Hezbollah formally joined the war against Israel, attacking mainly northern Israel with rockets and missiles. During April 2026, a temporary ceasefire was agreed between Iran and Israel and the United States and thereafter (on April 17, 2026) a 10-day ceasefire between Israel and Lebanon, however fighting has since resumed in southern Lebanon and mainly northern Israel. The substantial majority of our operating facilities, which serve as our main sources of liquidity, are located outside of Israel, in Spain, Italy and the Netherlands. The substantial majority of the projects under development of the Company are also located outside of Israel, in Italy and in the USA. These facilities and projects have not been impacted by the war and hostilities in Israel. Our headquarters are located in Tel Aviv, which is in central Israel, and our headquarter work continued uninterrupted throughout the initial war and hostilities.
The Company has two assets that are currently operating or under construction in Israel: (i) the Pumped Storage Project in the Manara Cliff (83.34% owned by the Company, in northern Israel), and (ii) the Dorad Power Plant (16.875% owned by the Company, in southern Israel). The Dorad Power Plant has not been materially impacted by the war and is currently fully operational. For a discussion of the impact on the Manara PSP, see below under “Projects under Development or Construction; The Manara PSP.” Any continued or future escalation of the war and hostilities in southern and northern Israel, including potential direct damage due to missile attacks, temporary or permanents cessation of operations and potential inability to access the sites, could materially adversely impact our Israeli operations and projects under development and our results of operations.
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Projects under Development or Construction
The Manara PSP
The construction of the Manara PSP commenced in April 2021. We and Ampa Ltd., Manara PSP’s other shareholder, invested the equity required for the Manara PSP (not including indexation), with the remainder of the funding received from a consortium of lenders led by Mizrahi Tefahot Bank Ltd., at a scope of approximately NIS 1.27 billion. This aggregate amount is linked to a synthetic composite index comprising a weighted average of the indices and currencies applicable to the Manara PSP’s construction costs.
Due to the “Iron Swords” war, which also affects the northern area of Israel in proximity to the Lebanon border, works on the Manara PSP site were suspended in early October 2023. Efforts have since focused on accelerating design activities to mitigate potential delays, while manufacturing of the main equipment, including electro-mechanical equipment, is proceeding as planned. The ramp-up activities at the site commenced on April 7, 2025. Following the March 2026 war between the United States and Israel and Iran, and due to the ongoing hostilities in the area of the Manara PSP, work on the upper and lower reservoir have stopped, however tunneling works continue according to schedule. The State of Israel protects the project in situations that may be considered force majeure, such as the current war. This protection is provided under the framework of the tariff regulation (financing support standards). The project is expected to receive remedies for schedule or budget overruns caused by such situations. Originally, the project was planned to become commercially operational in the first half of 2027. However, due to the ongoing war, the operation date will be delayed. The construction period is currently expected to be extended by the sixteen-month regulatory extension and an additional period of several months required for the ramp-up of the contractor’s operations.
For more information, see “Item 4.B: Business Overview” under the heading “Pumped Storage Project in the Manara Cliff in Israel.”
The construction of the Manara PSP and the connection of this project to the grid are subject to risks and uncertainties. For more information concerning these and other risks see under “Item 3.D: Risk Factors - Risks Related to our Business.”
Solar Projects under Development
Italian 198 MW Solar Portfolio Held Jointly with Clal – Transaction with Clal and PPA
The Italian 198 MW Solar Portfolio consists of: (i) solar facilities with an installed capacity of an aggregate of 19.8 MW and 18.1 MW that were connected to the grid in February-May 2024 and in January 2025, respectively, and (ii) solar projects with an aggregate installed capacity of approximately 160 MW that are under construction. All of these projects are located in the Lazio, Piemonte and Marche Regions, Italy. In addition, we have solar projects in Italy that are wholly-owned by us that have reached Ready-to-Build and are under development as detailed below under “Additional Solar Projects under Development” and “Fer X Tender Wins – Italian Solar Projects.”
In June 2025, we consummated the investment transaction with Clal in the Italian 198 MW Solar Portfolio. In consideration for its undertaking to invest approximately €52 million in the Italian solar portfolio, Clal received a 49% interest in the portfolio (including outstanding shareholder’s loans, capital notes and equity). The entire amount was received during 2025. As we continue to direct the operations of the Italian 198 MW Solar Portfolio, and the rights granted to Clal are protective minority rights, this transaction did not result in a loss of control and was accounted for as an equity transaction. We therefore recognized in equity (transaction reserve with non-controlling interests) an amount of approximately €9.1 million (net of taxes in the amount of approximately €0.9 million). Tax benefit was recorded in profit and loss in connection with the utilization of current losses to offset such taxes amounting to approximately €0.9 million.
Pursuant to the Clal Agreement, we and Clal set up a new Israeli limited partnership, or the Israeli LP, in which an entity wholly-owned by us is the general partner and we hold 51% of the limited partner interests and Clal holds the remaining 49%. The Israeli LP wholly-owns a newly founded Luxembourg entity, to which Ellomay Luxembourg transferred all of the issued and outstanding shares, capital reserves and shareholder loans of seven Italian project companies, who hold the Italian 198 MW Solar Portfolio. The Clal Agreement includes customary representations and warranties of us and Clal and an indemnification mechanism for breaches of representations, warranties and undertakings, subject to customary caps and limitations, as a sole remedy, subject to customary exceptions. The Clal Agreement provides Clal with a right of first look commencing with the consummation of the transactions contemplated by the Clal Agreement with respect to investment in other solar projects currently developed or that will be developed by us in Italy for an investment under similar terms as the Clal Agreement, mutatis mutandis. Pursuant to the right of first look mechanism, we will provide Clal certain information with respect to each project that has reached Ready-to-Build status and we decide to advance its construction, and Clal will have a few months to notify us that it is interested in investing up to 49% in such projects or any portion thereof upon the terms set forth in the notice provided to Clal by us.
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Upon consummation of the transactions contemplated by the Clal Agreement, we and Clal entered into a partners agreement, or the Clal PA and issued Clal a warrant, or the Clal Warrant.
The Clal PA sets forth the relationship between the general partner and the limited partners, the governance and management of the Israeli LP, the funding and financing of the Israeli LP and the mechanism for future transfers of interests in the Israeli LP. Pursuant to the Clal PA, Clal undertakes to provide its pro rata portion of the amounts required for the development and construction of the Italian 198 MW Solar Portfolio to the Israeli LP, which in turn will fund the Luxembourg subsidiary and the Italian project companies. Our aggregate funding commitment in the Italian 198 MW Solar Portfolio has already been provided by us. The Clal PA also provides for the payment of annual management fees to us. The Clal PA provides each limited partner with customary rights, including a full tag-along right in the event of a change in our control and includes customary veto rights. The Clal PA provides that following repayment of partners’ loans, the Israeli LP’s surpluses will be distributed to the limited partners, pro rata to their holdings, on a semi-annual basis, subject to maintaining the working capital required by the Israeli LP for the two following quarters.
Upon consummation of the transaction with Clal, we issued Clal a warrant initially exercisable for 416,000 of our ordinary shares, at an exercise price of NIS 69.7 (currently approximately €18.6) per share, or the Clal Warrant. The Clal Warrant is for a term of twenty-six months and may only be exercised on a cashless basis. In the event our shares are traded at a price higher than NIS 80 (currently approximately $26.8) per share when the Clal Warrant is exercised, we, at our discretion, may choose to issue shares on a cashless basis assuming a market price per share of NIS 80 and pay Clal the remainder in cash. As the exercise price is denominated in NIS, the option constitutes a liability and is revalued and recognized at fair value in each reporting period. As of the closing date the value of the Clal Warrant was approximately €0.5 million and as of June 30, 2025, the Clal Warrant was valued at approximately €1 million.
In July 2025, three Italian project companies that are included in the Italian 198 MW Solar Portfolio signed long-term (9-year) power purchase agreements, or PPAs, with Statkraft, Europe’s largest generator of renewable energy. The PPAs cover 75% of the capacity (at P50) of three operating solar plants in Italy’s central-southern zone (CSUD), with a combined capacity of approximately 38 MW.
Fer X Tender Awards – Italian Solar Projects
In December 2025, Ellomay Solar Italy Eleven S.r.l., or Ellomay 11, which is an Italian project company 100% indirectly owned by us that owns a Ready-to-Build solar project located in the Friuli-Venezia Giulia Region in Italy with a peak capacity of 79.5 MWp, was informed that it has been awarded a tariff in Italy’s Transitional FER X national competitive tender, securing support for 75% of the project’s capacity. The Ellomay 11 project has an expected annual generation (P50) of approximately 119,300 MWh, leveraging energy specific yield of 1,501 kWh/kWp. The tariff awarded to the project in the FER X tender is an operating fixed price of €55.1/MWh, to which a €10/MWh regional supplement applies, resulting in a total supported price of €65.1/MWh.
The FER X tender award entails a 20-year two-way Contract for Difference, or CfD, providing long-term price stability for 75% of Ellomay 11’s total production, while the remaining 25% will be sold under merchant pricing, preserving meaningful upside exposure to market price movements. The awarded tariff is indexed at 100% from the tender publication date in July 2025 until the project’s commercial operation date, or COD, and following COD the tariff is 20% indexed to the Italian CPI, further enhancing revenue resilience and predictability over the contract period. In addition, the project will be eligible to receive Guarantees of Origin certificates, or GoOs, which are expected to be tradeable.
Also in December 2025, Ellomay Solar Italy Fourteen S.r.l., or Ellomay 14, which is an Italian project company 100% indirectly owned by us that owns a Ready-to-Build solar project located in the Piemonte Region in Italy with a peak capacity of 20 MWp, was informed that it has been awarded a tariff in Italy’s Transitional FER X “NZIA” national competitive tender for solar plants using non-Chinese components, securing support for 80% of the project’s capacity. The Ellomay 14 project has an expected annual generation (P50) of approximately 32,200 MWh. The FER X “NZIA” tender awarded the Ellomay 14 project an operating fixed price of €68/MWh, to which a €10/MWh regional supplement applies, resulting in a total supported price of €78/MWh.
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The FER X “NZIA” tender award entails a 20-year two-way CfD, providing long-term price stability for 80% of Ellomay 14’s total production, while the remaining 20% will be sold under merchant pricing, preserving meaningful upside exposure to market price movements. The awarded tariff is indexed to the Italian CPI at 100% from the tender publication date in September 2025 until the project’s COD and following COD the tariff is 20% indexed to the Italian CPI, further enhancing revenue resilience and predictability over the contract period. In addition, the project will be eligible to receive GoOs, which are expected to be tradeable.
Texas, USA, Solar Portfolio
We currently own three operating solar plants with an aggregate capacity of approximately 38 MW, which connected to the grid during the second and third quarters of 2025 (the Fairfield, Malakoff and Talco projects), and one additional project with a capacity of approximately 11 MW that commenced commercial operation in April 2026 (the Mexia project). An additional project with a capacity of approximately 14 MW (the Hillsboro project) is currently under construction.
Ellomay Solar Project in Spain
Ellomay Solar, which currently owns a 28 MW Solar Plant in Spain, is developing a hybridization Project in accordance with the terms foreseen in the Spanish Royal Decree-Law 23/2020 of June 2020, for which it received a permit for incorporating 10 MW battery storage in April 2026. Ellomay Solar is in the process of increasing the license to a capacity of 22 MW and submitted a request for permit to charge the batteries with electricity from the grid.
Additional Solar Projects under Development
In addition to the Italian 198 MW Solar Portfolio, and the portfolio of Israeli and US solar projects, we have solar projects under various development stages as follows: (i) under advanced development stages (including, for example, projects that have reached ready to build status) – approximately 262 MW in Italy (including Ellomay 11 and Ellomay 14); and (ii) in early development stages – approximately 800 MW in Italy, US, Spain and Israel.
The advancement and development of all projects under development is subject to the projects reaching several milestones, including receipt of regulatory approvals and authorizations, procurement of land rights, obtaining financing, commencement and completion of construction and connection to the grid, and to various risks and uncertainties applicable to projects under development and construction as more fully set forth under “Item 3.D: Risk Factors” above. In addition, we will require additional funding to fund the equity investment required for the construction of the projects under development, which may be obtained by issuance of debt/equity and/or sale of assets. There can be no assurance as to how many projects, if any, will reach the final stage of connection to the grid and operational status and, even if projects reach certain milestones, there is no assurance that we will decide to advance the projects. We may advance some or all of the projects with partners and therefore we may not wholly-own such projects in the future.
Series G Debentures Public Offering and Private Placement in Israel
On February 16, 2025, we issued in an Israeli public offering an aggregate principal amount of NIS 214,479,000 of our newly issued Series G Debentures, due December 31, 2032. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 211.9 million (approximately €56.7 million as of the issuance date). In December 2025, we issued in a private placement to Israeli classified investors NIS 130,000,000 par value of our unsecured non-convertible Series G Debentures, at a price of NIS 1.05 per NIS 1 principal amount of the Additional Series G Debentures, for an aggregate gross consideration of approximately NIS 136.5 million (approximately €36.3 million as of the issuance date).
Following completion of the private placement, the aggregate outstanding par value of the Company’s Series G Debentures is NIS 344,479,000. For more information concerning our Series G Debentures see “Item 5.B: Liquidity and Capital Resources.”
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Private Placement of Ordinary Shares in Israel
In July 2025, we consummated a private placement of 926,000 ordinary shares to Israeli institutional and classified investors at a price per share in the Private Placement was set at NIS 54 (approximately $16.3 at the time of the issuance) and the gross proceeds to the Company were approximately NIS 50 million.
Purchase of Dorad Shares by Ellomay Luzon Energy through Exercise of Right of First Refusal
On July 22, 2025, Ellomay Luzon Energy purchased an additional 15% of the outstanding share capital of Dorad after Ellomay Luzon Enregy exercised its right of first refusal to purchase such shares. For more information see “Acquisition of an Additional 15% of Dorad’s Shaer Capital by Ellomay Luzon Energy” below.
Separation Process in Ellomay Luzon Energy
On March 27, 2026, Ellomay Energy LP entered into an agreement with the Luzon Group to sell all of its holdings of Ellomay Luzon Energy at a Dorad valuation of NIS 4.4 billion. As of the date hereof, based on the Company’s indirect holdings in Dorad (through Ellomay Luzon Energy) and the current value of 50% of the other assets and liabilities of Ellomay Luzon Energy, the consideration expected to be received by Ellomay Energy LP upon consummation of the sale is approximately NIS 560 million. For more information see “Execution of SPA in connection with the Company’s Indirect Holdings in Ellomay Luzon Energy” below.
Change of Control of the Company
On December 16, 2025, S. Nechama Investments (2008) Ltd., Kanir Joint Investments (2005) LP and Anat Raphael, who together held approximately 45.85% of our outstanding share capital, or the Sellers, executed an agreement to sell their holdings in our shares to O.Y. Nofar Energy Ltd., or Nofar, a public company listed on the Tel Aviv Stock Exchange Ltd. (TASE: NOFR). The consideration for the Sellers’ shares was calculated based on a Company valuation of NIS 1 billion (approximately $310.4 million at the time), subject to customary adjustments. Based on Nofar’s report submitted to the Israel Securities Authority, the sale agreement provided that upon consummation of the transaction, and at Nofar’s discretion, up to four directors on behalf of Nofar may be appointed to our Board of Directors, and an equivalent number of directors (other than our external directors) will be replaced. Nofar’s report notes that Mr. Ran Fridrich will continue to act as our CEO.
The transaction was consummated on March 4, 2026. In connection with the sale of the shares, two members of our Board of Directors, Ms. Anita Leviant and Mr. Ehud Gil, resigned from the Board effective immediately and our Board of Directors unanimously appointed two new independent non-executive directors to fill the vacancies created, Ms. Odelya Ohayon and Mr. Gilad Mamlok. Mr. Mamlok was appointed as a member of the Audit Committee and the Compensation Committee, replacing Ms. Leviant.
Amendments to Deeds of Trust Governing our Debentures
On March 31, 2026, the holders of our Debentures approved the change in control resulting from the acquisition by Nofar of approximately 45.85% of our outstanding share capital. In connection with such approval, certain amendments were adopted to the Deeds of Trust governing our Debentures, including an increase in the annual interest rate of our Debentures (Series E-Series G). for more information see “Item 5.B: Liquidity and Capital Resources” and the amendments to the Deeds of Trust governing our Debentures included as Exhibits 4.26-4.29 under “Item 19: Exhibits.”
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Principal Capital Expenditures and Divestitures
In the last three fiscal years, our principal capital expenditures were mainly the development and construction of the Manara PSP and of various solar projects in Italy, Spain, the United States and Israel. For information regarding our projects under development and construction, please see above under “Recent Developments,” below under “Business Overview,” “Item 5: Operating and Financial Review and Prospects” and Note 6 to our annual financial statements included elsewhere in this Report.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that we file electronically with the SEC. These SEC filings are also available to the public from commercial document retrieval services. Our website is http://www.ellomay.com. The information on our website is not incorporated by reference into this Report.
We are involved in the initiation, development, construction and production of renewable and clean energy projects in Europe, USA and Israel. We indirectly own: (i) approximately 335.9 MW of operating solar power plants in Spain (including a 300 MW solar plant in owned by Talasol, which is 51% owned by us) and 51% of approximately 38 MW of operating solar power plants in Italy; (ii) 16.875% in Dorad Energy Ltd., which owns and operates one of Israel’s largest private power plants with production capacity of approximately 850 MW; (iii) Groen Gas Goor B.V., Groen Gas Oude-Tonge B.V. and Groen Gas Gelderland B.V., project companies operating anaerobic digestion plants in the Netherlands, with a green gas production capacity of approximately 3 million, 3.8 million and 9.5 million Nm3 per year, respectively; (iv) 83.333% of Ellomay Pumped Storage (2014) Ltd., which is involved in a project to construct a 156 MW pumped storage hydro power plant in the Manara Cliff, Israel; (v) 51% of solar projects in Italy with an aggregate capacity of 160 MW that are under construction; (vi) solar projects in Italy with an aggregate capacity of 210 MW that have reached “ready to build” status; and (vii) solar projects in the Dallas Metropolitan area, Texas, USA with an aggregate capacity of approximately 38 MW that are connected to the grid, 11 MW that are currently in the test run phase prior to commercial operation and 14 MW that are under construction. We also initiate and develop additional solar projects in Italy, USA, Spain and Israel.
Solar Plants
Solar Industry Background
Clean electricity generation accounts for a growing share of electric power. While a majority of the world’s current electricity supply is still generated from fossil fuels such as coal, oil and natural gas, these traditional energy sources face a number of challenges including fluctuating prices, security concerns over dependence on imports from a limited number of countries, and growing environmental concerns over the climate change risks associated with power generation using fossil fuels. As a result of these and other challenges facing traditional energy sources, governments, businesses and consumers are increasingly supporting the development of alternative energy sources, including solar energy, the fastest-growing source of renewable energy.
By extracting energy directly from the sun and converting it into an immediately usable form, either as heat or electricity, intermediate steps are eliminated.
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Global Trends in the Industry
Europe
European Climate Goals
In June 2021, the EU established the European Climate Law based on the Renewable Energy Directive, or RED, II, in which the previously adopted CO2 reduction goals are made legally binding for the EU member states. The European Climate Law includes the obligation for Europe’s economy and society to become climate-neutral by 2050 and also provides the intermediate target for a 55% cut in greenhouse gas emissions in 2030 compared to 1990 levels (also known as the “Fit for 55” package). On October 9, 2023, the EU Counsil adopted the amended Renewable Energy Directive (“RED III”), which forms part of the “Fit for 55” package. The RED III increases the renewable energy target share out of overall EU energy consumption from the initial 32% under the RED II Directive, which was increased to 40% in July 2021 to 42.5% by 2030, with an indicative target of an additional 2.5%. RED III also includes specific targets for EU Member States in certain sectors as follows: (i) industry – including a 1.6% annual increase in renewable energy usage, (ii) transport – including a requirement that each EU Member State choose between reaching at least 29% renewables in the energy consumption of the sector by 2030 or reducing greenhouse gas intensity in the sector by 14.5% by 2030, and (iii) building (district heating and cooling) – setting an indicative target of at least 49% share of renewable energy in buildings by 2030 and gradually increasing renewable targets for heating and cooling systems. The RED III Directive also requires EU Member States to further streamline the administrative permit-granting procedures to eliminate unnecessary administrative burden for the purpose of establishing renewable energy projects and related grid infrastructure projects and determine the maximum timeframe for the permit-granting procedures in renewable acceleration areas and in other areas. The RED III Directive became effective on November 20, 2023, and EU members states were granted 18 months to amend their national laws accordingly (i.e., until May 21, 2025), with a shorter deadline of July 2024 for some provisions related to permitting for renewables. In this regard, the European Commission has established, as part of the REPowerEU program, measures to increase the target to 45% by 2030. This program furthermore focuses on saving energy, producing clean energy and diversifying the EU’s energy supplies. On February 4, 2024, the EU published its recommendation for a 90% reduction in net greenhouse gas emissions by 2040 intermediate as a new intermediate goal. In December 2025, the European Union agreed to set a legally binding climate target for a CO2reduction of 90% by 2040 compared to 1990 levels. This 90% target has not yet entered into force (as an amendment to the European Climate Law) but it is expected to soon, as the European Parliament has given its final consent on February 10, 2026.
European Installed Capacity
65.1 GW of new solar capacity was connected to the grid in 2025 throughout EU Member States, a 0.7% decrease compared to the 65.6 GW installed in 2024. The total solar capacity of EU Member States reached approximately 403 GW in 2025.
According to “SolarPower Europe,” the 0.7% annual market decrease between 2024 and 2025 is expected to continue during 2026 and 2027 before slightly recovering towards 2030. The previous year-to-year growth of 41-53% during 2021-2023 was driven mainly by the increase in energy prices during the period. The reasons for the downturn are the increasing challenges on profitability for large-scale projects, causing such projects to search for solutions, mainly through higher self-consumption and installations of battery storage and by rooftop demand and small-commercial installations decreasing as the supporting regulation phases out.
Israel
In October 2020, the Israeli government approved a plan to increase its solar capacity by 15 GW and raise its target proportion of national electricity drawn from renewables from 17% to 30% by 2030. The 2025 target was set at 20%. According to the Israeli Electricity Authority’s 2023 Annual Renewable Energy Report, the total installed renewable energy capacity is expected to be 7.81 GW by the end of 2025, of which approximately 4.3 GW will be in dual-use photovoltaic systems and approximately 2.1 GW will be from land photovoltaic systems. Furthermore, the Israeli Electricity Authority forecasts that the total installed renewable energy capacity will be approximately 16 GW by the end of 2030, expected to constitute 39% of the total installed capacity in the Israeli electricity sector in 2030.
According to the 2024 Annual Renewable Energy Report of the Israeli Electricity Authority, Israel’s total renewable energy installed capacity (excluding degradation) reached approximately 6.9 GW at the end of 2024, representing 28% of the total capacity in the Israeli electricity market. The report shows that solar energy contributed 6.2 GW out of the total 6.9 GW, with 3.8 GW from dual-use photovoltaic systems and 2.4 GW from land photovoltaic systems. In addition, the report notes that renewable energy represented 11.1% of the actual electricity produced during 2024.
For more information, see below under “Material Effects of Government Regulations on the Israeli Solar Plant”.
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United States
Commencing January 2021, the United States has actively committed to addressing climate change through a series of ambitious goals, actions and legislations. These acts include rejoining the Paris Agreement, a global initiative aimed at limiting temperature increases to below 2 degrees Celsius, and forming the US National Climate Task Force which included the US Secretary of Treasury and the US Secretary of Defense. The Climate Task Force outlined nation-wide climate goals that include reducing the US greenhouse emissions by 50%-52% compared to 2005 levels by 2030, achieving 100% carbon pollution-free electricity by 2035 and achieving a net-zero emissions economy by 2050.
On January 20, 2025, President Trump signed two executive orders: “Declaring a National Energy Emergency” and “Unleashing American Energy,” imposed a regulatory freeze and announced a withdrawal from the Paris Climate Agreement. The executive orders call, among other things, for an immediate pause on clean energy-related federal disbursements. For additional U.S. regulatory updates see “Material Effects of Government Regulations on Texas, USA, Solar Plants” below.
Anatomy of a Solar Power Plant
Solar power systems convert the energy in sunlight directly into electrical energy within solar cells based on the photovoltaic effect. Multiple solar cells, which produce DC power, are electrically interconnected into solar panels. A typical solar panel may have several dozens of individual solar cells. Multiple solar panels are electrically wired together and are electrically wired to an inverter, which converts the power from DC to AC and interconnects with the utility grid.
Solar electric cells convert light energy into electricity at the atomic level. The conversion efficiency of a solar electric cell is defined as the ratio of the sunlight energy that hits the cell divided by the electrical energy that is produced by the cell. In recent years, effort in the industry has been directed towards the development of solar cell technology that reduces per watt costs and increases conversion efficiency. Solar electric cells today are getting better at converting sunlight to electricity, but commercial panels still harvest only part of the radiation they are exposed to. Scientists are working to improve solar panels’ efficiency using various methods.
Solar electric panels are composed of multiple solar cells, along with the necessary internal wiring, aluminum and glass framework, and external electrical connections.
Invertersconvert the DC power from solar panels to the AC power distributed by the electricity grid. Grid-tie inverters synchronize to utility voltage and frequency and only operate when utility power is stable (in the case of a power failure these grid-tie inverters shut down to safeguard utility personnel from possible harm during repairs). Inverters also operate to maximize the power extracted from the solar panels, regulating the voltage and current output of the solar array based on sun intensity.
Monitoring. There are two basic approaches to access information on the performance of a solar power system. The most accurate and reliable approach is to collect the solar power performance data locally from the counters and the inverter with a hard-wired connection and then transmit that data via the internet to a centralized database. Data on the performance of a system can then be accessed from any device with a web browser, including personal computers and cell phones. As an alternative to web-based remote monitoring, most commercial inverters have a digital display on the inverter itself that shows performance data and can also display this data on a nearby personal computer with a hard-wired or wireless connection.
Tracker Technology vs. Fixed Technology
Some of our Solar Plants use fixed solar panels while others use panels equipped with single or dual axis tracking technology. Tracking technology is used to minimize the angle of incidence between the incoming light and a photovoltaic panel. As photovoltaic panels accept direct and diffuse light energy and panels using tracking technology always gather the available direct light, the amount of energy produced by such panels, compared to panels with a fixed amount of installed power generating capacity, is higher. As the double axis trackers allow the photovoltaic production to stay closer to maximum capacity for many additional hours, an increase of approximately 20% (single) - 30% (dual) of the photovoltaic modules plane irradiation can be estimated. On the other hand, tracker technology requires more complex and expensive operations and maintenance and, as this is a more sophisticated technology, it is exposed to more defects.
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Energy Storage Solutions
According to a study published by the European Commission in 2020, innovative energy storage solutions will play an important role in ensuring the integration of renewable energy sources into the grid in the EU at the lowest cost. This will help the EU reach its 2050 de-carbonization objectives under the European Green Deal while ensuring Europe’s security of energy supply. This independent study, titled “Energy Storage Study - Contribution to the security of electricity supply in Europe”, analyzes the different flexibility energy storage options that will be needed to reap the full potential of the large share of variable energy sources in the power system. This study notes that the main energy storage reservoir in the EU at the moment is pumped hydro storage. However, as prices fall, new battery technology projects are emerging - such as lithium-ion batteries and behind-the-meter storage.
The National Grid
To commence delivery of power to customers, our Solar Plants require an authorization for the connection to the grid. Due to the increase in energy manufacturing installations, there is increasing congestion on the grid, limiting the availability of authorization. The increased production leads, in certain periods, to a decrease in the electricity prices and to potential curtailments.
Solar Power Benefits
The direct conversion of light into energy offers the following benefits compared to conventional energy sources:
These benefits impacted our decision to enter into the solar photovoltaic market. We believe the fluctuations in fuel costs, environmental concerns and energy security make it likely that the demand for solar power production will continue to grow. Many countries, including Italy and Spain, have put incentive programs in place to spur the installation of grid-tied solar power systems. For further information please see “Material Effects of Government Regulations on the Solar Plants.”
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Measuring the Performance of Solar Power Plants
One of the main factors for measuring the efficiency and quality of a power plant is the performance ratio (PR). The performance ratio is stated as percent and describes the relationship between the actual and theoretical energy outputs of the solar plant. This calculation provides the proportion of the energy that is actually available for export to the electricity grid after deduction of any energy losses and of energy consumption for the operation of the solar plant. The performance ratio can be used to compare solar plants at different locations as the calculation is independent of the location of a solar plant. The closer the performance ratio is to 100%, the more efficient the relevant solar plant is operating, however a solar plant cannot reach a performance ratio of 100% as there are inevitable losses and use of energy of the solar plant. High-performance solar plants can however reach a performance ratio higher than 80%.
There are several risk factors associated with the photovoltaic market. See “Item 3.D: Risk Factors - Risks Related to our Business.”
Our Operating Photovoltaic Plants
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The following table includes information concerning our operating Solar Plants:
882
649
1,079
517
17,364
1,462
695
2,055
2,248
327
191
180
160
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The table does not include information about the Talmei Yosef Solar Plant, which was sold on June 2, 2024. The results of the Talmei Yosef Solar Plant are presented as a discontinued operation in our financial statements for the year ended December 31, 2024.
Solar (Photovoltaic) Plants
The construction and operation of photovoltaic plants entail the engagement of Contractors, in order to build, assemble, install, test, commission, operate and maintain the photovoltaic power plants, for the benefit of our wholly-owned subsidiaries.
Each of the Solar Plants is constructed and operates on the basis of the following main agreements:
With respect to our Spanish Solar Plants:
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With respect to Italian Solar Plants:
With respect to the US Solar Plants developed in the vicinity of Dallas, Texas:
The summaries below describe the material terms of the O&M Agreements executed in connection with our operating Solar Plants.
Operation and Maintenance Agreements
General
As mentioned above, each of the Solar Plants is operated and maintained by a local contractor pursuant to an O&M Agreement executed between such Contractor and our subsidiary that owns the Solar Plant, or the Solar Principal. Each O&M Agreement sets out the terms under which each of the Contractors is to operate and maintain the Solar Plant.
A technical adviser, or the Technical Advisor, was appointed by the Financing Entity, in several of our financed projects, to monitor the performance of the services.
We expect that, if required, we could replace some or all of our current O&M Contractors with other contractors and service providers. However, we cannot ensure that if such replacement shall take place we will receive the same terms and warranties from the new contractor. In addition, to the extent the relevant Solar Plant received financing from a bank or other financing institution, the applicable financing agreement generally requires that we obtain the financing institution’s approval for the replacement of an O&M contractor.
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The Services
Each O&M Agreement governs the provision of the following services: (i) Subscription Services, which include Preventive Maintenance Services (maintenance services such as cleaning of panels and taking care of vegetation, surveillance, remote supervision of operation and full operational status of the Solar Plant) and Corrective Maintenance Services (services to correct incidents arising at the Solar Plant or to remedy any anomaly in the operation of the Solar Plant), and (ii) Non-Subscription Services, which are all services outside the scope of the Subscription Services. In some cases, certain engagement agreements are executed by us directly with service providers (such as internet, security services, etc.).
The Consideration
Based on the range of services offered by the Contractor, the annual consideration for the Subscription Services in our operating Solar Plants in Spain, other than Ellomay Solar and Talasol, varies from €15,000 to €28,000 per MWp (linked to the local Consumer Price Index) for each of the Solar Plants, paid on a quarterly basis. The annual consideration for the Talasol O&M services amounts to approximately €2.4 million, paid on a monthly basis. The annual consideration for the Ellomay Solar O&M services amounts to approximately €0.22 million, paid on a monthly basis. The annual consideration for the Ellomay Solar One O&M services amounts to approximately €103,600, paid on a monthly basis. The annual consideration for the Ellomay Solar Two O&M services amounts to approximately €35,000, paid on a monthly basis. The annual consideration for the Ellomay Solar Ten O&M services amounts to approximately €126,000, paid on a monthly basis. The annual consideration for our Texas solar plants’ O&M services amounts to approximately €3,000 per MWp, paid on a quarterly basis. The Subscription Services fee is fixed, and the Contractor is not entitled to request an increase in the price due to the occurrence of unforeseen circumstances. This annual consideration does not include the price of the insurance policies to be obtained by the Solar Principal, including all risk insurance policies.
O&M Contractor’s Obligations, Representations and Warranties
The Contractor’s obligations under the O&M Agreement include, inter alia, the duty to diligently perform the operation and maintenance services in compliance with the applicable law and permits in a workmanlike manner and using the most advanced technologies, to manage the spare parts and replenish the inventory as needed, and to assist the Solar Principal and the Financing Entity in dealing with the authorities by providing the necessary information required by such authorities. The Contractor represents and warrants, inter alia, that it holds the necessary permits and authorizations, and that it has the necessary skills and experience to perform the services contemplated by the O&M Agreement.
Termination
Each party may terminate the O&M Agreement (to the extent applicable, after obtaining the approval of the financing entity) if the other is in breach of any of its obligations.
The O&M Agreement is terminated if the Contractor is liquidated or becomes bankrupt or insolvent, and on other similar grounds, unless the Solar Principal is willing to continue the O&M Agreement.
The O&M Agreement also provides the parties the option to withdraw from the agreement other than in the event of a breach by the other party, subject to certain circumstances and advance notice requirements.
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The Talasol Solar Plant
The Talasol Solar Plant is a 300 MW photovoltaic plant in the municipality of Talaván, Cáceres, Spain, which was connected to the Spanish national grid in December 2020 and of which we indirectly own 51%.
In June 2018, Talasol executed the Talasol PPA in respect of approximately 80% (75% based on P-50) of the output of a prospective photovoltaic plant for a period of 10 years. The Talasol PPA was executed with a leading international energy company with a solid investment grade credit rating and a pan-European asset base, which is active in more than forty countries and has a proven track record in financial hedges. The power produced by the Talasol Solar Plant is sold in the open market for the then current market power price. The Talasol PPA is expected to hedge the risks associated with fluctuating electricity market prices by allowing Talasol to secure a certain level of income for the power production included under the Talasol PPA. The hedging provides that if the market price goes below a price underpinned by the Talasol PPA, the Hedging Provider will pay Talasol the difference between the market price and the underpinned price, and if the market price is above the underpinned price, Talasol will pay the Hedging Provider the difference between the market price and the underpinned price. The hedge transaction became effective in March 2019.
In April 2019, we sold 49% of our holdings in Talasol to two entities and therefore our current ownership interest in the Talasol Solar Plant is 51%.
The Talasol Solar Plant reached mechanical completion in September 2020 and was connected to the electricity grid and electricity production commenced at the end of December 2020.
Agreements with Partners in Talasol
We own 51% of Talasol, through our holdings in Ellomay Luxembourg. The remaining 49% is held, in equal parts, by GSE 3 UK Limited and Fond-ICO Sostenibilidad e Infraestructuras, FICC (formerly : Fond-ICO Infraestructuras II, FICC), or, together, the Talasol Partners.
We and the other shareholders of Talasol are parties to a Partners’ Agreement, or the Talasol PA, setting forth the relationship between the prospective shareholders of Talasol, the governance and management of Talasol, the funding and financing of Talasol and the mechanism for future transfers of Talasol’s shares. The Talasol PA provides that all matters brought for a vote at a partners’ meeting, other than specific reserved matters, will be adopted by the majorities set forth in the Spanish Companies Act. The Talasol PA includes minority rights for the Talasol Partners and provides that we will appoint the majority of the board members and that all matters brought for a vote at a board of directors meeting will be adopted by a simple majority of the directors, other than specific matters.
The Talasol PA further provides that Ellomay Luxembourg will be entitled to receive a management fee from Talasol in consideration for the administrative, support and management services to be provided to Talasol by Ellomay Luxembourg. The Talasol PA includes restrictions on transfer of the shares of Talasol by Ellomay Luxembourg and any of the Talasol Partners, which is prohibited for a certain period (other than in connection with certain customary permitted transfers) and thereafter is subject to a right of first offer, tag along rights granted to the Talasol Partners on sales by Ellomay Luxembourg and a drag along right granted to Ellomay Luxembourg.
Talasol Solar Plant Project Finance
The Talasol Solar Plant obtained project financing in connection with the commencement of its construction. During January 2022, Talasol refinanced its previous financing. For more information concerning the refinancing and the new financing of Talasol, see “Item 5.B: Liquidity and Capital Resources.”
The Talasol Solar Plant and the Ellomay Solar Plant are in their operational stage, which entails several risks and uncertainties. For more information concerning these and other risks see under “Risk Factors – Risks Related to our Business.”
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Damages Caused by Fire in the Talasol and Ellomay Solar Plants
On July 20, 2024, a fire broke out in the area between the Talasol Solar Plant and the Ellomay Solar Plant. After a short disconnection of parts of such plants due to the fire, the non-affected parts of the plants were reconnected on July 21, 2024 and as of such date approximately 80% of the plants were connected and operating. Since then, the plants gradually resumed operations and as of December 31, 2025, both were fully operational. Transformers and converters were not damaged from the fire, and the damage was caused mainly to communication cables, connection boxes and the panels above the connection boxes. These plants are insured with policies covering loss of profits and direct and indirect damages, and the Company received the majority of the insurance proceeds in connection with the fire.
Framework Agreement for the Development of Solar Projects in Italy
In December 2019, Ellomay Luxembourg executed a Framework Agreement, or the Framework Agreement, with an established and experienced European developer. Pursuant to the Second Framework Agreement, the developer will provide Ellomay Luxembourg with development services with respect to photovoltaic greenfield projects in Italy in the scope of 350 MW with the aim of reaching an aggregate “ready to build” authorized capacity of at least 265 MW over a period of forty-one months.
The Framework Agreement provides that the developer will offer all projects identified during the term of the Framework Agreement exclusively to Ellomay Luxembourg and that, with respect to each project acquired by Ellomay Luxembourg, the developer will be entitled to provide development services until it reaches “ready to build” status. The parties agreed on a development budget including a monthly development service consideration, to be paid to the developer and all other payments for the tasks required to bring the projects to a ready to build. In addition, Ellomay Luxembourg undertook to pay a success fee to the developer with respect to each project that achieves a “ready to build” status. Currently development is progressing as planned.
In April 2021, the Framework Agreement was amended and the target of reaching an aggregate “ready to build” authorized capacity of at least 265 MW was increased to 365 MW.
Our Italian 198 MW Solar Portfolio (as more fully described under “Item 4.A: History and Development of Ellomay,” under “Recent Developments”) was developed under the Framework Agreement. For more information concerning the project finance for the Italian 198 MW Solar Portfolio entered into and the EPC agreements executed in connection with an aggregate capacity of approximately 160 MW that are also part of the Italian 198 MW Solar Portfolio see below and also see “Item 5.B: Liquidity and Capital Resources.” In addition to the Italian 198 MW Solar Portfolio, projects with an aggregate capacity of approximately 261 MW were developed under the Framework Agreement.
The advancement and development of projects that are part of the Framework Agreement is subject to various conditions, including receipt of regulatory approvals and authorizations and procurement of land rights. There can be no assurance that all of the aggregate capacity of projects that were identified by the developer will thereafter reach the “ready to build” status, and as to our decision and success in completing construction of any of such projects. Any future decision of the Company with respect to the continued development of projects will be subject to the relevant circumstances existing at the time such decision will be made. In addition, projects in the construction stage are exposed to several risks, including delays in supply of equipment and defaults by contractors as noted under “Item 3.D: Risk Factors” above.
Italian 198 MW Solar Portfolio Held Jointly with Clal
The Company holds a 198 MW Solar Portfolio jointly with Clal (Company’s share is 51%). These projects were developed as part of the Framework Agreement. The portfolio is financed by a financing agreement in an amount of up to €110 million. For more information see “Item 5.B: Liquidity and Capital Resources.”
In December 2024, we executed construction agreements with an EPC contractor for the 160 MW projects that are ready to build and included in the Italian 198 MW Solar Portfolio. A notice to proceed was issued to the EPC contractor at the end of March 2025 and the construction is expected to take approximately 18 months. The EPC agreements are conditioned, among other things, on the execution of a financing agreement for the Italian 198 MW Solar Portfolio as detailed above. The cost of construction of the Italian 198 MW Solar Portfolio, including related expenses, is currently estimated at approximately €200 million. Pursuant to regulatory requirements, several of the projects include small-scale agricultural activities such as beehive cultivation and olive orchards.
For information concerning the agreements with Clal, see “Item 4.A: History and Development of the Ellomay.”
Additional Italian Solar Projects under Development
For information concerning our solar projects under development and construction, see “Item 4.A: History and Development of the Ellomay.”
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US Solar Market Joint Development Agreement
On March 14, 2023, we entered into a Joint Development Agreement, or the JDA, for the development of solar photovoltaic projects in the State of Texas. The JDA was executed with a project development company experienced in the development of energy projects, site acquisition, capital markets and commercial management. Construction on the first two Solar projects under the JDA, with an aggregate capacity of approximately 27.36 MW, commenced in March 2024 and December 31, 2024 and these projects were connected to the grid in April 2025. In addition, construction on two additional projects with an aggregate capacity of approximately 21.5 MW commenced in August 2024 and one of the projects (10.3 MW) was connected to the grid in July 2025 and the other project (11.2 MW) was connected to the grid in March 2026. An additional project (14 MW) is currently under construction.
The projects developed under the JDA will be subject to the ERCOT Distributed Generation, or DG, Scheme for projects of up to 10 MW AC capacity. Under the DG Scheme, ERCOT (the electricity regulator of the State of Texas), allows owners of generation assets to sell electricity through Qualified Scheduling Entities (QSE’s) at market rates under Real Time or Day Ahead prices at the local nodes where the projects are located and/or to designated “Behind the Meter” clients under Power Purchase Agreements.
On September 13, 2024, Ellomay USA Inc., our indirectly wholly-owned subsidiary which owns the US project companies, entered into an agreement to transfer Investment Tax Credits (ITCs) linked to the Fairfield, Malakoff, Mexia and Talco solar projects, with a reputable financial institution, with vast experience in executing tax credit transactions. Through this transaction, we expect to receive approximately $19 million from the sale of ITCs, representing approximately 32% of the expected total portfolio costs. The sale was facilitated under the transferability provisions of the Inflation Reduction Act, or IRA, allowing us to retain 100% of the operating profits from these projects. Funds from the sale of the ITCs generated from a project will be disbursed after such project is placed in service and meets the applicable requirements. The agreement includes customary indemnification obligations (for damages not covered by tax insurance policy), including in connection with certain continued eligibility requirements and scope of the ITCs, for which we provided a guarantee to the purchaser of the ITCs. During the year ended December 31, 2025, we received an amount of approximately $10 million in consideration for the ITCs linked to the Fairfield and Malakoff projects.
Israeli Solar Projects under Development
We are advancing the following Solar projects in Israel:
The continued development and construction of the facilities depends upon various factors, including, but not limited to, our ability to locate sites for construction, enter into EPC agreements and obtain project finance and all other required approvals, all upon terms acceptable to us. Therefore, there is no assurance as to whether and when such process will be completed.
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Sale of the Talmei Yosef Solar Plant
On December 31, 2023, we executed an agreement, or the Talmei Yosef Sale Agreement, to sell our holdings in the 9 MW solar plant located in Talmei Yosef, Israel, or the Talmei Yosef Solar Plant.
The Talmei Yosef Sale Agreement provided for the sale of our holdings in the Talmei Yosef Solar Plant to Greenlight Fund Limited Partnership and Doral Group Renewable Energy Resources Ltd., in equal parts, in consideration for NIS 44.75 million (approximately €11.2 million), with an additional potential payment of up to NIS 4 million (approximately €1 million) in the event the Talmei Yosef Solar Plant will produce more than 18 million KWh during 2024. The Talmei Yosef Sale Agreement provided for a cutoff date of June 30, 2023 and at closing the parties were to determine whether an adjustment to the purchase price is required to reflect our entitlement to revenues (net of expenses) up to such date, taking into account the results and the cash held by the project company.
The Talmei Yosef Sale Agreement included customary representations and indemnification undertakings in connection with breaches of representations, which, other than with respect to customary exceptions, are subject to a cap of NIS 9 million and limited to a period of 18 months from the closing date.
The sale was consummated on June 2, 2024. The net consideration paid at closing was approximately NIS 42.6 million (approximately €10.6 million).
Following consummation of the sale, we maintained the rights to the two projects under development located in the vicinity of the Talmei Yosef Solar Plant as noted under “Israeli Solar Portfolio” above.
Competition
Our competitors are mostly other entities that seek land and contractors to construct new power plants on their behalf or seek to purchase existing solar power plants. The competition in the European solar sector concentrates on winning a guaranteed tariff in regulatory tenders, obtaining long-term power purchase agreements and obtaining connections to the national grid, all of which have become more difficult in recent years due to the increase in the number of private energy developers and manufacturers that. The competition in the Israeli photovoltaic sector concentrates on the ability to receive licenses from the Israeli Electricity Authority for the construction of new photovoltaic plants, which is subject to a quota as more fully described below and the ability to acquire existing plants that were already granted an electricity production license. The market for solar energy is intensely competitive and rapidly evolving, and many of our competitors who strive to construct new solar power plants have established more prominent market positions and are more experienced in this field. Our competitors in this market include Etrion Corporation (TSX, TO:ETX), Sunflower Sustainable Investments Ltd. (TASE:SNFL), Nofar Energy Ltd, (TASE:NOFR), Doral Group Renewable Energy Resurcs Ltd. (TASE:DORL), Meshek Energy-Renewable Energies Ltd. (TASE:MSKE), Shikun & Binui Energy Ltd. (TASE:SBEN), Enlight Renewable Energy Ltd. (NASD, TASE:ENLT), Energix Renewable Energies Ltd. (TASE:ENRG), Allerion Clean Power S.p.A. (ARN.MI), NextEra Energy Partners (NYSE:NEP), NRG Yield (NASD:NYLD), TransAlta Renewables (TSX:RNW), Pattern Energy Group (NASD:PEGI), Abengoa Yield PLC (NASD:ABY), NextEnergy Solar Fund Limited (LSE:NESF), Bluefield Solar Income Fund Limited (LSE:BSIF), Infinis Energy PLC (LSE:INFI), The Renewables Infrastructure Group Limited (LSE:TRIG) and TerraForm Power, Inc. (NASD:TERP). If we fail to attract and retain ongoing relationships with solar plants developers, we will be unable to reach additional agreements for the development and operation of additional solar plants, should we wish to do so.
Customers
The customers of our Solar Plants are generally the local operators of the national grid and our Solar Plants do not generally provide electricity or enter into power purchase agreements with private customers. The agreements with the customers include customary termination provisions, including in connection with breaches of the electricity producer and in the event the plant causes disruptions with the grid.
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The local operators acquiring the electricity manufactured by our solar plants generally pay a price based on the electricity price in the market, which is determined based on supply and demand. Therefore, we are significantly impacted by changes in the electricity prices caused, among other reasons, but increased or decreased supply and demand. For example, during 2024 and 2025 the electricity prices in Spain declined significantly due to excess generation of hydro power in Spain and were on occasion negative. This decrease impacted the revenues from our Spanish facilities that are not covered by a financial power swap (such as the Talasol PPA) and reduced our 2024 and 2025 revenues.
Seasonality
Solar power production has a seasonal cycle due to its dependency on the direct and indirect sunlight and the effect the amount of sunlight has on the output of energy produced. We produce a substantial amount of our Solar Plants’ energy during the summer months when sunlight conditions tend to be most favorable. Although we received the technical calculation of the average production recorded in the area of each of our Solar Plants from our technical advisors and incorporated such data into our financial models, adverse meteorological conditions, including climate change and extreme weather conditions, can have a material impact on the Solar Plants’ output and could result in production of electricity below expected output.
Sources and Availability of Components of the Solar Power Plant
As noted above, the construction of our Solar Plants entails the assembly of solar panels and inverters purchased from third party suppliers. A critical factor in the success of our Solar Plants is the existence of reliable panel suppliers, who guarantee the performance and quality of the panels supplied. Degradation in such performance above a certain minimum level, generally 90% during the initial ten-year period and 80% during the following ten-fifteen year periods thereafter, is guaranteed by the panel suppliers. However, if any supplier is unreliable or becomes insolvent, it may default on warranty obligations.
There are currently sufficient numbers of solar panel manufacturers at sufficient quality and we are not currently dependent on one or more specific suppliers. Silicon is a dominant component of the solar panels and inverters are also a material component of the photovoltaic systems, and although manufacturing abilities of silicon have increased over-time, any shortage of silicon, or any other material component necessary for the manufacture of the solar panels, or any shortage of other components, including inverters, may adversely affect our business. Shortages in materials may also impact the ability to construct batteries designated for energy storage.
Material Effects of Government Regulations on the Solar Plants and Projects
The development, construction and operation of a photovoltaic plant is subject to complex legislation covering, inter alia, building permits, licenses, the governmental long-term incentive scheme and security considerations. The following is a brief summary of the regulations applicable to our Solar Plants.
Material Effects of Government Regulations on Italian Solar and Energy Storage Plants
The regulatory framework surrounding solar and energy storage plants located in Italy consists of legislation at the Italian national and local level.
Environmental Procedures
According to Legislative Decree no. 152 of 3 April 2006, or LD 152/2006, which regulates environmental procedures:
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Upon the conclusion of the EIA Screening, the competent authority determines whether or not the project should be subject to the EIA procedure.
Authorization Procedures for the Construction and Operation of Solar Projects
The construction and operation of a solar project is subject to the obtainment of the Autorizzazione Unica (Single Authorization or AU) pursuant to art. 9 of LD 190/2024.
The Single Authorization is an authorization issued by the relevant Region (or, as the case may be, the public entity delegated by the Region) or by the MASE (exclusively for solar projects with a nominal capacity exceeding 300 MW, as well as for floating solar projects placed on the water surface of reservoirs - invasi - created by certain dams - dighe) pursuant to art. 9 of LD 190/2024, which contains all permits, authorizations and opinions that would otherwise be necessary to start the construction works, including building licenses, landscape authorizations, and permits for interconnection facilities, among others.
The AU procedure encompasses, where applicable, the EIA procedure, while the EIA Screening procedure shall be carried out (if applicable) prior to the commencement of the AU procedure.
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The AU is issued following a procedure called Conferenza di Servizi (“Steering Committee”) in which all relevant entities and authorities participate. This procedure is to be completed within 120 days of the first meeting of the Steering Committee. The 120-day term may be suspended under certain circumstances. For example, the term shall be suspended up to 90 days for projects subject to the EIA procedure.
According to art. 27-bis of LD 152/2006 and art. 9 of LD 190/2024, in the case of projects subject to the EIA procedure and to the AU procedure under the competence of the Region, the interested party shall submit to the Region (or, as the case may be, the public entity delegated by the Region) the Provvedimento Autorizzatorio Unico Regionale (PAUR) application. The deadline for the conclusion of the PAUR procedure may not exceed 2 years from the start of the procedure itself or from the start of the EIA Screening procedure, where applicable.
Under the PAUR procedure, all authorizations, agreements, concessions, licenses, opinions, approvals, nihil obstats and consents, however denominated, necessary for the implementation and operation of the same project, including the EIA and AU, are issued.
According to art. 9 of LD 190/2024, the Regions have the possibility to opt for the Single Authorisation procedure instead of the PAUR procedure.
Art. 8 of LD 190/2024 regulates the Procedura Abilitativa Semplificata (PAS), a simplified procedure designed to authorize specific types of renewable energy power plants. The PAS procedure is not available to applicants who do not have legal availability of the areas interested by the project or if the project is incompatible with urban planning instruments (projects falling with suitable areas or acceleration zones – zone di accelerazione - are deemed to be compatible with urban planning instruments). To obtain legal availability of the areas affected by the interconnection facilities, the applicant may initiate the expropriation procedure based on this new art. 8.
Under the PAS procedure, an applicant is entitled to construct a solar project if the competent municipality does not raise any objections and/or request integrations within 30 days of the filing of the PAS application. The 30-day term may be suspended once by the competent municipality for a period not exceeding 30 days, should the applicant be required to submit further documentation. The applicant then requests the publication of the notice of “consolidation” of the PAS in the Official Bulletin of the Region where the project is located and the PAS takes effect from the date of publication of such notice.
Where acts of consent are required in the matters referred to under art. 8, para. 4, letter e), of LD 190/2024, which fall within the competence of the municipality, the municipality is required to adopt them within 45 days of the submission of the application. If this period elapses without the applicant being notified of an express decision of refusal, the authorizing title shall be deemed to have been “consolidated” (as explained below) without any conditions.
Where acts of consent are required in the matters referred to under art. 8, para. 4, letter e), of LD 190/2024, which fall within the competence of authorities other than the municipality, the municipality shall convene a Steering Committee. Upon expiry of the deadlines of conclusion of the Steering Committee without any express decision of refusal being communicated (or, in case no express decision of refusal has been issued, without a negative opinion of an authority responsible for the protection of the hydrogeological risk, landscape, cultural heritage or the health and public safety of citizens being communicated), the applicant shall request the publication of the notice of “consolidation” of the PAS in the Official Bulletin of the Region where the project is located. This notice must indicate the date of submission of the PAS application, the date on which the PAS was “consolidated”, the type of project, and its exact location. The PAS takes effect from the date of publication, is enforceable against third parties, and the terms for challenging it start to run. If the municipality does not communicate a negative measure to the applicant, the municipality is entitled to act in self-defense pursuant to Law 241/1990 and annul the PAS within 6 months of its “consolidation.”
Solar and agrivoltaic projects that can be authorized by means of PAS procedure are those listed in Annex B to LD 190/2024. The most relevant projects subject to PAS are summarized as follows:
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Projects listed in Annex B to LD 190/2024 are not subject to EIA and EIA Screening procedures.
According to art. 7 of LD 190/2024, the realization of the projects referred to in Annex A is not subject to the acquisition of permits, authorizations or acts of consent, however denominated, and the proponent is not required to submit any communication, certification, report or declaration to the public authorities, without prejudice to (i) the submission of the single model referred to in para. 10 of art. 7, (ii) the provisions of specific sectoral regulations, as well as (iii) the obtainment of specific building titles, if necessary.
Projects listed in Annex A to LD 190/2024 shall be implemented in compliance with art. 7, with the provisions referred to in the Legislative Decree no. 285 of April 30, 1992 and in the Decree of the President of the Republic no. 495 of December 16, 1992. Such projects must be compatible with urban planning instruments (projects falling within suitable areas or acceleration zones – zone di accelerazione – are deemed to be compatible with urban planning instruments). The proponent who intends to implement one of the projects listed in Annex A must have the legal availability of the project’s areas.
Without prejudice to the identification of eligible areas (aree idonee), the projects listed in Annex A cannot be implemented pursuant to art. 7 of LD 190/2024 if they fall within protected property pursuant to Part Two of the Legislative Decree no. 42 of 22 January 2004, or LD 42/2004, in protected natural areas, or within Natura 2000 sites, as well as if such projects may have significant effects on Natura 2000 sites. If the projects listed in Annex A are located on the aforesaid properties, areas or sites, as well as on areas affected by certain constraints (listed under art. 7 of LD 190/2024), the PAS procedure applies.
The construction of the projects listed in Annex A, located, among other areas and properties, in villas, gardens and parks of exceptional beauty or in historic centers, is subject to the obtainment of the authorization of the authority in charge of the management of the constraint.
Except for the cases provided for in the previous sentence, the projects listed in Annex A interfering with public works or works of public interest are authorized by means of PAS procedure.
Projects listed in Annex A to LD 190/2024 are not subject to EIA and EIA Screening procedures.
Solar and agrivoltaic projects for which no permits, authorizations, or acts of consent, however denominated, are required, are those listed in Annex A to LD 190/2024. The most relevant projects subject to this regime are summarized as follows:
Suitable Areas and Agricultural Areas
LD 190/2024 refers to certain areas that are qualified as suitable for the installation of renewable energy projects (respectively, ground-mounted and off-shore), including solar projects. These projects are subject to simplified authorization procedures.
Suitable areas for ground-mounted solar projects include, among others:
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With regard to ground-mounted projects, within 120 days as of the entry into force (i.e., November 22, 2025) of Law Decree 175/2025, which introduced the aforementioned suitable area list, each Region shall identify additional suitable areas for the installation of renewable energy projects. Moreover, Regions shall not provide for a general and abstract ban on the installation of renewable energy projects.
The aforementioned law prohibits the installation of ground-mounted solar projects in agricultural areas, without prejudice to certain exceptions. In particular, this prohibition does not apply to:
Connection to the National Grid
The procedures for the connection to the national grid are established by the Regulatory Authority for Energy, Networks and Environment (Autorità di Regolazione per Energia Reti e Ambiente, or ARERA). Currently, the procedure to be followed for the connection is regulated by ARERA Resolution no. 99 of 2008 (Testo Integrato delle Connessioni Attive, or TICA), as subsequently integrated and amended.
According to TICA, an application for connection must be filed, depending on the power capacity of the solar plant, with the competent local/national grid operator, after which the latter issues in favor of the applicant the connection estimate for the connection costs of the solar project, including the Minimum General Technical Solution (Soluzione Tecnica Minima Generale, or STMG), which refers to the technical requirements and specifications that must be met for connecting a plant to the grid. Depending on the grid operator, the STMG shall be accepted within 45 or 120 days of its issuance. However, for the authorization to the connection to become definitive, all relevant authorization procedures (such as easements, ministerial nulla osta, etc.) must be successfully completed.
There are three alternative modalities to sell electricity:
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Law Decree 21/2026: possible impacts on the Connections to the National Grid
On February 20, 2026, the Italian Council of Ministers issued Law Decree 21/2026, regarding “Urgent measures aimed at reducing the cost of electricity and gas for households and undertakings, enhancing the competitiveness of enterprises and the decarbonization of industry, together with urgent provisions for resolving the virtual saturation of electricity networks and for integrating data centers into the electricity system”, entered into force on February 21, 2026.
Law Decree 21/2026 introduced a new article into LD 190/2024, pursuant to which ARERA shall update the technical and economic conditions, as well as the procedural arrangements, for the connection of renewable energy plants and storage plants to the electricity grid, within 180 days from the date of entry into force of the new article (i.e., from February 21, 2026).
As of the date of publication of the relevant measures adopted by ARERA, or the ARERA Measures, STMGs issued by the Italian transmission system operator (i.e., Terna S.p.a., or Terna) to non-authorized plants – already issued but not validated by Terna – shall cease to be effective. Please note that STMGs issued by distribution system operators (e.g., E-Distribuzione S.p.a., Ireti S.p.a.) shall remain fully effective.
In the event that an STMG issued by Terna ceases to be effective, the applicant will be required to take part in a transparent and non-discriminatory competitive procedure, the rules for which will be set out in the ARERA Measures, in order to obtain a new STMG.
The loss of effectiveness of the STMG shall not result in the rejection of applications already submitted for the issuance of the relevant authorization, including those relating to an environmental procedure, provided that such applications were submitted as at the date of publication of the ARERA Measures. In particular, the terms for completing the authorization procedures – including environmental procedures – shall start running again upon submission by the applicant of the documentation relating to the new STMG issued following the aforementioned competitive procedure.
The Incentive Tariff System for Solar and Agrivoltaic Plants
On December 22, 2023, the MASE approved decree no. 436, or the Agrivoltaic Decree, aimed at promoting the wide-spread use of advanced agrivoltaics plants through two measures: the granting of capital contributions and an incentivizing tariff based on the quantity of energy fed into the grid.
The Agrivoltaic Decree will cease to apply on July 31, 2026.
The Agrivoltaic Decree provides for two power quotas:
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In terms of aid, as highlighted above, a double benefit is envisaged:
The GSE, which is responsible for the disbursement of the incentive tariffs, proceeds as follows:
Access to incentives is granted through public procedures, divided into registers and auctions, announced by the GSE.
In order to gain access to the procedures announced by the GSE, an eligible plant (i.e., a plant that complies with both the subjective and technical requirements set out in the Agrivoltaic Decree) must guarantee the following:
To access the incentive mechanisms, applicants must offer in their participation application a percentage reduction of no less than 2% on the reference tariff.
Transitional FER X decree
On February 27, 2025, the so-called Transitional FER X decree, prepared by Italy’s Ministry of the Environmental and Energy Security on December 30, 2024, was officially published on the institutional website of the same ministry with number 457 and came into force on February 28, 2025.
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The Transitional FER X decree promotes the construction of production plants powered by renewable sources, with an estimated available capacity of 17.65 GW.
The Transitional FER X decree aims to support electricity production from renewable plants with generation costs close to market competitiveness pursuant to LD 199/2021. To this end, it includes a support mechanism for their effectiveness, efficiency, and sustainability in line with 2030 decarbonization objectives and consistent with the security and capacity of the electricity system.
Transitional FER X decree ceased to apply as of December 31, 2025. However, solar projects that were granted access to the Transitional FER X support scheme will benefit from the relevant incentives.
Renewable energy plants eligible for the Transitional FER X decree support mechanism are:
The categories of interventions falling within the scope of Transitional FER X decree include (i) the construction of new plants; (ii) partial and complete refurbishment (rifacimenti); and (iii) the upgrading (potenziamenti) of existing plants, it being understood that for the latter only the newly upgraded part of the plan can access the support mechanism.
Operating prices put up for auction are provided in the Transitional FER X decree and described below. As of the end of that year, the value of operating prices will be updated at upcoming single calls for tenders to take inflation into account.
Construction works may start only after the relevant plant has been ranked. Their entry into operation shall occur within 36 months following the date of publication of the relevant ranking list, it being understood that said deadlines cover any delay in the construction of the relevant plant due to force majeure causes.
Failure to meet the above deadlines will result in a reduction to the price awarded by 0.2% per month of delay for the first nine months and of 0.5% for the following six months, up to a maximum of 15 months.
If these deadlines are not met, the GSE will remove the plant from the ranking list and enforce the final guarantee. If the plant is subsequently readmitted to a support mechanism, it will be subject to a 5% reduction in the price awarded.
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From a plant’s entry into operation to the end of its average conventional useful life (set at 20 years), GSE will administer the payment of the award prices according to the following:
The provisions on rights and obligations relating to the execution of standard contracts to be signed by the applicants for the purpose of recognizing the award price will apply only to 95% of the energy produced by plants with a capacity of +1 MW placed in a useful position in the reference ranking list.
The award price is updated by the GSE based on the annual rate of change of consumer prices for blue and white-collar households surveyed by the Italian National Statistics Institute, or Istat.
Exceptions are provided in specific cases, as set forth in Transitional FER X decree.
Access to Transitional FER X decree support mechanism can only be cumulated with one of the following measures:
Other than the above, access the support mechanism provided for in the Transitional FER X decree is an alternative to the on-site trading mechanism and the dedicated withdrawal referred to in Legislative Decree no. 387 of December 29, 2003.
Operating Prices
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Exceptions are provided by Transitional FER X decree in specific cases defined in the decree. Specific adjustments to the award are provided for photovoltaic technology: +€4/MWh in the Center, +€10/MWh in the North; +€27/MWh for asbestos replacement, and +€5/MWh for surface water plants.
For details concerning our Italian solar projects that have been granted access to the FER X decree, see “Recent Developments” above.
FER Z Decree
The MASE is expected to issue a new support mechanism, typically known as the FER Z Decree, for investments in electricity generation capacity from renewable sources, including newly built solar plants, aimed at ensuring the availability of predefined quantities of renewable energy in line with decarbonization objectives, pursuant to LD 199/2021.
Based on the draft FER Z Decree, the proposed support mechanism shall apply until December 31, 2029, for a maximum quota of 5 GW. Applicants may access the support mechanism through participation in competitive public procedures, periodically launched by the GSE.
The applicants would be required, as is customary, to submit guarantees, to be determined in light of the project’s incentivized capacity, in order to access to the said support mechanism. Access to incentives would occur by means of standard two-sided-contracts-for-difference providing for:
The GSE would pay the incentives for a period of twenty years.
Energy Storage Plants
The authorization regimes applicable to solar plants, as well as the procedures for the connection to the national grid, as described above, apply to storage plants too.
With regard to environmental procedures, electrochemical stand-alone storage plants and the relevant connection infrastructure to the electricity grid are not subject to EIA or EIA Screening procedures, unless the connection infrastructures fall within the scope of such procedures.
Authorization Thresholds
With regard to the relevant authorization thresholds:
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Incentivizing regimes available to storage plants
Storage plants may benefit from either the Electricity Storage Capacity Procurement Mechanism, or MACSE, or from the capacity market discipline.
The MACSE regulation, approved by the MASE with Ministerial Decree no. 346 of 10 October 2024, or the MACSE Rules, establishes the rules for procuring electricity storage capacity in Italy. This mechanism was introduced to ensure the security, reliability, and flexibility of the national electricity system, especially in light of the increasing share of renewable energy.
The MACSE is based on public auctions through which Terna selects storage projects that meet specific technical and territorial needs. The MACSE Rules and the relevant attachments regulate the participation in the MACSE competitive procedures, as well as the admission requirements, preparatory activities, pre-auction and post-auction guarantees (to be calculated, by means of certain formulas, on the basis of various factors, including the capacity of the project).
Without prejudice to the termination of the relevant MACSE-related contracts, Terna may suspend a participant from the MACSE in the event of a serious breach of the MACSE Rules, providing appropriate justification. The assessment of seriousness takes into account the extent of the breach and its consequences. In such case, the entity may not participate in the competitive procedures taking place during the suspension period. Terna shall revoke the suspension if the grounds for such suspension cease to exist.
The first MACSE auction was launched on September 30, 2025, and the next auctions are expected to be launched in the fourth quarter of 2026.
An additional incentive scheme for storage plants is the capacity market. In particular, Terna procures capacity to storage plants by awarding long-term supply contracts via competitive auctions.
The capacity market provides for guarantees to be issued by the participants in order to access to this mechanism. The amount of such guarantees shall be calculated on the basis of specific formulas reported under Annex 5 to the capacity market regulation, and including various factors, such as the capacity of the project.
The competitive auctions, organized by Terna, are open to operators owning generation units – both dispatchable and non-dispatchable – which, for the capacity awarded, are subject to the following rights and obligations:
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Material Effects of Government Regulations on Spanish Solar Plants
The Spanish general legal framework applicable to renewable energies
Law 24/2013, of December 27, 2013, of the Power Sector
The Spanish general legal framework applicable to renewable energies is contained in Law 24/2013, of December 27, 2013, of the Power Sector, or Law 24/2013, which sets forth the regulatory framework of the power sector with the objective of guaranteeing the electricity supply with an adequate level of quality, at the least possible cost, while ensuring the economic and financial sustainability of the system and pursuing effective competition in the power sector. At the same time, the principle of environmental sustainability is considered.
The economic and financial sustainability is the guiding principle for both the Spanish Public Administration and the agents acting under the scope of Law 24/2013, with a view to avoid the accumulation of new tariff deficits. According to Law 24/2013, income must be enough to cover expenses and, on the other hand, tariffs and charges must be automatically reviewed in case of overcoming certain established thresholds.
In accordance with Royal Decree-law 9/2013, dated July 12, 2013, which adopts several urgent measures in order to ensure the financial stability of the power system, or RDL 9/2013, Law 24/2013 regulates the new remuneration scheme of those renewable energy installations entitled to a regulated income, or the so called “Specific Remuneration,” in addition to the market price. Law 24/2013 sets forth the principle of reasonable profit for the sake of which the parameters to determine the regulated income are reviewed every six years.
In addition, Law 24/2013 establishes the priority access and dispatching of RES and high efficiency Combined Heat and Power in line with the EU Directives, and further develops the general criteria for access and dispatching by reinforcing the principles of objectivity and non- discrimination. Thereby, the reasons to refuse access are based on technical criteria exclusively.
Moreover, Law 24/2013 develops a specific regulatory framework for self-consumption. Law 24/2013 defines three different categories of self-consumption and obliges those installations connected to the grid to contribute to the costs and services of the system in the same conditions of the other customers. It also defines the activity of “recharging managers” (for electric vehicles).
Royal Decree Law 15/2018
The Spanish general legal framework applicable to renewable energies includes Royal Decree Law 15/2018, of October 5, 2018, or RDL 15/2018, of urgent measures for energy transition and consumer protection. RDL 15/2018 includes, among others, the following:
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Royal Decree-law 17/2019
On November 24, 2019, Royal Decree-law 17/2019, of November 22, or RDL 17/2019, enacted urgent measures for the necessary adaptation of remuneration parameters affecting the electricity system and responding to the process of cessation of activity of thermal generation plants. Among others, this new regulation updates the remuneration parameters of generation plants entitled to a specific remuneration for the regulatory period starting January 1, 2020, as further explained below.
Royal Decree-law 23/2020
On June 25, 2020, Royal Decree-Law 23/2020 of June 23, 2020, or RD-law 23/2020, came into force, approving measures in the energy sector and other sectors for the reactivation of the economy and introducing a series of new provisions focused on overcoming the obstacles identified in the energy transition process and established an attractive framework for renewable energy investments in Spain.
As a novelty, and in connection with the expiry of access and connection to the grid permits, RD-law 23/2020 established certain permitting milestones to be achieved by the promoters. Failure to do so, will result in expiration of the permits (except when the environmental permit was not granted for reasons not attributable to the promoter). The milestones set up in RD-law 23/2020 were modified by Royal Decree-Law 29/2021, of December 21, 2021, or RD-law 29/2021, Royal Decree-Law 5/2023, of June 28, 2023, or RD-Law 5/2023, and Royal Decree-Law 8/2023 of December 27, 2023, or RD-law 8/2023, as further explained below.
Royal Decree-law 29/2021
On December 23, 2021, RD-law 29/2021 came into force, approving urgent measures in the energy field for the promotion of electric mobility, self-consumption, and the deployment of renewable energies.
As a novelty, and in connection with self-consumption, RD-law 29/2021 establishes that installations associated with a self-consumption modality with a surplus installed power not exceeding 100 kW are exempt from presenting the guarantee unless they are part of a group whose power exceeds 1 MW. Likewise, RD-Law 29/2021 adopts measures to facilitate collective or shared self-consumption–- in which several self-consumers benefit from a single installation–- and extends this possibility to high voltage.
Finally, the RD-law 29/2021 modifies the milestones established in RD-law 23/2020. In this sense, the dates foreseen in RDL 23/2020 for the intermediate milestones related to the Environmental Impact Statement (EIS), the prior administrative authorization (PAA) and the construction authorization (CAA) have been extended for an additional nine months. All this, without extending the total period of five years for the final milestone of obtaining the administrative exploitation authorization. As noted below, RD-law 8/2023 extends the deadlines for the achievement of the CCA and AEA for projects that have obtained the access and connection permits between January 1, 2018 and December 28, 2023.
Impact on the Talasol Solar Plant
The exploitation authorization is required to be granted within five years from the entry into force of RD-law 23/2020 (i.e., by June 25, 2025) as modified by RD-law 29/2021 and was already granted.
Impact on the Ellomay Solar 28 MW Project
The exploitation authorization is required to be granted within five years from the entry into force of RD-law 23/2020 (i.e., by June 25, 2025) as modified by RD-law 29/2021 and was granted on January 23, 2022.
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Impact on future Solar projects in Spain
Once the access permit is granted to a project, the below milestones will apply (the starting date is the date the permit access was granted):
As noted below, RD-law 8/2023 revised these deadlines for certain projects.
Impact on operating facilities
The above regulation does not affect our existing and operating facilities.
Royal Decree 1183/2020
Royal Decree-law 1183/2020, or RD 1183/2020, entered into force on December 31, 2020. RD 1183/2020 regulates in detail the procedure for obtaining access and connection permits. RDL 23/2020 established a moratorium by virtue of which it was not possible to request new access and connection permits until the regulation establishing the procedure for obtaining these was approved, and was then further extended until the available capacities in accordance with the new criteria established by the Spanish National Commission on Markets and Competition (CNMC) in Circular 1/2021 (as defined below) are published. The moratorium was released on July 1, 2022. In addition, the approval of RD 1183/2020 determines the entry into force of art. 33.8 of Law 24/2013, which sets a validity of five (5) years of the access and connection permits.
RD 1183/2020 also regulates the access capacity tenders in certain nodes of the transmission grid for the integration of renewable energies.
CNMC Circular 1/2021
The CNMC Circular 1/2021, or Circular 1/2021, establishing the methodology and conditions for access and connection to the electricity transmission and distribution networks, was published on January 22, 2021. Circular 1/2021 completes the regulation process related to access and connection to the electricity transmission and distribution networks. The regulation has been developed through the Resolution of May 20, 2021, explained further below.
Resolution of May 20, 2021, of the CNMC, which establishes the detailed specifications for the determination of the generation access capacity to the transmission network and distribution networks
Resolution of May 20, 2021, contains the detailed specifications for the determination of the access capacity of generation to the transmission grid and distribution networks.
The purpose of the detailed specifications for the determination of the access capacity to the transmission grid for generation is to establish the particular aspects of criteria and methodology for the calculation of the access capacity to the transmission grid for generation or storage facilities, new or existing, which change their declared conditions, with direct connection to the transmission grid or with connection in distribution with influence on the transmission grid.
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The detailed specifications for the determination of the generation access capacity to the distribution networks determine the criteria and methodology for the calculation of the access capacity to the distribution networks, the calculation of the access capacity to the distribution network in the processing of requests for access of generation or transmission requests for access of generation or storage facilities, whether new or existing that change their technical characteristics or existing facilities that change their significant technical characteristics.
Circular 1/2021 has been modified by Circular 1/2024, which now requires storage installations, such as batteries, to include demand-related information when applying for access and connection permits.
Law 7/2021 of climate change and energy transition
Law 7/2021 of May 20, 2021 on climate change and energy transition, or Law 7/2021, establishes objectives for 2030 which include the reduction of greenhouse gas emissions of the Spanish economy by at least 23% compared to 1990; the penetration of renewable energies in final energy consumption of at least 42%; achieving an electricity system with at least 74% of generation from renewable energies and reduction of primary energy consumption by at least 39.5%. It also establishes that Spain must achieve climate neutrality by 2050 at the latest. The energy transition promoted by Law 7/2021 enables the mobilization of more than 200 billion euros of investment over the decade 2021-2030.
Royal Decree-Law 17/2021, of September 14
Royal Decree-Law 17/2021, of September 14, or RDL 17/2021, entered into force on September 16, 2021. From the entry into force of RDL 17/2021, a temporary adjustment in the remuneration of certain generation facilities is foreseen, in proportion to the higher income obtained by such facilities due to the internalization in the price of electricity in the wholesale market of the increase in the price of natural gas in international markets by the marginal emitting technologies. The adjustment does not apply to certain, mainly smaller, plants and to the part of the energy produced by generation facilities which is subject to a fixed price (physical or financial) PPA under certain conditions (which included the Talasol PPA). Such adjustment was initially foreseen until March 31, 2022, but was amended and extended until December 31, 2023 and is now no longer in effect.
Royal Decree-law 6/2022
Royal Decree-law 6/2022, of March 29, 2022, or RDL 6/2022, establishes a range of urgent measures within the framework of the National Plan for Response to the Economic and Social Consequences of the War in Ukraine. In particular, in the renewable energy field it adopts several measures, among others: (i) the mechanism for reducing excess electricity market remuneration due to the high quotation price of natural gas in international markets, which was introduced under RDL 17/2021 and which is no longer in effect as explained above; (ii) it foresees the exceptional update of the specific remuneration parameters for 2022, as will be further detailed below; (iii) it establishes certain particularities in the environmental assessment to accelerate the permitting process; and (iv) it extended the suspension of the generation tax (a 7% tax imposed on certain electricity generating facilities, including our Solar Plants in Spain) until December 31, 2023. Please see below for a description of the relevant modifications introduced by RD-law 8/2023.
Royal Decree-law 11/2022
Royal Decree-law 11/2022, dated June 25, 2022, adopted certain measures to respond to the economic and social consequences of the war in Ukraine and to address situations of social and economic vulnerability. In particular, it extended the mechanism for reducing excess electricity market remuneration due to the high quotation price of natural gas in international markets, until December 31, 2022.
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Royal Decree-law 17/2022
Royal Decree-law 17/2022, dated September 22, 2022, modifies Article 115 of the Royal Decree 1955/2000 and adopts measures to allow cogeneration installations to recover their operating costs - due to the price situation in the energy markets - through a new type of voluntary waiver of the specific remuneration scheme so that they can apply for inclusion in the adjustment mechanism. It also introduces measures to promote the processing, commissioning and evacuation of renewable energy. Firstly, one of the requirements to obtain administrative authorization for construction, or AAC, without the need for a new prior administrative authorization, or AAP, in case of modifications to generation facilities that have already obtained AAP, is modified. Therefore, the requirement that the installed power, after the modifications, does not exceed by more than 10% the power defined in the original project, is amended so that the resulting installed power does not exceed the original one by more than 15%. This is without prejudice to the implications that this excess power may have for the purposes of access and connection permits. One of the requirements established regarding the consideration of non-substantial modifications is also revised to provide that a substantial modification in basic technical characteristics will be measured at more than 10% of the capacity and not 5%. Deadlines for the approval of the execution project are also reduced under certain circumstances. RD-law 17/2022 also modifies RD 413/2014 in relation to the prior registration of electricity production facilities and creates an active demand response service.
Royal Decree-law 18/2022
Royal Decree-Law 18/2022, of October 18, 2022, or RDL 18/2022, establishes a wide range of measures aimed at: (i) the protection of gas and electricity consumers, (ii) the promotion of renewable gases and digitalization, (iii) the promotion of self-consumption, (iv) the rapid injection of energy into the network, and (v) administrative simplification for electricity production facilities, among others. This RDL 18/2022 further extended the mechanism for reducing excess electricity market remuneration due to the high quotation price of natural gas in international markets until December 31, 2023.
In addition, regarding the procedure for holding capacity tenders, the nodes reserved for contest by Resolution of the Secretary of State for Energy will remain reserved regardless of whether the capacity reserved for competition has been reduced below the limit of 100 MW for nodes of the peninsular electricity system or 50 MW for those located in non-peninsular territory, and that the conditions contained in Article 18.2 of Royal Decree 1183/2020, of December 29, 2020 are no longer met after the resolution.
Royal Decree-law 20/2022
This Royal Decree-law introduces several measures in the energy field, among others, (i) an exceptional and transitory procedure for the determination of the environmental affection of generation projects from renewable energy sources and the specific authorization procedures for those projects that have obtained a favorable opinion; and (ii) with regard to grid capacity, the suspension of certain permitting procedures related to knots in which there is capacity that has been reserved for grid capacity tenders (in any case, this does not affect those projects for which access and connection has already been requested).
Remuneration of Renewable Energy Plants
The remuneration of electricity generation activity includes the following concepts: (i) the electric energy negotiated through the daily and intraday markets, remunerated on the basis of the price resulting from the balance between the supply and the demand of electric energy offered in them (i.e., spot price), (ii) adjustment services, including non-frequency services and system balance services, necessary to ensure adequate supply to the consumer, (iii) where appropriate, the remuneration for capacity mechanism, (iv) where appropriate, the additional remuneration for the production of electric energy in the electrical systems of non-peninsular territories, which the government may apply to cover the difference between the investment and operational costs and the incomes of these plants, and (v) where appropriate, the specific remuneration for the production of electric energy from renewable energy sources, high efficiency cogeneration and waste.
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The legal and regulatory framework applicable to the production of electricity from renewable energy sources in Spain was modified by RDL 9/2013, due to the adoption of several urgent measures in order to ensure the financial stability of the power system, eliminating the former “Special Regime” and feed-in-tariff established by Royal Decree 661/2007 and Royal Decree 1578/2008 and establishing the basis of the current remuneration scheme applicable to renewable energies called the “Specific Remuneration” regime.
Specific Remuneration includes two components to be paid in addition to the electricity market price: (i) an “investment retribution” sufficient to cover the investment costs of a so-called “standard facility” – provided that such costs are not fully recoverable through the sale of energy in the market, and (ii) an “operational retribution” sufficient to cover the difference, if any, between the operational income and costs of a standard plant that participates in the market.
The Specific Remuneration provides that commencing July 13, 2013 all Solar plants currently in operation, including our Spanish Solar Plants, were no longer entitled to receive the applicable feed-in-tariff for renewable installations but rather became entitled to receive the Specific Remuneration.
The basic concept of the Specific Remuneration contained in RDL 9/2013 was confirmed by the current Power Act (Law 24/2013) and further developed by the following regulations:
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Pursuant to the above regulations, the calculation of the Specific Remuneration is performed as follows:
The Specific Remuneration is not calculated independently for each power installation. It is calculated based on the inclusion of each existing installations in one of the formulated IT-categories and, as a result of such inclusion, is based on the retribution parameters assigned to that particular IT-category.
The update of the Specific Remuneration is carried out by reference to the IT-categories with the sole exception of the adjustment of annual revenues from the Specific Remuneration as a result of the number of Equivalent Operating Hours. This update is made installation by installation by the National Markets and Competition Commission.
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The Talasol Solar Plant is a “merchant” facility, i.e., will not be entitled to feed-in-tariff, “specific remuneration” or other similar regulatory incentives.
Special considerations for January 1, 2023 to December 31, 2025
Royal Decree-Law 5/2023 of June 28, 2023 updates the remuneration parameters of the standard installations for the regulatory half-period between January 1, 2023 and December 31, 2025 and provides that it will be carried out considering the following in relation to the estimate of the electricity market price:
Order TED/741/2023 establishes the same estimated values for 2023, 2024 and 2025.
The obligation to finance the tariff deficit
Pursuant to Law 24/2013, renewable installations are required to finance future tariff deficits whereas pursuant to the former Power Act, the tariff deficit was only financed by five vertically integrated companies (Iberdrola, Endesa, E.On, Gas Natural Fenosa and Hidrocantábrico). Therefore, in the event there is a temporary deviation between revenues and costs of the electricity system on any given monthly settlement, this deviation shall be borne by all the companies participating in the settlement system (including renewable facilities).
Taxation of the income from generation of electricity
In December 2012, the Spanish Parliament enacted the 15/2012 on fiscal measures for the sustainability of the energy sector, which entered into force on January 1, 2013. Law 15/2012 sets forth a tax on energy generation of 7% from the total amount received for the production of electricity. RDL 15/2018 suspended this tax with respect to the electricity produced and injected to the grid during a period of six months commencing October 6, 2018 through March 31, 2019. The suspension has been extended several times, the last one by Royal Decree-law 20/2022, dated December 27, 2022, until December 31, 2023. RD-law 8/2023 regulates the determination of the taxable base and the amount of the instalments of the tax on the value of electricity production for the year 2024.
Removal of the Generation Access Toll
The CNMC approved Circular 3/2020, which was published in the Official State Gazette on January 24, 2020, by which the electricity generators are exempted from paying the toll to access the grid. This means the removal of the €0.5/MWh access toll that was established for electricity generators under Royal Decree – Law 14/2010 of December 23, 2010.
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Royal Decree-Law 5/2023
Royal Decree-Law 5/2023 of June 28, 2023, which adopted multiple measures and regulatory modifications in various areas and affected multiple sectors, included certain provisions affecting Solar projects in Spain, mainly:
For the calculation of the adjustment value for deviations in the market price for the year 2023, provided for in article 22 of RD 413/2014, which will be applicable in the update of the remuneration parameters of the regulatory half-period that has its beginning on January 1, 2026, the weighted average value of the basket of electricity market prices for the year 2023 will be the minimum value between said value, as defined in article 22 of RD 413/2014, and the average annual price of the daily and intraday market in the year 2023.
Royal Decree-Law 8/2023
RD-law 8/2023, of December 27, 2023 adopted measures to face the economic and social consequences derived from the conflicts in Ukraine and the Middle East, as well as to alleviate the effects of the drought in Spain contains many provisions affecting the energy sector in general.
For example, for those new projects that have obtained the access and connection permits between January 1, 2018 and December 28, 2023, certain administrative milestones may be extended as follows:
Other special rules are included to address the issue of unavailability of grid connection infrastructure for the permitting process of renewable energy projects.
Additionally, RD-law 8/2023 contains new rules for access and connection tenders, such as (i) release of capacity which was reserved for self-consumption, (ii) new criterion to evaluate tenders and (iii) incorporation of capacity auctions on the demand side. Red Eléctrica publishes the access requests for demand at the nodes on a monthly basis. In this sense, several access requests for demand have been suspended because those nodes have been reserved for demand auctions. Moreover, from January 1, 2024 until March 31, 2024, Electricity Special Tax will be levied at the rate of 2.5%, and from April 1, 2024 until June 30, 2024, at the rate of 3.8%. Currently, since July 1, 2024, the Electricity Special Tax is applied at 5.11%, as established by Law 28/2014, of November 27 (recovering its original value).
Finally, RD-law 8/2023 extends certain measures adopted at the time to counteract the economic and social consequences of the war in Ukraine and also introduces certain measures on provisional and definitive operational notifications.
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Resolution of June 27, 2024, of the National Commission for Markets and Competition, establishing detailed specifications for determining the access capacity of generation to the transmission network and distribution networks.
The Resolution of June 27, 2024, issued by the National Commission for Markets and Competition, establishes detailed specifications for determining the access capacity of power generation facilities to transmission and distribution networks. This resolution finalizes a process initiated through several working groups during 2022 and 2023, which underwent public consultation and an audience process involving stakeholders. It advances the application of uniform criteria for calculating network access capacity, ensuring consistency across all grid operators.
The new criteria are expected to free up additional capacity in the networks, facilitating the connection of new renewable energy installations, energy storage systems, and emerging demand facilities. This resolution further develops Circular 1/2021 and replaces the previous Resolution of May 20, 2021.
In the transmission network, a differentiated approach is introduced for energy storage systems, recognizing their dual role in both injecting and absorbing energy.
Royal Decree 662/2024
Royal Decree 662/2024, establishes the regulatory framework for installing floating photovoltaic plants in reservoirs within the public hydraulic domain managed by the General State Administration. It amends the Regulation of the Public Hydraulic Domain, approved by Royal Decree 849/1986, and sets requirements for granting permits, allowing coverage of 5% to 15% of a reservoir’s surface based on water quality. Concessions, granted for up to 25 years, may be issued through direct applications or public tenders. The decree mandates environmental monitoring for projects exceeding 10% coverage and prohibits installations in protected water bodies. By promoting renewable energy, these plants enhance electricity generation while reducing water evaporation and algae growth, ensuring a balance between sustainability and water resource management.
Resolution of September 9, 2024, of the General Directorate for Environmental Quality and Assessment, issuing the strategic environmental declaration for the “Update of the National Integrated Energy and Climate Plan 2023-2030.”
The Resolution of September 9, 2024, by the General Directorate for Environmental Quality and Assessment issues the strategic environmental declaration for the Update of the National Integrated Energy and Climate Plan (PNIEC) 2023-2030, emphasizing the expansion of solar photovoltaic energy. The plan sets a target of 81% renewable electricity by 2030, with solar PV capacity growing from 8.7 GW in 2019 to 25.8 GW in 2023, including 7 GW from self-consumption. It assesses the environmental impact of large-scale solar projects on land use, biodiversity, and desertification risks and raises concerns about decommissioning obligations, with proposals for financial guarantees to ensure land restoration. Environmental monitoring will oversee water use, biodiversity, and grid expansion, reinforcing sustainable solar growth in Spain’s energy transition.
CNMC Circular 1/2024
Circular 1/2024, issued by the National Commission for Markets and Competition, establishes the methodology for access and connection to electricity transmission and distribution networks for demand installations. It introduces a key innovation: the distinction between firm and flexible access capacity. Firm capacity guarantees a constant power supply, while flexible capacity allows demand to adjust based on network availability. Applicants can request both types, though flexible capacity is voluntary and restricted in certain cases.
The circular defines evaluation criteria for permits, specifying technical and safety conditions in its annexes. If capacity is unavailable, alternatives may be considered. Storage installations, such as batteries, must now include demand-related data, updating Circular 1/2021. Additionally, network operators must publish capacity data monthly to enhance transparency. While this framework addresses previous regulatory gaps, the implementation of flexible access is delayed until further regulatory developments by the CNMC.
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CNMC Resolution of June 12, 2025
On June 12, 2025, Spain’s CNMC approved an overhaul of Operating Procedures 7.4, 3.1, 3.6, 9.1 and 14.4, establishing a modernized voltage-control service with a mandatory basic layer and a remunerated dynamic layer based on real-time setpoints from the system operator, and enabling procurement of additional reactive-power capacity together with an incentives/penalties regime and updated market/information processes.
Red Eléctrica has published the Technical Specifications and the habilitation pack so eligible facilities, including solar facilities, can request activation. Since October 2025, Red Eléctrica has been habilitating the first renewable plants, which once active gain dispatch priority and faster ramp rates as operational benefits.
CNMC Resolution of December 1, 2025
The Resolution develops Circular 1/2024 for demand installations and introduces two levers that condition grid access: (i) a “reference value” to be agreed at each transmission–distribution frontier, which becomes a prerequisite to compute and grant firm demand capacity at the relevant node, and (ii) a dynamic criterion assessing how large power-electronic loads ride through voltage dips, with a material impact on calculated capacity if the methodology is not carefully tuned.
In January 2026 the CNMC opened a public hearing (January 30, 2026–February 6, 2026) to modify the Resolution and defer the first publication of demand-capacity maps on the transmission grid from February 2, 2026 to May 4, 2026 so that reference-value agreements could be finalized and the dynamic criterion integrated more prudently; notwithstanding the deferral, applications filed from February 2, 2026 are assessed under the new technical criteria.
Royal Decree 997/2025
Following the April 28, 2025 system “black-out”, Royal Decree-law 7/2025 introduced urgent, temporary measures to bolster system resilience, but it was not ratified by Parliament and was repealed a few weeks later. Nevertheless, Royal Decree 997/2025 subsequently recovers and consolidates much of that package with regulatory rank from November 7, 2025. For the photovoltaic sector, Royal Decree 997/2025 delivers a clearer legal definition of “installed capacity” for both generation (PV) and storage (BESS) at the administrative-authorization stage, reducing re-openings of files when plant configurations are optimized.
It also simplifies and accelerates PV-to-BESS hybridization when the battery is inside a perimeter already covered by a favorable Environmental Impact Assessment (EIA), providing, in specific cases, exemption from a new environmental screening, and it regulates repowering with the option of partial authorizations where shared infrastructure exists, allowing a staged commissioning via provisional and definitive operating authorizations.
In parallel, the Royal Decree requires the CNMC and Red Eléctrica to reinforce supervision and inspection, covering, among others, compliance with voltage-control obligations and restoration capability, and to develop technical adjustments to balancing and congestion-management processes, while advancing the demand-access framework in coordination with CNMC Circular 1/2024.
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Material Effects of Government Regulations on Texas, USA, Solar Plants
Texas Solar Market and Regulation
U.S. Federal Tax Subsidies for Solar Energy Projects
The Internal Revenue Code of 1986, as amended, or the Code, has long provided for tax credits for the development of specified types of renewable energy generation projects in the form of investment tax credits, or ITCs, under section 48 of the Code. Prior to the enactment of the IRA, these tax credits were subject to being phased out or phased down. The IRA extended these credits to projects that began construction before January 1, 2025, and restored the full value of the credits subject to compliance with new prevailing wage and apprentice requirements. The IRA also added a new ITC for standalone energy storage property.
These technology-specific credits are now being phased out in favor of a new “technology neutral” credit regime under sections 45Y and 48E of the Code for qualified facilities and energy storage property that are placed in service after December 31, 2024. Sections 45Y and 48E of the Code generally define qualified facilities as those used for the generation of electricity for which the greenhouse gas emissions rate is not greater than zero. Qualified facilities that begin construction before January 1, 2025, and are placed in service after December 31, 2024, effectively have a choice between the two regimes if they qualify for both.
In July 2025, the OBBBA was enacted by the Trump Administration that claws back or, in some cases terminates, certain tax incentives enacted under the IRA. As amended by OBBBA, tax credits available under sections 45Y and 48E of the Code for technologies other than wind and solar are scheduled to begin phasing down in 2032. For wind and solar, to qualify for tax credits available under sections 45Y and 48E of the Code, the project must be placed in service by the end of 2027 or it must begin construction before July 5, 2026 and thereafter satisfy a continuous construction requirement, which will be deemed if the project is placed in service by the end of the fourth calendar year following the calendar year in which construction began. The ITC available under sections 48 and 48E of the Code, is a one-time credit claimed in the year the eligible facility is originally placed in service, equal to a specified percentage of the taxpayer’s original cost basis of such property. The ITC is subject to recapture (in declining increments) if the ITC-eligible property is disposed of or ceases to be ITC-eligible during the five-year period following the date it is originally placed in service.
For projects placed in service on or after January 1, 2022, both types of credits are structured as a “base” credit amount that is subject to a five-fold increase (or “5x bonus” credit amount) if the prevailing wage and apprenticeship requirements are met or otherwise deemed satisfied. Assuming the prevailing wage and apprenticeship requirements are met, the ITC is equal to 30% of eligible property’s cost basis.
The IRA also enacted three bonus credits or “adders”—the domestic content bonus credit, the energy community bonus credit and low-income community bonus credit—for otherwise eligible facilities that satisfy additional requirements. Qualified facilities that satisfy these additional requirements are eligible to claim incremental ITCs in excess of the “base” credit available to all qualified projects under sections 48, and 48E of the Code. For qualified facilities that satisfy the prevailing wage and apprenticeship requirements, the bonus credits are in addition to the “base + 5x bonus” credit amount. For projects claiming the ITC, each of the domestic content bonus credit and energy community bonus credit is a 10 percentage point increase in the base + 5x bonus credit rate (30%) for projects that satisfy the prevailing wage and apprenticeship requirements (e.g., a 40-50% total credit rate) or a 2 percentage point increase in the 6% base credit rate for facilities that do not satisfy such requirements (i.e., an 8-10% total credit rate). The low-income community bonus credit is a 10-20% incremental ITC for qualified facilities located in certain communities.
Significantly, the IRA introduced two new ways of monetizing ITCs—“direct pay” and transferability. Prior to the IRA, renewable energy credits were largely monetized by taxpayers through tax equity financing structures that required a so-called “tax equity investor” to acquire an ownership interest in the project generating the credit. In recognition of the limited pool of tax equity investors and the constraints on tax-exempt entities, the IRA enacted new sections 6417 and 6418 of the Code. Under section 6417 of the Code, eligible taxpayers (primarily, tax-exempt entities) can make a “direct pay” election with respect to certain ITCs and receive a direct payment from the U.S. government. Under section 6418, eligible taxpayers (generally, any taxpayer other than a tax-exempt entity) can irrevocably elect to sell certain tax credits to unrelated third parties. Payments must be paid in cash within a certain time frame, and are excludable from gross income of the eligible taxpayer and non-deductible by the transferee.
In addition to the changes described above, OBBBA enacted a significant new set of restrictions relating to “prohibited foreign entities” that (i) impose new eligibility restrictions for certain federal tax credits (including sections 45Y and 48E) based on the sourcing of equipment and other components from “specified foreign entities” and (ii) deny the benefit of certain federal tax credits (including sections 45Y and 48E credits) to “specified foreign entities” and “foreign-influenced entities” and other taxpayers to which the rules are determined to apply.
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Under these new rules, no section 45Y or 48E credit is allowed with respect to any qualified facility or energy storage technology, or EST, that begins construction after December 31, 2025 that is constructed with “material assistance” from a prohibited foreign entity. A qualified facility or EST will be treated as having been constructed with material assistance from a prohibited foreign entity if the material assistance cost ratio (expressed as a percentage) is less than a specified percentage, which varies based on the type of technology and the beginning of construction year. The material assistance cost ratio is determined by dividing (i) the taxpayer’s total direct costs attributable to all manufactured products and components incorporated into the qualified facility or EST upon completion of construction (the total direct costs) minus the total direct costs attributable to all manufactured products and components that were produced or manufactured by a prohibited foreign entity, by (ii) the total direct costs. For solar projects that begin construction in 2026, the material assistance threshold is 40%; for solar projects that begin construction in 2027, the material assistance threshold is 45%. For energy storage projects that begin construction in 2026, the material assistance threshold is 55%, which steps up 5% each year until 2030.
Regardless of when construction of a qualified facility or EST begins, no section 45Y or 48E credit is allowed to the taxpayer that owns the property if the taxpayer is a specified foreign entity, a certain category of foreign-influenced entity or the foreign-influenced entity rules are otherwise determined to apply to the taxpayer. Specified foreign entities include “foreign entities of concern” and certain designated companies associated with the Chinese government, as well as U.S. and non-U.S. companies controlled by the governments of Russia, China, North Korea or Iran (or any citizen or national thereof). Foreign-influenced entities include U.S. and non-U.S. companies owned or financed (subject to certain thresholds) by specified foreign entities, as well as taxpayers that are parties to (or are related to a person that is a party to) commercial contracts, such as supply, services and license agreements, with a specified foreign entity (or a person related thereto) that entitles the specified foreign entity (or related person) to exercise “effective control” over the qualified facility or EST.
To date, limited guidance has been issued with respect to the prohibited entity rules. In February 2026, the IRS issued a notice providing interim rules and a safe harbor for calculating the material assistance cost ratio based on assigned percentages rather than direct costs, similar to prior guidance issued with respect to the domestic content bonus credit. Additional guidance (including anti-abuse rules to prevent evasion of the restrictions relating to prohibited foreign entities) is expected in the future.
Texas Renewable Energy Regulations and Permitting
In 2023, pursuant to Section 46 of House Bill 1500, Texas repealed the Public Utility Regulatory Act, or PURA § 39.904, Goal for Renewable Energy, which was the statutory basis for the renewable portfolio standard, or RPS, mandate in the state. However, Section 53 of HB 1500 required the Public Utility Commission of Texas, or PUCT, to adopt rules to implement a new RPS only for Solar resources and phase it out so that it terminates on September 1, 2025. HB 1500 also added PURA § 39.9113, which requires ERCOT to maintain a voluntary renewable energy credits, or RECs, trading program to maintain accreditation and a banking system to award and track RECs to facilitate voluntary contractual obligations and verify claims regarding environmental attributes of renewable energy production in Texas.
Unlike many states across the USA, Texas does not have a Power Siting Board and does not require project developers to obtain approval for the siting or construction of a new Solar plant. The PUCT has the authority to oversee power generation companies; however, it lacks the capability to grant permits or certificates for the construction of new electric generating plants or to directly regulate the building process of individual electric generating plants. At the local level, Texas counties have restricted control over specific elements of the construction process, such as the utilization of county roads, but they do not have the authority to regulate the development and construction of Solar projects. While the authorization of electric generating facilities in Texas does not necessitate state or county permits, these projects still require general construction permits such as the General Permit for Storm Water Discharges from Construction Activities required under the Clean Water Act and the Texas Water Code. Other permits may be required for specific components of a project, such as access driveways and utility line crossings, or when new water wells, septic systems or concrete batch plants will be installed, but such permits are generally ministerial and can be obtained in the ordinary course of business.
According to the ERCOT protocols, a Solar facility generating 10 MWac or less and meeting certain other requirements is considered a Distributed Generation facility. The owner of a Distributed Generation facility that generates electricity intended to be sold at the ERCOT wholesale market must register with the PUCT as a Power Generation Company and submit an Emergency Operations Plan to the PUCT and ERCOT. Furthermore, the Distributed Generation facility must interconnect with the local distribution utility through executing the standard Distributed Generation Interconnection Agreement. All of our US Solar projects are considered Distributed Generation facilities.
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In addition to the registrations required by the PUCT, the owner of the Distributed Generation facility must register with ERCOT as a Resource Entity. Additionally, the owner of the Distributed Generation can choose to be registered as a Settlement Only Distributed Generator which enables the facility to be settled for exported energy only without participating in the ERCOT Ancillary Services market, Reliability Unit Commitment, and Security-Constrained Economic Dispatch. A Settlement Only Distributed Generator must engage and designate a Qualified Scheduling Entity who will be responsible for financial settlements on its behalf.
In order for a Distributed Generation facility to sell the Solar Renewable Energy Certificates (SREC) that are generated from the operations of the facility, the facility must register with ERCOT for a Texas Renewable Energy Certificates account and with the PUCT as a Renewable Energy Credit Generator.
In 2024, the Texas Legislature enacted PURA § 39.1592, requiring owners or operators of electric generation facilities in the ERCOT region to demonstrate their portfolio’s ability to operate at or above seasonal average generation capability during times of highest reliability risk. To implement this statutory mandate, the PUCT initiated Project No. 58198, adopting amendments to 16 TAC § 25.65 establishing firming reliability requirements. Under the final rules, electric generating facilities that (i) sign a standard generation interconnection agreement on or after January 1, 2027, (ii) have been in operation for at least one year, and (iii) are not self-generators, must annually demonstrate by December 1 their ability to meet reliability standards during high-risk periods. Battery energy storage resources are exempt from these requirements. For solar facilities, which are nondispatchable generation resources with variable output patterns, compliance may necessitate the integration of battery energy storage systems or other firming resources to ensure generation capability during periods when solar production is typically reduced, such as late afternoon peak demand periods and weather-related events. The firming requirements represent a significant shift in Texas energy policy, redirecting investment toward reliability measures and potentially affecting the economic viability and operational structure of solar projects that fall within the scope of the rule. Additionally, Project No. 58393 implements new reporting requirements under 16 TAC § 25.75 for annual reports distinguishing between dispatchable and nondispatchable generation facilities, which will require solar facilities to report operational and capability data to demonstrate compliance with state reliability standards.
Texas law, under Senate Bill 2116 known as the Lone Star Infrastructure Protection Act, imposes restrictions on contracts with certain foreign-owned companies in connection with critical infrastructure. Under the Act, “critical infrastructure” is defined to include communication infrastructure systems, cybersecurity systems, electric grids, hazardous waste treatment systems, and water treatment facilities. The Act prohibits business entities from entering into agreements that would grant direct or remote access to or control of critical infrastructure with companies owned by, controlled by, or headquartered in China, Iran, North Korea, Russia, or countries designated by the governor as threats to critical infrastructure, excluding access specifically allowed for product warranty and support purposes. For distributed generation solar facilities in Texas, the Act’s implications arise from the facilities’ interconnection with the electric grid and the use of cybersecurity systems that may grant vendors or service providers access to grid-connected infrastructure. This legislation has practical implications for equipment procurement and system integration decisions, particularly regarding inverters, battery energy storage systems, monitoring software, and cybersecurity platforms that require remote access or control capabilities. The prohibition applies regardless of whether the company’s securities are publicly traded or whether the company is listed on a public stock exchange. While the Act does not prohibit the purchase of equipment manufactured by covered companies outright, it restricts agreements that provide operational access or control, requiring distributed generation solar developers to carefully structure their equipment supply agreements, operations and maintenance contracts, and system monitoring arrangements to ensure compliance with Texas law.
Texas Market Structure
Utility-scale projects, particularly wind and solar farms, stand as the backbone of the renewable energy capacity of Texas. These projects generate electricity and interface with the ERCOT grid, which operates independently, overseeing the majority of the state’s electric power flow. The integration of utility-scale renewable energy projects into ERCOT has significantly reshaped the state’s energy landscape.
Within the ERCOT market, utility-scale renewable energy generators engage in the competitive wholesale electricity market through participating in the Real-Time energy market or in the Day-Ahead energy market. Real-time transactions driven by supply and demand dynamics set the market-clearing price, establishing a dynamic framework for electricity trading. As utility-scale projects contribute substantial capacity to the grid, they play a vital role in influencing these market dynamics.
In many areas in ERCOT, retail customers may purchase power from retail electricity providers, or REPs, that may procure renewable electricity in the ERCOT wholesale electric market. Renewable energy plans offered by REPs enable consumers to make choices aligned with their sustainability goals.
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Material Effects of Government Regulations on Israeli Solar Plants
The Israeli Electricity Market
The Israeli electricity market is divided into several segments: manufacturing, transmission, distribution, supply and management. The market is dominated by the IEC, which fully controls the transmission and distribution segments and previously manufactured and sold most of the electricity consumed in Israel and by the Palestinian Authority. As of 2024, approximately 60% of the electricity in the market is generated by private producers, while the IEC’s share has decreased to about 40%. The IEC’s market share in the supply segment represented 65% of the supply segment of the Israeli market in 2024, with the remainder represented by the independent power producers and virtual suppliers. As of June 2025, over 270,000 consumers have switched to private suppliers. The IEC controls both the transmission network (for long-distance transmittal of electricity) and the distribution network (for transmittal of electricity to the end users). The Israeli Electricity Authority predicts that the IEC’s actual production will represent approximately 23% of the electricity manufactured in Israel in 2030. Unless otherwise noted, the information concerning the Israeli electricity market included in this Report is derived from the Israeli Electricity Sector Annual Report for 2024, published by the Israeli Electricity Authority in September 2025.
As of 2024, the aggregate electricity storage capacity in Israel was approximately 557 MW, of which 300 MW was pumped storage and 257 MW was battery storage (standalone and storage integrated photovoltaic). In February 2025, a pumped storage facility at Kokhav HaYarden with a capacity of 344 MW commenced commercial operation. The Israeli Electricity Authority forecasts that in 2030 the electricity storage capacity in Israel will be approximately 9,250 MW (40,200 MWh), of which 800 MW will be pumped storage, 3,500 MW will be storage integrated photovoltaic and 4,950 MW will be standalone battery storage.
In 2024, the market model regulation of the supply segment, which enables consumers to purchase electricity from private manufacturers, became effective and regulation enabling private consumers without “smart meters” to purchase electricity from private suppliers also came into effect. As of September 2024, consumers with basic (non-smart) meters were permitted to switch to private suppliers, opening the competition to hundreds of thousands of additional households. In recent years, the Israeli Electricity Authority granted licenses to suppliers who are not manufacturers to supply electricity to consumers. In 2024, 21 virtual suppliers were active, supplying approximately 14% of the consumption by customers of private suppliers (approximately 5% of the market in total). In May 2025, the Israeli Electricity Authority established the “Bilateral Market Regulation” for renewable generation and storage facilities connected to the transmission grid, which is expected to further enhance competition in the supply segment (see “Market Model for Private Manufacturers on the Transmission Grid” below). These steps are expected to increase competition in the supply segment.
Israeli Regulation
The regulatory framework applicable to the production of electricity by the private sector in Israel is provided under the Israeli Electricity Law, and the regulations promulgated thereunder, including the Electricity Market Regulations (Terms and procedures for the granting of a license and the duties of the Licensee), 1997, the Electricity Market Principles (Transactions with the supplier of an essential service), 2000, and the Electricity Market Regulations (Conventional Private Electricity Manufacturer), 2005, or the Electricity Market Regulations. In addition, standards, guidelines and other instructions published by the Israeli Electricity Authority (established pursuant to Section 21 of the Electricity Law) and\or by the Israeli Electric Company also apply to the production of electricity by the private sector in Israel. The operations of photovoltaic plants in Israel are also subject to various licensing, permitting and other regulations and requirements, issued and supervised by the relevant municipality, the Israeli Land Authority and various governmental entities including the Ministry of Energy, the Ministry of Agriculture, the Ministry of Interior and the Ministry of Defense.
In June 2018, the Israeli Government issued resolution no. 3859 for the reform of the electricity market and a structural change in the IEC. In July 2018, Amendment No. 16 to the Electricity Law was adopted. This amendment implements the reform of the Israeli electricity market and the reduction of the IEC’s monopolistic power by providing arrangements for the removal of the system management authorities from the IEC, maintaining the transmission and part of the distribution facilities with the IEC, increasing the competition in the production segment by forcing the IEC to sell some of the power plants it owns and opening up the supply segment to competition.
The Israeli Electricity Authority operates in accordance with the Israeli Electricity Law and the policies of the Israeli government and the Minister of Energy and Infrastructures, or the Minister of Energy. As part of its authorities, the Israeli Electricity Authority, among other roles, grants licenses and supervises the compliance with the provisions of the Israeli Electricity Law and the licenses issued thereunder, sets the tariffs and the methods for updating them and determining standards for the quality, nature and level of the services provided by the holders of essential service supplier licenses in relation to their customers and other electricity manufacturers, including in connection with electricity consumption, grid connections, supply reliability, infrastructure services and the purchase of electricity from licensees.
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As part of the 2018 reform referred to above, the Israeli government separated the system management unit from the IEC and transitioned it to a separate government company (the System Manager). The System Manager is responsible for planning and development of the electricity market and maintaining the balance between the supply and demand for electricity and ensuring survivability of the electricity production and transmission systems, managing the transmission of the energy from the power plants through the grid to substations with the requisite reliability and quality, timing of maintenance works in the production units and transmission system, managing the trade in electricity under competitive, equal and beneficial terms, including entering into agreements to purchase energy availability from manufacturers and the design of development of the transmission and transformation system.
During 2020, the Minister of Energy instructed that the coal-based production units of the IEC gradually transition to manufacturing electricity using natural gas, commencing in 2022 and through 2025. On the basis of this decision, in 2019 the IEC sold its production units in Alon Tavor, in 2020 its production units in Ramat Hovav, and in 2022 its production units in Hagit Mizrach (effective June 2022). In addition, the IEC completed the sale of the Eshkol power station in June 2025, reducing the IEC’s market share in the electricity production segment in Israel to below 50%. In November 2023, the IEC published a tender for the BOT construction and operation (for a 25 year period) of a new power plant to be fueled by natural gas with installed capacity of 630-900 MW in Sorek (in central Israel) and in December 2024 the winner in the tender process, a group that includes one of the indirect shareholders of Dorad that offered an availability tariff of NIS 0.0318 per KWh, was announced. This power plant is expected to commence operations in 2029 and will be operated by the winners of the bid for 25 years and thereafter transferred to the ownership of the state.
Following the Reform, the IEC is also permitted to receive new generation licenses for two natural gas combined cycle gas turbine, or CCGT, units at the ‘Orot Rabin’ site, with a total installed capacity of about 1,200 MW. One unit (CCGT 70) began commercial operation in January 2025 and the second unit (CCGT 80) began commercial operation in January 2026.
In addition, the concentration regulations, which established caps on the holding of generation licenses by private entities, expired at the end of 2024. As of 2025, the Israeli Electricity Authority is in the process of formulating new concentration regulations to ensure fair competition.
As noted above, the System Manager was established in connection with the implementation of the 2018 reform in the electricity sector. The System Manager began operating at the end of 2020 and the planning, development and technology unit, as well as the statistics unit, were transferred to it. In November 2021, the system management unit was also transferred to the System Manager as described above, and it began to operate fully. Commencing its full operation, the System Manager manages the planning and development of the electricity system and the operation of the electricity production units in Israel. Based on the Israeli Electricity Sector Report, published by the Israeli Electricity Authority in September 2025, as of 2024, the IEC owned approximately 40% of the production capacity and the remainder is owned by the private electricity producers. In addition, the System Manager is responsible for managing the electricity market in Israel.
Renewable Energy in Israel
On August 6, 1998, the Israeli government approved the resolution of the Committee of Ministers for Environment and Hazardous Materials “to act to advance the development of technologies for efficient use of renewable energies in order to reduce the dependency on imported fuel and reduce the contamination of the environment.” Commencing in 2009, the Israeli government adopted a number of decisions intended to achieve the integration of renewable energies into the local electricity market, including the adoption of a roadmap for the market in July 2011 and setting targets for renewable energy manufacturing.
The current targets for manufacturing electricity from renewable sources were set by the Israeli government in October 2020 (Government Resolution 465), as follows: 20% in 2025, and 30% in 2030. These targets were set as part of the Israeli government’s efforts to reduce greenhouse gas emissions in Israel. During 2024, the actual consumption of electricity from renewable energy represented 14.6% of the consumption and the installed capacity (DC) of renewable energy as of the end of 2024 was approximately 6.89 GW, compared to 5.9 GW as of the end of 2023. The Israeli Electricity Authority predicts that in 2030 the renewable energy installed capacity will be 16 GW, representing approximately 39% of the predicted aggregate installed capacity and 30% of total electricity consumption.
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In August 2017, Amendment no. 14 to the Electricity Sector Law, or Amendment no. 14, was published. Amendment no. 14 is in effect until December 31, 2030. Amendment no. 14 requires that the Israeli Minister of Energy formulate a perennial work plan in connection with production of electricity from renewable energy, which will include action items per year in order to meet the targets for renewable energy manufacturing determined by the Israeli government. Amendment no. 14 further provides that an inter-ministerial committee will be established, which will be required to submit its recommendations to the Israeli Minister of Energy regarding the advancement of electricity manufacturing from renewable energy, including recommendation with respect to: (i) methods for minimizing or eliminating obstructions for manufacturing of electricity from renewable energy, including in connection with planning and financing and (ii) methods for minimizing or eliminating obstructions for the construction of facilities for manufacturing electricity from renewable energy. Amendment no. 14 also requires the general manager of the Ministry of Energy to provide an annual report to the Economic Committee of the Israeli parliament on meeting the targets for manufacturing electricity from renewable energy and with respect to the implementation of Amendment no. 14 and the perennial work plan.
During 2024, the Israeli Electricity Authority adopted a resolution enabling it to utilize the existing distribution grid and connect additional renewable energy facilities with an aggregate capacity of approximately 2,500 MW and a resolution to combine approximately 2,500 MW of private storage facilities. In February 2025, the Israeli Electricity Authority established an availability rate for storage facilities in an aggregate capacity of 1,500 MW.
The Israeli Electricity Authority determines the quotas for various traditional and renewable energy manufacturers in Israel. In the past, the Israeli Electricity Authority determined quotas for photovoltaic installations. The previous quota of 300 MWp for medium installations, connected to the distribution grid, and 200 MWp for large installations, connected to the transmission grid, have been fully utilized.
Israeli government resolution no. 2117, approved in October 2014, provides for a shift of thermo-solar, wind and bio-gas quotas in aggregate of 340 megawatt to solar quotas to be equally divided between plants connected to the transmission network and plants connected to the distribution network and further providing that the total quotas will not exceed 114 megawatt per year.
On October 10, 2016, The Israeli Electricity Authority published a hearing concerning the development of new photovoltaic plants with a total capacity ranging between 800-1700 megawatts as will be determined by the Israeli Electricity Authority, or the Publication. According to the Publication, the licenses to construct new photovoltaic plants under the new quotas shall be granted on the basis of a competitive bidding process, in which the bidders shall propose the applicable tariffs they expect to be paid for each KW/h supplied to the electric grid. The Publication provides that bidders who submit the lowest proposals that collectively fall within the quota limits will be entitled to develop a photovoltaic plant and sell electricity to the grid at a price equal to the lowest tariff proposal amongst the unsuccessful bids. Consequently, all successful bidders shall eventually sell electricity at the same tariff.
The final tariff will be valid for a period of 23 years for plants connected to the distribution grid, and 22 years for plants connected to the transmission grid, starting from the date of commercial operation or upon receiving a permanent license to produce electricity and the commencement of commercial operation, as shall be determined in accordance with the then applicable licensing regulation.
In November 2017, the Minister of Energy approved an additional quota of 1,600 MWp for photovoltaic installations that will be allocated between small rooftop installations and medium installations.
In recent years, the market has undergone a shift towards more market-based models for renewable energy, with growth in the low and high voltage distribution grid primarily driven by the “Market Regulation,” and in the transmission grid by the “Bilateral Market Regulation” (see “Market Model for Private Manufacturers on the Transmission Grid” below).
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Licensing
The Israeli Electricity Authority regulated the establishment of photovoltaic plants, in several categories as noted above. Medium photovoltaic plants, such as the Israeli Solar Plant, are governed by the Israeli Electricity Authority’s decision no. 284, or Decision 284. Decision 284 provided that it will apply until the earlier of reaching a quota of 300 megawatt in Israel or until the end of 2017.
An entity wishing to construct and operate a photovoltaic plant in Israel is required to obtain a conditional license, subject to the fulfillment of several threshold conditions set forth in Decision 284. A conditional license is generally valid for 42 months and the licensee, after meeting the milestones included in the conditional license, may be granted a conditional tariff approval based on the prevailing tariff, which is valid until the earlier of: (i) 90 days following its issuance and (ii) receipt of financing for the construction of the photovoltaic plant. In the event the licensee obtains financing during the 90 day period, it is issued the conditional tariff becomes permanent and is linked to the Israeli Consumer Price Index for a period of 20 years commencing upon commercial operation of the plant. Thereafter, subject to fulfilment of certain conditions, a permanent production license is granted.
In response to the war that began on October 7, 2023, the Israeli Electricity Authority granted a series of deadline extensions throughout 2023-2024 for the construction and operation of renewable energy facilities.
National Outline Plan and Permits
In December 2010, the Israeli National Committee for Planning and Construction approved National Outline Plan 10/d/10, or the Outline Plan, for regulating photovoltaic plants from small rooftop mounted installations through photovoltaic plants on land plots up to a size of 0.29 square miles. The Outline Plan provides for the construction of photovoltaic plants in two routes: permit and plan. Permits are available for rooftop mounted installations and for land installations on specific lands, depending on their designation in the National Outline Plan and a plan route requires the licensee to file a plan with the relevant planning authority and such a plan cannot be filed with respect to certain lands that are designated as forests, national parks or reservations. The Outline Plan provides that preference will be given to the construction of photovoltaic plants in areas designated for construction and development. The Outline Plan permits planning authorities to approve the construction of photovoltaic plants in certain areas in northern and southern Israel in larger scopes than other areas.
Transfer of Rights in a Photovoltaic Plant
Any change of control in a photovoltaic plant that received a production license from the Israeli Electricity Authority requires amending the license and the approval of the Israeli Electricity Authority. Therefore, in the event we execute an agreement to acquire or sell and Israeli solar plant, such acquisition or sale, among other things, will be conditioned upon receipt of these approvals and the amendment of the relevant license.
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Ellomay Luzon Energy and the Dorad Power Plant
Ellomay Luzon Energy is an Israeli private company in which we currently hold 50%. The remaining 50% is currently held by the Luzon Group (f/k/a the Dori Group). The Luzon Group is an Israeli publicly traded company, whose shares and debentures are traded on the Tel Aviv Stock Exchange. Ellomay Luzon Energy’s main asset is its holdings of 33.75% of Dorad.
Ellomay Luzon Energy
On November 25, 2010, Ellomay Energy Ltd., our wholly-owned subsidiary, entered into an Investment Agreement, or the Dori Investment Agreement, with the Dori Group and Ellomay Luzon Energy, with respect to an investment by Ellomay Energy Ltd. in Ellomay Luzon Energy. Pursuant to the terms of the Dori Investment Agreement, Ellomay Energy Ltd. invested a total amount of NIS 50 million (approximately €10 million) in Ellomay Luzon Energy, and received a 40% stake in Ellomay Luzon Energy’s share capital. The transaction contemplated by the Dori Investment Agreement, or the Dori Investment, was consummated in January 2011, or the Dori Closing Date.
Ellomay Energy Ltd. was also granted an option to acquire additional shares of Ellomay Luzon Energy, or the Dori Option, which, if exercised, will increase Ellomay Energy Ltd.’s percentage holding in Ellomay Luzon Energy to 49% and, subject to the obtainment of certain regulatory approvals – to 50%. The exercise price of the options was NIS 2.4 million for each 1% of Ellomay Luzon Energy’s issued and outstanding share capital (on a fully diluted basis). In May 2015, we exercised the first option and in May 2016, we exercised the second option, accordingly, we currently hold 50% of Ellomay Luzon Energy. The aggregate amount paid in connection with the exercise of such options amounted to approximately NIS 2.8 million (approximately €0.7 million), including approximately NIS 0.4 million (approximately €0.1 million) required in order to realign the shareholders loans provided to Ellomay Luzon Energy by its shareholders with the new ownership structure.
Concurrently with the execution of the Dori Investment Agreement, Ellomay Energy Ltd., Ellomay Luzon Energy and Dori Group also entered into the Ellomay Luzon Energy Shareholders Agreement that became effective upon the Dori Closing Date. The Ellomay Luzon Energy Shareholders Agreement provides that each of Dori Group and Ellomay Energy Ltd. is entitled to nominate two directors (out of a total of four directors) in Ellomay Luzon Energy for as long as the ratio of holdings between the two shareholders is in the range of 1:1 to 1:1.5 and thereafter such number of directors based on the ratio of holdings of the parties. The Ellomay Luzon Energy Shareholders Agreement also grants each of Dori Group and Ellomay Energy Ltd. with equal rights to nominate directors in Dorad, provided that in the event Ellomay Luzon Energy is entitled to nominate only one director in Dorad, such director shall be nominated by Ellomay Energy Ltd. for so long as Ellomay Energy Ltd. holds at least 30% of Ellomay Luzon Energy. The Ellomay Luzon Energy Shareholders Agreement further includes customary provisions with respect to restrictions on transfer of shares, a reciprocal right of first refusal, tag along, limitations on pledging of Ellomay Luzon Energy’s shares, principles for the implementation of a BMBY separation mechanism, special majority rights, etc.
Following the Dori Closing Date, the holdings of Ellomay Energy Ltd. in Ellomay Luzon Energy were transferred to Ellomay Energy LP, an Israeli limited partnership whose general partner is Ellomay Energy Ltd. and whose sole limited partner is us. Ellomay Energy LP replaced Ellomay Energy Ltd. with respect to the Dori Investment Agreement and the Ellomay Luzon Energy Shareholders Agreement.
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Ellomay Luzon Energy’s representatives on Dorad’s Board of Directors are currently Mr. Ran Fridrich, who is also our CEO and a member of our Board of Directors and Mr. Amos Luzon. Mr. Luzon currently serves as the Chairman of the Board of Dorad.
Ellomay Energy LP and Ellomay Luzon Energy entered into a loan agreement and capital notes agreements, effective December 31, 2022, which provide for the conversion of approximately NIS 23.5 million of the then outstanding shareholders’ loans to capital notes, payable not less than 60 months after the date of their execution, at the sole discretion of Ellomay Luzon Energy, with the remaining balance of shareholders’ loans (NIS 10 million), linked to the Israeli CPI and bearing an annual interest equal to the interest payable on Dorad’s senior debt plus 3%, with a repayment date of December 31, 2023. The Luzon Group entered into a similar loan agreement and capital notes with respect to its portion of the shareholders’ loans. During the year ended December 31, 2023, Ellomay Luzon Energy repaid all outstanding shareholders’ loans. As of December 31, 2025, there were no outstanding shareholders’ loans granted to Ellomay Luzon Energy.
To the best of our knowledge, in February 2018, a pledge was registered on the holdings and rights of the Luzon Group in Ellomay Luzon Energy (including the shares of Ellomay Luzon Energy held by the Luzon Group and the shareholders’ loans provided by the Luzon Group to Ellomay Luzon Energy) in favor of the holders of debentures issued by the Luzon Group to the public in Israel. In May 2024, the Luzon Group repaid in full the series of debentures that was secured by pledges on the Luzon Group’s holdings and rights in Ellomay Luzon Energy and in June 2024 the related pledges were deleted. Thereafter, also in June 2024, pledges were again registered on all of the Luzon Group’s holdings and rights in Ellomay Luzon Energy in favor of holders of a new series of debentures issued by the Luzon Group to the public in Israel in May 2024. We provided pledges on our holdings in Ellomay Luzon Energy and the shareholder’s loans and capital notes provided to or issued by Ellomay Luzon Energy in connection with the issuance of our Series E Secured Debentures. For more information see Item 5.B: Liquidity and Capital Resources” and “Item 10.C: Material Contracts.”
The Dorad Power Plant
Other than information relating to Ellomay Luzon Energy, the disclosures contained herein concerning the Dorad Power Plant are based on information received from Dorad and other publicly available information.
Dorad currently operates the Dorad Power Plant, a combined cycle power plant based on natural gas, located south of Ashkelon. The Dorad Power Plant was constructed as a turnkey project, with the consideration denominated in US dollars, and commenced commercial operations in May 2014. The electricity produced by the Dorad Power Plant is sold to end-users throughout Israel and to the Israeli National Electrical Grid. The transmission of electricity to the end-users is done via the existing transmission and distribution grid, in accordance with the provisions of the Israeli Electricity Market Law, 1996, or the Electricity Law, and its regulations, and the standards and the tariffs determined by the Israeli Electricity Authority. The existing transmission and the majority of the existing distribution lines are operated by the IEC, which is the only entity that holds a transmission license in Israel.
The Dorad Power Plant is a combined cycle power plant based on natural gas, with a license to produce approximately 860 MW. The production capacity of the Dorad Power Plant is subject to degradation and is currently approximately 850 MW.
The Dorad Power Plant is based on combined cycle technology using natural gas. The combined cycle configuration is a modern technology to produce electricity, where gas turbines serve as the prime mover. After combustion in the gas turbine to produce electricity, the hot gases from the gas turbine exhaust are directed through an additional heat exchanger to produce steam. The steam powers a steam turbine connected to a generator, which produces additional electric energy. The Dorad Power Plant is comprised of twelve natural gas turbines, each with an installed capacity of 50 MWp and two steam turbines, each with an installed capacity of 100 MWp. These turbines can be turned on and off quickly, with no material losses in energy efficiency, which provides operational flexibility in accordance with the expected needs of customers and the IEC, calculated based on a proprietary forecasting system implemented by Dorad. During 2024, Dorad purchased two new gas turbines, for an amount that is not material to Dorad, one of which became operational in April 2025 and the other is expected to become operational in June 2026.
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Dorad Ownership Structure
The other shareholders in Dorad are Eilat Ashkelon Infrastructure Services Ltd., or EAIS (37.5%), an Israeli private company owned by EAPC, Edelcom Ltd., or Edelcom, (18.75%), an Israeli private company indirectly owned by Mr. Ori Edelsburg, The Phoenix Insurance Company Ltd. (4.07%) and The Phoenix Pension and Provident Fund Ltd. (5.93%), together, The Phoenix. Dorad’s shareholders, including Ellomay Luzon Energy, are parties to a shareholders agreement dated November 2010 that includes customary provisions including provisions in connection with the holdings of Dorad’s shares, the investments in Dorad, its financing and management, restrictions of transfer of shares, including a right of first refusal, pre-emption rights, arrangements in connection with the financing of Dorad’s operations and mechanisms that will be implemented in the event any of Dorad’s shareholders does not meet its financing obligations, including dilution mechanisms, certain special shareholder or board, as applicable, majority requirements (either a 66% majority or for certain resolutions a 70% majority requirement) and the right of each shareholder holding 10% of Dorad’s shares to nominate, replace or terminate the service of one member to Dorad’s Board of Directors, providing that shareholders may aggregate holdings for purposes of appointment of a director and that each director will be entitled to the voting rights determined based on a division of the holdings of the shareholder that appointed such director by the number of directors appointed by such director. As noted below, pursuant to the shareholders’ agreement among Ellomay Luzon Energy’s shareholders and Ellomay Luzon Energy, or the Ellomay Luzon Energy Shareholders Agreement, we were entitled to recommend the nomination of the Dorad board member on behalf of Ellomay Luzon Energy when Ellomay Luzon Energy had the right to appoint one director to Dorad’s board of directors (i.e., before the acquisition of the additional 15% of Dorad’s shares by Ellomay Luzon Energy).
Acquisition of an Additional 15% of Dorad’s Share Capital by Ellomay Luzon Energy
On March 4, 2025, Zorlu Enerji Elektrik Üretim A.S, or Zorlu, a former shareholder of Dorad who at the time held 25% of the outstanding share capital of Dorad, entered into two share purchase agreements covering its entire holdings in Dorad based on a valuation of Dorad of approximately NIS 2.8 billion. The first share purchase agreement entails the sale of 10% of Dorad’s outstanding shares to The Phoenix, and was not subject to a right of first refusal under Dorad’s articles of association and shareholders agreement. The second share purchase agreement, or the Dorad SPA, entails the sale of an additional 15% of Dorad’s outstanding shares to The Phoenix, Hagoz (2015) Ltd. and Shahar Investments in Energy Limited Partnership (Hagoz (2015) Ltd. and Shahar Investments in Energy Limited Partnership, together, the Purchasers), through its general partner – Y.L. Shahar Investments in Energy Ltd. and was subject to a right of first refusal under Dorad’s articles of association and shareholders agreement.
Pursuant to the Dorad SPA, the aggregate purchase price for 15% of Dorad’s outstanding shares is approximately NIS 424.4 million, subject to certain adjustments, and the consummation of the sale is subject to customary conditions to closing (including receipt of approvals from Dorad’s board of directors, governmental authorities and Dorad’s lenders, and the consummation of the sale of 10% of Dorad’s outstanding shares to The Phoenix under the first share purchase agreement). The Dorad SPA also required the purchaser to deposit an autonomous guarantee with an escrow agent in the amount of approximately NIS 414.1 million on the date of execution of the Dorad SPA. Pursuant to the Dorad SPA, the consummation of the sale of Dorad’s shares was scheduled to occur between June 30, 2025 and July 15, 2025 (the Long Stop Date determined in the Dorad SPA), subject to conditions to closing as set forth above.
On March 6, 2025, following the execution of the Dorad SPA, Ellomay Luzon Energy received a sale notice, or the Sale Notice, from Zorlu with respect to 15% of Dorad’s outstanding shares, or the Offered Shares. Pursuant to Dorad’s articles of association and shareholders agreement, Dorad’s shareholders, including Ellomay Luzon Energy, were required to respond within 30 days.
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On March 20, 2025, a preliminary discussion regarding the sale of Zorlu’s shares to The Phoenix and its affiliates was held during a meeting of Dorad’s board of directors, which, pursuant to Dorad’s articles of association, is authorized to determine whether the purchasers constitute a direct or indirect competitor of Dorad. At that meeting, the Dorad board of directors determined that The Phoenix and its affiliates do not compete with Dorad.
On March 30, 2025, the Ellomay Luzon Energy board of directors approved the exercise of Ellomay Luzon Energy’s right of first refusal in connection with all the Offered Shares. Ellomay Luzon Energy thereafter provided an acceptance notice to Zorlu, accompanied by an autonomous guarantee in the amount of the purchase price provided in the Dorad SPA for all the Offered Shares.
On April 7, 2025, Ellomay Luzon Energy received a notification from Zorlu stating that both Ellomay Luzon Energy and Edelcom, which holds 18.75% of Dorad, submitted acceptance notices with respect to all the Offered Shares. Dorad’s articles of association and shareholders agreement provide that in the event acceptance notices are delivered for a number of shares higher than the number of offered shares, the offered shares will be allocated among the offerees in accordance with their pro rata holdings in Dorad, subject to approval of the transfer of the shares by Dorad’s board of directors. Accordingly, Ellomay Luzon Energy and Edelcom each entered into a share purchase agreement with Zorlu with respect to 7.5% of the issued and outstanding shares of Dorad in a form substantially similar to the Dorad SPA. Ellomay Luzon Energy notified Zorlu that it maintains its right to purchase all the Offered Shares should the sale to Edelcom not be consummated for any reason.
To enable Ellomay Luzon Energy to provide the guarantee required under the Dorad SPA, the Company deposited an amount equal to 25% of its portion of the guarantee (pro rata to its holdings in Ellomay Luzon Energy), which served as collateral to the bank that issued the guarantee. In connection with the pledged deposit, the Company entered into a Commercial Paper Agreement enabling it to receive a short-term loan in the amount of NIS 60 million – NIS 210 million, with a variable annual interest rate equal to the Israeli Prime lending rate (currently 6%) + 0.5%. The commercial paper is for a term of one year and includes customary causes for early repayment. In addition, the Company and the holders of the commercial paper are entitled to effect early repayment without cause with a 45 business day prior notice. The Company initially withdrew an amount of NIS 60 million under the Commercial Paper Agreement. Following consummation of the acquisition of 15% of Dorad’s outstanding shares by Ellomay Luzon Energy as set forth below, the guarantee was released and the Company provided a notice of early repayment to the holder of the commercial paper.
On May 27, 2025, Decision No. 71201 was issued by the Israeli Electricity Authority regarding the “transfer of means of control” in Dorad. It was resolved to approve Zorlu’s transfer of from 10% to up to 19.9% of Dorad’s outstanding shares to The Phoenix.
In connection with its acquisition of Dorad’s outstanding shares and due to regulatory restrictions imposed on The Phoenix, The Phoenix and Dorad’s lenders reached a preliminary agreement whereby, in lieu of a pledge over the Dorad shares that will be purchased by The Phoenix, Dorad’s lenders will receive from The Phoenix an alternative package of rights. In connection with this arrangement, Dorad was informed by Edelcom that, in Edelcom’s view, the proposed alternative package of rights constitutes a matter that requires the consent of each of Dorad’s shareholders. The proposed arrangement between The Phoenix and Dorad’s lenders was approved by the Dorad board of directors, Dorad’s shareholders and Dorad’s lenders on May 29, 2025, June 4, 2025 and June 26, 2025, respectively.
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On June 4, 2025, Dorad received a statement of claim filed against it by a former director and a serving director (both representing Edelcom), seeking declaratory relief for access to Dorad’s documents, a declaration that the Dorad board of directors’ resolutions regarding the sale of shares by Zorlu are null and void, and a declaration that the director representing Edelcom is entitled to independent legal counsel and representation with respect to his rights as a director, particularly in relation to the sale of Zorlu’s shares, retroactively as from April 14, 2025. Dorad notes in its financial statements as of and for the three and six months ended June 30, 2025 that it denies the allegations made in the statement of claim, and its response was expected to be filed by September 21, 2025. Shortly before the deadline for submitting Dorad’s response, the plaintiffs’ counsel contacted Dorad and notified Dorad that he intends to amend the statement of claim and that until such amendment, he proposes to agree to postpone the deadline for filing Dorad’s response. On November 10, 2025, the plaintiffs filed an amended statement of claim considering the change in circumstances detailed above in connection with the sale of Zorlu’s shares. On that same day, the court rejected the motion to amend and dismissed the claim, reserving all parties’ rights.
On June 23, 2025, the Israeli Competition Authority approved the transfer of Dorad’s shares to Ellomay Luzon Energy. On June 25, 2025, Decision No. 71401 was adopted by the Israeli Electricity Authority regarding the “transfer of means of control” in Dorad. It was resolved to approve the transfer by Zorlu of 7.5% of Dorad’s outstanding shares to each of Ellomay Luzon Energy and Edelcom. The aforementioned decision was published on June 29, 2025.
On June 26, 2025, Dorad’s lenders approved in principle the transfer of shares to The Phoenix, the Additional Purchasers and the shareholders who exercised their right of refusal, subject to the fulfillment of certain conditions.
On July 1, 2025, Zorlu approved an extension of the deadline for the completion of the acquisition of shares by Ellomay Luzon Energy and Edelcom until July 22, 2025.
On July 10, 2025, Dorad’s board of directors approved the transfer of 10% of Dorad’s outstanding shares from Zorlu to The Phoenix and the transfer of 7.5% of the Dorad’s outstanding shares from Zorlu to Ellomay Luzon Energy. On July 13, 2025, the transfer of 10% of Dorad’s outstanding shares from Zorlu to The Phoenix was completed. As noted above, as of the completion date of the sale to The Phoenix, both Ellomay Luzon Energy and Edelcom received the approval from the Israeli Electricity Authority to purchase 7.5% of Dorad’s outstanding shares and Ellomay Luzon Energy received the approval of the Israeli Competition Authority for the acquisition of Dorad’s outstanding shares but Edelcom did not receive the approval of the Israeli Competition Authority for its acquisition of Dorad’s outstanding shares.
Dorad notes in its financial statements as of and for the year ended December 31, 2025 that on July 17, 2025, it discovered incidentally, and despite the applicants’ obligation to inform Dorad of the decision, that on July 13, 2025, a director and a former director representing Edelcom submitted an ex parte petition to the Tel Aviv–Jaffa District Court requesting the cancellation of the July 10, 2025 resolution approving the transfer of 10% of Dorad’s outstanding shares to The Phoenix, due to alleged competition concerns. The court dismissed the petition, ex parte, on the same day, without requesting the position of Dorad (which does not accept the claims).
On July 18, 2025, Edelcom notified Dorad that it sold 1.25% of Dorad’s outstanding shares held by it to a private third party (Mr. Tamir Cohen) and that pending receipt of required approvals for the sale (including the approval of Dorad’s board of directors), the voting rights and entitlement to dividends in connection with the shares will be held by a trustee. At the same time, Edelcom notified the Israeli Competition Authority that it withdraws its request for the approval of the Israeli Competition Authority for the transfer of the shares from Zorlu to Edelcom, claiming that such approval was no longer required due to the transaction with Mr. Cohen.
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On July 20, 2025, Dorad’s board of directors discussed the matter, however, as no request was made to approve the transfer of shares from Edelcom to Mr. Cohen, Dorad’s board of directors did not resolve on the matter and the Dorad shareholders register was not amended.
On July 20, 2025, the Israeli Electricity Authority adopted Decision No. 71801 (amending Decision No. 71401), approving the transfer of between 7.5% to 15% of Dorad’s outstanding shares from Zorlu of each of Ellomay Luzon Energy and Edelcom.
On July 20, 2025, Edelcom filed an ex parte petition with the Tel Aviv (Economic Division) District Court for a temporary injunctions and orders, requesting that the court prohibit Dorad’s board of directors and shareholders from convening to approve the transfer of 7.5% of Dorad’s outstanding shares from Zorlu to any entity other than to Edelcom, and to prohibit Zorlu from selling those shares to Ellomay Luzon Energy or to The Phoenix. On the same day the court rejected Edelcom’s petition and set deadlines for the parties’ responses (by July 29, 2025), and for the filing of a main proceedings by Edelcom (by July 27, 2025). The Court’s decision further noted that if future actions will be approved by Dorad based on a transfer of shares if it occurs (and this, as stated, without the Court preventing it), whereby the increased power of the respondents as shareholders is used for the purpose of changes in Dorad’s board of directors, or the transfer of the shares to third parties, as Edelcom noted that it fears, and to the extent that the respondents will try to take such actions or other irrevocable action, Edelcom will be notified seven days in advance, in a manner that will allow it time to act and the Court to give appropriate instructions.
On July 21, 2025, the final date for obtaining all required approvals for the completion of Zorlu’s share sale, Dorad’s board of directors and shareholders convened and approved the transfer of an additional 7.5% of Dorad’s outstanding shares from Zorlu to Ellomay Luzon Energy. On July 22, 2025, as not all the conditions to closing of the sale of 7.5% of Dorad’s outstanding shares to Edelcom were fulfilled, Edelcom’s agreement with Zorlu was terminated and the transfer of 15% Dorad’s outstanding shares from Zorlu to Ellomay Luzon Energy was consummated. As stated above, following such transfer, the shareholders of Dorad are: EAIS (37.5%), Ellomay Luzon Energy (33.75%), Edelcom (18.75%) and The Phoenix (10%).
On July 27, 2025, Edelcom filed a statement of claim with the Tel Aviv (Economic Division) District Court against Dorad, Dorad’s other shareholders and the trustee appointed in connection with the Zorlu transactions. The claim requested a declaratory relief, including that as of July 21, 2025 (the date on which Dorad’s board of directors and shareholders’ approved the transfer of the additional 7.5% of Dorad’s outstanding shares to Ellomay Luzon Energy) the agreement between Zorlu and Edelcom for the sale and purchase of 7.5% of Dorad’s outstanding shares was valid and binding and did not require the approval of any third parties; that the said agreement was breached by Zorlu; that the resolutions of Dorad’s board of directors and shareholders approving the transfer of 7.5% of Dorad’s outstanding shares to Ellomay Luzon Energy are void; that the sale agreement between Zorlu and Ellomay Luzon Energy with respect to the additional 7.5% of Dorad’s outstanding shares is void; and requesting mandatory injunctions ordering Ellomay Luzon Energy to cancel the agreement between it and Zorlu for the sale of 7.5% of Dorad’s outstanding shares, and compelling Zorlu to sell these shares to Edelcom. Additionally, the claim seeks orders requiring Dorad’s board of directors and shareholders to convene and approve the transfer of 7.5% of Dorad’s outstanding shares to Edelcom, to amend Dorad’s shareholder register accordingly, and for any other relief necessary to complete the aforementioned actions.
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Pursuant to an arrangement between the parties to the legal proceeding, the respondents were required to respond to Edelcom’s request for temporary injunctions by August 4, 2025. Several hours before the filing deadline, Edelcom informed the respondents and the court that it was unilaterally withdrawing its request for temporary injunctions. Following submission of the respondents’ positions on the matter, on August 11, 2025 the court approved the withdrawal request, imposing legal expenses on Edelcom in the aggregate amount of NIS 200 thousand (of which NIS 40 thousand are due to each of Dorad and Ellomay Luzon Energy).
On November 11, 2025, a preliminary hearing was held before the defendants submitted their statements of defense. On November 18, 2025, Edelcom submitted a notice and request to the court, requesting the dismissal of the claim. On November 19, 2025, the court granted the request and dismissed Edelcom’s claim, stating that in the event Edelcom will commence a similar proceeding in the future, the defendants will be entitled to file a request for expenses in connection with the dismissed claim.
As a result of the sale of Zorlu’s shares, all of Zorlu’s representatives on the Dorad board of directors resigned and one director was appointed by The Phoenix. On August 5, 2025, Ellomay Luzon Energy notified Dorad of the appointment of Mr. Amos Luzon as an additional director on its behalf based on its updated holdings in Dorad.
Pursuant to the terms of the Dorad SPA, approximately NIS 10.3 million of the consideration was deposited in escrow pending a resolution on the obligation to pay VAT on the proceeds received by Dorad under the arbitration award referenced under “Legal Proceedings” below. As determined in the Dorad SPA, because the decision of the Israeli Tax Authority was not provided by September 30, 2025, approximately NIS 6.3 million was released to Ellomay Luzon Energy and the remainder was released to Zorlu, thereby reducing the consideration paid for Dorad’s shares under the Dorad SPA to approximately 418.1 million.
During the year ended December 31, 2025, Ellomay Luzon Energy performed a purchase price allocation in connection with the acquisition of 15% of Dorad’s shares. As the net amount recognized at the acquisition date for the identifiable assets exceeds the cost of the acquired Dorad shares by approximately NIS 112.8 million, such amount was recognized in the profit and loss statements of Ellomay Luzon Energy for the year ended December 31, 2025, as “gain on bargain purchase.” We believe that the reason for the bargain purchase price relates to the circumstances leading to the sale of the shares held by Zorlu, which included a deterioration of the relationship between Israel and Turkey and the political and public pressure in Turkey on Zorlu to divest its holdings in Israeli assets. These circumstances led to a sale of the shares under pressure.
Ellomay Luzon Energy Financing
The consideration for 15% of Dorad’s outstanding shares acquired by Ellomay Luzon Energy was funded by bank financing, or the Loan Agreement, provided to Ellomay Luzon Energy consisting of three tranches as follows: (i) a loan in the amount of NIS 175 million (approximately €45 million at the time), bearing annual interest in the range of +0.5% to -0.5% of the Israeli Prime Rate, or the First Loan, (ii) a loan in the amount of NIS 175 million (approximately €45 million at the time), bearing fixed annual interest rate between 5% and 6%, or the Second Loan, and (iii) a loan in the amount of NIS 70 million (approximately €18 million at the time), bearing annual interest rate in the range of +0.5% to -0.5% of the Israeli Prime Rate, or the Third Loan.
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The First Loan is repayable in four semi-annual payments commencing December 31, 2031 and ending on June 30, 2033, and the interest on the First Loan is payable in semi-annual payments commencing December 31, 2025 and ending on the final repayment of the First Loan. The Second Loan is repayable in sixteen semi-annual payments commencing December 31, 2025 and ending on June 30, 2033, and the interest on the Second Loan is payable in semi-annual payment commencing December 31, 2025 and ending on the final repayment of the Second Loan. The Third Loan is repayable in one payment on December 31, 2025, unless the conditions set forth in the Loan Agreement will not be met, which will enable Ellomay Luzon Energy to ask for an extension until December 31, 2026. The interest on the Third Loan is payable on December 31, 2025 and, to the extent an extension is requested, in semi-annual payments thereafter until the final repayment of the Third Loan. During the year ended December 31, 2025, Ellomay Luzon Energy repaid an amount of NIS 30 million out of the Third Loan and requested an extension until December 31, 2026 for the remainder of the Third Loan. As of December 31, 2025, the outstanding amount on the loans was NIS 40 million (the Third Loan) and approximately NIS 336 million (the First Loan and Second Loan).
In connection with the Loan Agreement, Ellomay Luzon Energy granted the lender a first ranking fixed pledge on its rights in connection with an account with the lender, or the Pledged Account, in which all amounts due to Ellomay Luzon Energy from Dorad will be deposited. The Loan Agreement provides that when any dividend is received from Dorad: (i) Ellomay Luzon Energy will leave in the Pledged Account the amount required for the next payment to the lender, (ii) to the extent the amount received during a calendar year exceeds NIS 65 million, then Ellomay Luzon Energy will make an early repayment of the First Loan and thereafter the Third Loan in the amount of 50% of the difference between the amount of receipts in the calendar year and NIS 65 million by no later than June 30 of the following year (pro rata over all future payments), and (iii) with respect to any amount in excess of the amounts required as stated in paragraphs (i) and (ii) – Ellomay Luzon Energy is entitled to use the funds deposited in the Pledged Account for any need, subject to the provisions of the law and the agreements with the lender. The Loan Agreement provides that the First and Third Loans may be prepaid without an early repayment fee and the Second Loan may be prepaid subject to payment of fees as generally acceptable in the lender.
The Loan Agreement includes customary immediate repayment provisions, including in the event of a breach of an undertaking by Ellomay Luzon Energy, a deterioration in Ellomay Luzon Energy’s financial situation and the initiation of legal proceedings in connection with the Dorad shares held by Ellomay Luzon Energy. The Loan Agreement includes additional undertakings by Ellomay Luzon Energy, including not to amend the Ellomay Luzon Energy shareholders’ agreement without the lender’s prior written consent and the execution of an undertaking not to operate outside its current field of operations; not to assume financial obligations and not to provide financing to a third party; not to sell and/or transfer and/or deliver and/or lease and/or rent any Asset and/or any right of its rights, as well as a negative pledge on any Asset (as this term is defined below) and/or part of the its Assets, without the lender’s prior written consent, other than a pledge on its shares of Dorad in favor of the lenders of Dorad. The undertaking defines an “Asset” as any asset and right of Ellomay Luzon Energy, including the shares of Dorad held by it and other rights of any kind, including its unissued share capital and goodwill
Execution of SPA in connection with the Company’s Indirect Holdings in Ellomay Luzon Energy
On February 8, 2026, we received a copy of a letter sent by the Luzon Group to Prof. Yitzhak Soari, requesting Prof. Soari to determine the timetable and other terms for implementing a separation mechanism between the Company and the Luzon Group with respect Ellomay Luzon Energy. The Luzon Group’s letter refers to the Ellomay Luzon Energy’s shareholders’ agreement, which provides that either party may approach an agreed-upon expert to determine a separation mechanism between the parties out of the following two options: (a) a bidding process, or (b) a Buy Me Buy You (BMBY) mechanism.
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As both individuals who were named in the Ellomay Luzon Energy shareholders’ agreement as potential arbitrators for purposes of determining the separation process (including Prof. Soari) are not able to perform such role, the parties to the shareholders agreement discussed the separation mechanism since the delivery of the aforementioned letter. Despite such ongoing discussions, on March 12, 2026, the Luzon Group informed the Company that the Luzon Group submitted a petition to the Tel Aviv District Cout requesting the appointment of an arbitrator that will determine the separation process or appoint a third party for such purpose.
On March 15, 2026, Ellomay Energy LP submitted its response to the petition filed with the Israeli District Court by the Luzon Group. In its response, Ellomay Energy LP notes, inter alia, that the Luzon Group did not comply with the requirements under the Israeli Arbitration Law and the Ellomay Luzon Energy shareholders’ agreement, that the parties reached an understanding in principle without the need to appoint an arbitrator or other third party to determine the separation process, and that the fulfillment of such understanding is crucial to prevent damages to Ellomay Luzon Energy and Dorad. On March 18, 2026, Ellomay Energy LP submitted a statement of claim and a request for temporary mandatory injunction against the Luzon Group. Ellomay Energy LP requests the issuance of a temporary mandatory injunction instructing the parties to perform a separation process in connection with their holdings in Ellomay Luzon Energy in accordance with the terms agreed between the parties (subject to board approvals and other internal processes as required in both companies). Ellomay Energy LP claims that the Luzon Group is ignoring the understandings reached between the parties and, at the very least, withdrew from the negotiations in bad faith, after it was the one who initiated the separation process.
The separation process was conducted on March 27, 2026, following the Israeli court’s ruling and the appointment of Judge (ret.) Hila Gerstel to act as the ruler regarding the separation process. The separation process resulted in the Luzon Group committing to acquire the Ellomay Luzon Energy shares indirectly held by the Company at a Dorad valuation of NIS 4.4 billion. As of the date hereof, based on the Company’s indirect holdings in Dorad (through Ellomay Luzon Energy) and the current value of 50% of the other assets and liabilities of Ellomay Luzon Energy, the consideration is approximately NIS 560 million.
Ellomay Clean Energy LP and the Luzon Group entered into a share purchase agreement, or the SPA on March 27, 2026. The consummation of the sale is subject to customary closing conditions, including the approvals of the Israeli Electricity Authority, the Israeli Competition Authority and Ellomay Luzon Energy’s lenders, all to the extent required.
The SPA provides that the sale will be consummated within two business days of fulfillment of the conditions to closing, and that the deadline for fulfillment of the conditions to closing is seven and a half months from signing of the SPA. In connection with the separation process, each party deposited a bank guaranty or cash in the amount of NIS 72 million in escrow. In connection with this requirement, the Company received a short-term loan from O.Y. Nofar Energy Ltd., or Nofar, the Company’s principal shareholder, in an amount of NIS 47.5 million at a risk-free interest rate (the interest rate of Israeli governmental bonds with similar repayment terms). The Company’s deposit may be replaced by a bank guarantee, which, if replaced, will be issued by Nofar. These transactions were approved by the Company’s Audit Committee and Board of Directors pursuant to the Israeli Companies Regulations (Relief in Related Party Transactions), 2000, or the Relief Regulations.
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The SPA provides that in the event a party materially breaches its undertakings or prevents the fulfillment of a condition to closing, and the breach is not repaired within a 14 day period, the other party will receive the amount deposited in escrow as liquidated damages and will also be entitled to purchase the Ellomay Luzon Energy shares held by the breaching party based on a Dorad valuation of NIS 3.5 billion. In the event the transaction is not consummated within seven and a half months other than due to a breach by any party, Ellomay Clean Energy LP may acquire the Luzon Group’s holdings in Ellomay Luzon Energy based on a Dorad valuation of NIS 4.4 billion.
In preparation for the separation process, we agreed with The Phoenix Insurance Company and The Phoenix Pension and Provident Fund Ltd., both Israeli institutional investors, that they will assist us in financing the acquisition of Ellomay Luzon Energy’s shares in the event the separation process will result in us buying the shares. In consideration for their agreement to provide such financing, we agreed to pay such entities (in a division of 40.72% and 59.28%, respectively) an amount in cash that equals the difference between the five-day average of the closing price of our ordinary shares on the Tel Aviv Stock Exchange and NIS 76 (subject to certain customary adjustments), multiplied by up to an aggregate of 263,158. Each Phoenix entity can choose to request such cash payment, in whole or in part, until April 27, 2027. For the sake of caution, to the extent our indirect controlling shareholder has a personal interest in the transaction, this transaction was approved by our Audit Committee and Board of Directors pursuant to the Relief Regulations.
“Iron Swords” War and the Wars between Israel and Iran
The “Iron Swords” war in Israel began on October 7, 2023, and significantly impacted the security and economic situation in the State of Israel. The continuation of the fighting and attacks on Israel, together with the measures taken by the government following the declaration of a state of war and the mobilization of reserve forces, led to a decline in the scope of business and economic activity throughout the country. These effects were reflected in disruptions to supply and production chains, shortages of manpower, and volatility in the value of financial assets and in foreign currency exchange rates against the shekel. In addition, the downgrade of Israel’s credit rating by international rating agencies, as well as the implications for the state budget, also affected the economy as a whole and the business operations of many companies, and consequently their financial reporting.
On June 13, 2025, the war significantly expanded to an additional front, when the State of Israel initiated a direct confrontation with Iran, or the June 2025 Iran Operation, upon the commencement of which the State of Israel declared a special state of emergency on the home front and closed its airspace. This confrontation further deepened the impact of the war on the activities of many companies in the economy. As a result of the June 2025 Iran Operation, Dorad’s revenues in June 2025 decreased by approximately 22% compared to June 2024. The June 2025 Iran Operation ended on June 24, 2025, with a ceasefire agreement, and the economy returned to full activity. In addition, in October 2025, a ceasefire was reached between Israel and Hamas in the Gaza Strip.
On February 28, 2026, an additional operation against Iran was started by the USA and Israel. This operation impacted the Israeli economy due to a state of emergency impacting education, tourism, consumption and places of work. During April 2026, a temporary ceasefire was agreed between Iran and Israel and the United States and thereafter (on April 17, 2026) a 10-day ceasefire between Israel and Lebanon, however fighting has since resumed in southern Lebanon and mainly northern Israel. At this stage, Dorad does not identify a significant impact on its financial results but continues to regularly monitor the developments and is examining their potential effect on its operations and the value of its assets.
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Dorad Credit Facility
Dorad entered into a credit facility agreement with a consortium led by Bank Hapoalim Ltd. as the arranger of the debt and Clal Credit and Financing Ltd. of the Clal Insurance Company Ltd. group as the organizer of the institutional lenders’ consortium, or the Dorad Credit Facility, and financial closing of the Dorad Power Plant was reached in November 2010, with the first drawdown received in January 2011. The Dorad Credit Facility provides that the consortium will fund up to NIS 3.85 billion, indexed to the Israeli CPI, which in any event will not be more than 80% of the cost of the project, with the remainder to be funded by Dorad’s shareholders and that guarantees will be provided to third parties in accordance with the project’s documents.
The funding is linked to the Israeli consumer price index and bears interest at a rate that is subject to updates every three years based on Dorad’s credit rating. As of December 31, 2025, the effective interest rate was approximately 5.1%. Dorad received an “investment grade” rating (AA-), on a local scale, from S&P Ma’alot. On May 21, 2025, Dorad received a debt rating of Aa3.il with a stable outlook from Midroog Ltd. (an affiliate of Moody’s). The rating did not have an impact on the interest rate of Dorad’s credit.
The funding is repaid (interest and principal) in semi-annual payments (on May 26 and November 26 of each year), commencing six months of the commencement of operations of the Dorad Power Plant and for a period of 17 years thereafter. Dorad is also required to pay annual commissions in the aggregate amount of approximately $0.17 million. The Dorad Credit Facility further includes customary provisions, representations and warranties, including early repayment under certain circumstances and floating and fixed charges on Dorad’s assets and rights in connection with the Dorad Power Plant, whereby a breach of representations and warranties is likely to lead, among others, to a demand for immediate repayment, a breach of Dorad’s undertakings under its licenses and potentially the termination of the licenses.
The Dorad Credit Facility requires Dorad to comply with the following financial standards: (i) a debt coverage ratio of 1.10:1 over two consecutive calculation periods, and a debt coverage ratio of 1.05:1 over the entire calculation period, and (ii) a minimal loan life coverage ratio of 1.10:1. Dorad is required to examine compliance with these standards as of May 27 and November 27 of each year. Dorad is in compliance with these financial standards as of December 31, 2025 (based on the compliance examination conducted as of November 27, 2025).
As noted above, Dorad’s senior loan facility is linked to the Israeli CPI. As the production tariff is partially linked to the Israeli CPI, the exposure is minimized. However, as the production tariff is published in delay with respect to the actual changes in the CPI, Dorad executed derivative transactions on the Israeli CPI. In connection with the Dorad Credit Facility, Dorad’s shareholders (including Ellomay Luzon Energy) undertook to provide guarantees to the IEC and to various suppliers and service provides of Dorad and also undertook to indemnify Dorad and the consortium in connection with certain expenses, including certain environmental hazards. During 2024 and 2025, the Israeli CPI increased by approximately 3.2% and 2.4%, respectively, which increased Dorad’s financing expenses in an aggregate amount of approximately NIS 80 million and NIS 59 million, respectively.
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The aggregate investment of Dorad in the construction of the Dorad Power Plant was approximately NIS 4.7 billion. The Dorad Credit Facility provides for the establishment of the project’s accounts and determines the distribution of the cash flows among the accounts. In addition, the Dorad Credit Facility includes terms and procedures for executing deposits and withdrawals from each account and determines the minimum balances in each of the capital reserves. In connection with the Dorad Credit Facility, Dorad also provided pledges on its properties, including fixed, floating and real property pledges.
As of December 31, 2025, the outstanding balance of the Dorad Credit Facility was approximately NIS 1.8 billion. As of December 31, 2025, no additional withdrawals are permitted under the Dorad Credit Facility.
In connection with the Dorad Credit Facility, Dorad executed an accounts agreement that regulates the opening of the project accounts and the distribution of cash flows between the accounts. In addition, the agreement provides conditions and procedures for making deposits and withdrawals from each account, determines the total minimum balances in each of the reserve funds, regulates the order of priorities for payments between the accounts and other conditions in connection with the management of the accounts, including regarding transfers between accounts. The reserve funds include a fund for debt service, a fund for heavy maintenance, a fund for distribution and a fund for regulatory fines. As of December 31, 2025, the remaining deposits in respect of the aforementioned reserve funds are in the aggregate amount of approximately NIS 495.2 million.
The Dorad Credit Facility includes limitations on distributions by Dorad based on compliance with financial covenants and certain undertakings. For the purposes of the Dorad Credit Facility, a “distribution” includes also the repayment of shareholders’ loans. A distribution that is not in compliance with the Dorad Credit Facility is a cause for immediate repayment of the financing obtained by Dorad.
In connection with the Dorad Credit Facility, Dorad’s shareholders executed an equity injection agreement and subordinated loan agreement with Dorad and the financing entities. These agreements include undertakings by Dorad’s shareholders to inject, separately and each according to their relative share, from time to time and simultaneously with each withdrawal request from the Dorad Credit Facility, a total of up to 20% cash, whether as equity or by way of shareholders’ loans, which in any case will be subordinated and pledged to Dorad’s obligations towards the financing entities, in accordance with the terms of the agreements. In accordance with the capital injection agreement and to guarantee the shareholders’ obligations to provide their relative share of funding, the shareholders provided at that time cash and bank guarantees in the amount of their commitment net of any amounts transferred to Dorad prior to such date. The capital injection agreement includes representations and undertakings in relation to Dorad’s shareholders and the project, the violation of which may, among other things, cause a demand for immediate repayment of the Dorad Credit Facility, a breach of Dorad’s undertakings under its licenses and potentially the termination of the licenses. In accordance with the subordinated loan agreement, commencing on the financial closing date, any amount that will be designated as a loan will be linked to the Israeli CPI and will bear an annual interest rate of 10%, and it is also determined that any distribution to Dorad’s shareholders, including loan repayment, will be possible subject to compliance with financial standards as detailed in the financing agreements (see above). As part of the Dorad Credit Facility, all of Dorad’s issued share capital is pledged in favor of Poalim Trust Services Ltd., as trustee for the financing entities.
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As of December 31, 2025, we (through Ellomay Luzon Energy) provided guarantees to the Israeli Electricity Authority, to the System Manager, to the Israeli Electricity Authority and to Israel Natural Gas Lines Ltd. in the aggregate amount of approximately NIS 31.2 million (the amount was increased following Ellomay Luzon Energy’s acquisition of an additional 15% of in Dorad). The guarantees were provided pursuant to a Guarantee Provision Agreement between Ellomay Luzon Energy and an Israeli bank, which includes customary provisions and also undertakings of the Company to comply with certain financial standards and an agreement of the shareholders of Ellomay Luzon Energy that upon the occurrence of certain events, including non-compliance with the financial standards, an event of default under the Dorad Credit Facility, a breach by the Luzon Group, the Company, Ellomay Energy, Ellomay Energy LP or Ellomay Luzon Energy of undertakings to the bank and a change of control of the Luzon Group, the Company, Ellomay Energy and/or Ellomay Energy LP, the shareholders’ loans provided to Ellomay Luzon Energy will be subordinated to amounts due from Ellomay Luzon Energy to the bank under this agreement and Ellomay Luzon Energy will not be permitted to distribute any dividends or make any payments to its shareholders. Ellomay Luzon Energy is in compliance with the financial covenants included in the Guarantee Provision Agreement. On April 16, 2026, Dorad replaced the guarantees provided by its shareholders with guarantees issued on its behalf.
Dorad Bridge Financing
On February 26, 2026, Dorad entered into a financing agreement with a banking corporation, or the Bank, pursuant to which a bridge financing facility in the amount of approximately NIS 2.1 billion was made available to Dorad, bearing interest at a rate ranging between Prime and Prime plus 1%, for a period of one year from the date it was made available, with an option to extend, subject to the parties’ consent, for an additional one-year period. Concurrently, Dorad is acting to advance an agreement with the Bank for the provision of long-term financing, under which the term of the bridge financing facility would be extended beyond two years. Until it is repaid in full, the repayment dates of the bridge financing facility are the same as the repayment dates of the Dorad Credit Facility.
This financing enabled Dorad to repay the full outstanding balance of the Dorad Credit Facility, such that the Bank is currently Dorad’s sole lender, until the financial closing of Dorad 2.
To secure Dorad’s obligations to the Bank, the same collateral securing the Dorad Credit Facility and the same financial covenants, as described above, remain in effect.
Dorad O&M Agreement
The Dorad Power Plant commenced operations in May 2014, following the receipt of the permanent production and supply licenses discussed under “Material Effects of Government Regulations on Dorad’s Operations” below.
Dorad previously entered into an operation and maintenance agreement with Eilat-Ashkelon Power Plant Services Ltd., or EAPPS, a wholly-owned subsidiary of EAIS, which holds 37.5% of Dorad. Certain of the obligations under such agreement were subcontracted to Zorlu, which holds 25% of Dorad. During 2013, EAPPS entered into an agreement with Edeltech O&M Ltd., or Edeltech O&M, which, to our knowledge, is 75% owned by the controlling shareholder of Edelcom (which holds 18.75% of Dorad) with the remainder held by a company controlled by Zorlu, for the provision of sub-contracting services to EAPPS. Despite the assignment and subcontracting agreement, EAPPS remained liable to Dorad for all obligations under the agreement. In December 2017, Dorad and Edeltech O&M executed an operation and maintenance agreement for the Dorad Power Plant, or the Dorad O&M Agreement, replacing EAPPS by Edeltech O&M as the O&M contractor of the Dorad Power Plant under the same terms. On August 22, 2022, the operating contractor informed Dorad that 25% of the ordinary shares and voting rights in the maintenance contractor were transferred to Edeltech Holdings 2006 Ltd., or Edeltech Holdings, which from that date owns 100% of the issued and paid-up share capital of the maintenance contractor. On November 29, 2022, the agreement between Dorad and EAPPS was assigned to EAIS.
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The Dorad O&M Agreement is for a period of 24 years and 11 months commencing upon receipt of a permanent license by Dorad, and in no event for a period that is longer than the period of the lease of the Dorad Power Plant premises. Pursuant to the O&M agreement, Dorad receives operation and maintenance services, including purchase of spare parts and repairs in consideration for a fixed and variable (depending on production during the period) monthly payment.
In 2008, Dorad executed a lease with respect to the land on which the Dorad Power Plant is located (approximately 18.5 acres) with EAIS (one of Dorad’s shareholders who leases the land from the Israel Land Authority) for the construction period and for a period of 24 years and 11 months following the commencement of commercial operations of the Dorad Power Plant. The lease agreement was executed by the Israel Land Authority in April 2015 and expires on May 20, 2039. The annual payment under the lease agreement is approximately NIS 3.7 million, linked to the Israeli CPI. Dorad undertook to indemnify EAPC and EAIS for payments and expenses paid or to be paid by EAIS, including the improvement, tax payments, fines for expenses and other payments, in respect of the land due to the construction of the power plant. In addition, Dorad’s shareholders signed a guarantee in favor of EAPC (which transferred its lease right to EAIS) to fulfill Dorad’s obligations as stated above to indemnify EAIS. The liability of Dorad’s shareholders according to the guarantee will be up to their holdings in Dorad’s share capital (pro rata).
Dividends
In August 2023, Dorad’s board of directors approved the distribution of a dividend in the amount of NIS 70 million and such dividend was distributed during August and September 2023. In connection with such dividend distribution, Ellomay Luzon Energy received an amount of approximately NIS 13 million and repaid an amount of NIS 6.5 million to us. On December 28, 2023, Dorad’s board of directors approved the distribution of an additional dividend in the amount of NIS 70 million and such dividend was distributed during December 2023 and January 2024. In connection with such dividend distribution, Ellomay Luzon Energy received approximately NIS 13 million and repaid approximately NIS 5 million to us, thereby repaying the shareholders’ loans in full. In addition, in December 2023 Ellomay Luzon Energy declared and paid its shareholders a dividend in the amount of NIS 3 million, of which we received NIS 1.5 million. On September 2, 2024, Dorad’s board of directors decided to distribute a dividend in the aggregate amount of NIS 50 million and such dividend was distributed during September 2024. In connection with such dividend distribution, Ellomay Luzon Energy received approximately NIS 9.4 million and shortly thereafter Ellomay Luzon Energy distributed a dividend to its shareholders approximately NIS 7.6 million (our indirect share is approximately NIS 3.8 million). On November 25, 2024, Dorad’s board of directors decided to distribute an additional dividend in the aggregate amount of NIS 75 million and such dividend was distributed shortly thereafter. In connection with such dividend distribution Ellomay Luzon Energy received approximately NIS 14 million and shortly thereafter Ellomay Luzon Energy distributed a dividend to its shareholders approximately NIS 14 million (our indirect share is approximately NIS 7 million).
In December 2024, the Ellomay Luzon Energy board of directors approved a dividend distribution approximately NIS 8.5 million (our indirect share is approximately NIS 4.25 million) following receipt of a refund of legal expenses in connection with the arbitration procedure described below.
On December 2, 2025, Dorad’s board of directors decided to distribute a dividend in the aggregate amount of NIS 200 million and such dividend was distributed on December 4, 2025. In connection with such dividend distribution, Ellomay Luzon Energy received approximately NIS 67.5 million.
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Legal Proceedings
We and Ellomay Luzon Energy, and several of the other shareholders of Dorad and their representatives and Dorad, were involved in various litigations as follows:
In connection with three proceedings between Dorad’s shareholders and Dorad commencing 2015, on June 28, 2023, an arbitration award was issued as follows:
Following an appeal process, on November 14, 2024, the arbitrator appointed to rule on the appeals submitted by both parties to the arbitration on the arbitration award provided his ruling, or the Ruling on the Appeal. In the Ruling on the Appeal, the arbitrator rejected the majority of the claims and requests of the Defendants, other than a decrease in the amount that the Defendants were ordered to repay to Dorad in the original arbitration award from $100 million to $94.375 million. The arbitrator ruled that this amount will bear interest based on the rate prescribed by the Israeli Statutory Interest Rate and Linkage Adjudication Law, 1961, commencing January 1, 2013, which currently amounts to an additional payment of approximately $35 million. The arbitrator further ruled in the Ruling on the Appeal that the reimbursement of expenses of Dorad and of the Plaintiffs ordered in the original arbitration award will remain unchanged and that each of the parties will bear its expenses in connection with the appeal process. The arbitrator rejected the appeal submitted by the Plaintiffs (including Ellomay Luzon) on the original arbitration award.
During December 2024, Dorad received the full amounts determined in the arbitration ruling, as follows:
1. Approximately $94.375 million (approximately NIS 338 million), of which approximately NIS 194.4 million was recorded as a reduction of the remaining depreciated cost of fixed assets and will be depreciated on a straight-line basis according to the remaining useful life of the Dorad Power Plant. The remaining amount of NIS 143.5 million was recorded in Dorad’s profit or loss statement as a reduction of depreciation expenses, representing the reversal of previously recognized increased depreciation expenses;
2. Approximately $35 million (approximately NIS 127 million), representing the interest and linkage component under applicable law from January 1, 2013 until the actual payment date, was recorded in the profit or loss statement under finance income (interest income and linkage differences); and
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3. Approximately NIS 9.5 million, representing reimbursement of legal expenses incurred by Dorad in connection with the various arbitration proceedings, was recorded in the profit or loss statement under general and administrative expenses.
The net impact of the amounts on Dorad’s profit or loss statement for 2024 amounts to a profit of approximately NIS 280 million before the effect of taxes (profit of approximately NIS 215.6 million after the effect of taxes). Dorad estimated, based on the opinion of its legal advisors, that the likelihood of its position, that the amounts received in the arbitration are not subject to Israeli VAT (currently 18%) being accepted is greater than the likelihood of it being rejected. Accordingly, Dorad has not recorded a VAT provision for these payments in its financial statements. On November 13, 2025, Dorad received an approval from the Israeli Tax Authority confirming that the amounts received under the arbitration award are not subject to Israeli VAT.
In addition, Ellomay Luzon Energy received an amount of NIS 10 million as reimbursement of legal expenses based on the arbitrator’s ruling.
For more information see Note 6 to our annual financial statements included elsewhere in this Report.
Motion to Approve Class Action Against Dorad and Pazgaz Ltd.
On January 18, 2026, a motion to approve a class action was filed with the Tel Aviv District Court against Dorad and against Pazgas Ltd. The applicant alleges that the respondents charged their customers an operational fee in the amount of NIS 2.93 without consent and without providing an actual service, and further unilaterally reduced the discount rate from 7% to 6% without the customers’ consent. The proposed class is comprised of approximately 55,000 customers, and the claim amount is estimated at approximately NIS 5.2 million. As of the date of approval of Dorad’s financial statements, given the preliminary stage of the proceeding, Dorad is unable to assess the likelihood that the motion for approval or the claim itself will be accepted. Dorad is required to file its response to the motion for certification by within 60 days of the decision in a motion to strike another claim submitted against Pazgaz, which has not been granted yet.
For information concerning a third-party notice submitted to Dorad by the IEC in connection with a class action filed against the IEC, see “Consumption Plans and Deviations” below.
Potential Expansion of the Dorad Power Plant
Dorad is advancing the construction of an additional power plant within the area of the existing Dorad Power Plant, that will become part of the existing plant. On July 13, 2020, Dorad submitted to the National Infrastructure Committee, or NIC, plans for public objections, on January 11, 2021, the NIC decided to postpone the final decision and on December 27, 2021, the NIC decided to raise the construction of another power plant to a government decision. The NIC’s decision includes conditions to the issuance of the building permit.
On May 28, 2023, the Israeli Government approved the national infrastructures plan (NIP 11/b) which governs, among other issues, the expansion of the power plant owned by Dorad by approximately 650-720 MW.
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On July 12, 2023, Dorad received a copy of a petition submitted by O.P.C Hadera Expansion Ltd., or OPC, concerning the approval of the Israeli Government. On July 19, 2023, the Israeli Supreme Court rejected the petition submitted by OPC due to non-exhaustion of proceedings. On July 24, 2023, Dorad received a copy of OPC’s letter to the Israeli Government, through the Secretary of the Government, requesting an urgent response to OPC’s letter dated July 3, 2023 and noting that to the extent the Government does not act accordingly, OPC will have no other recourse and will file a new petition with the court. Furthermore, on July 17, 2023, Dorad received a copy of a petition submitted by Reindeer Energy Ltd., or Reindeer, concerning the same approval of the Israeli Government. On July 19, 2023, the Israeli court resolved that Reindeer is required to notify the court by July 24, 2023 why its petition should not be deleted as it is premature, without an order to pay legal expenses and while reserving its claims until a final resolution is adopted in the matter. On July 25, 2023, Dorad received a copy of Reindeer’s response, claiming that the petition is not premature and that without the court’s interference at this stage, the possibility to compete over building a power plant in Central Israel will be eliminated until 2035, therefore, Reindeer claims that the court’s suggestion does not maintain its rights but eliminates them and harms the public interest, which requires a discussion of the petition. On July 27, 2023, the court rejected Reindeer’s petition resolving that it is premature and that under the circumstances there is no justification to discuss it at this time because it is unclear what the recommendation of the National Infrastructure Committee will be after another discussion and what will be the final resolution of the Israeli Government and the basis of the resolution.
Following the approval of NIP 11/b, Dorad approached the NIC for a building permit, however, on January 11, 2024, Dorad was informed in an e-mail message from the NIC that its position is that as long as NIP 20/B or NIP 91 are not definitively rejected, it is not possible to issue a building permit for the new power plant, based on a legal opinion of legal advisers in the NIC and in the planning administration, which were sent to Dorad on January 15, 2024. On February 7, 2024, Dorad, through its legal counsel, sent a letter, among other addressees to the legal advisers of the NIC and the planning administration that prepared the aforesaid legal opinion, arguing that the NIC’s refusal to grant Dorad a building permit is illegal and contrary to the proper interpretation of NIP 11/B. On February 26, 2024, Dorad received a response from the NIC, which stands by its position that the issuance of building permits for the expansion of the power plant should not be promoted. In Dorad’s opinion, the NIC’s opposition and conduct in refusing to issue building permits is illegal. In March 2024, Dorad filed a petition with the Israeli Supreme Court requesting the issuance of a conditional order to the NIC instructing it to provide the reasons for its refusal to attend to the request for issuance of building permits for the construction of the “Dorad 2” power plant, which was approved by the Israeli government as aforementioned. Dorad also requested that following the issuance of this order, the order will become a permanent order instructing the NIC to attend to the issuance of the building permits. A response to the petition is due to be filed in May 2024.
On February 19, 2024, Dorad received a planning survey to receive the expansion of the power plant from the System Manager, which allows electricity to be taken out commencing October 2028.
On March 13, 2024, Dorad filed a petition with the Israeli High Court of Justice, against the NIC, the Government of Israel, the Ministry of Energy and Infrastructure, and the legal advisor to the government, requesting a conditional order addressed to the NIC instructing it to provide the reasons refusal to attend to the request for building permits for the construction of the “Dorad 2” power plant, which was approved by the Israeli government as aforementioned. Dorad also requested that following the issuance of the conditional order, the order will become a permanent order instructing the NIC to attend to the issuance of the building permits for the “Dorad 2” power plant in accordance with the NIP 11/b. On March 13, 2024, the Israeli High Court of Justice ruled that a preliminary response on behalf of the respondents to the petition will be submitted by May 16, 2024. On May 2, 2024, the legal advisor of the NIC announced that at the April 17, 2024 meeting of the Israeli government, it was decided to reject NIP 20/B - Hadera Power Station and therefore it is possible to resume and promote the procedure of issuing the building permits under NIP 11/B at the at the National Licensing Authority. Dorad was therefore asked by the legal advisor to the NIC to submit a request to delete the petition, as the petition became redundant in light of the rejection of NIP 20/B. Considering this development, Dorad submitted a request to the High Court of Justice to delete the petition without an order for costs. On May 8, 2024, a judgment was issued dismissing the petition without an order for costs.
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On September 10, 2024, Edelcom submitted a claim against Dorad and the other shareholders of Dorad to the Israeli District Court in Tel Aviv requesting the court to provide the following declaratory judgements: (1) to declare that based on Dorad’s articles of organization the general meeting of the shareholders of Dorad is the authorized body for approving any resolution relating to the change in the field of operations of Dorad, including any planning or construction of a new power plant or the expansion of the capacity of the existing power plant and any budget and preliminary feasibility tests, including the “Dorad 2” project, (2) to declare that based on the articles of organization of Dorad the board of directors of Dorad is the authorized body for advancing and managing the construction of a new power plant or the expansion of the existing power plant, including the “Dorad 2” project, following the approval by Dorad’s shareholders of a resolution to promote the project or perform preliminary feasibility testing, and of a related budget, (3) to declare that any resolution of the shareholders or the board of directors of Dorad in the aforementioned subjects will be approved only if all of the shareholders or all of the directors, as the case may be, voted in favor of the resolution, and (4) to declare that any resolution in connection with the “Dorad 2” project adopted since 2018 and until a ruling is given in connection with the claim, which was not adopted by the authorized bodies of Dorad as set forth in the claim, is null and void. In addition, Edelcom requests that the court issue a permanent injunction instructing Dorad and its other shareholders (the defendants), including anyone on their behalf, not to do any action that relates to a change in Dorad’s field of operation, including planning and construction of a new power plant or the expansion of the existing power plant, including in connection with “Dorad 2” and approving budgets for these actions and/or performing any tests in connection therewith, unless these actions were unanimously approved by the shareholders of Dorad and that the court permit the plaintiff to bifurcate its requests as financial claims may arise in the future. On December 17, 2024, Dorad filed a request to dismiss the claim in limine and to extend the deadline for filing a defense, in light of the fact that this is a theoretical remedy as Dorad’s management has not yet made a recommendation regarding the project and in any case it has not yet been submitted to Dorad’s organs for approval, due to delay and abuse of legal proceedings. On the same day, the court transferred the requests to the parties’ response. On December 15, 2024, the court granted Dorad’s request for an extension of the deadline for filing a defense on its behalf, pending a decision on Dorad’s request to dismiss in limine. On January 27, 2025, Edelcom filed its response to Dorad’s request to dismiss in limine and on February 13, 2025, the court rejected the request.
On April 7, 2025, Dorad, EAIS and Ellomay Luzon Energy submitted their responses. The court instructed the parties to finalize the preliminary proceedings by May 15, 2025. On June 29, 2025, the parties submitted an updated request for court approval of a procedural arrangement regarding the completion of the preliminary proceedings, whereby: the parties shall respond to the document disclosure requests and provide access to all documents listed in their disclosure affidavits by July 30, 2025; and any motions relating to document disclosure, if necessary, shall be submitted by September 1, 2025. On June 30, 2025, the court approved the updated procedural arrangement. On July 28, 2025, the parties submitted a joint motion for extension of the dates to finalize the preliminary proceedings and the court granted the motion as requested and dates were set for the finalization of the preliminary proceedings.
On September 14, 2025, Dorad’s board of directors approved the planning and execution of the “Dorad 2 Project.” The Dorad board of directors also approved additional resolutions in connection with the Dorad 2 Project including a budget until the project achieves financial closing and authorizing Dorad’s management to negotiate an agreement to maintain a production slot with a turbine manufacturer (an agreement that will be subject to an additional approval by Dorad’s board of directors). The aforementioned resolution was preceded by the adoption by Dorad’s shareholders of an amendment to Dorad’s articles of association providing that the project will require the approval of Dorad’s board of directors with a majority of 70% of the participating directors.
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On October 5, 2025, following the postponement of the deadline for completing the preliminary proceedings, Edelcom notified Dorad that it intends to file a motion to amend its statement of claim and requested Dorad’s consent to a procedural amendment whereby the dates set for submission of affidavits of discovery will be postponed until after the decision on the motion to amend. Dorad provided its consent while reserving all of its rights and claims, including the right to object to the motion to amend and to request expenses, including in connection with work already performed (almost in its entirety) in connection with the preliminary proceedings. Edelcom’s motion to amend was provided to Dorad for its response by November 16, 2025 and the parties agreed to an extension until November 30, 2025. The parties agreed, and the court approved, that the preliminary proceedings will be completed after the ruling will be provided in connection with the motion to amend. On December 22, 2025, following the hearing held before the court on November 11, 2025, and further to Edelcom’s notice in the matter, the court ordered the dismissal of the claim without an order as to expenses (while reserving the parties’ arguments in this regard should a similar proceeding be initiated in the future).
Accordingly, as of the date hereof, there are no pending claims or proceedings in connection with the “Doral 2” project.
For an update concerning the decision issued by the Israeli Electricity Authority updating its prior decision regarding “Regulation for Conventional Production Units” see “Tariffs and Payments” below.
On June 24, 2025, Dorad filed an administrative petition pursuant to Section 5(1) and Item 2 of the First Schedule to the Administrative Courts Law, 2000, and pursuant to Section 17(a) of the Freedom of Information Law, 1998, requesting that the court exercise its authority under Section 17 of the Freedom of Information Law and instruct the Israeli Electricity Authority to disclose to Dorad the Israeli Electricity Authority’s Decision No. 69505, made at Meeting No. 695 held on September 2, 2024, regarding the tender for the construction of a power plant at the Sorek site, in full and without redactions. On September 17, 2025, the Israeli Electricity Authority, together with the Public Liaison for Freedom of Information submitted a preliminary response to the petition, opposing Dorad’s petition. On November 18, 2025, the respondents notified the court that the preliminary response should be considered as a statement of defense to the petition. On January 6, 2026, a hearing was held at the Jerusalem District Court, at the conclusion of which a judgment was issued by consent of the parties and without an order as to expenses, pursuant to which the redacted details in Decision 69505 will be disclosed to Dorad (except for one specific item).
On August 18, 20 and 25, 2025, a discussion was held at the Dorad board of directors regarding the Dorad 2 project. On August 25, 2025, at the conclusion of Dorad’s board of directors’ meeting, a vote was held to approve the Dorad 2 project in principle in order to advance the project to the financial closing stage. As the director appointed by Edelcom objected to this resolution, it was not unanimously approved at the aforementioned meeting. Dorad is examining the implications of the vote of the director appointed by Edelcom. Subsequently, on August 25, 2025, the director appointed by Ellomay Luzon Energy requested to convene a meeting of Dorad’s shareholders to amend Dorad’s articles of association so that the Dorad 2 project would be subject to approval by the Dorad board of directors by a 70% majority. The meeting of Dorad shareholders was convened for September 8, 2025 and the amendment was approved.
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On March 29, 2026, Dorad’s board of directors approved an agreement to secure a production slot with a heavy equipment supplier for the purchase of a new turbine as well as the related auxiliary equipment. In connection with this agreement, an amount that constitutes approximately 5% of the total cost of the Dorad 2 project, currently estimated at NIS 4–4.6 billion, and approximately 20% of the cost of the equipment to be procured from the heavy equipment supplier, will be deposited with the supplier and will be treated as a Reservation Deposit. Under the agreement, the supplier will undertake to supply the aforementioned equipment in accordance with the timelines and terms set forth therein, including scope of warranty, guarantees and the terms for their forfeiture, performance provisions, and more. At this stage, the Reservation Consideration for the main equipment will be paid from Dorad’s own sources. If the final required agreements for the purchase of the said equipment are executed by September 2026 or by the financial close date, whichever is earlier, the Reservation Deposit will constitute an advance payment toward the full payment for the main equipment and the related auxiliary equipment. If the required agreements are not executed within the aforesaid timeframe, the Reservation Deposit will be forfeited. This agreement is expected to be signed in the near future.
The expansion of the Dorad Power Plant by building the Dorad 2 facility in a combined cycle technology, will result in an aggregate capacity of the Dorad Power Plant of approximately 1,500-1,570 MW and the approved plan also enables adding batteries with a capacity of approximately 80 MW. The Company expects that if the Dorad 2 plan will materialize and the expansion will be completed, the expansion of the power plant will increase the revenues and income of Dorad. The execution of the expansion is subject to various conditions, including, among others, receipt of permits, obtaining financing, receipt of licenses from the Israeli Electricity Authority, regulatory changes and market terms and condition, all of which are not within the control of Dorad or the Company.
Dorad competes with the IEC, private electricity manufacturers and other sellers of electricity with respect to sales to potential customers directly. In connection with Dorad 2, Dorad competes for regulatory benefits with other developers constructing power plants, including Dalia and Kesem. For more information see “Tariffs and Payments” below.
As long as the regulation remains unchanged, as the IEC controls the transmission and the majority of the distribution lines and the connection of the private power plants to the Israeli national grid, Dorad and the other private manufacturers are dependent on the IEC for their operations and may also be subject to unilateral actions on the part of IEC’s employees.
As of December 31, 2025, there are several private power plants operating in Israel for the production and supply of electricity through different technologies, including natural gas, diesel, pumped energy, co-generation and renewable energy. To the best of our knowledge and according to public information, the major private manufacturers in Israel include the OPC Rotem Ltd. power plant (440 MW), the Dalia Energy Power Ltd. power plant (900 MW), the IPM power plant (450 MW) and the Nesharim power plant (120 MW) Based on the Israeli Electricity Sector Report, published by the Israeli Electricity Authority in September 2025, as of the end of 2024, the private power producers owned a market share in the production segment of approximately 53% of the installed electricity capacity in Israel and in 2024 the private sector produced approximately 59% of the electricity.
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Dorad entered into electricity supply agreements with various commercial consumers for the entire production capacity of the Dorad Power Plant (assuming maximal consumption by all customers in the summer season, characterized by peaks of demand from customers). The majority of the agreements are for ten years terms and may be extended for an additional five years, and the agreements do not obligate the customers to purchase a minimum quantity of electricity. The end-users include the Israeli Ministry of Defense, Mekorot (Israel’s water utility and supply company), Israeli food manufacturers (Ossem and Strauss), Israeli hotel chain (Isrotel), and others. The electricity supply agreements are, mainly, based on a reduced rate compared to the rate applicable to electricity consumers in the general market, as determined by the Israeli Electricity Authority. There is no regulatory or contractual limit on the discount rate at which electricity can be sold by Dorad. Dorad’s supply agreements, with the exception of agreements executed prior to the extension of the supply license) are required to include an exit right for the customer no later than five years from the date of the start of electricity supply.
In April 2024, the Israeli Electricity Authority published a decision that enables transitioning domestic consumers without a “smart meter” to private manufacturers by adopting a “Normative Consumption Model of a Domestic Consumer” (a statistical estimation of the consumption by the average domestic consumer in each half hour during the year). Based on this model, Dorad contracted with a number of entities that provide services to domestic consumers on a large scale, for the purpose of selling electricity to domestic customers of those entities.
Dorad entered into agreements with several entities that provide services to household consumers and have a broad customer base, for the purpose of selling electricity to their household customers. Under the signed agreements, all customer-related risks are borne by the service-providing entities.
In addition to the provision of electricity to specific commercial consumers, in August 2010, Dorad entered into an agreement with the IEC, which governs the provision of infrastructure services and electricity from the IEC to Dorad, provides that Dorad will supply availability and energy to the IEC based on a production plan determined by the Israeli Electricity Authority, on IEC’s requirements and on the tariffs determined by the Israeli Electricity Authority. According to the aforementioned agreement, the IEC connected Dorad’s power plant to the electricity grid, and also provides Dorad with infrastructure, backup and ancillary services that are required to enable the supply of electricity by Dorad to the private consumers at the time and in consideration for the prices that will be determined according to the standards applicable to Dorad, as determined from time to time by the Israeli Electricity Authority. In the agreement, provisions were established, among other things, regarding the equipment, materials and assets used and intended for use to connect the Dorad Power Plant to the electricity grid, their operation by the IEC, their inspection and the provision of maintenance services for them.
According to the agreement of Dorad with the System Manager, Dorad undertook to provide the System Manager with variable availability at the level of power that is not intended for Dorad’s end customers, in accordance with a production plan whose format is determined by the Israeli Electricity Authority, and to sell to the System Manager the electricity that it will seek to purchase out of the variable availability provided to it. The System Manager committed to purchase availability and energy capacity from Dorad in accordance with the Electricity Market Regulations (Conventional Private Electricity Manufacturer), 2005, for a period of twenty years commencing on the date of commercial operation. In the event that Dorad does not sell any electricity to private customers, Dorad will be entitled for payments from the System Manager for all its free availability capacity. It was also determined that in exchange for the sale of energy, the System Manager will pay Dorad the price at which Dorad offered to sell to the System Manager, but no more than the maximum price set by the Israeli Electricity Authority in accordance with the standards applicable to Dorad and in accordance with Dorad’s tariff approval.
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In connection with the establishment of Noga, the new System Manager, Dorad’s agreement with the IEC was assigned by the IEC to the System Manger during 2021.
On May 4, 2025, Dorad entered into an updated agreement with a major customer for the supply of electricity at a reduced tariff, which amends and replaces the agreement previously signed between Dorad and such customer on April 28, 2010, as amended from time to time. Pursuant to the updated agreement, Dorad undertakes to sell the customer all the electricity it requires. The term of the updated agreement is retroactively effective from December 1, 2024, and will expire on May 31, 2029.
The demand for electricity by Dorad’s customers is seasonal and is affected by, among other factors, the climate prevailing in that season. The months of the year are split into three seasons as follows: summer – June-September; winter – December-February; and intermediate (spring and autumn) – March-May and October-November. There is a higher demand for electricity during the winter and summer seasons, and the average electricity consumption per hour is higher in these seasons than in the intermediate seasons and is even characterized by peak demands due to extreme climate conditions of heat or cold. In addition, Dorad’s revenues are affected by the change in load and time tariffs – TAOZ Tariff (an electricity tariff that varies across seasons and across the day in accordance with demand hour clusters), as, on average, the Taoz Tariff is higher in the summer season than in the intermediate and winter seasons.
Changes in the climate have an effect on electricity consumption of Dorad’s customers, which is increased and/or more prolonged during periods of heat or cold that are more extreme than in previous years (in the summer and winter seasons) and could have a material impact on Dorad and its financial results.
Sources and Availability of Raw Materials for the Operations of the Dorad Power Plant
As described above, the Dorad Power Plant is a dual-fuel plant. However, the cost of running on diesel oil is expensive and the use of diesel oil increases the level of emissions into the air (compared to gas-based operation). In accordance with applicable regulatory requirements, Dorad maintains a stock of diesel oil intended for use as backup for operating the plant for 100 hours at full load, in the event of inability to operate the plant with gas. In accordance with the standards published by the Israeli Electricity Authority, the tariff approval granted to Dorad, the agreement between Dorad and the IEC and the existing agreements between Dorad and its customers, in the event of a gas shortage (either due to a lack of supply or the ability to transport the gas, as described above) Dorad will purchase the energy it requires in order to meet its obligations towards its customers from the IEC and will sell it to its customers at the retail price (that is, without the discount included in these agreements). During 2024 Dorad did not have a significant diesel oil use. During 2025, due to the war between Iran and Israel and the temporary shortage in natural gas, Dorad use of diesel oil was more significant.
Pursuant to the Israeli Electricity Sector Report, published by the Israeli Electricity Authority in September 2025, natural gas is currently being used for the production of approximately 72% of the electricity produced in Israel.
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Agreement with Tamar
On October 15, 2012, Dorad entered into the Tamar Agreement with Tamar, which is one of the suppliers of natural gas for the Israeli electricity market. Pursuant to information received from Dorad, Dorad purchases natural gas from Tamar for purposes of operating the Dorad Power Plant and the main terms of the Tamar Agreement are as follows:
As a result of the indexation included in the gas supply agreement, Dorad is exposed to changes in exchange rates of the U.S. dollar against the NIS. To minimize this exposure Dorad executed forward transactions to purchase U.S. dollars against the NIS.
On April 2, 2019, Dorad entered into an addendum to the Tamar Agreement according to which the gas quantities specified in the addendum to the Tamar Agreement that Dorad purchases from Tamar will not be included for the purpose of calculating the quantities of gas at the time of the reduction of the purchases from Tamar, in accordance with the instructions of the Tamar Agreement and in accordance with the layout instructions for increasing the quantity of natural gas produced from the Tamar natural gas field and rapid development of natural gas fields Leviathan, Karish and Tanin and additional fields, dated August 16, 2015.
On March 22, 2021, Dorad entered into an addendum to the Tamar Agreement according to which the parties agreed on the amount of gas that Dorad will purchase from Tamar commencing January 1, 2022, and Dorad exercised the option set forth in section (d) above, resulting in an update to the amounts and prices of gas purchased by Dorad from Tamar, which is beneficial to Dorad. This addendum also provides that Dorad will be entitled to compensation in the amount specified in the addendum, which was received in the third quarter of 2021.
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On April 5, 2021, Dorad entered into an additional gas purchase agreement with Tamar, or the Additional Tamar Agreement, pursuant to which Dorad is entitled to purchase additional quantities of gas from Tamar during a period of four years ending on April 5, 2025. As part of the Additional Tamar Agreement, Dorad will receive a grant that depends, among other things, on the amount of gas consumption quantities determined in the Additional Tamar Agreement. Dorad received 50% of the grant in the first quarter of 2022 and expects to receive the remainder on the date of termination of the Additional Dorad Agreement pursuant to the conditions set forth therein.
The addendums to the Tamar Agreement and the Additional Tamar Agreement were subject to certain conditions precedent that were met on July 14, 2021.
On May 4, 2025, Dorad entered into an agreement with the partners in the Tamar license to extend the Additional Tamar Agreement, which was originally set to expire in April 2025, until June 2025. In addition, it was agreed to increase the quantity of gas Dorad will purchase in 2026. On May 18, 2025, following the fulfilment of relevant conditions, Dorad received the second half of the payment due to it under the Additional Tamar Agreement. The payment was recognized in Dorad’s statement of profit or loss for the year ended December 31, 2025 as a reduction in energy costs.
In 2025, Dorad did not consume the minimum annual quantity it had committed to under the agreement with Tamar. As a result, Dorad recognized an additional long-term liability of NIS 66.8 million in its statement of financial position. These amounts represent the monetary value of the shortfall between the minimum quantity Dorad is obligated to purchase under the agreement and the actual quantity consumed during the year, or the Tamar Excess Gas Quantity. As of December 31, 2025, Dorad estimates that it will fully consume the Tamar Excess Gas Quantity over the next three years. Accordingly, Dorad recognized an asset of approximately NIS 66.8 million under “Long-Term Prepaid Expenses” in its statement of financial position. This estimation constitutes forward looking information as defined in the Securities Law, 1968. The aggregate amount recognized as of December 31, 2025 in connection with the Tamar Excess Gas Quantity as long-term prepaid expenses in connection with the Tamar Agreement is approximately NIS 72.1 million.
Natural Gas Purchase Agreement with Energean
In October 2017, Dorad executed an agreement with Energean regarding the acquisition of natural gas, in a cumulative volume of approximately 6 BCM over a period of 14 years, from the Karish and Tanin reserves held by them and whose completion was initially expected to be by the second half of 2021. Based on the agreement, Dorad will purchase about half of the gas required to operate the Dorad Power Plant and the rest of the demand will continue to be supplied by Tamar. According to the agreement with Energean, if Dorad does not actually consume the minimum quantity it has undertaken, it will be required to pay for that quantity, in addition to the minimum gas quantity Dorad is obligated to consume each year. However, Dorad will be allowed to consume the unused quantity over the following three years. Due to these delays in the commencement of operations of Energean’s production facilities, Dorad continued to purchase gas from Tamar at a higher price than the price set in the agreement with Energean during 2020-2022. In February 2022, Dorad approached Energean demanding that it meet the timeline set forth in the agreement and compensate Dorad for the delays. Energean began to flow gas to Dorad at the beginning of November 2022.
In 2024, Dorad did not consume the minimum annual quantity it had committed to under the agreement with Energean. As a result, Dorad recognized a liability of NIS 4.5 million under “Other payables” and a long-term liability of NIS 51.7 million under “Other Long-Term Liabilities” in its statement of financial position. These amounts represent the monetary value of the shortfall between the minimum quantity Dorad is obligated to purchase under the agreement and the actual quantity consumed during the year, or the Energean Excess Gas Quantity. As of December 31, 2024, Dorad estimated that it will fully consume the Energean Excess Gas Quantity over the next three years. Accordingly, Dorad recognized an asset of NIS 4.5 million as “other receivables” and an asset of approximately NIS 51.7 million under “Long-Term Prepaid Expenses” in its statement of financial position in connection with the Energean Excess Gas Quantity for the year ended December 31, 2024. This estimation constitutes forward looking information as defined in the Securities Law, 1968. As of December 31, 2025, the amounts recognized in connection with the agreement with Excess Gas Quantity are: (i) approximately NIS 9.5 million and approximately NIS 200 thousand, presented under “Trade payables and other payables” and “Other long-term liabilities,” respectively and (ii) approximately NIS 30.1 million and approximately NIS 600 thousand, presented under “Trade receivables and other receivables” and “Long-term prepaid expenses,” respectively.
On March 12, 2025, Dorad entered into an amendment to the agreement with Energean pursuant to which the request for payment for the minimal natural gas quantities that Dorad undertook to purchase but did not consume during 2024 will be reduced and the daily quantity that Dorad will be required to consume during the summer months of 2026 was reduced. In April 2025 Dorad paid the sums due to Energean pursuant to the amendment.
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Delivery of Natural Gas
The natural gas is supplied through Israel Natural Gas Lines Ltd., currently the sole operator of a natural gas transportation system in Israel. The ability to deliver natural gas depends on the extent of the capacity of gas that can be transported in the pipeline and a system payment within the framework of a resolution of the Israeli Gas Authority.
In November 2010, Dorad executed a standard agreement with Israel Natural Gas Lines Ltd., a governmental company, which was approved by the Israeli Gas Authority, according to which the Dorad Power Plant was connected to the natural gas pipeline. Dorad paid connection fees in the amount of NIS 47 million and is obligated to pay Israel Natural Gas Lines Ltd. a fixed monthly payment for the capacity in the pipeline and a variable payment for gas flowing through the pipeline.
Tamar carried out a project to add compressors aimed at increasing the amount of gas passing through the transmission pipeline. The agreements between Israel Natural Gas Lines Ltd. and its customers (including Dorad), include, among other things, the maximum capacity that the customer may purchase. As of December 31, 2025, the maximum capacity established in the agreement between Israel Natural Gas Lines Ltd. and Dorad is sufficient for the full production capacity of the Dorad Power Plant. In extreme conditions, there may be a shortage in the supply of natural gas. However, Dorad estimates that even if such a shortage occurs, for example due to extreme weather conditions, it is expected to last only a few hours. In Dorad’s estimation, no material financial impact is expected on Dorad if such a shortage arises.
Material Effects of Government Regulations on Dorad’s Operations
As noted above under “Material Effects of Government Regulations on the Israeli Solar Plant,” the regulatory framework applicable to the production of electricity by the private sector in Israel is provided under the Electricity Law, regulations promulgated thereunder, and other standards, guidelines and instructions published by the Israeli Electricity Authority and the IEC. In addition, the gas transportation system in Israel is regulated by the Israeli Gas Authority, and by the regulation and decisions of the Ministry of Energy and the Israeli Gas Authority on these issues.
Licenses
The Israeli Electricity Market Law provides that certain actions in the electricity market, including generation of electricity and supply of electricity, require a license. In May 2014, the Israeli Electricity Authority resolved to grant Dorad production licenses for a period of twenty years (which can be extended for an additional ten year period under certain conditions) and a supply license for a period of one year. In August 2014, Dorad filed a request to extend the supply license for an additional period of nineteen years and the long-term supply license was executed in July 2015.
In accordance with the terms of Dorad’s production licenses, the sale to the System Manager is conducted using the method of available capacity and energy. The production licenses impose on Dorad an obligation to comply with a minimum level of availability, regularity and efficiency in the operation of the license, an obligation to carry out inspections of the power plant and maintenance work therein, and an obligation to report to the Israeli Electricity Authority, including in connection with malfunctions and inspections carried out at the power plant. In accordance with the terms of the supply license, Dorad may sell electricity to consumers who have a continuous electricity meter installed that stores consumption data (only). In addition, in accordance with the terms of the supply license, it is required that Dorad’s equity not be less than a certain percentage of the normative cost of the power plant (according to the definition of the relevant term therein).
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The licenses cannot be transferred, encumbered or seized, directly or indirectly, and the production licenses also provide that it is not possible to sell or pledge any property used for the execution of the licenses, all except with the prior approval of the Minister. In addition, the licenses state, among other things, that the approval of the Minister of Energy is required for the transfer or encumbrance of control of Dorad. In the event that the transfer of control also includes a change in the terms of the license, the approval of the Israeli Electricity Authority is also required. In addition, the licenses include restrictions and requirements in connection with transfers of rights, directly or indirectly, in Dorad.
Subject to the right of hearing and the rules applicable to it, the Israeli Electricity Authority may, with the approval of the Minister, change the conditions of the licenses granted to Dorad, add to them or subtract from them, if there have been changes in the suitability of Dorad, in the general environment of the electricity market (or in the technology relevant to the license, in relation to the production license), or if the changes are required to ensure competition in the electricity market (in relation to the production license) or the level of services to be provided. The Israeli Electricity Authority is also entitled to terminate the licenses or suspend them before the end of their term, subject to the right of the license holder for a hearing, for example in the event of a violation of the terms of the license or non-compliance with the eligibility conditions for receiving the licenses, all in accordance with the conditions specified in the licenses and according to the provisions of applicable law. The Israeli Electricity Law provides that in addition to revocation or suspension of a license due to non-compliance, the Israeli Electricity Authority may also revoke, suspend or modify a license based on other considerations, including the contribution of the license to the level of services to the public, the benefit of the consumers and the contribution of the license to the competition in the electricity market. The Israeli Electricity Law further provides that other than due to non-compliance or loss of eligibility, the revocation, suspension or modification of certain licenses, which licenses of the scope held by Dorad, requires the approval of the Minister.
As a condition for receiving the licenses, Dorad provided guarantees to ensure compliance with the conditions of the licenses as well as to compensate and indemnify the State of Israel for damages caused to it as a result of breach of these conditions or as a result of termination, limiting or suspension of the licenses. In addition, Dorad must provide a guarantee in favor of the System Manager in the amount of 70% of the average monthly bill payment of its customers in the summer season according to their consumption in the corresponding period of the previous year. In accordance with the terms of the licenses granted to Dorad, Dorad is not allowed to carry out actions that may cause a reduction in competition in the electricity market or harm it. These licenses also include provisions regarding the insurance that Dorad must maintain during the licenses period.
As of December 31, 2025, Dorad is in compliance with the terms of the licenses granted to it.
Tariffs and Payments
As noted above, the Israeli Electricity Authority determines the tariffs in the electricity sector, including the Taoz Tariff, which is the tariff for electricity consumers above a certain size, based on the costs of production, infrastructure, transmission, distribution and system costs, which changes according to the seasons and according to clusters of demand hours during the day, or the Taoz Tariff. The Taoz Tariff creates a direct link between the costs of electricity production and its supply at different times and the price paid by the customer. In each season, three clusters of hours were determined: peak (hours with the highest demand), high (hours with an average demand) and low (hours with low demand). The price of electricity at peak is the highest, at high is at an intermediate level, and at low is the lowest. These rates have a material effect on the results of Dorad’s operations.
The Israeli Electricity Authority determined the method and tariffs for the provision of availability and electricity by private electricity producers to the System Manager in the event not all of the capacity of such manufacturers was sold directly to customers. The Israeli Electricity Authority’s decision provides that the System Manager will pay for the availability even in the event electricity was not actually used by end customers depending on the amount of electricity made available to the System Manager. This decision further provides that in the event the System Manager purchases electricity from the private manufacturer, the tariff paid for the electricity will not be higher than the tariff determined in the tariff approval issued to the private manufacturer.
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For the purpose of guaranteeing the tariffs that electricity producers are entitled to receive from the Israeli Electricity Authority, they are granted a “tariff approval” by the Israeli Electricity Authority, which includes, among other things, tariffs arising from the tariff arrangements in the standards in connection with force majeure and insurance, warranty, replacement fuel and tariffs for the manufacturer in connection with the purchase of electricity, purchase of availability and energy or the purchase of related services. In September 2010, Dorad received a tariff approval from the Israeli Electricity Authority that sets forth the tariffs applicable to the Dorad Power Plant throughout the period of its operation, valid for a period of 20 years from the date of receipt of the production license (i.e., until May 2034), which is updated according to mechanisms set forth therein and includes, among other things as described above, tariffs for the sale of availability and energy to the System Manager, and in October 2013, Dorad received a revised tariff approval pursuant to the Tamar Agreement.
On December 26, 2022, the Israeli Electricity Authority published a decision regarding “Annual Update of 2023 Electricity Rates for Customers of the IEC” which provided for a decrease in the average production component of approximately 0.7% from January 1, 2023 through the end of 2023. On January 26, 2023, the Israeli Electricity Authority published a decision regarding “Annual Update of 2023 Electricity Rates for Customers of the IEC” which provided for a decrease in the average production component of approximately 1.2% from February 1, 2023 through the end of 2023. On March 27, 2023, the Israeli Electricity Authority published a decision regarding “Ongoing Update to Electricity Rates for Customers of IEC,” which provided for a decrease in the average production component of approximately 1.4% from April 1, 2023, which was in effect through the end of January 2024.
On January 29, 2024, the Israeli Electricity Authority published a decision regarding “Annual Update of 2024 Electricity Rates for Customers of the IEC,” which provided for a decrease in the average production component of approximately 1% from February 1, 2024.
On December 29, 2024, the Israeli Electricity Authority published a decision regarding an annual update to the electricity tariff for 2025 for IEC consumers, according to which the average production component decreased by approximately 2.2% compared with the average production tariff published by the Israeli Electricity Authority in January 2024, and which was valid up to and including December 2024.
On December 11, 2025, the Israeli Electricity Authority published a decision regarding an update to the electricity tariff structure for consumers of the IEC, effective as of January 1, 2026. The update includes, inter alia, a revision of the generation component structure into a variable and a fixed component on a median basis. Pursuant to the decision, the average generation component decreased by approximately 1.7% compared to the average generation tariff published by the Israeli Electricity Authority in December 2024, which was valid through and including December 2025.
On March 26, 2025, the Israeli Electricity Authority published a decision updating its prior decision number 69407 of August 12, 2024, regarding “Regulation for Conventional Production Units,” which regulates the manner of construction and operation of conventional technology energy production facilities with a capacity higher than 630 MW and determines in their matter the validity of the tariff and the extension of the deadline for receiving tariff approval for the purpose of entering into regulation. The updated decision provides with regard to the availability tariff per KWh that it will be updated to NIS 0.0331 for manufacturers that will receive a tariff approval by June 30, 2026, NIS 0.0318 for manufacturers that will receive a tariff approval between July 1, 2026 and December 31, 2026 and NIS 0.0305 for manufacturers that will receive a tariff approval between January 1, 2027 and June 30, 2027. Furthermore, regarding the tariff approvals, the prior resolution was amended so that these will be granted to a maximum of four production units (instead of two), and a manufacturer that will reach commercial operation prior to December 31, 2029 will be entitled to an addition of 0.75% per month based on the number of months in which commercial operation preceded such date (this increase does not apply to the premium component of the tariff). In addition, the first manufacturer that will reach financial closing and receive a tariff approval within the dates set forth in the decision and will construct the facility north to Gush Dan based on the map included in the decision (an area that does not include Dorad’s geographic location) will be entitled to an addition of NIS 0.005 to the availability tariff applicable to it under the decision. The updated resolution will apply to the first four production facilities that will reach financial closing and receive tariff approval by no later than June 30, 2027.
Consumption Plans and Deviations
In August 2019, the Israeli Electricity Authority published a proposed resolution that is subject to a public hearing concerning an amendment to the standards governing deviations from consumption plans. These standards regulate the accounting mechanism in the event the actual consumer consumption is different than the consumption plan submitted by the electricity manufacturers (such as Dorad) and include a mechanism protecting the manufacturers from random deviations in actual consumption volumes. Based on the Israeli Electricity Authority’s publication, which includes a call for public comments (the hearing process), the Israeli Electricity Authority proposed revoking the protections included in the aforementioned standards, claiming that the manufacturers are misusing the protections and regularly submit plans and forecasts that deviate from the actual expected consumption, and also seeks to impose financial sanctions on the manufacturers, which may be in material amounts upon the occurrence of certain deviation events. On January 27, 2020, the Israeli Electricity Authority issued a resolution amending the standards and imposing financial sanctions in cases of certain extraordinary events that may add up to significant sums. The resolution entered into effect commencing September 1, 2020. Dorad is preparing to reduce the implications of the resolution and the implementation of the resolution does not have a material effect on the financial results of Dorad.
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On November 22, 2020, the IEC filed a third-party notice against Dorad in connection with a request to approve a class action submitted against the IEC claiming that the IEC was negligent in overseeing the private electricity manufacturers thereby damaging the electricity consumers at an amount of NIS 330 million as estimated in the request. The IEC did not include in its third-party notice the amount it attributes to Dorad. The claim against the IEC alleges that the private electricity manufacturers provided false reports in the consumption plans they submitted to the System Manager, based on the standards set by the Israeli Electricity Authority. Dorad and other third parties submitted their responses (and objections) to the class action and the claimant notified the court that he does not object to the third-party notices. On April 10, 2023, the District Court decided to reject the request submitted by the IEC to send the third-party notice to Dorad. On June 11, 2023, the IEC submitted an appeal to the Supreme Court on the District Court’s decision. On February 14, 2024, the applicant submitted his response to the appeal and on March 28, 2024, Dorad submitted its answer to the appeal (following an extension approved by the court). On February 24, 2025, the District Court ruled that, given the nature of the appeal pending before the Supreme Court, there is no reason to proceed with the class action as long as the appeal remains unresolved. The District Court further instructed the parties to submit an appropriate request to examine the advancement of the appeal before the Supreme Court and to file an update with the District Court after a decision is made on the appeal or by the end of the year, whichever comes first. On March 26, 2025, the IEC submitted an update to the District Court notifying of the Supreme Court’s decision to schedule a hearing on the appeal on December 1, 2025. On March 27, 2025, the District Court instructed to file an update with the District Court after a decision is made on the appeal or by the end of the year, whichever comes first. On December 6, 2025, the hearing on the appeal, which had been scheduled for February 16, 2026, was postponed by the court. On December 11, 2025, a new hearing date for the appeal was set for June 9, 2026. If the appeal is accepted in full, the hearing on the motion to certify the claim as a class action will take place with Dorad participating therein as a third party. Dorad estimates, based on the opinion of its legal advisors, that at this stage, it is not possible to reasonably assess the outcome of the appeal. Therefore, no provision has been recorded in Dorad’s financial statements.
Permits and Environmental Laws
The Dorad Power Plant is subject to a variety of Israeli environmental laws and regulations, including limitations concerning noise, emissions of pollutants, handling hazardous materials, including storage, transport and disposal, electromagnetic field radiation, and water pumping. In the event of non-compliance with environmental laws, Dorad could be subject to financial and criminal sanctions, denial of permits or licenses, suspension of activity and/or an increase in Dorad’s expenses due to damages, to the extent that they are caused as a result of non-compliance with environmental laws.
Dorad is required to obtain and maintain various licenses and permits from local and municipal authorities for its operations. Dorad holds a business license, a discharge permit into the sea, a toxic permit and an emission permit according to the Israeli Clean Air Law, 2008.
In connection with Dorad’s financing, Dorad’s shareholders undertook to indemnify Dorad and/or the financing entities in connection with environmental hazards in the event that Dorad bears any cost or expense or liability, among other events in connection with environmental hazards or pollution and deviations from the business plan related to seawater absorption. To the extent that indemnification is provided as stated above, the indemnification amounts will not be considered part of the equity that Dorad’s shareholders have committed to provide to Dorad as part of the financing of the project.
Market Model for Private Manufacturers on the Transmission Grid
In March 2022, the Israeli Electricity Authority published its resolution providing for a market model for private manufacturers and renewable energy on the transmission grid. The purpose of the resolution is to create a uniform set of rules and a possibility for better control of the System Manager over the loads on the network, especially in view of the massive entry of renewable energies into the market. This resolution preserves the ability of manufacturers operating under a different regulation, including Dorad, to continue operating in a format of physical (or self) loading (production according to the predicted customer consumption and selling excess electricity to the System Manager), and also allows those manufacturers to decide, every month, at their discretion, to switch to a central loading format that will entitle them to energy payments in accordance with the mechanisms established in the resolution and in parallel to purchase the electricity required by their customers from the System Manager at system marginal price (SMP). This arrangement became effective commencing July 1, 2024.
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In parallel, as part of the gradual opening of the supply segment to competition, the Israeli Electricity Authority adopted regulation enabling the entry of “virtual suppliers” into the market, i.e., companies that do not own generation assets and purchase electricity from the System Manager and/or directly from producers, and sell it to end consumers. In September 2022, the “Market Regulation” enabled generation facilities connected to the distribution grid to sell electricity directly to virtual suppliers instead of to the System Manager. In July 2021, Dorad received the supply license of a virtual supplier to suppliers who do not hold means of production, and for that purpose it provided a guarantee in the amount of NIS 2 million in favor of the Israeli Electricity Authority and a guarantee in the amount of NIS 8 million in favor of the System Manager for availability certificates. The guarantee to the System Manager was reduced to NIS 4.8 million in February 2026. On January 7, 2026, the Israeli Electricity Authority published Decision No. 73205 regarding the results of Competitive Process No. 1 for determining the tariff for the purchase of availability certificates from the System Manager. As part of the procedure, a total capacity of 520 MW was allocated to ten different suppliers. The tariff determined is NIS 0.0932 per kilowatt-hour. Dorad was awarded an allocation of 60 MW in this competitive process. In connection with the award, Dorad provided the System Manager with guarantees in the amount of NIS 31 million. Dorad commenced operating as a virtual supplier in March 2026.
In May 2025, the Israeli Electricity Authority established the “Bilateral Market Regulation” for renewable generation and storage facilities connected to the transmission grid. This regulation, which is expected to come into effect in early 2026, introduces a mechanism of “Capacity Credits,” allowing eligible facilities to sell their generation capacity directly to suppliers, and is intended to increase the supply of electricity available to virtual suppliers and thereby enhance competition.
The Israeli Electricity Authority has also established a protection mechanism and payment cap for storage facilities operating under the Bilateral Market Regulation.
Waste-to-Energy (“Biogas”) Plants
3,073
3,576
8,370
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The Goor Plant
We indirectly wholly-own Groen Gas Goor B.V., or Groen Goor, a project company operating an anaerobic digestion plant, with a green gas production capacity of approximately 3 million Nm3 per year, in Goor, the Netherlands, or the Goor Plant and the land on which the Goor Plant is located.
The Goor Plant commenced operations in December 2017. The overall cost of the Goor Plant was approximately €13 million, including bank financing. We provided approximately €9 million in shareholder’s loans and capital reserves to Groen Goor. The Goor Plant is currently operated by Groen Goor, who recruited experienced employees for this purpose. During 2019 we added a centrifuge decanter and a dry silo system for the Goor Plant. In October 2016, Groen Goor executed offtake agreements for selling its produced gas, electricity, green gas certificates and green electricity certificates.
The Oude Tonge Plant
We indirectly wholly-own Groen Gas Oude–Tonge B.V., or Oude Tonge, which owns an anaerobic digestion plant, with a green gas production capacity of approximately 3.8 million Nm3 per year, in Oude Tonge, the Netherlands, or the Oude-Tonge Plant. The Oude Tonge Plant commenced operations in June 2018. The overall cost of the Oude Tonge Plant was approximately €10 million, including bank financing. We provided approximately €6.4 million in shareholder’s loans and capital reserves to Oude Tonge.
The Oude Tonge Plant is currently operated by Oude Tonge, who recruited experienced employees for this purpose and the senior management provides services both to the Oude Tonge Plant and to the Goor Plant. During 2019, we added a centrifuge decanter for the Oude Tonge Plant. In May 2017, Oude Tonge executed offtake agreements for selling its produced gas and green gas certificates.
The Gelderland Plant
On December 1, 2020, we acquired all issued and outstanding shares of Groen Gas Gelderland B.V., or GG Gelderland, through our wholly-owned subsidiary, Ellomay Luxembourg. We paid €1.567 million for the shares and the repayment of shareholder loans. An additional shareholder loan of approximately €5.9 million was granted to GG Gelderland by Ellomay Luxembourg on December 1, 2020. GG Gelderland owns an operating anaerobic digestion plant in Gelderland, the Netherlands, with a permit that provides for a subsidy in connection with production of approximately 7.5 million Nm3 per year. The actual production capacity of the plant is approximately 9.5 million Nm3 per year.
The overall cost of the GG Gelderland Plant was approximately €16.5 million, including bank financing. We provided approximately €14.7 million in shareholder’s loans and capital reserves to GG Gelderland.
Assessment of recoverable amount
During 2025, we assessed the recoverable amount of the Groen Goor Biogas plant in the Netherlands in light of operating losses suffered by this project in recent years and lower results than forecasted for 2025. For more information see “Item 5: Operating and Financial Review and Prospects.”
Licenses to Increase Production
We are in the process of obtaining licenses to increase production in our Biogas Plants from approximately 16 million cubic meters of gas per year to approximately 24 million cubic meters of gas per year in the existing facilities. The license to increase production capacity at the GGOT facility was received and licenses to increase production at the two additional facilities are in advanced stages.
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Waste-to-Energy Technologies
The process of energy recovery from non-recyclable waste is often referred to as waste-to-energy or energy-from-waste. The waste-to-energy market includes various treatment processes and technologies used to generate a usable form of energy while reducing the volume of waste, including combustion, gasification, pyrolization, anaerobic digestion and landfill gas recovery. The resulting energy can be in the form of electricity, gas, heating and/or cooling, or conversion of the waste into a fuel for future use.
Gasification in the waste-to-energy market is the process of converting organic carbonaceous materials into carbon monoxide, hydrogen and carbon dioxide (CO2) by reacting the material at high temperatures (>700 °C), without combustion, with a controlled amount of oxygen and/or steam. This process produces a gas mixture called synthetic gas or syngas or producer gas and is itself a fuel. The organic materials used in the gasification process are a variety of biomass and waste-derived feedstocks, including wood pellets and chips and waste wood.
Anaerobic digestion is a biological process that produces a gas (also known as biogas) principally composed of methane (CH4) and carbon dioxide (CO2). These gases are produced from organic waste such as livestock manure and food processing waste and from agro-residues. Depending on the type of feedstock used and the system design, biogas is typically 55%-75% pure methane. The biogas is emitted during the digestion process of the substrates by specific combinations of bacteria. As there is a relatively wide range of feedstock mix that can be used in the process, the plants in the Netherlands are designed to allow flexibility that is expected to reduce dependency on certain feedstock mix or the feedstock supplier. Biogas is used to produce green gas, or bio-methane, with properties close to natural gas that is injected into the natural gas grid.
The anaerobic digestion process leaves an organic residue, the digestate. The digestate can be used as a fertilizer and soil improver and the WtE plant is required to find solutions for the proper disposal of the digestate. The ability to dispose of digestate is subject to the relevant regulation in the target countries with respect to the amounts and timing of disposal of digestate as a fertilizer in such country. In the event restrictions and regulation does not permit disposal in a certain country, the WtE plant is required to dispose of the digestate in more distant locations or to store the digestate, which increases the costs of the disposal of digestate.
Benefits of Waste-to-Energy
Waste-to-energy generates clean, reliable energy from a renewable fuel source, thus expected to reduce dependency on “traditional” energy production methods, such as fossil fuels, oil and other similar raw materials that are less friendly to the environment. The use of waste assists in the on-going management of waste in a manner that is more environmentally-friendly than other waste management solutions, such as landfilling. We believe that by processing waste in waste-to-energy facilities, greenhouse gas emissions and the risk of contamination of ground water will be reduced.
Sources and Availability of Raw Materials for the Operations of the WtE Plants
As noted above, the anaerobic digestion process requires continuous input of raw materials such as: manure, glycerin, mix grain and corn, all of which are not freely available (as is the case with wind, solar and hydro energies).
The success of a WtE plant depends on its ability to procure and maintain sufficient levels of the waste applicable and suitable to the WtE technology the plant uses, to meet a certain of range of energy (gas, electricity or heat) production levels. To ensure continuous supply of raw materials, both in terms of the quantity and the quality and composition of the raw materials, our WtE plants started working with a large number of waste suppliers, such as farmers, food manufacturers and other specialized waste suppliers in order to continuously monitor the proposed sales and try to locate the most efficient and beneficial offers.
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The Netherlands Waste-to-Energy Market and Regulation
Dutch Climate Goals
In July 2019, the national Climate Act (“Klimaatwet”) was adopted. The Climate Act contains several national climate goals. As a result of the European Climate Law, the CO2 emission reduction targets in the Climate Act were amended in July 2023 to 55% by 2030 and climate-neutral by 2050, aiming for negative emissions after 2050. In addition, pursuant to the Coalition Agreement (“Coalitieakkoord”) of December 2021, the Dutch government is aiming for a CO2 reduction of 60% (at least 55%) by 2030, 70% by 2035 and 80% by 2040, compared to 1990 levels. In March 2025, the Dutch government has presented the Climate Plan 2025-2035 to the Dutch House of Representatives and the Senate. This plan has not yet been enacted as binding law. The 90% reduction by 2040 goal expected to be set by the European Parliament as mentioned above is also incorporated in the Coalition Agreement (“Coalitieakkoord”) of January 2026. This 90% target will directly replace the 80% target for 2040 and the other intermediate goals as well, since these are not strict enough to reach the 90% target for 2040.
In a recent decision in a Dutch climate case about the Caribbean island of Bonaire (which applies to all of The Netherlands), the District Court of The Hague has ruled that aiming for these reductions is insufficient and that the Netherlands must set binding and stricter emission reduction targets for 2050 within eighteen months – including interim targets for the entire period – to comply with UN emission reduction standards. The target of 55% CO2 reduction by 2030 will be considered unlawful (unless this decision is overturned), but will be outdated with the EU’s upcoming 90% target regardless. The stricter emission reduction targets will have to align with the new 90% target.
The Climate Act does not contain any direct obligations for citizens and businesses; it provides the national government with a framework to establish further legislation in order to reach the national climate goals and renewable energy goals. In this regard the Climate Act requires the Dutch government to draft a so-called National Energy and Climate Plan (NECP). The Climate Plan covers a period of ten years, is adjusted every five years based on actual insights and contains the most important decisions and measures in the field of climate policy and energy saving management for the next five years. The first NECP (“Integraal Nationaal Energie en Klimaatplan 2021-2030”) was presented on November 1, 2019 and mainly refers to the headlines and various goals set – in broad outline – in the aforementioned Climate Act. It also provides an overview of the current and upcoming Dutch legislation in the field of climate policy. In June 2022, the Dutch government presented the draft NECP (“Ontwerp Beleidsprogramma Klimaat en Energie”). This program complements the Climate Plan and elaborates on the climate policy from the Coalition Agreement of December 2021. In December 2023, in connection with the RED III Decree, the European Commission issued recommendations under the European Climate Law to the Netherlands on their submitted draft NECP. The recommendations reflected that, based on projections, the contribution of the Netherlands to (amongst other) renewable energy, energy efficiency and reduction of greenhouse gas emissions is significantly below the EU target. The final NECP contains some editorial changes compared to the draft NECP, however the content remained unchanged.
Another mechanism introduced in the Climate Act is the Climate and Energy Outlook (“Klimaat en Energieverkenning”), which is regarded as one of the accountability instruments of Dutch climate and energy policy. Based on the Climate and Energy Outlook published in 2023, Dutch greenhouse gas emissions are expected to decrease by 46%-57% in 2030 compared to 1990. The Climate and Energy Outlook mentions that the main reason for the delay in reaching the 55% reduction target is the need for more rapid implementation of existing plans and formulation of additional policies. Until 2023, the Dutch government’s goal was to have at least 16% renewable energy and an almost fully sustainable energy supply in 2050. The first goal was achieved as in 2023 17% of the energy use in the Netherlands was based on renewable sources. However, according to European law, by the year 2030 the production rate of energy from renewable sources for the Netherlands must be 39%. The now projected 29%-36% is significantly below this target due to less offshore wind, fewer solar facilities and fewer heat pumps. This is one of the reasons it is currently extremely unlikely that the Netherlands will reach the legal climate goal of a 55% reduction in greenhouse gas emissions (GHG) by 2030. In addition, parts of the abovementioned NECP are not yet sufficiently detailed. REPowerEU, a 2022 strategy adopted by the European Commission in response to the energy crisis as a result of Russia’s invasion of Ukraine, is meant to achieve the EU’s full energy independence from Russia by accelerating the rollout of renewable energy and improving energy savings and energy efficiency. The Climate and Energy Outlook is accompanied with a Climate and Energy Memorandum (“KlimaatnotaKlimaat en Energienota”). The 2025 Climate and Energy Memorandum contains, amongst others, an updated climate and energy legislative and policy program regarding emission reduction, energy infrastructure, energy efficiency, the implementation of EU legislation, etc.
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In order to have a fully sustainable energy supply or circular economy in 2050, the Dutch government established the National Circular Economy Program 2023-2030 (“Nationaal Programma Circulaire Economie 2023-2030”) in February 2023. In 2023, the intermediate target for 2030 was 50% less use of raw materials compared to 2016 levels. The National Circular Economy Program 2023-2030 was renewed in 2025, in which new more specific targets have been formulated for 2035 that replace the intermediate target for 2030. The share of sustainable biotic and secondary raw materials in our raw material use needs to be at least approximately 50% in 2030 and 55% in 2035. The National Circular Economy Program 2023-2030 introduces four general measures: reducing raw material usage, substituting raw materials (by, for example bio-based materials), extending product lifetime and high-grade processing, which focuses on recycling (raw) materials. For the most impactful product groups, within the five supply chains with the most harmful environmental impact, concrete targets have been formulated, and specific policy has been developed. This is, for instance, the case for companies producing/manufacturing wind farms, solar systems and climate control systems. The other categories are consumer goods, plastics, construction and biomass & foodstuffs (which latter category fall under the transition agenda for circular agriculture). The National Circular Economy Program 2023-2030 sums up several measures of government intervention (mostly of voluntary nature) to reach the targets, such as pricing measures (for instance levies), regulatory measures and stimulating measures (e.g., subsidies), encouraging companies to take possible and/or necessary measures in order to reach the targets set out in the program.
The Dutch government also introduced a policy program concerning “green gas” (biomethane) in December 2022 (“Programma Groen Gas”). Green gas is gas from renewable energy sources, such as biomethane. Through this program, the government aims for a significant scale-up of the production of green gas in the Netherlands, particularly within the chemical industry sector. The program entails (amongst others) the introduction of targets and regulations for a so-called blending obligation regarding green gas and for “gasification” (vergassing) of biogenic residual streams. The Dutch Minister of Economic Affairs and Climate published draft legislation in July 2023 in this regard, but the legislation regarding the blending obligation has still not entered into force due to the difficulty of properly implementing the obligation in legislation.
In 2025, the Dutch government stated its intention to have a blending obligation for green gas by January 1, 2027. However, it remains unclear at this moment whether the legislation will be formally adopted in time. When adopted, the legislation regarding the blending obligation is expected to introduce an administrative burden for energy suppliers of gas to provide a certain amount of green gas to the end users concerned (all part of Emission Trade System (‘ETS2’): urban environment, agriculture and any industry not regulated by the ETS1) as part of the total gas supply. Compliance with this obligation can (exclusively) be proven by the existing ‘green gas certificates’, so-called Guarantees of Origin (Garanties van Oorsprong, or GoO’s), which can be traded through the VertiCer register (the organization responsible for issuing and managing the Guarantees of Origin). The GoOs are valid for a year after receiving them. The blending obligation will therefore also introduce tradable green gas units (“groengaseenheden”, GGE), issued originally by the Dutch Emission Authority (Nederlandse Emissieautoriteit, Nea). The GGEs can be traded on the market between producers and suppliers (also between themselves) and do not have a determined validity period.
By imposing the obligation on the gas suppliers, the government hopes to create a sufficiently high market price, thereby stimulating new (necessary) investments in the production capacity of green gas (such as the manufacturing of production installations, but also cooperation within the chain). The blending obligation does not follow directly from European regulations, but will be incorporated in Dutch law, in the Environmental Protection Act ((Wet milieubeheer,” which already contains several obligations regarding renewable energy). The obligation is however in line with EU ambitions and policies, such as the ambition in the REPowerEU-plan to produce 35 bcm of green gas (biomethane) in 2030.
In addition to the blending obligation, the Dutch government aims to increase the use of non-biogenic gas streams for gasification (vergassing), in particular for waste streams that are unsuitable for recycling. In this regard, the government opened a subsidy scheme in mid-February 2024 for “demonstration projects” (DEI+) regarding installations (partially) meant for gasification of biogenic or mixed (with non-biogenic) residual streams into renewable energy carriers (such as green gas and biofuels). The subsidy scheme for 2026 is open from January 27 until July 30, 2026 and has a total possible budget of €30 million per demonstration project.
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The Dutch government is continuously exploring whether new climate legislation or other measures can stimulate the contribution of financial companies to the climate transition. For that purpose, the Dutch government opened a consultation round for the draft version of the Act on Climate Measures Financial Sector (“Consultatie klimaatmaatregelen financiële sector”), aiming to capture all the possible advantages and disadvantages of new legislation, also with respect to other possible (legal and non-legal) measures, European developments, the possible impact of the legislation for the financial sector on financing Dutch businesses and on the international competitiveness of the Netherlands and its businesses. The consultation round was open until February 15, 2024. In 2025, the Minister of Finance announced that he did not consider it desirable to introduce additional national legislation on top of all the existing European regulations. It remains to be seen if the new Dutch Cabinet, which began its term on February 23, 2026, agrees or if it opts for new climate legislation for the financial sector.
Permits
As of January 1, 2024, various regulations on environment and spatial planning are implemented in the Dutch Environment and Planning Act (“Omgevingswet”) and underlying legislation. This includes the former Dutch Environmental Permitting Act (“Wet algemene bepalingen omgevingsrecht”), the Dutch Water Act (“Waterwet”), the Dutch Spatial Planning Act (“Wet ruimtelijke ordening”), the former Activities Decree on Environmental Management (“Activiteitenbesluit”) and several parts of the Dutch Environmental Protection Act (“Wet milieubeheer”).
The legislator of the Environment and Planning Act has stated that the Act has a policy neutral character and that the Environment and Planning Act and underlying regulations are not materially different than the prior regulation. One difference is that under the new legal system, it is not the operator of a certain facility/business but the performer of any environmentally impactful activity that has to comply with the applicable regulations (including any permitting obligations).
In practice, permits obtained under former legislation are and will stay valid. Any permit applications that have been submitted before the Dutch Environment and Planning Act entered into force, are assessed in accordance with the former legislation.
Under former legislation, a permit is required to operate a waste treatment plant in the Netherlands for its (now-called) environmentally impactful activities. In addition to this permit, a permit might be required for discharging waste (water) into sewage systems or surface water as well as permits for activities regulated under the local zoning plan (“omgevingsplan”) or local ordinances (“verordeningen”). The need for these permits depends on the (physical) scale of the waste treatment plant and its impact on the nearby environment. A permit is, in principle, issued without a time limit, but the competent authorities are allowed to include provisions regarding limitations or conditions under which the activities performed by the waste treatment plant need to be carried out. To ensure compliance, the authorities may withdraw a permit in case of significant violations of restrictions and/or applicable environmental regulations. Moreover, changing circumstances, as a consequence of new operational activities on-site, new developments nearby or new (EU) legislation, may require the permit to be revised.
Furthermore, the operation of a waste treatment plant must be in line with the designated use in the applicable zoning plan as established by the municipality. In case the plant/operation is not in line with the provisions in the zoning plan, either the zoning plan has to be adapted or a permit has to be obtained under the aforementioned Environment and Planning Act (thereby allowing deviation from the applicable designated use). New zoning plans may amend or prohibit the designated use that allows the operation of an existing plant.
For the operation of a waste treatment plant in the Netherlands, a permit under the Dutch Environment and Planning Act is required as well for any environmentally impactful activities that might negatively affect designated Natura 2000-areas (“Natura 2000-gebieden”), in particular by causing deposition of nitrogen. Furthermore, as of July 1, 2021, the Dutch Nitrogen and Nature Improvement Act (“Wet stikstofreductie en natuurverbetering”) establishes provisions targeting a more structural solution in regard to the (both ecological and political) nitrogen issue in the Netherlands due to the annulment of the so-called ‘Integrated Approach to Nitrogen’ (“Programma Aanpak Stikstof”) by the highest Dutch Administrative Court in May 2019. This approach, which provided exemptions to the permit obligation and entailed the idea that through nature restoration measures and source-directed measures, a general autonomous reduction of nitrogen depositions/emissions could be created (only) in favor of (more) economic developments, was ruled to be unlawful in light of EU law.
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Since then, the highest Dutch Administrative Court has rendered multiple judgments with significant implications for the sectors with activities with expected and/or possible (significant) nitrogen deposition effects on Natura 2000 areas. The first of these implications is that the possibilities for internal netting are more limited than before, making the (stricter) conditions for both internal and external netting aligned. The second implication by case law is that a permit is required in most cases of expected (significant) nitrogen deposition, both for new and expansion of existing activities. The changes in case law apply directly to ongoing and future permit procedures. This means that authorities must immediately apply the new assessment framework.
As a result, permits regarding nitrogen deposition are only issued if the nitrogen deposition is practically nil. The competent authority will only grant a nature permit if it can be established with certainty that no adverse effects on Natura 2000 habitats will occur, thereby taking into account the available nitrogen deposition capacity, provincial nitrogen policy and the ecological condition of nearby Natura 2000 sites. If adverse effects cannot be excluded, mitigation or compensatory measures will be required before a nature permit can be granted. An application for a nature permit requires an appropriate assessment (passende beoordeling) of the nitrogen deposition effects of the relevant activities. In practice, this entails that: (i) not all available nitrogen deposition capacity may be allocated to new activities, as part of that capacity must be reserved for ecological restoration; and (ii) it must be demonstrated that the remaining available nitrogen deposition capacity is not required for the restoration of overburdened Natura 2000 sites.
Hence, in general it is rather difficult to obtain a permit for both the construction and the operation of a (modified/new) waste treatment plant. Under the Dutch Nitrogen and Nature Improvement Act, the Dutch government published the Program for Nitrogen Reduction 2022-2035. The main goal of this program is to determine which measures are necessary to achieve the reduction of nitrogen deposition on nitrogen-sensitive Natura 2000-areas (40% in 2025, 50% in 2030 and 74% in 2035). Furthermore, the Environment and Planning Act obliges the Dutch government to legalize nitrogen reports and calculations, based on the abovementioned Integrated Approach to Nitrogen, via a ‘legalization program’. This program has expired and has been unable to provide a solution for every company registered under the Integrated Approach to Nitrogen. The new (minority) Cabinet intends to provide a solution and provide ground for provinces to (again) develop updated nitrogen policies in response to ongoing legal and policy developments in the Netherlands.
Under the Environment and Planning Act, several other permitting requirements regarding environmentally impactful activities might apply, dependent on the specific activities performed and the local zoning plan. If applicable, the permitting requirements are generally regulated in the Decree on Environmental Activities (“Besluit activiteiten leefomgeving”) and local zoning plan.
The Decree on Environmental Activities (“Besluit activiteiten leefomgeving”), requires anyone who performs an environmentally harmful activity to take all measures to prevent adverse effects. If this is not possible, the company must limit or undo the adverse effects as much as possible (“minimalisatieplicht”). This specific duty of care (’zorgplicht’) applies to all substances, including Substances of Very High Concern (ZZS). This may involve emissions of ZZS but also ZZS in waste and products or the use of pesticides. Also, a company is obliged to apply, in any case, the best available techniques.
In addition, a company must take all appropriate preventive measures against environmental pollution, to protect health and not cause significant pollution. The consideration of which measures are appropriate for a company is thus broader than looking at the best available technique.
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There are currently calls for a European ban on all PFAS (a ZZS), which the new Dutch (minority) Cabinet supports. This would complement existing European restrictions on the use of PFAS, such as the ban on all PFAS in firefighting foams. The District Court of The Hague recently ruled that the Dutch state is currently doing enough to prevent the spread of PFAS, but the political momentum could lead to more restrictions on the use of PFAS. In the short term, the (minority) Cabinet wants to investigate a ban on discharges in the Netherlands.
Energy saving/supply
The Netherlands waste treatment sector is subject to strict regulatory obligations, requiring that approximately 10% of the market is processed. As a result, facilities that produce waste (such as the industry sector farms) are expected and encouraged to seek more appropriate solutions for waste management. As part of the Climate Act, the (outgoing) Dutch government has intensified the enforcement of the legal obligation for operators of facilities to take energy saving measures under the Decree on Environmental Activities (“Besluit activiteiten leefomgeving”) (and earlier under the Activities Decree). In short, the obligations require operators of facilities that consume > 50,000 kWh of electricity and/or 25,000 m³ of natural gas per year to implement all (statutory designated) possible energy saving measures with a payback period of five (5) years or less. In order to support this effort, the Dutch government has drafted a so called ‘recognized measures’ list in April 2020, intended to simplify compliance with the energy saving obligation. Since the publication of an updated ‘recognized measures’ list in 2023, these facilities are obliged to also take energy saving measures whenever the measures do not save energy but do reduce CO2 emissions. These energy saving measures include generating renewable energy and switching to an energy carrier with lower CO2 emissions. In order to monitor these obligations, the operator of the plant has an obligation to inform and report to the competent authorities which energy saving measures are taken/implemented on site. This information report was required to be submitted to the Dutch Enterprise Agency (“RVO”) by December 1, 2023 and, subsequently, this has to be repeated every 4 years. This duty to inform does not apply if a permit for the operation of a plant already stipulates certain energy saving obligations or when there exists an audit obligation under the European Energy Efficiency Directive (EED).
In January 2022, the amended Chapter 9.7 of the Dutch Environmental Protection Act (“Wet milieubeheer”) entered into force (along with the underlying amended Dutch Energy Transport Decree (“Besluit energie vervoer”) and Dutch Energy Transport Regulation (“Regeling energie vervoer”)). These amendments are part of the implementation of the national Climate Act and the RED II. In July 2021 the European Commission proposed an amendment of the RED II, as part of the package to deliver on the European Green Deal. In short, the regulation in Chapter 9.7 of the Dutch Environmental Protection Act (“Wet milieubeheer”) contains the obligation for a fuel supplier to meet a certain reduction of non-sustainable fuels, by for example compensating their oil supply with sustainable biofuels (or electricity produced from renewable sources). In May 2023, the new Renewable Energy Directive (RED III) entered into force, which contains stricter obligations to become climate neutral in 2050. In September 2023, the Dutch government published draft legislation regarding the implementation of RED III and further draft legislation, such as additional amendments to the Dutch Environmental Protection Act and the Dutch Energy Transport Decree. All the adjustments will mainly, in brief, focus on the encouragement of renewable hydrogen, both in the industry and the transport sector.
All legislation regarding the implementation of RED III, including the amendments to the Dutch Environmental Protection Act and the Dutch Energy Transport Decree, has not entered into force yet. The amendments to the Dutch Environmental Protection Act are still to be reviewed by the Senate. With regard to the amendments to the Dutch Energy Transport Decree, a request for advice is pending before the Council of State.
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Electricity Act
To accelerate the energy transition (from fossil to sustainable energy) in the Netherlands, the Dutch Electricity Act (“Elektriciteitswet”) obliges network operators to provide priority to facilities that produce renewable energy in the connection to the electricity grid. This Act also sets rules and requirements regarding the connection point’s allocation, the method of connection and the distribution of ‘connection costs’ between network operator and the plant’s operator. Due to a considerable growth of renewable energy developments (e.g., the rise of wind and solar power projects onshore), congestion on the electricity grid is an issue of increasing size and legal complexity in several parts of the Netherlands. In January 2021, the revised version of the Dutch investment plan and quality of electricity and gas Decree (“Besluit investeringsplan en kwaliteit elektriciteit en gas”) entered into force. This Decree determines among others that the reserve capacity of the high-voltage grid will be dedicated to energy generated by renewable energy sources. This Decree has been revoked due to the introduction of the Dutch Energy Act (“Energiewet”), which substituted the Dutch Electricity Act and the Dutch Gas Act (“Gaswet”) as of January 2026. The Dutch Energy Act offers a modern and updated regulatory framework that supports and stimulates the energy transition in the Netherlands and contributes to the goal of a clean energy supply that is safe, reliable, affordable and takes into account spatial planning. The Dutch Energy Act retains the ordering of the gas and electricity market, but at the same time contains adjustments to support the transition to a climate neutral energy supply. It also implements the European ‘Clean Energy Package’. The new Collective Heat Act (“Wet collectieve warmte”) and the Municipal Heat Transition Instruments Act (“Wet gemeentelijke instrumenten warmtetransitie”) will enter into force in a phased manner over the course of 2026. Together they allow the energy sector to prepare for the upcoming changes regarding sustainability.
Subsidies/funds
The current subsidy scheme for renewable energy in the Netherlands is called SDE++ (“Stimulering Duurzame Energieproductie en Klimaattransitie” or Stimulating Renewable Energy Production and Climate Transition). The SDE++ program stimulates the further rollout of renewable energy and focuses on stimulating CO2 emissions reduction techniques, by compensating the so-called unprofitable top margin of these techniques. The SDE++ program provides various categories of biomass technologies for which subsidy can be requested, for example heat generation and gas extraction from biomass. Under the SDE++ program, subsidies are granted on the basis of the quantity of renewable energy that has been produced or CO2 emissions that have been prevented. The subsidy is equal to the difference between the cost price of reduction of CO2 emissions or renewable energy, and the profits that have been/will be made (defined as the ‘unprofitable top margin’). Subsidy applications under the SDE++ program are handled on the basis of increasing maximum subsidy need per phase. Consequently, projects with a lower subsidy need shall be given priority when granting subsidies. The subsidy is granted for a period of 12 to 15 years. Throughout the term, part of the subsidy is provided via an advance payment based on the expected market prices established by November 1 of the previous year. After the end of the calendar year, from April onwards, an adjustment of the advance payment based on the actual market prices and production is made.
In November 2022, the Dutch government notified the Parliament that the advance payments were considerably too high and that the Dutch government should not pay subsidies for as many categories and projects, thereby also taking into account the high energy prices (and high profits). The waste-to-energy plants may keep these profits and will, during the subsidy term, receive subsidy again when energy prices drop (which may create the unprofitable top margin again). The Dutch government furthermore stated that it wants to prevent subsidized projects from realizing excess profits over the entire duration of the subsidized project as the aim of the SDE++ is to compensate the unprofitable top margin and not to facilitate excess profits. In that regard the Dutch government investigated the possibility of adapting the SDE ++ program, for example into a system where subsidies are only paid after any previous excess profits are taken into account. This has led the government to offset excess profits of solar panels or wind turbines against subsidies already paid or still to be paid at low market prices from the 2024 SDE++ application onwards.
In most cases the SDE++ program allows ‘banking’. This means that when less sustainable energy is produced than predicted, one can make up for this difference in the following years (forward banking). When, on the other hand, the production exceeds the subsidized annual production, one can counterbalance this in the following years (backward banking), though with a maximum of 25% of the subsidized annual energy production, except for the wind category.
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The SDE++ program is determined annually. Some modifications in the subsidy allocation system have been made since 2023, in order to stimulate certain techniques that are currently insufficiently addressed but essentially to the energy transition. The SDE++-program will continue in 2026 and will be open for subsidy applications in autumn. The budget amounts to €8 billion. The program will come to a halt in 2027 because no budget has been set aside for new projects under the SDE++ program from 2027 onwards. However, the new Dutch (minority) Cabinet has announced in its Coalition Agreement that it is planning to extend the SDE++ with six new application rounds for the rollout of renewable energy sources.
In the Coalition Agreement of December 2021, the Dutch government announced the introduction of a new climate and transition fund of €35 billion for the upcoming ten years, in addition to the SDE++ program. This fund has taken shape in the Temporary Climate Fund Act (“Tijdelijke wet Klimaatfonds”), which was approved by Parliament in December 2023 and published in February 2024. The Act entered into force on July 1, 2024. The objectives of the Climate Fund are: (a) greenhouse gas-neutral energy supply by 2050; (b) encouraging the implementation of energy efficiency techniques and promoting the use of renewable energy and other greenhouse gas-reducing techniques and measures in the industry; (c) stimulating the implementation of energy efficiency techniques and renewable energy in the built environment. Measures in all economic sectors, including the circular economy, are eligible for funding, provided that these measures meet the abovementioned objectives. The Climate Fund is a budgetary fund and intended to reserve available resources that can be used for specific purposes in the future. Commencing 2023, a multiannual climate funding program (“Meerjarenprogramma Klimaatfonds”) is published on an annual basis, which provides information on achieving the financial obligations and purposes of the Climate Fund.
One of the expected concrete spending targets of the Climate Fund is the National Investment Scheme for Climate Projects Industry (“Nationale Investeringsregeling Klimaatprojecten Industrie”, in short: “NIKI”). The NIKI subsidy scheme applies in addition to the SDE++ program, and subsidizes larger-scale sustainable investments relating to green chemistry and electrification. The NIKI subsidy scheme was open for applications throughout September 2025 and is expected to open again for applications in autumn this year.
Taxes
In January 2021, the Industry CO2 Tax (“Wet CO2-heffing industrie”) entered into force. The rationale behind this tax is that the big polluters, in general the larger industrial facilities such as industry falling under the Industrial Emissions Directive and European Emissions Trading System (“EU ETS”) and waste incineration plants, have to pay their fair share in reducing CO2 emissions in the Netherlands. Furthermore, the Industry CO2 Tax aims at ensuring that the reduction target for industry as agreed in the Climate Agreement is achieved, while the level playing field with neighboring countries is affected as little as possible. This tax is connected with the EU ETS system as provided for in the European Directive 2003/87/EC; if emission prices within that system rise, the Industry CO2 Tax falls and vice versa. Facilities are granted an exemption for part of the CO2 emissions, on which they do not have to pay any tax (dispensation rights). The exemption is determined by comparing the plant’s CO2 emissions with the most efficient facilities in the same industry in Europe. The more efficiently the plant produces, the less Industry CO2 Tax is required to pay on balance, because that tax is levied on the emitted CO2that is in excess of the dispensation rights. The levy has increased from €30 per ton CO2 in 2021 up to €87,90 in 2025 and was planned to increase to €125 in 2030. However, the levy has decreased from €87,90 to €78,67 per ton CO2in 2026. At the same time, the dispensation rights will decrease throughout the years. In addition, since January 1, 2023, a second tariff has been in place due to the Minimum CO2-price Industry Act (“Wet minimum CO2-prijs industrie”). This tariff is part of the existing levy on industry and supplements the levy. This tariff ensures that a minimum CO2 price applies as well to emissions for which a company has dispensation rights under the Industry CO2 Tax.
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Furthermore, in March 2022 the Dutch Minimum CO2-price Electricity Generation Act (“Wet minimum CO2-prijs elektriciteitsopwekking”) entered into force. The minimum price covers greenhouse gas emissions from electricity generation at companies covered by the EU ETS. More specifically, this Act introduces an annually modified CO2 tax, because the tax is based on the difference between the annual national CO2 price and the EU ETS price. The tax is based on the number of tons of carbon dioxide released into the air in accordance with the plant’s electricity emission report. This means that, for instance, no tax will be levied on companies that generate electricity with windmills or solar panels. This tax can impact the biogas facilities, if they fall under the EU ETS system and emit CO2 while generating electricity.
Dutch tax laws also provide for an Energy Investment Allowance (“EIA”), a tax advantage for companies in the Netherlands that invest in energy-efficient technology allowing a deduction of 40% (in 2026) of the investment costs from the corporate income, on top of the usual depreciation. The right to the EIA is declared with the tax return, provided the investment is timely reported to the Dutch Enterprise Agency. The net EIA benefit is about 11% of the investment costs. The EIA can be claimed for all assets included in the annual Energy List (as published by the Dutch Enterprise Agency). The 2026 Energy List was published in January 2026. The EIA can also be claimed for customized investments that result in substantial energy savings, as far as these investments meet the saving standards of the EIA. The EIA budget used to be around €150 million but it increased up to €460 million for 2026. It has been agreed that the EIA program will primarily be focused on energy efficiency investments. A renewable energy project that is eligible for an SDE++ subsidy is not eligible for the EIA tax advantage (the latter only relates to new projects and projects that have already obtained rights to tax advantages).
In January 2023, the Dutch government published a draft for the ‘Temporary Inframarginal Electricity Tax Act’ (“Tijdelijke wet Inframarginale Elektriciteitsheffing”). This Act implements the 2022 EU regulation containing ‘an emergency intervention to address high energy prices.’ In short, the Act introduced a retroactive levy for market revenues in the period December 1, 2022 – July 1, 2023, insofar the market revenues rise above an exempt amount per megawatts. The tax/levy is levied on the sum of the taxable market revenues per calendar month. A producer is obliged to keep records of its generated electricity per month in the above-mentioned period. The market revenues can follow from three types of revenues, namely: (i) income from electricity sales agreements regarding the Dutch electricity markets, (ii) negative income from agreements to purchase electricity on this market, to comply with selling obligations under the agreements referred to under (i), and (iii) negative and positive income from contracts such as power purchase agreements. The levy will be imposed on electricity producers in the Netherlands with a production installation of an installed capacity of 1 MW or more (e.g., +/- 3.000 solar panels or more). The Act entered into force on July 25, 2024. The producer will receive an invitation from the Tax Administration (Belastingdienst) to file a tax return. The latest date of filing the tax return was March 31, 2025.
Electricity and Green Certificates
There are generally two types of electricity on the Dutch electricity market: (i) grey electricity, which is less environmentally friendly because it is made from sources such as gas and coal, and (ii) green electricity, which is made from renewable energy sources, such as sun, wind water and certain forms of biomass. Both types of electricity eventually end up on the same energy grid, but only electricity with a ‘green power certificate’ (in the Netherlands also known as a Guarantee of Origin) is treated as sustainable. In the Netherlands, the organization VertiCer is responsible for issuing and managing these certificates. A producer can register an electricity production installation, for example a waste-to-energy plant, with VertiCer – and is obliged to register the plant if a subsidy for SDE ++ has been issued by the government. One certificate covers 1 MWh and is valid for one year after the month in which the energy has been generated. A green certificate can also be obtained if the plant generates sustainable heat. If an installation generates both heat and electricity, it must be registered twice. If electricity is generated with sun, water or wind, the grid operator sends the production data to VertiCer. A measurement protocol, which must be approved by a recognized measurement company, is submitted to VertiCer simultaneously with the registration if electricity is generated with a biomass installation or the installation generates heat.
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The green certificates are booked by VertiCer on the account of a trader, which has been chosen by the producer. This trader does not have to be the (contracted) energy supplier of the plant. The issuance of green power certificates happens across Europe and the trader can sell the certificates on the European market through the platform of the Association of Issuing Bodies (“AIB”). The Netherlands may only import and export Guarantees of Origin made by an AIB member that belongs to the European Economic Area. This means that, for example, exporting certificates to the United Kingdom is not allowed. Green certificates give consumers and companies more insight into what exactly takes place in energy generation and therefore they can choose more consciously what type of energy they want to consume. The increase in demand for energy and the government policy to offset the GHG emission is also a major factor in the growth of the green certificates market. For more information see “Dutch Climate Goals” above.
Pumped Storage Project in the Manara Cliff in Israel
The current ownership structure of Ellomay PS is as follows: (i) 75% is owned by Ellomay Water Plants Holdings (2014) Ltd., or Ellomay Water, which we wholly-own, and (ii) 25% is owned by Sheva Mizrakot Ltd., an Israeli private company, or Sheva Mizrakot. 66.667% of Sheva Mizrakot is owned by Ampa Investments Ltd., or Ampa, and the remaining 33.333% are owned by Ellomay Water. Accordingly, we hold (through our direct holdings in Ellomay PS and through our holdings in Sheva Mizrakot) 83.333% of the Manara PSP, and the remaining 16.667% of the Manara PSP are held by Ampa through its holdings in Sheva Mizrakot.
The Manara PSP was projected to cost approximately NIS 1.64 billion (excluding future indexation) (approximately €0.43 billion). As of December 31, 2025, the projected aggregate cost amounts to approximately NIS 2.2 billion (approximately €0.6 billion), including financing expenses during the construction period. This amount includes a reevaluation of the project CAPEX according to actual basket of indices applicable to such CAPEX for the period since financial close and until March 2024. On March 7, 2021, the Manara PSP received the approval of the Israeli Electricity Authority that the conditions for Financial Close under the applicable regulations were met. In April 2021, a notice to commence the construction works (NTC) was issued to Electra Infrastructures Ltd., the EPC contractor of the Manara PSP, and construction of the Manara PSP commenced. The construction period of the Manara PSP was initially expected to be 62.5 months from such date. Due to the “Iron Swords” war situation, which also affects the northern area of Israel in proximity to the Lebanon border, works on the Manara PSP site were suspended in early October 2023. Efforts are currently being focused on accelerating design activities to mitigate potential delays, while manufacturing of the main equipment, including electro-mechanical equipment, is proceeding as planned. The State of Israel fully protects the project in situations that may be considered force majeure, such as the current war. This protection is provided under the framework of the tariff regulation (financing support standards). The project is expected to receive full remedies for schedule or budget overruns caused by such situations. Originally, the project was planned to become commercially operational in the first half of 2027. However, due to the Iron Swords war, the operation date will be delayed and the construction period is currently expected to be extended by the sixteen months regulatory extension and an additional period of several months required for the ramp-up of the contractor’s operations. As a result of the delays due to the war, the Israeli Electricity Authority has approved a 16-month extension to the project schedule.
Manara PSP Project Finance
On February 11, 2021, we announced the financial closing of the project finance of the Manara PSP, or the Manara PSP Project Finance. The Manara PSP Project Finance is provided by a consortium of Israeli banks and institutional investors, arranged and led by Mizrahi-Tefahot Bank Ltd. As of the date of the financial closing, the Manara PSP Project Finance was in the aggregate amount of NIS 1.27 billion (excluding future indexation) (approximately €0.32 billion). This amount is subject to reevaluation to an actual basket of indices similar to the CAPEX as described above. As of December 31, 2025, the Manara PSP Project Finance (including reevaluation linkage to the Project Index) amounts to approximately NIS 1.44 billion (approximately €0.385 billion).
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For more information see “Item 5.B: Operating and Financial Review and Prospects – Liquidity and Capital Resources” and Notes 6 and 11.A to our annual financial statements included elsewhere in this Report.
Manara PSP EPC Agreement
On February 14, 2021, we also announced the execution of the EPC agreement for the construction of the Manara PSP, or the Manara PSP EPC Agreement, under a “turnkey” contract with Electra Infrastructure Ltd., or Electra Infrastructure, one of Israel’s largest construction companies. The aggregate consideration payable to Electra Infrastructure under the Manara PSP EPC Agreement is expected to be approximately NIS 1.13 billion (excluding future indexation) (approximately €0.3 billion). The majority of this amount is linked to the actual change in the Israel Residential Construction Index. In accordance with the Manara PSP EPC Agreement Voith Hydro, the world’s leading manufacturer of hydroelectric turbines, or Voith Hydro, was nominated as the subcontractor that will be providing the electro-mechanical equipment to the Manara PSP.
Manara PSP O&M Agreement
In parallel to the execution of the Manara PSP EPC Agreement, Ellomay PS also executed an O&M agreement, or the Manara PSP O&M Agreement, with Mekorot Israel National Water Co., the Israeli national water company, or Mekorot (which is fully owned by the Israeli Government), Voith Hydro and Verbund Hydro, one of the largest hydroelectric companies in Europe with extensive expertise in the operation of hydroelectric power plants, or, together, the Manara PSP O&M Contractors. The Manara PSP O&M Agreement provides that the Manara PSP O&M Contractors will be involved in the construction process through a mobilization period and that O&M services will be provided for a twenty year period, during which Mekorot, Voith Hydro and Verbund will provide O&M services for the initial three years, with Mekorot providing O&M services exclusively for the remaining 17 years.
Background
In January 2014, we entered into an agreement with Ortam Sahar Engineering Ltd., or Ortam, an Israeli publicly traded company, pursuant to which we acquired (a) Ortam’s holdings (24.75%) in Agira Sheuva Electra, L.P., or the Partnership, an Israeli limited partnership that had been promoting the Manara PSP; and (b) Ortam’s holdings: (i) in Chashgal Elyon Ltd., or the GP, an Israeli private company, which is the general partner in the Partnership (holding 25% in the Partnership), and (ii) in the engineering, procurement and construction contractor of the aforementioned project (50%). On May 20, 2014, our indirectly wholly-owned subsidiary, Ellomay Manara (2014) Ltd., or Ellomay Manara, entered into an agreement, or the Electra Agreement, with Electra Ltd., or Electra, an Israeli publicly traded company. Pursuant to the Electra Agreement, Ellomay Manara acquired Electra’s holdings (24.75%) in the Partnership, as well as Electra’s holdings in the GP (25%).
In addition, we, Ellomay Manara and Electra agreed that: (i) on the closing date of the transactions contemplated under the Electra Agreement, Ellomay Manara shall transfer to subsidiaries of Electra all of its then holdings in the engineering, procurement and construction contractor of the aforementioned project, or the EPC, (50%), which will be acquired at closing by us from another partner in the Partnership pursuant to a conditional agreement we entered into, resulting in Electra’s subsidiaries holding 100% of the EPC; and (ii) each of Electra (through its subsidiaries) and us (together with Ellomay Manara) was granted an eighteen-month put option and call option, respectively, with respect to the entire holdings in the EPC.
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In addition to the aforementioned agreements, in January 2014 we entered into an agreement with Galilee Development Cooperative Ltd., an Israeli cooperative, or the Cooperative, pursuant to which, subject to the fulfillment of certain conditions, we shall acquire the Cooperative’s holdings (24.75%) in the Partnership as well as its holdings in: (i) the GP (25%), and (ii) the EPC (50%).
In November 2014, Ellomay Manara consummated the acquisition of 75% of the limited partnership rights in the Partnership, as well as 75% of the holdings in the GP, from Electra, Ortam and the Cooperative. The remaining 25% of the holdings in the Partnership and in the GP are held by Sheva Mizrakot. We and Ellomay Manara did not pay any consideration upon the acquisition. On the same date, Ellomay Manara acquired Ortam’s holdings (50%) in the EPC and, as set forth above, immediately transferred such holdings to a subsidiary of Electra, which, following such transfer now holds 100% of the EPC. According to the various agreements executed in connection with the Manara PSP, we and Ellomay Manara are liable, jointly and severally, to all the monetary obligations set forth in said agreements.
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Tariff Approval
On December 31, 2020, Ellomay PS received the tariff approval for the Manara PSP from the Israeli Electricity Authority that regulates the tariffs and formulas for purchasing energy from a pumped storage manufacturer connected to the transmission network for a period of 20 years beginning on the date of receipt of the permanent production license. The tariff approval became effective following the financial closing of the Manara PSP in February 2021.
On February 11, 2021, the Manara PSP complied with the conditions precedent under the Manara PSP Conditional License following the financial closing of the Manara PSP Project Finance and the execution of the Manara PSP EPC and O&M Agreements. The construction process of the Manara PSP is expected to be highly complex and includes various engineering and other challenges, includes planning and conducting of a comprehensive investigation to characterize the variety of soils and rocks at the construction sites. In accordance with the infrastructure characteristics and the seismic risks that exist on site, stability calculations need to be performed on the basis of which instructions are given for the planning and execution of the reservoirs.
Pumped Storage Power Plants
Pumped storage is a form of renewable energy based on hydropower. A pumped storage power plant is capable of generating electric energy on demand and is one of the most veteran and widely applied technologies used worldwide for energy storage. The technology has been in use for more than 100 years, providing over 100,000 MW around the world.
The technology allows storing available energy for later use. Pumped storage plants store electricity during low demand periods and release it back to the grid during peak demand periods, thereby utilizing the gap in production costs to stabilize the grid’s voltage and regulation.
The plant is a hydro-storage system comprised of upper and lower water reservoirs, connected by an underground water pressure pipe: during low demand – pumping water from the lower reservoir for energy storage, and during peak demand – releasing water from the upper reservoir for energy production. The technology utilizes excess electricity production capacity during low demand hours to increase supply during peak demand hours, thus providing available reserves to be used by the grid dispatcher during peak and low demand periods.
Pumped storage also allows optimal grid stability functionality by providing a combination of low latency, high power and high energy response (~90 sec).
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The need for electricity storage solutions in the Israeli electricity market
The purpose of pumped storage systems is to stabilize the grid’s voltage and to create optimization in the management of the electricity grid. The demand for electricity, in the Israeli market as well as in other electricity markets, is influenced by many factors, including the weather, time of day and day of the week, and the rise in the standard of living in Israel.
In order to meet the growing electricity needs in Israel, and being able to provide electricity to consumers, the IEC constantly over-generates energy. The over-generation of energy is the result of using low flexibility energy sources (coal and gas). The demand curve is generally characterized by peak demand, usually in summer afternoons or winter evenings, and low demand during nighttime. During low demand periods, the majority of energy is produced by base-load plants at relatively cheap production costs, while at peak demand times, more expensive energy sources are added.
In recent years, the use of renewable, volatile energy sources has increased, thus increasing the grid’s volatility and the need for storing energy during low-demand hours as a way to create demand when renewable energy is produced and releasing it during peak-consumer demand hours.
The Manara Cliff is in Northern Israel, just south of the city of Kiryat Shmona. According to the construction plans of the Manara PSP, the plant will deploy water reservoirs built on agricultural land. The upper water reservoir will be located near Kibbutz Manara and the lower water reservoir will be based on an existing reservoir near Kiryat Shmona belonging to a local water cooperative.
Ellomay PS entered into land lease option agreements with the site holders, in order to secure land use rights for the duration of the construction phase and the commercial operation of the Manara PSP, and a water supply agreement with the Galil Elyon Water Association, in order to secure water supply for the project for the duration of the commercial operation.
Ellomay PS also holds detailed geological and hydrological surveys, and an environmental impact assessment.
According to the current applicable regulation, the Manara PSP cannot enter into electricity sale agreements with private customers, and will therefor provide 100% of its available capacity and energy to the System Manager (Noga, formerly a business unit of IEC that was spun off from IEC according to government decision), pursuant to a power purchase agreement. The System Manager is obligated to purchase availability and energy from any power plant whose commercial operation was approved by the applicable regulation.
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Material Effects of Government Regulations on the Manara PSP
The Manara PSP is subject to regulations applicable to energy producers and power plants in general, including the Electricity Market Regulations, and to pumped storage producers in particular. For more information concerning the Israeli electricity market and regulation see “The Israeli Electricity Market” under “Material Effects of Government Regulations on Israeli Solar Plants” and “Material Effects of Government Regulations on Dorad’s Operations” under “Ellomay Luzon Energy and the Dorad Power Plant” above.
The Manara PSP was announced by the Israeli Government as a national infrastructure project. National Infrastructure Plan 41A (which updated National Infrastructure Plan 41), which establishes the planning principles for the Manara PSP.
The Manara PSP was initially granted a conditional license by the Israeli Electricity Authority for the construction of a pumped storage power plant with a capacity of 340 MW, or the Prior Conditional License. On December 4, 2017, the Israeli Electricity Authority announced the reduction of the capacity stipulated in the Prior Conditional License from 340 MW to 156 MW. The reduced capacity was based on the remaining portion of the quota for pumped storage projects in Israel as determined by the Israeli Government and implemented by the Israeli Electricity Authority, which is currently 800 MW, after deducting the capacity already allocated to two projects that were at the time in more advanced stages than the Manara PSP. On February 26, 2020, Ellomay PS retracted the Prior Conditional License issued to it, which was due to expire on February 28, 2020 because Ellomay PS did not reach financial closing by such date as was required under the milestones included in the Prior Conditional License. On the same date, Ellomay PS filed an application for a new similar conditional license for a pumped storage plant with a capacity of 156 MW.
On June 17, 2020, the Israeli Minister of Energy executed the Manara PSP Conditional License, following the retraction of the previous conditional license, which permits Ellomay PS to construct the Manara PSP. The Manara PSP Conditional License includes several conditions precedent to the entitlement of Ellomay PS to receive an electricity production license. The Manara PSP Conditional License is valid for a period of seventy-two (72) months commencing from the date of its approval by the Minister of Energy, subject to compliance by Ellomay PS with the milestones set forth therein and subject to the other provisions set forth therein (including achieving financial closing, the provision of guarantees and the construction of the pumped storage hydro power plant). As noted above, on February 11, 2021, Ellomay PS complied with the project finance milestone under the Manara PSP Conditional License. Effective October 1, 2024, the Israeli regulations governing the grant of licenses to private electricity manufacturers were amended providing that the 72 months validity period may be extended for up to three additional periods of 12 months each due to circumstances existing after the previous extension was approved if required and subject to the Minister’s approval at such time. Each extension may result in forfeiture of up to 40% of the license guarantee which value currently amounts to approximately NIS 4.1 million (approximately €1.1 million). The guarantee amount is linked to the USD and is reduced over time upon fulfillment of certain interim project milestones. As noted above, the Israeli Electricity Authority approved a 16-month extension to the license due to the effects of the Iron Swords war.
The licenses issued by the Israeli Electricity Authority include several milestones, which the license holder must meet in a timely manner in order to be eligible for a permanent license to produce electricity. In the event the license holder does not meet the milestones within certain timeframes set out under applicable electricity regulations, the Israeli Electricity Authority has the authority to revoke the license.
The Israeli Water Authority granted to Ellomay PS a water plant license, and approved the water rationing needed for the preliminary filling of the reservoirs prior to commencement of commercial operation, and for the continued operation of the power plant. The water plant license was granted to Ellomay PS in August 2015 and was since renewed from time to time.
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Tariffs
In November 2009, the Israeli Electricity Authority published the regulatory framework for pumped storage power plants, or the PS Regulatory Framework, which has since been amended a few times. The PS Regulatory Framework establishes the following principles:
On December 31, 2020, the Manara PSP received a tariff approval from the Israeli Electricity Authority that regulates the tariffs and formulas for purchasing energy from a pumped storage manufacturer connected to the transmission network for a period of 20 years beginning on the date of receipt of the permanent production license. The tariff approval became effective following the financial closing of the Manara PSP in February 2021.
In connection with the war that commenced on October 7, 2023 and the ongoing military operations, Ellomay Pumped Storage (2014) Ltd. submitted a request to the Israeli Electricity Authority to recognize the war as a Force Majeure event as defined in Standard 130 of the Book of Standards. The request seeks recognition of costs resulting from the Force Majeure event in accordance with the Finance Supporting Standards (Standards 130-140). The Israeli Electricity Authority is expected to hold a discussion regarding this matter during 2026.
Material Effects of Government Regulations – General
Investment Company Act of 1940
Regulation under the Investment Company Act governs almost every aspect of a registered investment company’s operations and can be very onerous. The Investment Company Act, among other things, limits an investment company’s capital structure, borrowing practices and transactions between an investment company and its affiliates, and restricts the issuance of traditional options, warrants and incentive compensation arrangements, imposes requirements concerning the composition of an investment company’s board of directors and requires shareholder approval of certain policy changes. In addition, contracts made in violation of the Investment Company Act are void.
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An investment company organized outside of the United States is not permitted to register under the Investment Company Act without an order from the SEC permitting it to register and, prior to being permitted to register, it is not permitted to publicly offer or promote its securities in the United States.
We do not believe that our current asset structure results in our being deemed to be an “investment company.” Specifically, we do not believe that our holdings in our Solar Plants or our WtE plants would be considered “investment securities,” as we control our Solar Plants (other than the Talasol Solar Plant) and our WtE plants via wholly-owned subsidiaries. In addition, despite minority holder protective rights granted to the minority shareholders of the Talasol Solar Plant and the Manara PSP, including several rights which effectively require the unanimous consent of all shareholders, and certain limited partners rights held by Clal in connection with the Italian 198 MW Solar Portfolio, we believe that our interests in the Talasol Solar Plant, the Manara PSP and the Italian 198 MW Solar Portfolio do not constitute “investment securities” given, among other things, our majority shareholder and board membership status. The current fair value of our holdings in Ellomay Luzon Energy and other relevant assets do not in our judgment exceed 40% of our aggregate assets, excluding our assets held in cash and cash equivalents. If we were deemed to be an “investment company,” we would not be permitted to register under the Investment Company Act without an order from the SEC permitting us to register because we are incorporated outside of the United States and, prior to being permitted to register, we would not be permitted to publicly offer or promote our securities in the United States. Even if we were permitted to register, it would subject us to additional commitments and regulatory compliance. Investments in cash and cash equivalents or in other assets that are not deemed to be “investment securities” might not be as favorable to us as other investments we might make if we were not potentially subject to regulation under the Investment Company Act. We seek to conduct our operations, including by way of investing our cash and cash equivalents, to the extent possible, so as not to become subject to regulation under the Investment Company Act. In addition, because we are actively engaged in exploring and considering strategic investments and business opportunities, and in fact have entered the Italian and Spanish photovoltaic power plants markets through controlling investments, we do not believe that we are currently engaged in “investment company” activities or business.
Shell Company Status
Following the consummation of sale of our previous wide format printers business in 2008 and until we commenced our renewable energy business in 2010, we ceased conducting any operating activity and substantially all of our assets consisted of cash and cash equivalents. Accordingly, we may have been deemed to be a “shell company,” defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934 during such period as (1) a company that has no or nominal operations; and (2) either: (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets.
Our characterization as a former “Shell Company” subjects us to various restrictions and requirements under the U.S. Securities Laws. For example, pursuant to the provisions of Rule 144(i) promulgated under the Securities Act of 1933, as amended, shares issued by us at the time we were deemed to be a “shell company” and thereafter can only be resold pursuant to the general provisions of Rule 144 subject to the additional conditions in Rule 144(i), including that we have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve month period preceding the use of Rule 144 for resale of such shares. This continuing restriction may limit our ability to, among other things, raise capital via the private placement of our shares.
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C. Organizational Structure
Our Spanish Solar Plants are held by: (i) Rodríguez I Parque Solar, S.L., (ii) Rodríguez II Parque Solar, S.L., (iii) Seguisolar S.L., (iv) Ellomay Spain S.L. and (v) Ellomay Solar S.L.U., all wholly-owned by Ellomay Luxembourg. The Talasol Solar Plant is held by Talasol Solar S.L.U, of which 51% is owned by Ellomay Luxembourg.
We hold our Ellomay Luzon Energy shares through Ellomay Clean Energy Limited Partnership, an Israeli limited partnership whose general partner is Ellomay Clean Energy Ltd., a company incorporated under the laws of the State of Israel and wholly-owned by us.
Our WtE plants located in the Netherlands are held by: (i) Groen Gas Goor B.V., (ii) Groen Gas Oude–Tonge B.V. and (iii) Groen Gas Gelderland B.V., all wholly-owned by Ellomay Luxembourg.
We hold the rights in connection with the Manara PSP through our wholly-owned subsidiary, Ellomay Water Plants Holdings (2014) Ltd., which indirectly owns 75% of the rights in Ellomay PS and through our 33.333% holdings in Sheva Mizrakot, which owns 25% of Ellomay PS.
Our rights in connection with the Italian 198 MW Solar Portfolio, which includes Solar Plants that are connected to the grid in Italy held by Ellomay Solar Italy One SRL, Ellomay Solar Italy Two SRL and Ellomay Solar Italy Ten SRL and projects under construction held by Ellomay Solar Italy Five SRL, Ellomay Solar Italy Seven SRL, Ellomay Solar Italy Nine SRL and Ellomay Solar Italy Fifteen SRL all 51% indirectly owned by us and the remainder is held by Clal.
Our rights in connection with additional Solar Plants that have reached “Ready to Build” status in Italy are held by: (i) Ellomay Solar Italy Four SRL, (ii) Ellomay Solar Italy Eight SRL, (iii) Ellomay Solar Italy Eleven SRL, (iv) Ellomay Solar Italy Fourteen SRL, (v) Ellomay Solar Italy Sixteen SRL, and (vi) Ellomay Solar Italy Eighteen, all wholly-owned by Ellomay Luxembourg.
Our rights in connection with Solar Plants that have finished construction, are under construction or have reached “ready to build” status in the USA are held by our indirect wholly-owned subsidiaries: (i) Fairfield Solar Project, LLC, (ii) Malakoff Solar I LLC, (iii) Malakoff Solar II, LLC, (iv) Mexia Solar I, LLC, (v) Mexia Solar II, LLC, (vi) Talco Solar, LLC, (vii) Hillsboro Solar I, LLC and (viii) Hillsboro Solar II, LLC.
D. Property, Plants and Equipment
Our office space of approximately 360 square meters is located in Tel Aviv, Israel. This lease currently expires in February 2030. We previously sub-leased a small part of our office space to a company controlled by Mr. Shlomo Nehama, our former controlling shareholder, at a price per square meter based on the price that we pay under our leases. This sub-lease agreement was approved by our Board of Directors.
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Our operating Solar Plants are located in Spain, Italy and the United States. Pursuant to the building right agreements executed by the majority of our subsidiaries that hold our Solar Plants, our subsidiaries own the Solar Plants and received the right to maintain the Solar Plants on the land on which they are located, or the Lands. The ownership of the Lands under the leasing agreements remains with the relevant owners of the Lands who are the grantors of the building rights under the respective building right agreements. The following table provides information with respect to the Lands of our operational Solar Plants:
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Most of our Italian subsidiaries that are developing Solar projects that do not own the land on which the project is planned to be located executed long-term lease agreements in connection with the land on which the Solar plants developed and constructed by such subsidiaries will be located. For further information concerning the lease agreements of our Solar Plants and of the Italian subsidiaries, see the summaries of the lease agreements included as Exhibits 4.9-4.14 and 4.19 under “Item 19: Exhibits.”
The land on which our WtE plants are located is owned by the relevant project companies. The land on which the Manara PSP is being constructed is leased from various Israeli cooperatives. Manara PS also entered into a development agreement with the ILA in connection with the land. A summary of the lease agreement and development agreement is included as Exhibit 4.17 under “Item 19: Exhibits.”
Our subsidiaries in the United States that own or are constructing Solar projects executed long-term lease agreements in connection with the land on which the solar plants are constructed by such subsidiaries. The lease agreements are included as Exhibits 4.20 and 4.21 under “Item 19: Exhibits.”
For more information concerning the use of the properties in connection with the Solar Plants, the WtE plants and the Manara PSP, see “Item 4.A: History and Development of Ellomay” and “Item 4.B: Business Overview” above.
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ITEM 4A: Unresolved Staff Comments
ITEM 5: Operating and Financial Review and Prospects
The following discussion and analysis is based on, and should be read in conjunction with, our consolidated financial statements, including the related notes, and the other financial information included in this Report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involves risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report. For discussion related to changes in financial condition and the results of operations comparing the years ended December 31, 2024 and 2023, refer to “Item 5. Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission on April 30, 2025.
We are involved in the initiation, development, construction and production of renewable and clean energy projects in Europe, USA and Israel. As of December 31, 2025, we indirectly own: (i) approximately 335.9 MW of operating solar power plants in Spain (including a 300 MW solar plant in owned by Talasol, which is 51% owned by us) and 51% of approximately 38 MW of operating solar power plants in Italy; (ii) 16.875% in Dorad Energy Ltd., which owns and operates one of Israel’s largest private power plants with production capacity of approximately 850 MW; (iii) Groen Gas Goor B.V., Groen Gas Oude-Tonge B.V. and Groen Gas Gelderland B.V., project companies operating anaerobic digestion plants in the Netherlands, with a green gas production capacity of approximately 3 million, 3.8 million and 9.5 million Nm3 per year, respectively; (iv) 83.333% of Ellomay Pumped Storage (2014) Ltd., which is involved in a project to construct a 156 MW pumped storage hydro power plant in the Manara Cliff, Israel; (v) 51% of solar projects in Italy with an aggregate capacity of 160 MW that are under construction; (vi) solar projects in Italy with an aggregate capacity of 210 MW that have reached “ready to build” status; and (vii) solar projects in the Dallas Metropolitan area, Texas, USA with an aggregate capacity of approximately 38 MW that are connected to the grid, 11 MW that are currently in the test run phase prior to commercial operation and 14 MW that are under construction. We also initiate and develop additional solar projects in Italy, USA, Spain and Israel. See “Item 4.A: History and Development of Ellomay” and “Item 4.B: Business Overview” for more information.
We generate revenue from the sale of gas and electricity produced by our renewable energy plants and from the sale of green certificates to third parties in Spain and the Netherlands (of which prices significantly increased in recent years, mainly due to supporting regulation attempting to reduce the impact of carbon emissions). During the year ended December 31, 2025, we generated revenues from our solar operations in Spain, Italy (for a portion of the year, since the connection to the grid of the operating solar plants) and the United States (for a portion of the year, since the connection to the grid of the operating solar plants) and from our WtE operations in the Netherlands. During the year ended December 31, 2025, we had several projects under construction, including solar projects in Italy and Texas, USA, and the Manara PSP in northern Israel. We mainly finance our operations and development efforts from our ongoing operations and by the issuance of corporate debt in the Israeli market, with the remainder being funded by project finance obtained on a per-project or per-portfolio basis and we expect to finance our solar development efforts in the USA by raising funds from tax credit sales or tax equity investors.
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On December 31, 2023, we executed an agreement to sell our holdings in the Talmei Yosef Solar Plant and such sale was consummated in June 2024. For more information, see “Item 4.A: History and Development of Ellomay; Recent Developments.”
In connection with the sale of the Talmei Yosef Solar Plant, we present the results of the Talmei Yosef Solar Plant as a discontinued operation. The Talmei Yosef Solar Plant was presented in our financial results as a financial asset, in accordance with IFRIC 12 under IFRS, and since its acquisition, we recognized relatively high profits through its ownership. Accordingly, although the consideration received for the Talmei Yosef Solar Plant reflects a market value higher than the price invested by us in its acquisition, due to the accounting treatment under IFRIC 12, we recognized a net loss of approximately €3.2 million in connection with the sale.
Assessment of Recoverable Amount – Dutch Biogas Plant
During 2025, we assessed the recoverable amount of the Groen Goor plant in the Netherlands in light of operating losses suffered by this project in recent years and lower results than forecasted for 2025. The examination was conducted based on projected cash flows that were discounted at an after tax rate of 7.6%. The examination concluded that the value in use of the plants is higher than the carrying value of such plant and therefore there is no need for an impairment provision. The assumptions on which the examination was based could be affected by our inability to meet the budget in certain circumstances including increases in the prices of feedstock required in order to maintain the optimal mix of feedstock necessary to maximize performance of the plants, technical malfunctions and other circumstances that influence the operation of the plants. For more information see Note 6D.1 to our annual financial statements included elsewhere in this Report.
Segments
Our reportable segments, which form our strategic business units, are presented per geographical areas and type of plant as follows:
For more information see Note 22 to our annual financial statements included elsewhere in this Report.
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Results of Operations
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
The results for the year ended December 31, 2024 do not include the results for an entire year of the Solar Plants owned by Ellomay Solar Italy Two SRL and Ellomay Solar Italy One SRL, which were connected to the grid in February 2024 and May 2024, respectively, and further do not include the results of the Solar Plant owned by Ellomay Solar Italy Ten SRL, which was connected to the grid in August 2025 and of Solar Plants in Texas, USA, which were connected to the grid on April 2025 and July 2025. The results for the year ended December 31, 2025 do not include the results for an entire year of the Solar Plants in Italy and Texas, USA that, as noted, were connected to the grid during 2025. Therefore, our past results are not indicative of our results in the future.
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Revenues
Revenues were approximately €42.8 million for the year ended December 31, 2025, compared to approximately €40.5 million for the year ended December 31, 2024. The increase in revenues mainly results from revenues generated from our 19.8 MW and 18.1 MW Italian solar facilities that were connected to the grid in February-May 2024 and in January 2025, respectively, and from our facilities in the USA that were connected to the grid during the second quarter of 2025 and in the beginning of the third quarter of 2025. Such increase was partly offset by lower revenues from our Dutch biogas facilities, one of which experienced a production issue related to the biological process in January and April 2025 and another facility whose output was adversely affected during the summer months due to unusually high temperatures. The decrease in electricity prices in Spain also had a negative impact on the revenues and we are currently advancing the development of battery storage capacity which is expected to reduce future impact of lower electricity prices.
Revenues by Segments
Italy Solar Segment. Revenues from our Italy solar segment were approximately €5 million for the year ended December 31, 2025, compared to approximately €2.3 million for the year ended December 31, 2024. The change resulted from the commencement of operations of our 19.8 MW and 18.1 MW Italian solar facilities that were connected to the grid in February-May 2024 and in January 2025, respectively.
Spain - Subsidized Solar Segment. Revenues from our Spain subsidized solar segment were approximately €3.1 million for the year ended December 31, 2025, compared to approximately €3 million for the year ended December 31, 2024.
Spain - 28 MW Solar Segment.Revenues from our Spain 28 MW Solar segment were approximately €1.5 million for the year ended December 31, 2025, compared to approximately €1.7 million for the year ended December 31, 2024.
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Spain - Talasol Solar Segment. Revenues from our Talasol Solar segment were approximately €17.4 million for the year ended December 31, 2025, compared to approximately €18.4 million for the year ended December 31, 2024.
USA Solar Segment. Revenues from our USA solar segment were approximately €0.9 million for the year ended December 31, 2025, compared to €0 for the year ended December 31, 2024. The change resulted from the commencement of operations of our 38 MW Texas solar facilities that were connected to the grid during the second quarter of 2025 and in the beginning of the third quarter of 2025.
Netherlands Biogas Segment. Revenues from our Netherlands biogas segment were approximately €15 million for the year ended December 31, 2025, compared to approximately €15.1 million for the year ended December 31, 2024. The decrease in revenues is mainly due to a production issue in one of our biogas facilities related to the biological process in January and April 2025 and another facility whose output was adversely affected during the summer months of 2025 due to unusually high temperatures.
Operating Expenses and Depreciation and Amortization Expenses
Operating expenses were approximately €19.4 million for the year ended December 31, 2025, compared to approximately €19.8 million for the year ended December 31, 2024. The decrease in operating expenses mainly results from lower costs in connection with the acquisition of feedstock and increased gate fee received by our Dutch biogas plants, partially offset by the achievement of preliminary acceptance certificate (PAC) of our 19.8 MW Italian solar facilities during the fourth quarter of 2024, upon which we commenced recording operating expenses of the solar facilities.
Depreciation and amortization expenses were approximately €16.5 million for the year ended December 31, 2025, compared to approximately €15.9 million for the year ended December 31, 2024.
Operating Expenses by Segments
Italy Solar Segment. Operating expenses in connection with our Italy solar segment were approximately €0.5 million for the year ended December 31, 2025, compared to approximately €0.1 million for the year ended December 31, 2024. The change resulted from the commencement of operations of our 19.8 MW and 18.1 MW Italian solar facilities that were connected to the grid in February-May 2024 and in January 2025, respectively.
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Spain- Subsidized Solar Segment. Operating expenses in connection with our Spain subsidized solar segment were approximately €0.5 million for each of the years ended December 31, 2025 and 2024.
Spain- 28 MW Solar Segment. Operating expenses in connection with the 28 MW Solar segment were approximately €0.3 million for the year ended December 31, 2025, compared to approximately €0.6 million for the year ended December 31, 2024. The decrease mainly resulted from a transfer of an employee of Ellomay Solar to a different entity during the second quarter of 2024.
Spain- Talasol Solar Segment. Operating expenses in connection with the Talasol solar segment were approximately €4.8 million for the year ended December 31, 2025, compared to approximately €4.7 million for the year ended December 31, 2024.
USA Solar Segment. Operating expenses in connection with the USA solar segment were approximately €0.2 million for the year ended December 31, 2025, compared to €0 for the year ended December 31, 2024. The change resulted from the commencement of operations of our 38 MW Texas solar facilities that were connected to the grid during the second quarter of 2025 and in the beginning of the third quarter of 2025.
Netherlands Biogas Segment. Operating expenses in connection with our Netherlands biogas segment were approximately €12.8 million for the year ended December 31, 2025, compared to approximately €13.9 million for the year ended December 31, 2024. The decrease is mainly attributable to lower costs in connection with the acquisition of feedstock and increased gate fee received by our Dutch biogas plants.
Project Development Costs
Project development costs were approximately €2.6 million for the year ended December 31, 2025, compared to approximately €4.1 million for the year ended December 31, 2024. The decrease in project development costs is mainly attributable to a reversal of provision recorded in connection with consultancy expenses.
General and Administrative Expenses
General and administrative expenses were approximately €6.4 million for the year ended December 31, 2025, compared to approximately €6.1 million for the year ended December 31, 2024.
Share of Profits of Equity Accounted Investee
Our share of profits of equity accounted investee, after elimination of intercompany transactions, was approximately €16.9 million for the year ended December 31, 2025, compared to approximately €11.1 million for the year ended December 31, 2024. The increase in share of profits of equity accounted investee was mainly due to the recording of a gain on bargain purchase by Ellomay Luzon Energy, our equity accounted investee, in the amount of NIS 112.8 million (approximately €29.1 million based on the average EUR/NIS exchange rate for the year 2025) in connection with its acquisition on July 22, 2025 of 15% of the outstanding share capital of Dorad reflecting the excess of the net amount recognized at the acquisition date for the identifiable assets over the cost of the acquired Dorad shares.
Other Income, Net
Other income, net was approximately €3.6 million for the year ended December 31, 2025, compared to approximately €3.4 million for the year ended December 31, 2024. The other income recognized for the year ended December 31, 2025 is based on agreed compensation expected to be received from the EPC contractor of two of our USA solar facilities for loss of income due to delays in construction and from the recognition of a proportional share of deferred income related to tax credits in connection with two of our USA solar facilities. The other income recognized for the year ended December 31, 2024 is based on compensation received from insurance in connection with the fire near the Talasol and Ellomay Solar facilities in Spain in July 2024, net of impairment expenses related to the damaged fixed assets.
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Financing Income / Expenses
Financing expense, net was approximately €27.4 million for the year ended December 31, 2025, compared to financing expense, net of approximately €19.7 million for the year ended December 31, 2024. The increase in financing expenses, net, was mainly attributable to an increase in financing expense of approximately €5.1 million in connection with derivatives and warrants and higher interest expenses amounting to approximately €1.7 million in connection with our Series G debentures issued during February and December 2025.
Tax Benefit
Tax benefit was approximately €2.5 million for the year ended December 31, 2025, compared to a tax benefit of approximately €1.4 million for the year ended December 31, 2024. The change is primarily attributable to deferred taxes recognized in connection with facilities that reached RTB status and the tax impact of the investment transaction with Clal in our 198 MW Italian solar portfolio, which is expected to be fully offset through the utilization of current losses.
Loss from Continuing Operations
Loss from continuing operations was approximately €6.4 million in the year ended December 31, 2025, compared to a profit from continuing operations of approximately €9.1 million in the year ended December 31, 2024.
Profit / Loss from Discontinued Operation
Profit from discontinued operation was €0 in the year ended December 31, 2025, compared to a profit from discontinued operation (net of tax) due to the sale of the Talmei Yosef Solar Plant of approximately €137 thousand in the year ended December 31, 2024.
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Net Loss
Loss for the year ended December 31, 2025 was approximately €6.4 million, compared to a loss of approximately €9 million for year ended December 31, 2024.
Total Other Comprehensive Income
Total other comprehensive income was approximately €2.3 million for the year ended December 31, 2025, compared to total other comprehensive income of approximately €13.1 million for the year ended December 31, 2024. The change in total other comprehensive income is primarily as the result of foreign currency translation adjustments due to the change in the NIS/euro exchange rate and changes in fair value of cash flow hedges, including a material decrease in the fair value of the liability resulting from the Talasol PPA. The Talasol PPA experienced high volatility due to the substantial change in electricity prices in Europe. In accordance with hedge accounting standards, the changes in the Talasol PPA’s fair value are recorded in our shareholders’ equity through a hedging reserve and not through the accumulated deficit/retained earnings. The impact of the change in the fair value of the Talasol PPA was partially offset by liability recorded in connection with the PPA contracts of three of our solar facilities in Italy. The changes in the PPA balances do not impact our consolidated net profit/loss or our consolidated cash flows.
Total Comprehensive Income / Loss
Total comprehensive loss was approximately €4.1 million for the year ended December 31, 2025, compared to total comprehensive income of approximately €4.1 million for the year ended December 31, 2024.
EBITDA
EBITDA was approximately €34.9 million for the year ended December 31, 2025, compared to approximately €25.1 million in the year ended December 31, 2024. The EBITDA for the year ended December 31, 2025 includes the impact of a gain on bargain purchase in the amount of approximately €14.5 million recognized by Ellomay Luzon Energy, an equity accounted investee, in connection with the acquisition of additional shares of Dorad.
EBITDA is a non-IFRS measure and is defined as earnings before financial expenses, net, taxes, depreciation and amortization. We present this measure to enhance the understanding of our historical financial performance and to enable comparability between periods. While we consider EBITDA to be an important measure of comparative operating performance, EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our commitments, including capital expenditures and restricted cash and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. Not all companies calculate EBITDA in the same manner, and the measure as presented may not be comparable to similarly-titled measures presented by other companies. Our EBITDA may not be indicative of our historic operating results; nor is it meant to be predictive of potential future results.
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Reconciliation of Loss to EBITDA
Impact of Fluctuation of Currencies
We hold cash and cash equivalents, deposits and restricted cash in various currencies, mainly in euro, NIS and USD. Our revenues from, and investments in, our European operations (i.e., in our Spanish Solar Plants, our Italian Solar Plants, our WtE plants, the Talasol Solar Plant and our solar projects under development in Italy) are denominated in euro, our income from, and investments in, our Israeli operations (i.e., Ellomay Luzon Energy, the Manara PSP and Solar projects under development) are denominated in NIS and our revenues from, and investments in, our operating solar plants and projects under development in Texas, USA, are denominated in USD. Our financing is denominated in NIS (i.e., principal and interest payments on our Debentures and the financing of the Manara PSP), in euro (i.e., financing in connection with our Spanish Solar Plants, our Italian Solar Plants and the project finance and loans provided by the minority (49%) holders of Talasol and by Clal) and in USD (short-term financing in connection with our USA Solar Plants). We therefore are affected by changes in the prevailing euro/NIS exchange rates and euro/USD exchange rates.
The table below sets forth the annual rates of appreciation (or devaluation) of the NIS against the euro and of the NIS against the USD.
(12.5
The representative NIS/euro exchange rate was NIS 4.012 for one euro on December 31, 2023, NIS 3.796 for one euro on December 31, 2024 and NIS 3.7455 for one euro on December 31, 2025. The average exchange rates for converting the NIS to euro during the years ended December 31, 2023, 2024 and 2025 were 3.99, 4.002 and 3.881 for one euro, respectively. The representative exchange rate as of April 15, 2026 was NIS 3.5499 for one euro.
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The representative NIS/USD exchange rate was NIS 3.627 for one USD on December 31, 2023, NIS 3.647 for one USD on December 31, 2024 and NIS 3.19 for one USD on December 31, 2025. The average exchange rates for converting the NIS to USD during the years ended December 31, 2023, 2024 and 2025 were 3.692, 3.699 and 3.43 for one USD, respectively. The representative exchange rate as of April 15, 2026 was NIS 3.014 for one USD.
Our management determined that our functional currency is the euro and elected the euro as our reporting currency, since December 31, 2017.
Items included in the financial statements of each of our subsidiaries and investees are measured using their functional currency. When a company’s functional currency differs from its parent’s functional currency that entity represents a foreign operation whose financial statements are translated so that they can be included in the consolidated financial statements as follows: (i) the assets and liabilities of foreign operations, including adjustments arising on acquisition, are translated at exchange rates at the reporting date, (ii) the income and expenses for each period presented in the statement of profit or loss and other comprehensive income (loss) are translated at average exchange rates for the presented periods; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of the transactions and (iii) foreign currency differences are recognized in equity as a separate component of other comprehensive income (loss) under “foreign currency translation adjustments.”
For information concerning hedging transactions entered, see “Item 11: Quantitative and Qualitative Disclosures About Market Risk.”
Governmental Economic, Fiscal, Monetary or Political Policies or Factors that have Materially Affected or could Materially Affect our Operations or Investments by U.S. Shareholders
Governmental Regulations Affecting the Operations of our Solar Plants and other Plants
Our Solar Plants and other energy manufacturing plants are subject to comprehensive regulation and we sell the electricity and energy produced for rates determined by governmental legislation and to local governmental entities. Any change in the legislation that affects plants such as our plants could materially adversely affect our results of operations. An economic crisis or change in government in Europe and specifically in Spain, the Netherlands and Italy or in the United States, whether related to a military conflict or otherwise, or financial distress of the IEC or Noga in Israel, could cause the applicable legislator to reduce benefits provided to operators of solar plants or other privately-owned energy manufacturing plants or to revise the incentive or regulatory regimes that currently govern the sale of electricity in Spain, the Netherlands, Italy, the United States and Israel. For more information see “Item 3.D: Risk Factors - Risks Related to our Renewable Energy Operations,” “Item 3.D: Risk Factors - Risks Related to our Investment in Ellomay Luzon Energy,” “Item 3.D: Risk Factors - Risks Related to our Other Operations”, “Item 4.B: Material Effects of Government Regulations on the Solar Plants,” “Item 4.B: Material Effects of Government Regulations on Dorad’s Operations,” “Item 4.B: The Netherlands Waste-to-Energy Market and Regulation” and “Item 4.B: Material Effects of Government Regulations on The Manara PSP.”
Effective Israeli Corporate Tax Rate
Israeli companies are generally subject to company tax on their taxable income. The Israeli corporate tax has been 23% as from January 2018.
As of December 31, 2025, Ellomay Capital Ltd. had carry forward tax losses in the amount of approximately €13.3 million. In addition, Ellomay Capital Ltd. had carry forward capital tax losses in the amount of approximately €6 million, which have no expiration date. Deferred taxes of Ellomay Capital Ltd. have not been recognized because our management currently believes that as the Company has a history of losses it is more likely than not that the deferred tax regarding losses carry forward will not be utilized in the foreseeable future. For more information see Note 19D to our annual financial statements included elsewhere in this Report.
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As of March 31, 2026, we held approximately €59.5 million in cash, cash equivalents and short-term deposits and approximately €36.4 million in restricted short-term and long-term cash.
Although we now hold the aforementioned funds, and we expect to receive the proceeds from the sale of our indirect holdings in Ellomay Luzon Energy, we may need additional funds if we seek to acquire certain new businesses and operations and if we seek to implement our project development plans, including the plans and projects under development as set forth in “Item 4.B: Business Overview,” and to advance large development projects that require substantial funds. If we are unable to raise funds through public or private financing of debt or equity, we will be unable to fund certain projects, investments or business combinations that could have ultimately improved our financial results. We cannot ensure that additional financing will be available on commercially reasonable terms or at all.
We entered into various project finance agreements in connection with the financing of several of our Solar Plants, our Biogas facilities and the Manara PSP and raised funds via issuances of debt in private and public offerings in Israel (all as more fully described below).
We will require additional funds to advance the projects that are currently under development or that will be developed in the future.
On February 1, 2023, we issued NIS 220 million par value principal of our Series E Secured Debentures.
On January 16, 2024, we issued units consisting of an aggregate principal amount of NIS 170 million of our newly issued Series F Debentures and Series 2 Warrants to purchase an aggregate of 1,020,000 ordinary shares at a price per share of NIS 80 (subject to customary adjustments). On April 17, 2024, we issued NIS 40 million par value of our unsecured non-convertible Series F Debentures, in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 37.8 million, reflecting a price of NIS 0.946 per NIS 1 principal amount of the Series F Debentures. On August 29, 2024, we issued NIS 52,029,136 par value of our Series F Debentures in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 50 million, reflecting a price of NIS 0.961 per NIS 1 principal amount of the Series F Debentures. On November 5, 2024, we issued NIS 66,061,600 par value of our Series F Debentures in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 62.2 million, reflecting a price of NIS 0.942 per NIS 1 principal amount of the Series F Debentures.
On February 16, 2025, we issued NIS 214,479,000 par value principal of our Series G Debentures in an Israeli public offering and on December 10, 2025 we issued NIS 130,000,000 par value principal of our Series G Debentures in a private placement to Israeli classified investors. For more information see “Item 4.A: History and Development of Ellomay” under “Recent Developments.”
For more information see “Item 4.B: Business Overview,” “Item 10.C: Material Contracts” and Notes 6 and 11 to our annual financial statements included elsewhere in this Report.
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As of December 31, 2025, we had a working capital of approximately €22.2 million, compared to a working capital deficiency of approximately €23.8 million as of December 31, 2024. Based on our current operating forecast, we believe that the combination of existing working capital, and expected cash flows from operations, will be sufficient to finance our ongoing operations for the next twelve months.
We currently invest our excess cash in cash and cash equivalents that are highly liquid and in short-term deposits.
As of December 31, 2025, we had approximately €87.6 million of cash and cash equivalents, compared with approximately €41.1 million of cash and cash equivalents at December 31, 2024 and approximately €51.1 million of cash and cash equivalents at December 31, 2023. The increase in cash during the year ended December 31, 2025 was mainly due to proceeds from the issuances of our Series G Debentures in February and December 2025, partially offset by our investments in the development and construction of renewable energy facilities and repayments made on account of our Debentures.
Project Finance
As of December 31, 2025, we were party to project finance agreements in connection with our Spanish Solar Plants, our Italian 198 MW Solar Portfolio, our WtE plants and the Manara PSP. We may in the future enter into additional project finance agreements with respect to one or more of our other current or future plants. The following is a brief description of the project finance agreements that existed during the year ended December 31, 2025.
Solar Project Finance
Talasol Plant Finance
On April 30, 2019, the Talasol Solar Plant reached financial closing. This financing included several facilities in the aggregate amount of approximately €158.5 million.
In December 2021, Talasol entered into a project finance arrangement in the aggregate amount of €175 million, or the Talasol Financing. The Talasol Financing achieved financial closing in January 2022 and amounts withdrawn were partially used to repay Talasol’s previous financing.
The Talasol Financing is based on a Facilities Agreement in the aggregate amount of €175 million provided by European institutional lenders, or the Talasol Financing. The Talasol Financing provides for the provision of a term loan facility in two tranches: (i) a term loan in the amount of €155 million of which the final maturity date is June 30, 2044, and (ii) a term loan in the amount of €20 million of which the final maturity date is December 31, 2042. The Talasol Financing bears a fixed annual interest rate at a weighted average of approximately 3%, compared to a variable interest rate that was fixed at an average of approximately 3% by an interest rate swap contract in Talasol’s previous financing.
The uses of the Talasol Financing amount were as follows: (1) prepayment of the outstanding €121 million amount of Talasol’s previous financing; (2) deposit of €6.9 million in Talasol’s bank account as a debt service fund; (3) deposit of €10 million in Talasol’s bank account as security for a letter of credit to the PPA provider, or the Talasol PPA Security Fund, (4) unwinding the interest rate SWAP entered into in connection with Talasol’s previous financing in an amount of €3.29 million; (5) transaction costs in an amount of approximately €3 million; and (6) a special dividend to Talasol’s shareholders in an amount of approximately €31 million.
The Talasol PPA Security Fund is reduced by 10% every year, up to a minimum amount of €3.5 million, which will be released at the expiration of the PPA.
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As of December 31, 2025, the outstanding amount under the Talasol Financing was approximately €150 million. This aggregate outstanding loan balance is net of an amount of approximately €2.4 million of debt issuance costs to be amortized over the length of the underlying loan.
We own 51% of Talasol and consolidate its results in our financial statements included elsewhere in this Report.
Rinconada II, Rodríguez I, Rodríguez II and Fuente Librilla Project Finance
On March 12, 2019, four of our Spanish indirect wholly-owned subsidiaries, Rodríguez I Parque Solar, S.L.U., Rodríguez II Parque Solar, S.L.U., Seguisolar, S.L.U. and Ellomay Spain, S.L., or, together, the Spanish Subsidiaries, entered into a facility agreement governing the procurement of project financing in the aggregate amount of approximately €18.4 million with Bankinter, S.A., or the Facility Agreement.
The Facility Agreement amount consists of the following tranches:
The termination date of the Facility Agreement is December 31, 2037 and an annual interest at the rate of Euribor 6 months plus a margin of 2% (with a zero interest floor) is repaid semi-annually on June 20 and December 20. The principal is repaid on a semi-annual basis based on a pre-determined sculptured repayment schedule.
The Spanish Subsidiaries entered into the swap agreements on March 12, 2019 with respect to approximately €17.6 million (with a decreasing notional principal amount based on the amortization table) until December 2037, replacing the Euribor 6 month rate with a fixed 6 month rate of approximately 1%, resulting in a fixed annual interest rate of approximately 3%.
As of December 31, 2025, the outstanding amounts under the Project Finance were approximately €11.1 million. This aggregate outstanding loan balance is net of an amount of approximately €0.2 million debt issuance costs to be amortized over the length of the underlying loan.
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Ellomay Solar Project Finance
In June 2024, Ellomay Solar entered into and reached financial closing of a project finance arrangement, or the Ellomay Solar Project Finance, with Bankinter, S.A. The Ellomay Solar Project Finance is comprised of two facilities: (i) a senior term loan for an amount of €10 million, or the Term Loan; and (ii) a revolving facility for an amount of €500,000, or the DSRF. The Ellomay Solar Project Finance is for a term of 16 years and is repayable in semi-annual installments (principal and interest). The Ellomay Solar Project Finance includes a cash sweep mechanism that is expected to reduce the term of the Ellomay Solar Project Finance to approximately 13 years. The Term Loan and DSRF (to the extent withdrawn) bear an annual interest of Euribor 6-month plus 2.5%.
Ellomay Solar entered into swap agreement with respect to the amount of the Ellomay Solar Project Finance until June 30, 2037, replacing the Euribor 6-month rate with a fixed 6-month rate of approximately 3%, resulting in a fixed annual interest rate of approximately 5.5%.
The Ellomay Solar Project Finance provides for mandatory prepayment upon the occurrence of certain customary events and includes various customary collaterals, representations, warranties and covenants, including covenants to maintain a DSCR not lower than 1.05:1, and not to make distributions unless, among other things: (i) the DSCR is at least 1.20:1.0, (ii) the first instalment of the Project Finance will be repaid on December 31, 2024, and (iii) no amount under the DSRF has been withdrawn and not fully repaid.
Upon financial closing Ellomay Solar withdrew the Term Loan and distributed €9.7 million to Ellomay Luxembourg.
As of December 31, 2025, the outstanding amounts under the Ellomay Solar Project Finance were approximately €9.5 million. This aggregate outstanding loan balance is net of an amount of approximately €0.2 million debt issuance costs to be amortized over the length of the underlying loan.
Italian 198 MW Solar Portfolio Financing
On February 27, 2025, we entered into a set of agreements governing the procurement of financing with a reputable European institutional investor, or the Lender, intended to finance the construction and related expenses of the Italian 198 MW Solar Portfolio, or the Italian 198 MW Solar Portfolio Financing. The financing in an amount of up to €110 million is provided by way of senior secured notes to be issued in multiple tranches during the construction phase by a wholly-owned subsidiary of Ellomay Luxembourg, our wholly-owned Luxembourg subsidiary. All notes are due on December 31, 2047 and to be repaid in semi-annual installments. The notes bear interest from and including the issue date to and excluding the maturity date at the rate of 4.50% per annum, to be paid semi-annually.
As of December 31, 2025, the outstanding amounts under the Italian 198 MW Solar Portfolio Financing were approximately €32 million.
US Solar Projects Financing
Our indirect subsidiary, Ellomay Texas Solar Projects, LP, entered into revolving loan agreements with Israel Discount Bank of New York. For more information see Note 11 to our annual financial statements included elsewhere in this Report.
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WtE Plants Finance
Groen Goor Project Finance
Groen Goor, Independent Power Plant B.V. (the entity that holds the permits and subsidies in connection with the Goor Project and is wholly-owned by Groen Goor), or GIPP, and Ellomay Luxembourg are parties to a senior project finance agreement documents, or the Goor Loan Agreement, with Coöperatieve Rabobank U.A., or Rabobank, that includes the following tranches: (i) two loans with principal amounts of €3.51 million (with a fixed interest rate of 3% for the first five years and 3.45% for the subsequent five years) and €2.09 million (with a fixed interest rate of 2.5% until the end of March 2022, of 2.65% until the end of March 2023 and of 6.05% until the end of March 2026), for a period of 12.25 years, repayable in equal monthly installments commencing three months following the connection of the Goor Project’s plant to the grid and (ii) an on-call credit facility of €370,000 with variable interest.
In connection with the Goor Loan Agreement, the following securities were provided to Rabobank: (i) pledge on the present and future rights arising from the feedstock purchase agreement, the EPC agreement, the O&M agreement, the SDE subsidy, the various power and green gas purchase agreements, and the green gas certification supply agreement, (ii) pledge on all present and future (a) receivables arising from business and trade, and (b) stock and inventory including machinery and transport vehicles of Groen Goor, and (iii) all rights/claims of Groen Goor against third parties existing at the time of the execution of the Loan Agreement, including rights from insurance agreements.
In addition, Ellomay Luxembourg, our wholly-owned subsidiary: (i) provided the following undertakings to Rabobank: (a) that Groen Goor will not make distributions to its shareholders for a period of two years following the execution of the Loan Agreement, (b) that Groen Goor will not make distributions or repurchase its shares so long as the ratio of Groen Goor’s and GIIP’s equity and liabilities to shareholders to their balance sheet minus certain reserves and intangible assets is less than 40%, and (c) that in the event the aforementioned ratio is below 40%, its shareholders will invest the equity required in order to increase this ratio to 40%, pro rata to their holdings in Groen Goor and up to a maximum of €1.2 million, and (ii) provided pledges on its rights in connection with the shareholders’ loans provided to Groen Goor, which loans shall also be subordinated by Ellomay Luxembourg in the favor of Rabobank. Shortages in liquidity as a result of exceeding the construction budget and/or extension of start-up costs of the Goor Project shall be provided by Ellomay Luxembourg and not financed by Rabobank. In addition, we provided a guarantee to Rabobank for the fulfillment of Ellomay Luxembourg’s undertakings set forth above.
As of December 31, 2025, the outstanding amount under the Groen Goor Project Finance was approximately €2.5 million.
Oude Tonge Project Finance
On May 3, 2017, Oude Tonge, Oude Tonge Holdings B.V. (the entity that holds the permits and subsidies in connection with the Oude Tonge Project and is wholly-owned by Oude Tonge), or OTH, and Ellomay Luxembourg are parties to senior project finance agreement documents, or the Oude Tonge Loan Agreement, with Rabobank. In June 2017, the financial closing occurred with respect to the project finance that includes the following tranches: (i) three loans with principal amounts of €3.15 million (with a fixed interest rate of 3.1% the end of June 2022 and with a fixed interest rate of 3.95% for the next three years), €1.54 million (with a fixed interest rate of 2.9% until the end of March 2023 and of 5.15% for the next five years) and €0.16 million (with a fixed interest rate of 3.4% until the end of March 2023 and of 5.65% for the next five years), for a period of 12.25 years, repayable in equal monthly installments commencing three months following the connection of the Oude Tonge Project to the grid and (ii) an on-call credit facility of €100,000 with variable interest.
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In connection with the Oude Tonge Loan Agreement, Ellomay Luxembourg, our wholly-owned subsidiary: (i) provided the following undertakings to Rabobank: (a) that Oude Tonge will not make distributions to its shareholders for a period of two years following the execution of the Loan Agreement, (b) that Oude Tonge will not make distributions or repurchase its shares so long as the ratio of Oude Tonge’s and OTH’s equity and liabilities to shareholders to their balance sheet minus certain reserves and intangible assets is less than 40%, (c) that in the event the aforementioned ratio is below 40%, its shareholders will invest the equity required in order to increase this ratio to 40%, pro rata to their holdings in Oude Tonge and up to a maximum of €1 million, and (d) that they will provide the equity required for the completion of the Goor Project and (ii) provided pledges on its rights in connection with the shareholders loans provided to Oude Tonge, which loans shall also be subordinated by Ellomay Luxembourg in the favor of Rabobank. Shortages in liquidity as a result of exceeding the construction budget and/or extension of start-up costs of the Goor Project shall be provided by Ellomay Luxembourg and not financed by Rabobank. In addition, we provided a guarantee to Rabobank for the fulfillment of Ellomay Luxembourg’s undertakings set forth above.
As of December 31, 2025, the outstanding amount under the Oude Tonge Project Finance was approximately €2 million.
Groen Gas Gelderland Project Finance
GG Gelderland entered into a senior project finance agreement, or the Gelderland Loan Agreement, with Rabobank, that includes the following tranches: (i) four loans with principal amounts of (a) approximately €2.5 million (with a fixed interest rate of 3.6% for the first five years), (b) €1.2 million (with a fixed interest rate of 4.5% until the beginning of December 2020 and of 3.5% until the beginning of December 2025), (c) €0.4 million (with a fixed interest rate of 3.55% until the end of January 2023 and with a fixed interest rate of 5.95% until the end of the loan period) and (d) approximately €2.8 million (with a fixed interest rate of 4.5% until the beginning of December 2020 and of 3.5% until the beginning of December 2025), for a period of 12 years (144 monthly payments), repayable in equal monthly installments and (ii) an on-call credit facility of €0.75 million with variable interest. An aggregate amount of approximately €6.9 million was withdrawn in 2015, 2016 and 2018 on account of these loans. On November 30, 2020, GG Gelderland replaced the loan set forth in (i)(a) above which as of that date had an outstanding principal amount of €1.89 million, with another loan from Rabobank with a fixed interest rate of 3.1% per year, repayable in 56 payments monthly, with a repayment of principal in one payment in August 2025. On the same date, the interest for the other loans bearing a fixed interest rate of 4.5% per year for 5 years was reduced to 3.5% per year for the next 5 years, commencing December 2020.
As of December 31, 2025, the outstanding amount under the Gelderland Loan Agreement was approximately €3 million.
GG Gelderland entered into a loan agreement at the end of November 2020, with Ontwikkelingsnaatscgappij Oost-Nederland N.V., or Oost, as a benefit created in connection with the Covid-19 pandemic. The loan is with a principal amount of €0.75 million bore a fixed interest rate of 3% per year for 3 years. The interest and the principle were to be fully repaid in one single amount after 3 years. According to the agreement with Oost, the loan term may be prolonged up to 5 years. In October 2023, it was decided to extend the loan to 5 years and the interest rate changed to 5% as from November 2020.
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The financial closing of the Manara PSP Project Finance occurred in February 2021. The Manara PSP Project Finance is provided by a consortium of Israeli banks and institutional investors, arranged and led by Mizrahi-Tefahot Bank Ltd., in the aggregate amount of NIS 1.27 billion (approximately €317 million). This amount is linked to a synthetic composite index comprising a weighted average of the indices and currencies applicable to the Manara PSP’s construction costs. The linkage is performed once a year in March during the first four years of construction, and thereafter semi-annually until construction end. In March 2022, the facilities under the Manara PSP Project Finance were increased as a result of the rise in the Project Index by approximately NIS 40 million (approximately €10.6 million). A similar increase was carried out in March 2023 in the amount of approximately 63 Million NIS (approximately €16.8 million).
The Manara PSP Project Finance includes: (i) a senior secured tranche at a fixed rate of interest (with base interest rate equal to the yield to maturity of Israeli treasury bonds with like duration of the loan), linked to the Israeli Consumer Price Index and to be repaid over a period of 19.5 years from the commercial operation date (annual interest rate spread of 3.25% per-annum during the Construction Period of the Project and 2.40% per-annum during the commercial operation phase); and (ii) a subordinated secured tranche at a floating rate of interest (Bank of Israel rate plus a spread of 4.35% per-annum during the construction period and 3.90% per-annum during the commercial operation phase) with a slightly shorter maturity. The Manara PSP Project Finance includes customary terms in connection with early prepayment, acceleration of payments upon certain breaches and limitations on distributions. The Manara PSP Project Finance also includes ancillary facilities such as Standby, VAT, Guarantees and Debt Service Reserve facilities.
Sheva Mizrakot and Ellomay Water undertook to provide aggregate financing of approximately NIS 353 million (approximately €94.1 million at that time), pro rata to their holdings in the Manara PSP, linked to the Project Index. Due to the indexation, additional shareholders’ loans were provided by the shareholders pro rata to their respective holdings in Manara PSP. As of December 31, 2025, the financing provided by the owners of Manara PSP amounted to approximately NIS 392 million (approximately €105 million). Following a publication of the Israeli Electricity Authority regarding calculation methods that may reduce coverage ratios during the operations of the Manara PSP, the owners of the Manara PSP agreed to provide the lenders with certain undertakings to inject additional equity to the Manara PSP in certain scenarios, subject to a cap which is currently estimated by the owners of the Manara Project PSP to be approximately NIS 37 million (approximately €9.2 million).
We and Ampa provided certain sponsor support undertakings towards the lenders commensurate with the size and complexity of the project and the length of the construction period, including a standby equity guarantee in the aggregate amount of approximately NIS 13.5 million (approximately €3.4 million), pro rata to our holdings in the Manara PSP. This standby equity guarantee is linked and adjusted in the same manner and timing as the long-term facilities, as described above.
In addition, we undertook in connection with the Manara PSP Project Finance to maintain control over the Manara PSP and to provide customary pledges on the assets of and rights in the project. The shareholders of Ellomay PS provided pledges over their shares, the shareholders’ loans and the shareholders’ mezzanine loan.
The first withdrawal of the funding for the Manara PSP, in the amount of NIS 75 million, occurred on January 31, 2022.
As of December 31, 2025, the outstanding amount under the Manara PSP Project Finance was approximately NIS 309 million (approximately €81.3 million). This aggregate outstanding loan balance is net of an amount of approximately NIS 6.9 million (approximately €1.8 million) of debt issuance costs to be amortized over the length of the underlying loan.
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Other Financing Activities
As noted above, we historically financed a portion of our operations through the issuance of debt and equity in Israel. The following is a summary of outstanding Debentures issued in Israel and traded on the Tel Aviv Stock Exchange as of December 31, 2025:
AnnualInterestRate as ofDecember 31, 20251
Series C Debentures – Repaid During 2025
On July 25, 2019, we issued approximately NIS 89.1 million (approximately €22.7 million, as of the issuance date) of unsecured non-convertible Series C Debentures due June 30, 2025 through a public offering in Israel. The gross proceeds of the offering were approximately NIS 89.1 million and the net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 87.6 million (approximately €22.3 million). During 2020 and 2021, we issued additional Series C Debentures in an aggregate principal amount of NIS 374.939 million for aggregate gross proceeds of approximately NIS 388.2 million and aggregate net proceeds of approximately NIS 385.1 million.
On June 6, 2022, the holders of our Series C Debentures approved an amendment to the Series C Deed of Trust, which provides for certain revisions to the financial covenants, reflected below, and for the increase of the annual interest rate payable on the principal of the Series C Debentures by 0.25% from 3.3% to 3.55%, commencing on June 6, 2022.
The Series C Debentures were traded on the TASE.
The principal amount of Series C Debentures was repayable in five (5) unequal annual installments as follows: on June 30, 2021 10% of the principal was paid, on June 30, 2022 15% of the principal was paid, on June 30, 2023 15% of the principal was paid, and on June 30 of each of the years 2024 and 2025 30% of the principal shall be paid. The Series C Debentures initially bore a fixed interest at the rate of 3.3% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31 commencing December 31, 2019 through June 30, 2025 (inclusive) and as noted above this annual interest rate was increased to 3.55% effective June 6, 2022.
The Series C Debentures were repaid in full on June 30, 2025.
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Series D Convertible Debentures
On February 23, 2021, we issued NIS 62 million (approximately €15.6 million, as of the issuance date) of unsecured convertible Series D Convertible Debentures due December 31, 2026 through a public offering in Israel. The gross proceeds of the offering were approximately NIS 62.6 million and the net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 61.8 million (approximately €15.6 million as of the issuance date).
The Series D Convertible Debentures are traded on the TASE.
The principal amount of Series D Convertible Debentures is repayable one installment on December 31, 2026. The Series D Convertible Debentures bear a fixed interest at the rate of 1.2% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31 commencing June 30, 2021 through December 31, 2026 (inclusive). The Series D Convertible Debentures are convertible into our ordinary shares, NIS 10.00 par value per share, at a conversion price of NIS 165 (approximately $50.55, as of the issuance date), subject to adjustments upon customary terms. In connection with the March 2026 amendments to the Deeds of Trust governing our Debentures, we disclosed that we intend to advance the approval of a decrease in the conversion price of the Series D Debentures from NIS 165 per ordinary share to a conversion price per ordinary share equal to the average closing price of our ordinary shares on the Tel Aviv Stock Exchange during the thirty trading days prior to our approach to the Israeli court for purposes of approval of the change in conversion price, plus 15%. Such decrease is subject to court approval (and any additional approvals required by the court, including potentially the approvals of the holders of the debentures and our shareholders) and to a listing approval of the additional shares by the NYSE American and Tel Aviv Stock Exchange and therefore we cannot currently estimate whether and when it will be implemented.
The Series D Deed of Trust includes customary provisions, including (i) a negative pledge such that we may not place a floating charge on all of our assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which we do not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series D Deed of Trust does not restrict our ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series D Convertible Debentures up to an aggregate par value of NIS 200 million provided that: (i) we are not in default of any of the immediate repayment provisions included in the Series D Deed of Trust or in breach of any of our material obligations to the holders of the Series D Convertible Debentures pursuant to the terms of the Series D Deed of Trust, (ii) the expansion will not harm our compliance with the financial covenants for purposes of the immediate repayment provision included in the Series D Deed of Trust and (iii) to the extent the Series D Convertible Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series D Convertible Debentures.
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The Series D Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and includes a mechanism for the update of the annual interest rate of the Series D Convertible Debentures in the event we do not meet certain financial covenants. The financial covenants are as follows:
The Series D Deed of Trust further provides that we may make distributions (as such term is defined in the Companies Law, e.g. dividends), to our shareholders, provided that: (a) we will not distribute more than 75% of the distributable profit, (b) we will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) we are in compliance with all of our material undertakings to the holders of the Series D Debentures and (d) on the date of distribution and after the distribution no cause for immediate repayment exists. We are also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series D Adjusted Balance Sheet Equity not lower than €85 million, (ii) Series D Ratio of Net Financial Debt to Series D CAP, Net not to exceed 60%, and (iii) Series D Ratio of Net Financial Debt to Series D Adjusted EBITDA, shall not be higher than 9, and not to make distributions if we do not meet all of our material obligations to the holders of the Series D Convertible Debentures and if on the date of distribution and after the distribution a cause for immediate repayment exists.
As of December 31, 2025, the outstanding amount under the Series D Convertible Debentures, net of capitalized expenses, was approximately NIS 59.2 million (approximately €15.6 million).
For further information concerning the Series D Deed of Trust, see “Item 10.C: Material Contracts” and the Series D Deed of Trust and Amendment No. 1 to the Series D Deed of Trust included as Exhibits 4.15 and 4.26, respectively, under “Item 19: Exhibits.”
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Series E Secured Debentures
On February 1, 2023, we issued NIS 220 million (approximately €58.5 million, as of the issuance date) of the Series E Secured Debentures, due March 31, 2029, through a public offering in Israel. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 218 million (approximately €56 million as of the issuance date). The Series E Secured Debentures are secured by the following pledges:
The Series E Secured Debentures are traded on the TASE.
The principal amount of Series E Secured Debentures is repayable in four equal installments on March 31 from 2026 through 2029 (inclusive). The Series E Secured Debentures bear a fixed interest at the rate of 6.05% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on March 31 and September 30, commencing March 31, 2023 through March 31, 2029 (inclusive). In connection with the March 2026 amendments to the Deeds of Trust governing our Debentures, the Series E Deed of Trust was amended, inter alia, to provide for an increase in the annual interest rate from 6.05% to 6.15%, commencing June 4, 2026.
The Series E Deed of Trust includes customary provisions, including (i) a negative pledge such that we may not place a floating charge on all of our assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which we do not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series E Deed of Trust does not restrict our ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series E Secured Debentures provided that: (i) we are not in default of any of the immediate repayment provisions included in the Series E Deed of Trust or in breach of any of our material obligations to the holders of the Series E Secured Debentures pursuant to the terms of the Series E Deed of Trust, (ii) the expansion will not harm our compliance with the financial covenants for purposes of the immediate repayment provision included in the Series E Deed of Trust, (iii) to the extent the Series E Secured Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series E Secured Debentures and (iv) the par value of the Series E Secured Debentures may not be higher than NIS 220 million following the expansion.
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The Series E Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event we do not meet certain financial covenants. The financial covenants are as follows:
The Series E Deed of Trust further provides that we may make distributions (as such term is defined in the Companies Law, e.g. dividends), to our shareholders, provided that: (a) we will not distribute more than 60% of the distributable profit, (b) we will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) we are in compliance with all of our material undertakings to the holders of the Series E Secured Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) we will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. We are also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series E Adjusted Balance Sheet Equity not lower than €90 million, (ii) Series E Ratio of Net Financial Debt to Series E CAP, Net not to exceed 60%, and (iii) Series E Ratio of Net Financial Debt to Series E Adjusted EBITDA, shall not be higher than 9, and not to make distributions if we do not meet all of our material obligations to the holders of the Series E Secured Debentures and if on the date of distribution and after the distribution a cause for immediate repayment exists.
The Series E Deed of Trust includes several limitations and requirements applicable to our holdings in Ellomay Luzon Energy and additional provisions that may limit our ability to sell our holdings in Ellomay Luzon Energy or to revise arrangements with Ellomay Luzon Energy.
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As of December 31, 2025, the outstanding amount under the Series E Secured Debentures, net of capitalized expenses, was approximately NIS 218.9 million (approximately €58.4 million).
For further information concerning the Series E Deed of Trust, see “Item 10.C: Material Contracts” and the Series E Deed of Trust and Amendment No. 1 to the Series E Deed of Trust included as Exhibits 4.18 and 4.27, respectively, under “Item 19: Exhibits.”
Series F Debentures
On January 16, 2024, we issued in an Israeli public offering units consisting of an aggregate principal amount of NIS 170 million of our newly issued Series F Debentures, due March 31, 2030 and the Series 2 Warrants to purchase an aggregate of 1,020,000 ordinary shares at a price per share of NIS 80 (subject to customary adjustments), which expire on January 5, 2028. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 165 million (approximately €40 million as of the issuance date). In the event all of the Series 2 Warrants are exercised prior to their expiration date, we will receive additional gross proceeds of NIS 81.6 million.
On April 17, 2024, we issued NIS 40 million par value of our unsecured non-convertible Series F Debentures, in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 37.8 million, reflecting a price of NIS 0.946 per NIS 1 principal amount of the Series F Debentures. On August 29, 2024, we issued NIS 52,029,136 par value of our Series F Debentures in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 50 million, reflecting a price of NIS 0.961 per NIS 1 principal amount of the Series F Debentures. On November 5, 2024, we issued NIS 66,061,600 par value of our Series F Debentures in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 62.2 million, reflecting a price of NIS 0.942 per NIS 1 principal amount of the Series F Debentures. Following completion of the private placement, the aggregate outstanding par value of our Series F Debentures is approximately NIS 328.1 million.
The Series F Debentures are not secured by any collateral. The Series F Debentures and the Series 2 Warrants are traded on the TASE.
The principal amount of Series F Debentures is repayable in four non-equal installments on March 31 in each of the years 2027 to 2030 (inclusive) as follows: in each of the principal payments in the years 2027 and 2028 a rate of 30% of the principal will be paid, in the principal payment in the year 2029 a rate of 25% of the principal will be paid and in the principal payment in the year 2030 a rate of 15% of the principal will be paid. The Series F Debentures bear a fixed interest at the rate of 5.5% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on March 31 and September 30, commencing March 31, 2024 through March 31, 2030 (inclusive). In connection with the March 2026 amendments to the Deeds of Trust governing our Debentures, the Series F Deed of Trust was amended,inter alia, to provide for an increase in the annual interest rate from 5.5% to 5.75%, commencing June 4, 2026; provided, however, that this increase will be eliminated in the event, and for as long as, the Series F Debentures are rated above Baa1.il (or an equivalent rating).
The Series F Deed of Trust includes customary provisions, including (i) a negative pledge such that we may not place a floating charge on all of our assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which we do not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series F Deed of Trust does not restrict our ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series F Debentures provided that: (i) we are not in default of any of the immediate repayment provisions included in the Series F Deed of Trust or in breach of any of our material obligations to the holders of the Series F Debentures pursuant to the terms of the Series F Deed of Trust, (ii) the expansion will not harm our compliance with the financial covenants for purposes of the immediate repayment provision included in the Series F Deed of Trust and (iii) to the extent the Series F Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series F Debentures.
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The Series F Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event we do not meet certain financial covenants. The financial covenants are as follows:
The Series F Deed of Trust further provides that we may make distributions (as such term is defined in the Companies Law, e.g. dividends), to our shareholders, provided that: (a) we will not distribute more than 60% of the distributable profit, (b) we will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) we are in compliance with all of our material undertakings to the holders of the Series F Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) we will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. We are also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series F Adjusted Balance Sheet Equity not lower than €94 million, (ii) Series F Ratio of Net Financial Debt to Series F CAP, Net not to exceed 58%, and (iii) Series F Ratio of Net Financial Debt to Series F Adjusted EBITDA, shall not be higher than 9, and not to make distributions if we do not meet all of our material obligations to the holders of the Series F Debentures and if on the date of distribution and after the distribution a cause for immediate repayment exists.
As of December 31, 2025, the outstanding amount under the Series F Debentures, net of capitalized expenses, was approximately NIS 312 million (approximately €83.3 million).
For further information concerning the Series F Deed of Trust, see “Item 10.C: Material Contracts” and the Series F Deed of Trust and Amendment No. 1 to the Series F Deed of Trust included as Exhibits 4.22 and 4.28, respectively, under “Item 19: Exhibits.”
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Series G Debentures
On February 16, 2025, we issued in an Israeli public offering an aggregate principal amount of NIS 214,479,000 of our newly issued Series G Debentures, due December 31, 2032. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 211.9 million (approximately €56.7 million as of the issuance date). In December 2025, the Company issued in a private placement to Israeli classified investors NIS 130,000,000 par value of its unsecured non-convertible Series G Debentures, at a price of NIS 1.05 per NIS 1 principal amount of the Additional Series G Debentures, for an aggregate gross consideration of approximately NIS 136.5 million (approximately €36.3 million as of the issuance date). Following completion of the private placement, the aggregate outstanding par value of the Company’s Series G Debentures is NIS 344,479,000.
The Series G Debentures are not secured by any collateral and are traded on the TASE.
The principal amount of Series G Debentures is repayable in seven non-equal installments on December 31 in each of the years 2026 to 2032 (inclusive) as follows: 10% of the principal on the 2026 repayment date, 2.5% of the principal on each of the 2027 and 2028 repayment dates, 10% of the principal on the 2029 repayment date and 25% of the principal on each of the 2030, 2031 and 2032 repayment dates. The Series G Debentures bear a fixed interest at the rate of 6.34% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31, commencing December 31, 2025 through December 31, 2032 (inclusive). In connection with the March 2026 amendments to the Deeds of Trust governing our Debentures, the Series G Deed of Trust was amended, inter alia, to provide for an increase in the annual interest rate from 6.34% to 6.59%, commencing June 4, 2026.
The Series G Deed of Trust includes customary provisions, including (i) a negative pledge such that we may not place a floating charge on all of our assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which we do not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series G Deed of Trust does not restrict our ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series G Debentures provided that: (i) we are not in default of any of the immediate repayment provisions included in the Series G Deed of Trust or in breach of any of our material obligations to the holders of the Series G Debentures pursuant to the terms of the Series G Deed of Trust, (ii) the expansion will not harm our compliance with the financial covenants for purposes of the immediate repayment provision included in the Series G Deed of Trust and (iii) to the extent the Series G Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series G Debentures.
The Series G Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event we do not meet certain financial covenants. The financial covenants are as follows:
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The Series G Deed of Trust further provides that we may make distributions (as such term is defined in the Companies Law, e.g. dividends), to our shareholders, provided that: (a) we will not distribute more than 60% of the distributable profit, (b) we will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) we are in compliance with all of our material undertakings to the holders of the Series G Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) we will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. We are also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series G Adjusted Balance Sheet Equity not lower than €97 million, (ii) Series G Ratio of Net Financial Debt to Series G CAP, Net not to exceed 58%, and (iii) Series G Ratio of Net Financial Debt to Series G Adjusted EBITDA, shall not be higher than 9, and not to make distributions if we do not meet all of our material obligations to the holders of the Series G Debentures and if on the date of distribution and after the distribution a cause for immediate repayment exists.
As of December 31, 2025, the outstanding amount under the Series G Debentures, net of capitalized expenses, was approximately NIS 341.7 million (approximately €91.2 million).
For further information concerning the Series G Deed of Trust, see “Item 10.C: Material Contracts” and the Series G Deed of Trust and Amendment No. 1 to the Series G Deed of Trust included as Exhibit 4.24 and 4.29, respectively, under “Item 19: Exhibits.”
For more information concerning our financing activities, see Note 6, Note 11 and Note 12 to our annual financial statements included elsewhere in this Report.
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Cash Flows
The following table summarizes our cash flows for the periods presented:
Operating activities
In the year ended December 31, 2025, we had net loss of approximately €6.4 million. Net cash generated from operating activities was approximately €2.4 million, which includes increased interest expenses in connection with our Debentures.
In the year ended December 31, 2024, we had net loss of approximately €9 million. Net cash provided by operating activities was approximately €8 million, which is mainly due to the decrease in electricity prices in Spain. In addition, during the year ended December 31, 2023, our Dutch biogas plants elected to temporarily exit the subsidy regime and sell the gas at market prices and during the year ended December 31, 2024 these plants returned to the subsidy regime. Under the subsidy regime, plants are entitled to monthly advances on subsidies based on the production during the previous year. As no subsidies were paid to our Dutch biogas plants for 2023, these plants were entitled to low advance payments for 2024 and the payment for gas produced by the plants during 2024 is expected to be received until July 2025 and reflected accordingly in our cash flow from operations.
Investing activities
Net cash used in investing activities was approximately €99.7 million in the year ended December 31, 2025, primarily attributable to investments in the development and construction of renewable energy facilities, including the Manara PSP Project, Ellomay Solar Italy One SRL and Ellomay Solar Italy Two SRL projects and several solar projects in Italy and in the USA that have reached “ready to build” status.
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Net cash used in investing activities was approximately €64.4 million in the year ended December 31, 2024, primarily attributable to investments in the development and construction of renewable energy facilities, including several Solar projects in Italy and in the USA that have undergone construction or reached “ready to build” status.
Financing activities
Net cash generated from financing activities in the year ended December 31, 2025 was approximately €140.4 million, derived primarily from proceeds from the issuance of our Series G Debentures and the private placement of our ordinary shares, proceeds from long-term loans, partially offset by repayment of Debentures and long-term loans.
Net cash provided by financing activities in the year ended December 31, 2024 was approximately €43 million, derived primarily from proceeds from the issuances of our Series F Debentures and proceeds from long-term loans, partially offset by repayment of Debentures and long-term loans.
For more information concerning hedging transactions undertaken in connection with financings granted at EURIBOR linked interest, in connection with our Debentures, and in connection with our exposure to changes in fair value of our other loans and borrowings, as a result of changes in the interest rates, see “Item 11: Quantitative and Qualitative Disclosures About Market Risk.”
During 2025, we issued our Series G Debentures in a public offering in Israel and in a private placement to Israeli classified investors and issued ordinary shares in a private placement to Israeli classified investors. For more information see “General,” and “Series G Debentures” under “Other Financing Activities” and “Project Finance” above and Notes 11, 12 and 16 to our financial statements included in this Report.
As of December 31, 2025, we were not in default under any financial covenants pursuant to the agreements set forth above.
As of December 31, 2025, our total current assets amounted to approximately €114.2 million, of which approximately €87.6 million was in cash and cash equivalents, compared with total current liabilities of approximately €92 million.
As of December 31, 2024, our total current assets amounted to approximately €62.8 million, of which approximately €41.1 million was in cash and cash equivalents, compared with total current liabilities of approximately €86.7 million.
Outstanding Warrants
As of March 31, 2026, we had 1,020,000 Series 2 Warrants outstanding. Each Series 2 Warrant is exercisable into one Ordinary Share, at an exercise price of NIS 80 (subject to adjustments upon customary terms) by no later than January 5, 2028. The Series 2 Warrants are traded on the TASE. In addition, the warrant issued to Clal in connection with its acquisition of 49% of our Italian 198 MW Solar Portfolio was outstanding. For more information concerning the Clal Warrant see “Item 4.A: History and Development of the Company” under “Recent Developments - Italian 198 MW Solar Portfolio Held Jointly with Clal.”
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We did not conduct any research and development activities in the years ended December 31, 2023, 2024 and 2025.
We operate in the Spanish, Italian and United States Solar markets, in the Netherlands waste-to-energy market and in the Israeli energy market through our five Solar Plants and the Talasol Solar Plant (of which we own 51%) in Spain, our three Solar Plants in Italy (of which we own 51%), our three Solar Plants in Texas, USA, our three WtE plants in the Netherlands, our ownership of 50% of the issued and outstanding shares of Ellomay Luzon Energy, our ownership of 83.333% of the Manara PSP and through several other projects under development in Italy, USA, Spain and Israel. Our operating Solar Plants are all fully operational and connected to the relevant national grids. However, as our operating Italian Solar Plants were connected to the grid during 2024 and in early 2025, and our operating US Solar Plants were connected to the grid during the second quarter of 2025, our results for 2023-2025 do not reflect a full three-years of operations of such plants.
Our business and revenue growth from the markets in which we operate depends, among other factors, on payments received in accordance with applicable regulations and from the sale of the electricity produced by our plants and on seasonality and availability of raw materials. Revenue derived from our Solar operations tends to be lower in the winter, primarily because of adverse weather conditions. The growth of our renewable energy business in Spain, Italy, the Netherlands, Israel and elsewhere and our other operations are affected significantly by government subsidies and economic incentives. Dorad’s revenues are also dependent to an extent on regulation and seasonality.
Our business was impacted in by the increase in electricity prices a portion of 2023 in Europe and specifically in Spain caused by the increasing demand for electricity and by the military conflict between Russia and Ukraine, which caused an increase in natural gas prices. Our business was further impacted by the decrease in electricity prices in Spain, mainly due to the increased hydro power production during the winter during 2024 and 2025. The impact of the decrease in electricity prices on our financial results was mitigated as it did not affect the portion of the electricity produced by our facilities that is subject to a PPA. The military conflict between Russia and Ukraine also contributed to a disruption in supply chains of certain materials, including materials comprising the feedstock used by our biogas facilities in the Netherlands and an increase in delivery prices, mainly due to an increase in the price of fuel. The increase in fuel prices due to the war between the USA and Israel and Iran in early 2026 may also impact delivery costs in the future. The demand for electricity is expected to continue to increase in the future, also due to the increased electricity use by computer and server farms in connection with artificial intelligence software, blockchain and crypto currencies.
In addition, our ability to continue to leverage the investment in these markets may affect the profitability of past and future transactions. In recent years, the capital markets have experienced an increase in interest rates, which also impacts our ability to raise the capital required for the implementation of our business plan. A continued increase in interest rates could limit the capital available to us, on acceptable terms or at all.
For more information see “Item 3.D: Risk Factors – Risks Related to our Renewable Energy Operations,” “Item 3.D: Risk Factors – Risks Related to our Investment in Ellomay Luzon Energy,” and “Item 4.B: Business Overview.”
Our financial statements have been prepared in accordance with IFRS® Accounting Standards (IFRS), as issued by the IASB, which differ in certain significant respects from U.S. Generally Accepted Accounting Principles, or U.S. GAAP.
Certain accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts recognized in our financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. The changes in accounting estimates are recognized in the period of the change in estimate. Our significant accounting policies are described in Notes 2 and 3 to our consolidated financial statements included elsewhere in this Report.
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ITEM 6: Directors, Senior Management and Employees
Directors and Senior Management
The following table sets forth certain information with respect to our directors and senior management, as of March 31, 2026:
The address of each of our executive officers and directors is c/o Ellomay Capital Ltd., 18 Rothschild Boulevard, 1st floor, Tel Aviv 6688121, Israel.
Ben Sheizaf has served as a director and Chairman of the Board of Ellomay since November 25, 2024. Mr. Sheizaf is the founder and CEO of B.P.O. Ltd., a consulting firm since 2019, and has held many senior positions in the Israeli finance and insurance sectors. Mr. Sheizaf currently serves as a member of the board of AIG Israel Ltd. and as chairman of the board of Detelix Software Technologies Ltd and previous served as a member of the board and chairman of the risk management committee of Isracard Ltd. (TASE: ISCD). Between 2008-2019 he held several positions in Phoenix Financial Ltd. (TASE: PHOE), including Deputy CEO and Head of the Long-Term Savings Division, CEO of The Phoenix Pension and Provident Fund Ltd. and a board member of other companies in the group, chairman of Excellence Provident Fund Ltd. and a member of the board of Excellence Investments Ltd. (between 2018-2019), and chairman of Shekel Insurance Agency (2008) Ltd. (between 2012-2015). Mr. Sheizaf holds a B.A. in Accounting and Economics from Tel Aviv University and completed a supplemental year of accounting studies.
Ran Fridrich has served as a director of Ellomay since March 2008, as our interim chief executive officer since January 2009, and as our chief executive officer since December 2009. Mr. Fridrich is the co-founder and executive director of Oristan, Investment Manager, an investment manager of CDO Equity and Mezzanine Funds and a Distress Fund, established in June 2004. In January 2001 Mr. Fridrich founded the Proprietary Investment Advisory, an entity focused on fixed income securities, CDO investments and credit default swap transactions, and served as its investment advisor through January 2004. Prior to that, Mr. Fridrich served as the chief executive officer of two packaging and printing Israeli companies, Lito Ziv, a public company, from 1999 until 2001 and Mirkam Packaging Ltd. from 1983 until 1999. Mr. Fridrich also serves as a director of the Plasto-Cargal Group Ltd. (TASE: PLCR) since September 2002. Mr. Fridrich is a graduate of the Senior Executive Program of Tel Aviv University.
Gilad Mamlok has served as a director of Ellomay since March 2026. Mr. Mamlok serves as the Chief Financial Officer of Protalix BioTherapeutics, Inc. (NYSE American: PLX) since August 2025. Mr. Mamlok is a seasoned financial executive with three decades of experience in healthcare and technology companies. He has an extensive background in capital markets transactions, mergers and acquisitions, business development and investor relations as well as in corporate governance matters. Prior to his role in Protalix, he served as the Chief Financial Officer of TytoCare Ltd., a privately-held company in the remote healthcare space. Prior to his role at TytoCare, Mr. Mamlok served as the Chief Financial Officer of Sol-Gel Technologies Ltd. In this role, he was responsible for an initial public offering and other capital markets transactions, as well as in-licensing and out-licensing transactions. Prior to his role at Sol-Gel, he served in other medical device companies, including Given Imaging which was acquired by Covidien plc in 2014. Mr. Mamlok holds a BA in Economics, magna cum laude, and a Master’s degree in Business/Managerial Economics, both from the Tel Aviv University.
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Odelya Ohayon has served as a director of Ellomay since March 2026. Ms. Ohayon is a strategic leader and business development expert with over 15 years of executive experience. She currently provides high-level strategic advisory to CEOs and Boards, focusing on business strategy and market-leading innovation. Previously, she served as VP of Marketing at Samsung Electronics Israel, where she was a member of the Executive Management Team and managed an annual turnover of NIS 1.5 billion. Her prior leadership roles include VP of Marketing and Business Development at Solgar & Supherb and Marketing Manager at Partner Communications, where she managed portfolios exceeding NIS 2 billion. Ms. Ohayon is a lecturer in marketing and entrepreneurship at the College of Management and Ariel University. She holds a B.A. in Business Administration from Ben-Gurion University and an M.B.A. from the Academic Studies Center.
Daniel Vaknin has served as an external director of Ellomay since December 20, 2020. Mr. Vaknin is a financial consultant. Mr. Vaknin currently serves on the Board of Directors of Clal Insurance Company Ltd., Ilex Medical Ltd. (TASE: ILX), Arad Ltd. (TASE: ARD), Kardan Israel Ltd. (TASE: KRDI), B.S.R Engineering and Development Ltd. (TASE: BSRE) and Fishman Chains Ltd. and served on the Board of Directors of Global Wings Leasing Ltd. (TASE: GKL) until 2020. From 2007 to 2011 Mr. Vaknin served as Chief Executive Officer of Israel Financial Levers Ltd. From 2005 to 2007 Mr. Vaknin served as the Chief Executive Officer of Phoenix Investments and Finance Ltd. From 2004 to 2005 Mr. Vaknin served as the Vice Chief Executive Officer of I.D.B Development Company Ltd. Prior to that Mr. Vaknin was a Senior Partner at Kesselman & Kesselman C.P.A.s, a member firm of PricewaterhouseCoopers International Limited. Mr. Vaknin is a CPA and holds a BA in Economics and Accounting from the Hebrew University in Jerusalem.
Dorit Ben Simon has served as an external director of Ellomay since December 20, 2023. Ms. Ban Simon serves as the Founder & Managing Partner of BSS Capital and as a President of IFI, the primary educational entity for the local financial services industry. Ms. Ben Simon previously served as a CFO and Group Chief Risk Officer (CRO) at Israel Discount Bank (2006-2011). Prior to Discount Bank, Ms. Ben Simon was CEO of Gmulot, the leading asset management company in Israel and a subsidiary of Bank Hapoalim (2001-2006). Ms. Ben Simon serves as an external director of Massivit 3D Printing Technologies Ltd. (TASE: MSVT) since 2021 and served as an independent director of Meshek Energy-Renewable Energies Ltd. (TASE: MSKE) from 2020 to 2022, Energix-Renewable Energies Ltd. (TASE: ENRG) from 2012 to 2018 and Knafaim Holdings Ltd. (TASE: KNFM) from 2012 to 2021. Ms. Ben Simon holds an M.B.A in Finance and Banking and a B.A in Economy and General Studies, both from the Hebrew University in Jerusalem.
Kalia (Weintraub) Rubenbach has served as our chief financial officer since January 2009. Prior to her appointment as our chief financial officer, Ms. Rubenbach served as our corporate controller from January 2007 and was responsible, among her other duties, for the preparation of all financial reports. Prior to joining Ellomay, she worked as a certified public accountant in the AABS High-Tech practice division of the Israeli accounting firm of Kost Forer Gabbay & Kasierer, an affiliate of the international public accounting firm Ernst & Young, from 2005 through 2007 and in the audit division of the Israeli accounting firm of Brightman Almagor Zohar, an affiliate of the international public accounting firm Deloitte, from 2003 to 2004. Ms. Rubenbach holds a B.A. in Economics and Accounting and an M.B.A. from the Tel Aviv University and is licensed as a CPA in Israel.
Maya Shaltiel has served as our Chief Strategy Officer since September 2025. Prior to that Ms. Shaltiel served as a consultant to the Company since April 2024. Ms. Shaltiel is a strategic dealmaker and entrepreneur with extensive experience in cross-border energy transactions. She has led negotiations with global energy companies, institutional investors, and private equity funds, with a proven ability to align diverse stakeholders across geographies and drive successful outcomes. Prior to joining Ellomay, Ms. Shaltiel founded MISA, an international boutique advisory firm, advising CEOs of publicly listed renewable energy companies on international expansion and strategic partnerships, and led utility-scale renewable energy initiatives in emerging markets, including establishing joint ventures and driving strategic partnerships with global partners. Ms. Shaltiel previously held senior consulting roles at Deloitte, and served as a member of the global management team at Baker Tilly International, where she led the development and execution of regional strategy across 92 member firms and drove cross-border collaboration. Ms. Shaltiel holds an M.B.A. with honors from a Columbia School program, and a B.A. in Economics and Management from Ben Gurion University (with honors).
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There are no family relationships among any of the directors or members of senior management named above. In April 2025, we and Mr. Yehuda Saban, our former Director of Operations for Israel and EVP of Business Development, agreed that his contract with the Company will terminate effective September 30, 2025. As of July 2025, Mr. Ori Rosenzweig’s employment as our Chief Investment Officer ended.
In March 2026, in connection with the sale of shares held by our former controlling shareholders to Nofar, Ms. Anita Leviant and Mr. Ehud Gil resigned from our Board of Directors and Ms. Odelya Ohayon and Mr. Gilad Mamlok were appointed to fill the vacancies created. Mr. Mamlok was appointed as a member of the Audit Committee and Compensation Committee, replacing Ms. Leviant.
Salaries, fees, commissions, share compensation and bonuses paid or accrued with respect to all of our directors and senior management as a group in the fiscal year ended December 31, 2025 was approximately €1.42 million, including an amount of approximately €0.1 million related to pension, retirement and other similar benefits (includes payments made to Ms. Shaltiel in consideration for consulting services provided to us prior to her appointment as an officer). These figures do not include the compensation of Mr. Ran Fridrich, our Chief Executive Officer and a member of our Board, who was compensated pursuant to a Management Services Agreement (see “Item 7.B: Related Party Transactions” below) and has, in connection with such agreement, waived his right to receive the compensation, including options, paid to our other directors. These fees also do not include the compensation of Mr. Sheizaf, who was appointed as our Chairman of the Board on November 25, 2024 and was compensated pursuant to an Active Chairman Agreement more fully described below.
The table below reflects the cost of employment of our five most highly compensated “office holders” (as such term is defined in the Companies Law) during or with respect to the year ended December 31, 2025. All amounts reported in the table below are as recognized in our financial statements for the year ended December 31, 2025.
For more information concerning option grants to office holders see “Item 6.E: Share Ownership.”
In January 2026, our Compensation Committee and Board of Directors approved a discretionary and special contingent bonus for Mr. Rubenbach (in the amount of six monthly salaries) and Ms. Shaltiel (in the amount of three monthly salaries) to be paid in the event such officer will remain an officer for a period of eighteen months commencing upon the change of control (which was consummated on March 4, 2026). In the event the officer’s employment will terminate prior to such period she will be entitled to receive the bonus if she resigned under circumstances that are deemed as termination of employment under Israeli law or if we terminate her employment other than under certain circumstances (such as termination under circumstances that entitle the employer not to pay severance payments under Israeli law).
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Management Services Agreement
As our annual shareholders meeting held on August 12, 2021, or the 2021 Shareholders Meeting, our shareholders approved, following the approval by our Audit and Compensation Committee and Board of Directors, an Amended and Restated Management Services Agreement, or the Management Services Agreement, effective July 1, 2021, which provided, among other things, for the payment of NIS 1.386 million (approximately €0.365 million) per year to Meisaf Blue & White Holdings Ltd., a private company controlled by Shlomo Nehama, or Meisaf, in consideration for the services provided by Meisaf, including the service of Mr. Nehama as our Chairman of the Board in no less than a 77% position and the payment of NIS 1.8 million (approximately €0.474 million) per year to Kanir and Keystone R.P. Holdings and Investments Ltd., a private company wholly-owned by Mr. Ran Fridrich, or Keystone (in an initial allocation of NIS 0.66 million to Kanir and NIS 1.14 million to Keystone or such other division as notified in writing to the Company by Kanir and Keystone) in consideration for service provided by these entities, including the service of Mr. Fridrich as our Chief Executive Officer and a director.
At our annual shareholders meeting held on July 25, 2024, or the 2024 Shareholders Meeting, our shareholders approved, following the approval by our Audit and Compensation Committee and Board of Directors, the extension of the Management Services Agreement through June 30, 2027 and the update of the management fees based on indexation to the Israeli CPI to an annual payment of approximately NIS 1.5413 million (approximately €0.406 million) to Meisaf and approximately NIS 2 million (approximately €0.527 million) to Kanir and Keystone.
The management fee is the full and final compensation for the provision of the services and shall be in lieu of any and all payments that are due to the Service Providers as Board members, including the right to receive the options to purchase ordinary shares of the Company in accordance with the Company’s 1998 Share Option Plan for Non-Employee Directors.
Kanir, Meisaf and Keystone serve as independent contractors of the Company and each of them is solely responsible to any payment it is required to pay its employees and representatives and undertake to indemnify the Company in the event the Company suffers any damage due to a determination that any of them or their affiliates are employees of the Company.
The Management Services Agreement be in effect until the earlier of: (i) June 30, 2027, (ii) the termination of service of Messrs. Nehama and Fridrich on our Board of Directors, (iii) a date that is six (6) months following the delivery of a written termination notice by Meisaf, Kanir and Keystone to the Company or by the Company to Meisaf, Kanir and Keystone, or (iv) the cessation of provision of Chairman and CEO services. In the event only Meisaf ceases to provide services or only Keystone and Kanir cease to provide services, the Management Services Agreement will continue in full force and effect with respect to the other parties, mutatis mutandis; and
On November 25, 2024, Mr. Shlomo Nehama resigned his position as Chairman of the Board and the Management Services Agreement was immediately terminated pursuant to its terms with respect to Meisaf. The Management Services Agreement continued in effect with respect to services provided by Kanir and Keystone through Mr. Ran Fridrich, who serves as our CEO and Board member.
For more information see “Item 7.B: Related Party Transactions.”
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Active Chairman Agreement
On November 25, 2024, Mr. Ben Sheizaf was appointed as a Board member and the Chairman of our Board of Directors. At an extraordinary meeting of the Company’s shareholders held on January 30, 2025, our shareholders approved, following the approval of the Compensation Committee and out Board of Directors, the execution of an Active Chairman Agreement with Mr. Sheizaf, effective November 25, 2024. Pursuant to the Active Chairman Agreement, Mr. Sheizaf is entitled to receive an annual fee of NIS 1.2 million (approximately €0.316 million) for his services as an active Chairman at a 60% position, paid on a quarterly basis and updated based on changes in the Israeli CPI on December 1 of each year commencing December 1, 2025.
For further information concerning the Management Services Agreement and an Active Chairman Agreement executed with Mr. Ben Sheizaf, our Chairman of the Board, see “Item 10.C: Material Contracts” and the Management Services Agreement and Active Chairman Agreement included as Exhibit 4.16 and Exhibit 4.23, respectively, under “Item 19: Exhibits.”
Compensation of Non-Executive Directors
As approved by our shareholders, we pay our non-executive directors (Daniel Vaknin, Dorit Ben Simon, Odelya Ohayon and Gilad Mamlok) remuneration for their services as directors. These directors are paid in accordance with the Companies Regulations (Rules for Compensation and Expenses of External Directors), 5760-2000, or the Compensation Regulations. The Compensation Regulations set forth a range of fees that may be paid by Israeli public companies to their external directors, depending upon each company’s equity based on the most recent financial statements. The cash amounts paid to our external directors pursuant to the Compensation Regulations, as approved by our shareholders, are the average between the minimum amount and the fixed amount permitted by the Compensation Regulations for companies that are in the range of shareholders’ equity of the Company, which currently amount to an annual fee of NIS 71,730 (approximately €19,151) and an attendance fee of NIS 2,610 (approximately €697) per meeting (board or committee). These amounts are updated once a year based on increases in the Israeli Consumer Price Index. According to the Compensation Regulations, which we apply to all our non-executive directors, the directors are entitled to 60% of the meeting fee if they participated at the meeting by teleconference and not in person, and to 50% of the meeting fee if resolutions were approved in writing, without convening a meeting.
Each of these non-executive directors also receives an annual grant of options to purchase 1,000 ordinary shares under the terms and conditions set forth in our 1998 Share Option Plan for Non-Employee Directors, or the 1998 Plan. The 1998 Plan provides for grants of options to purchase ordinary shares to our non-employee directors. The 1998 Plan, as amended, is administered, subject to Board approval, by the Compensation Committee and our Board. An aggregate amount of not more than 75,000 ordinary shares was initially reserved for grants under the 1998 Plan. The term of the 1998 Plan has been extended to December 8, 2028, unless earlier terminated by our Board.
Under the 1998 Plan, a “Grant Date” means August 1 of each year. The 1998 Plan provides that each of our non-employee directors automatically receives on such director’s first day as a director an option to purchase up to 1,000 ordinary shares pro-rated based on the number of full months of service between the prior Grant Date and the next Grant Date. Each such non-employee director would also automatically receive, on each subsequent Grant Date, an option to purchase 1,000 ordinary shares provided that he or she is a non-employee director on the Grant Date and has served as a non-employee director for the entire period since his or her previous Grant Date.
The exercise price of the option shares under the 1998 Plan is 100% of the fair market of such ordinary shares at the applicable Grant Date. The exercise price is required to be paid in cash.
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The term of each option granted under the 1998 Plan is 10 years from the applicable date of grant and such options may be terminated earlier upon certain circumstances, such as the expiration of three months from the date of the director’s termination of service on our Board (subject to extension and certain exceptions pursuant to the terms of the 1998 Plan). Currently, the options granted to non-employee directors vest in one installment on the first anniversary of the grant date of the options.
The options granted are subject to restrictions on transfer, sale or hypothecation. All options and ordinary shares issuable upon the exercise of options granted to our non-employee directors could be withheld until the payment of taxes due (if any) with respect to the grant and exercise of such options.
For more information concerning our share option plans and options granted to directors and an executive officer see “Item 6.E: Share Ownership.”
Compensation Policy and Approval Process of Directors’ and Officers’ Terms of Service and Employment
The Companies Law regulates the approval process of arrangements with “office holders” as to their terms of service or employment, including the grant of an exemption, insurance, undertaking to indemnify or indemnification, retirement bonuses and any other benefit, payment or undertaking to pay any such amounts, given due to service or employment, or together, the Terms of Service and Employment. An “office holder” is defined under the Companies Law as a general manager, chief business manager, vice general manager, any other person assuming the responsibilities of any of the foregoing positions without regard to such person’s title, and a director, or manager directly subordinate to the general manager. Each person identified as a director or member of our senior management in the first table in this Item is an office holder.
Compensation Policy
The Companies Law requires the board of directors of a public company to adopt a policy with respect to the Terms of Service and Employment of office holders, after taking into consideration the recommendations of the compensation committee. The Companies Law further provides for the approval of the compensation policy by the company’s shareholders with a “special majority” requirement, i.e. the affirmative vote of the holders of a majority of the shares present, in person or by proxy, and voting on the matter provided that at least one of the following conditions is met: (i) the shares voting in favor of the matter include at least a majority of the shares voted by shareholders who are not controlling shareholders and who do not have a personal interest in the approval of the compensation policy (or the transaction, as the case may be) or (ii) the total number of shares voted against the compensation policy by shareholders referenced under (i) does not exceed 2% of the company’s outstanding voting rights.
A compensation policy for a period exceeding three years is required to go through the complete approval process once every three years. In addition, the board of directors is required to periodically examine the compensation policy and the need for adjustments based on the considerations in determining a compensation policy in the event of a material change in the circumstances prevailing during the adoption of the compensation policy or for other reasons.
At our annual general meeting of shareholders held on December 11, 2023, or the 2023 Shareholders Meeting, our shareholders approved our amended compensation policy, or the Compensation Policy.
Our Compensation Policy is designed to support the achievement of our long term work plan goals and ensure that: (i) officer’s interests are as closely as possible aligned with the interests of our shareholders; (ii) the correlation between pay and performance will be enhanced; (iii) we will be able to recruit and retain top level senior managers capable of leading us to further business success and facing the challenges ahead; (iv) officers will be motivated to achieve a high level of business performance without taking unreasonable risks; and (v) an appropriate balance will be established between different compensation elements – fixed vs. variable, short term vs. long term and cash payments vs. equity based compensation. Our Compensation Policy is filed by us as Exhibit 4.5 under “Item 19: Exhibits.”
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Approval Process of Terms of Service and Employment of Office Holders
The Companies Law provides that the process for approval of Terms of Service and Employment of office holders, that are required to be for the benefit of the company, is as follows:
In the event the transaction with any office holder is not in accordance with the compensation policy, the approval of the company’s shareholders, by “special majority,” is also required. In the event the company’s shareholders do not approve the compensation of the CEO or other office holders (who are not directors, controlling shareholders or relatives of the controlling shareholders), the compensation committee and board of directors may, in special situations, approve the transaction, subject to their providing detailed reasons and after discussion and examination of the rejection by the company’s shareholders. The Companies Regulations (Relief in Related Party Transactions), 2000, promulgated under the Companies Law, or the Relief Regulations, provide additional temporary or permanent relief from the shareholder approval requirement under certain circumstances.
Clawback Policy
On October 30, 2023, we adopted a Clawback Policy based on the SEC requirements for NYSE American listed companies. This policy is included as Exhibit 97.1 under “Item 19: Exhibits.”
Until July 2025, we were a “controlled company” as defined in Section 801 of the NYSE American LLC Company Guide. As a result, we were exempt from certain of the NYSE American LLC corporate governance requirements, including the requirement that a majority of the board of directors be independent, the requirement applicable to the nomination process of directors and the requirements applicable to the determination or recommendation of executive compensation by a committee comprised of independent directors or by a majority of the independent directors and the additional requirements concerning compensation committee independence, compensation advisor engagement and independence. Commencing July 2025, we are no longer a “controlled company” and have elected to follow Israeli law (“home country law”), which we currently follow, with respect to certain matters. For more information see “Item 16.G: Corporate Governance.”
According to the provisions of our Second Amended and Restated Articles, or the Articles, and the Companies Law, our Board convenes in accordance with our requirements, and is required to convene at least once every three months. Furthermore, the Companies Law provides that the board of directors may also adopt resolutions without actually convening, provided that all the directors entitled to participate in the discussion and vote on a matter that is brought for resolution agree not to convene for discussion of the matter.
Our chief executive officer serves at the discretion of the board of directors.
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Terms of Directors
Our Board currently consists of six members, including two external directors. Pursuant to our Articles, unless otherwise prescribed by resolution adopted at a general meeting of our shareholders, our Board shall consist of not less than four (4) nor more than eight (8) directors (including the external directors). Except for our two external directors, the members of our Board are elected annually at our annual shareholders’ meeting and remain in office until the next annual shareholders’ meeting, unless the director has previously resigned, vacated his office, or was removed in accordance with the Articles. Our most recent annual meeting (the 2025 Annual Meeting), was held on October 23, 2025. Our Board, by unanimous approval of all directors then in office, may at any time appoint any person to serve as director as replacement for a vacated office or in order to increase the number of directors, subject to the condition that the number of directors shall not exceed the maximum established in the Articles. Any so appointed director shall remain in office until the next Annual Meeting, at which he may be reelected.
Pursuant to the Companies Regulations (Relief for Companies whose Securities are Listed for Trading on a Stock exchange Outside of Israel), 2000, one or more shareholders holding at least 5% of the voting rights at the general meeting may request the Board of Directors to include the election of a nominee director or the removal of a director from office on the agenda of a future shareholders’ meeting.
The members of our Board do not receive additional remuneration upon termination of their services as directors.
External Directors
We are subject to the provisions of the Companies Law, which requires that we, as a public company, have at least two external directors.
Under the Companies Law, a person may not be appointed as an external director if he or his relative, partner, employer or any entity under his control has or had during the two years preceding the date of appointment any affiliation with the company, any entity controlling the company or any entity controlled by the company or by this controlling entity or, in a company that does not have a controlling shareholder, in the event that he has affiliation, at the time of his appointment, to the chairman of the board, chief executive officer, a 5% shareholder or the highest ranking officer in the financial field. The term “affiliation” includes: an employment relationship, a business or professional relationship maintained on a regular basis, control, and service as an office holder. No person can serve as an external director if the person’s position or other business creates, or may create, conflicts of interest with the person’s responsibilities as an external director, or if the person is an employee of the Israel Securities Authority or of an Israeli stock exchange. In addition, an individual may not be appointed as an external director if she or he, or her or his relative, partner, employer, supervisor, or an entity she or he controls, has other than negligible business or professional relations with any of the persons with which the external director may not be affiliated, even if such relations are not routine, or if she or he received any consideration, directly or indirectly, in addition to the remuneration to which she or he are entitled and to reimbursement of expenses, for acting as a director in the company. The Compensation Regulations set the range of compensation and the terms of other compensation that may be paid to statutory external directors.
Pursuant to the Companies Law, the election of an external director for the initial term requires the affirmative vote of a majority of the shares present, in person or by proxy, and voting on the matter, provided that either: (i) at least a majority of the shares of non-controlling shareholders and shareholders who do not have a personal interest in the resolution (excluding a personal interest that is not related to a relationship with the controlling shareholders) are voted in favor of the election of the external director, or (ii) the total number of shares of non-controlling shareholders and of shareholders who do not have a personal interest in the resolution (excluding a personal interest that is not related to a relationship with the controlling shareholders) voted against the election of the external director does not exceed two percent of the outstanding voting power in the company.
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The initial term of an external director is three years. An external director may be re-elected to serve for two additional three-year terms in one of the two following methods: (i) the board of directors proposed the nomination of the external director for an additional term and her or his appointment is approved by the shareholders in the manner required to appoint external directors for an initial term as set forth above, or (ii) in the event a shareholder holding 1% or more of the voting rights nominates the external director for an additional term or in the event the external director nominates himself or herself for an additional term, the nomination is required to be approved by a majority of the votes cast by the shareholders of the company; provided that: (x) the votes of controlling shareholders, the votes of shareholders who have a personal interest in the approval of the appointment of the external director, other than a personal interest that is not as a result of such shareholder’s connections to the controlling shareholder, and abstaining votes are excluded from the counting of votes and (y) the aggregate votes cast by shareholders in favor of the nomination that are counted for purposes of calculating the majority exceeds two percent of the voting rights in the company. The external director nominated by shareholders may not be a related or competing shareholder or a relative of such shareholder at the date of appointment and may not have an affiliation to a related or competing shareholder at the date of appointment or for the two-year period prior to the appointment. A “related or competing shareholder” is defined by the Companies Law as the shareholder that proposed the nomination or a significant shareholder (a shareholder holding five percent or more of the outstanding shares of a company or of the voting rights in a company), provided that at the date of appointment of the external director such shareholder, its controlling shareholder or a corporation controlled by either of them, have business connections with the company or are competitors of the company. The term “affiliation” is defined as set forth above. In addition, Israeli companies listed on certain stock exchanges outside Israel, including the NYSE American LLC, such as our company, may appoint an external director for additional terms of not more than three years each subject to certain conditions. Such conditions include the determination by the audit committee and board of directors, that in view of the external director’s professional expertise and special contribution to the company’s board of directors and its committees, the appointment of the external director for an additional term is in the best interest of the company.
All the external directors of a company must be members of its audit committee and compensation committee and at least one external director is required to serve on every committee authorized to exercise any of the powers of the board of directors. Our external directors are currently Daniel Vaknin and Dorit Ben Simon.
Under the Companies Law an external director cannot be dismissed from office unless: (i) the board of directors determines that the external director no longer meets the statutory requirements for holding the office, or that the external director is in breach of the external director’s fiduciary duties and the shareholders vote, by the same majority required for the appointment, to remove the external director after the external director has been given the opportunity to present his or her position; (ii) a court determines, upon a request of a director or a shareholder, that the external director no longer meets the statutory requirements of an external director or that the external director is in breach of his or her fiduciary duties to the company; or (iii) a court determines, upon a request of the company or a director, shareholder or creditor of the company, that the external director is unable to fulfill his or her duty or has been convicted of specified crimes. For a period of two years following the termination of services as an external director, the company, its controlling shareholder and any entity the controlling shareholder controls may not provide any benefit to such former external director, directly or indirectly. The prohibited benefits include the appointment as an office holder in the company or the controlled entity, employment of, or receipt of professional services from, the former external director for compensation, including through an entity such former external director controls. The same prohibition applies to the former external director’s spouse and child for the same two-year period and to other relatives of the external director for a period of one year following the termination of services as an external director.
The Companies Law requires that at least one of the external directors have “Accounting and Financial Expertise” and the other external directors have “Professional Competence.” Under the applicable regulations, a director having accounting and financial expertise is a person who, due to his or her education, experience and talents is highly skilled in respect of, and understands, business-accounting matters and financial reports in a manner that enables him or her to understand in depth the company’s financial statements and to stimulate discussion regarding the manner in which the financial data is presented. Under the applicable regulations, a director having professional competence is a person who has an academic degree in either economics, business administration, accounting, law or public administration or an academic degree in an area relevant to the company’s business, or has at least five years’ experience in a senior position in the business management of a corporation with a substantial scope of business, in a senior position in the public service or a senior position in the field of the company’s main business. Our Board determined that both Daniel Vaknin and Dorit Ben Simon have the requisite accounting and financial expertise.
Our Board further determined that at least two directors out of the whole Board shall be required to have accounting and financial expertise pursuant to the requirements of the Companies Law and previously determined that Ben Sheizaf shall be designated as an accounting and financial expert as well.
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Independent Directors Pursuant to the Companies Law
In addition to the external director, the Companies Law includes another category of directors, which is the “independent” director. An independent director is either an external director or a director appointed or classified as such who meets the same non-affiliation criteria as an external director, as determined by the company’s audit committee, and who has not served as a director of the company for more than nine consecutive years (subject to the right granted to certain companies, including companies whose shares are listed on the NYSE American LLC, to permit independent directors to serve as such for periods exceeding nine years). For these purposes, ceasing to serve as a director for a period of two years or less would not be deemed to sever the consecutive nature of such director’s service.
Pursuant to the Companies Law, we, as a public company, may include in our articles of association a provision providing that a specified number of our directors be independent directors or may adopt a standard provision providing that a majority of our directors be independent directors or, if there is a controlling shareholder or a 25% or more shareholder, that at least one-third of our directors be independent directors. We have not included a provision requiring that a certain percentage of the members of our Board be independent directors.
Independent Directors pursuant to the NYSE American LLC Requirements
In general, the NYSE American LLC Company Guide requires that a NYSE American LLC listed company have a majority of independent directors, as defined under the NYSE American LLC Company Guide, on its board of directors. Because we are a “controlled company” as defined in Section 801 of the NYSE American LLC Company Guide, we are exempt from this requirement. If the “controlled company” exemption would cease to be available to us under the NYSE American LLC Company Guide, we may instead elect to continue to follow Israeli law.
Our Board determined that four of the members of our Board, Ms. Ohayon, Mr. Mamlok, Ms. Ben Simon and Mr. Vaknin, are “independent” within the meaning of Section 803A of the NYSE American LLC Company Guide.
Alternate Directors
Our Articles provide that, subject to the Board’s approval, a director may appoint an individual, by written notice to us, to serve as an alternate director. The following persons may not be appointed nor serve as an alternate director: (i) a person not qualified to be appointed as a director, (ii) an actual director, or (iii) another alternate director. Any alternate director shall have all of the rights and obligations of the director appointing him or her, except the power to appoint an alternate (unless the instrument appointing him or her expressly provides otherwise). The alternate director may not act at any meeting at which the director appointing him or her is present. Unless the appointing director limits the time period or scope of any such appointment, such appointment is effective for all purposes and for an indefinite time, but will expire upon the expiration of the appointing director’s term. There are currently no alternate directors.
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Duties of Office Holders and Approval of Certain Actions and Transactions under the Companies Law
The Companies Law codifies the duty of care and fiduciary duties that an office holder has to our company.
The duty of care requires an office holder to act at a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to utilize reasonable means to obtain (i) information regarding the appropriateness of a given action brought for his or her approval or performed by the office holder by virtue of his or her position and (ii) all other information of importance pertaining to the foregoing actions.
The duty of loyalty includes avoiding any conflict of interest between the office holder’s position in the company and his or her personal affairs or other positions, avoiding any competition with the company, avoiding exploiting any business opportunity of the company in order to receive personal gain for himself or herself or for others, and disclosing to the company any information or documents relating to the company’s affairs which the office holder has received due to his or her position as such. A company can approve actions by an office holder that could be deemed to be in breach of his or her duty of loyalty provided that: (i) the office holder acted in good faith and the action or its approval do not prejudice the company’s interests, and (ii) the office holder disclosed to the company, a reasonable time prior to the discussion of the approval, the nature of his or her personal interest in the action, including any material fact or document. The approval of such actions is obtained based on the requirements for approval of transactions in which an office holder has a personal interest. The Companies Law provides that for purposes of determining the approval process, “actions” (defined as any legal action or inaction) are treated as “transactions” and “material actions” (defined as an action that may materially affect the company’s profitability, assets or liabilities) are treated as “extraordinary transactions.” An “extraordinary transaction” is defined as a transaction that is not in the ordinary course of business, not on market terms, or that is likely to have a material impact on the company’s profitability, assets or liabilities. One of the roles of the audit committee under the Companies Law is to determine whether a transaction is or is not an extraordinary transaction. These transactions and extraordinary transactions are required to be for the benefit of the company and are subject to a special approval process as set forth below. The Companies Law requires that an office holder of a company promptly disclose to the company’s board of directors any personal interest that he or she may have, and all related material information known to him or her in connection with any existing or proposed transaction by the company. This disclosure must be made by the office holder, whether orally or in writing, no later than the first meeting of the company’s board of directors which discusses the particular transaction.
An office holder is deemed to have a “personal interest” if he has a personal interest in an act or transaction of a company, including a personal interest of his relative or of a corporation in which such office holder or his relative are a 5% or greater shareholder, but excluding a personal interest stemming from the fact of a shareholding in the company. The term “personal interest” also includes a personal interest of a person voting pursuant to a proxy provided to him from another person even if such other person does not have a personal interest and the vote of a person that received a proxy from a shareholder that has a personal interest is viewed as a vote of the shareholder with the personal interest, all whether the discretion with respect to the voting is held by the person voting or not.
Any transaction or action, whether material or extraordinary or not, cannot be approved unless they are for the benefit of the company. In the case of a transaction that is not an extraordinary transaction or an action that is not a material action, after the office holder complies with the above disclosure requirements, only board approval is required. In the case of an extraordinary transaction or a material action, the company’s audit committee and board of directors, and, under certain circumstances, the shareholders of the company, must approve the action or transaction, in addition to any approval stipulated by the articles of the company. For more information concerning the approval process of terms of service and employment of officers, directors, controlling shareholders and their relatives see “Compensation Policy and Approval Process of Directors’ and Officers’ Terms of Service and Employment” above.
For a discussion concerning the determination whether an action is material or not an whether a transaction is extraordinary or not and for a review on the approval process for the terms of services of officers, see “Committees of the Board of Directors – Audit Committee” below.
A director who has a personal interest in a matter that is considered at a meeting of the board of directors or the audit committee may not be present at this meeting or vote on this matter, provided that an office holder who has a personal interest may be present for the presentation of the transaction in the event the chairman of the audit committee or the chairman of the board, as the case may be, determine that she or he are required for the presentation of the transaction, unless a majority of the members of the board of directors or audit committee, as the case may be, have a personal interest in the matter, in which case they may all be present and vote. In the event a majority of the members of the board of directors have a personal interest in a matter, they can participate and vote, however such matter must be also approved by the shareholders of the company.
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Committees of the Board of Directors
Audit Committee
Under the Companies Law, we, as a public company, are required to have an audit committee. The Audit Committee must be comprised of at least three members of the Board, including all of the external directors. In addition, the Companies Law requires that the majority of the members of the audit committee be “independent” (as such term is defined under the Israeli Companies Law) and that the chairman of the audit committee be an external director. The Companies Law further provides that the following may not be members of the audit committee: (a) the chairman of the board of directors; (b) any director employed by or providing services on an ongoing basis to the company, to a controlling shareholder of the company or an entity controlled by a controlling shareholder of the company; (c) a director who derives most of its income from a controlling shareholder; and (d) a controlling shareholder or any relative of a controlling shareholder.
Our Audit Committee, acting pursuant to a written charter adopted based on the requirements of the Companies Law, the rules promulgated under the Exchange Act and the NYSE American LLC Company Guide, currently consists of Daniel Vaknin, who is also the chairman of the Audit Committee, Dorit Ben Simon and Gilad Mamlok. The members of our Audit Committee satisfy the respective “independence” requirements of the Securities and Exchange Commission, NYSE American LLC and Israeli law for audit committee members. During 2025, our Audit Committee met at least once each quarter.
The Companies Law provides that the roles of an audit committee are as follows: (i) monitoring deficiencies in the business management of a company, including by consulting with the internal auditor or independent accountants and suggesting methods of correction of such deficiencies to the board of directors, (ii) determining whether or not certain related party actions and transactions and actions taken by office holders that are “material actions” or “extraordinary transactions” in connection with their approval procedures as more fully described above, (iii) determining in connection with transactions with the controlling shareholder or with a third party in which the controlling shareholder has a personal interest (event if they are not extraordinary transactions) and in connection with transactions with the controlling shareholder or its relative, directly or indirectly, for the receipt of services or in connection with terms of employment or service, a duty to conduct a competitive process, supervised by the audit committee or anyone else appointed by the audit committee and based on criteria determined by the audit committee, or to determine that other procedures determined by the audit committee will be conducted, prior to execution of such transactions, all based on the type of the transaction (the audit committee is permitted to determine criteria for this matter once a year in advance), (iv) determining whether to approve actions and transactions that require audit committee approval under the Companies Law, (v) determining the method of approval of non-negligible transactions (i.e. transactions of a company with a controlling shareholder or with a third party in which the controlling shareholder has a personal interest that the audit committee determined are not extraordinary but are non-negligible), including to determine types of such transactions that will require the approval of the audit committee (the audit committee is permitted to determine a classification of transactions as non-negligible based on criteria determined once a year in advance), (vi) in a company in which the work plan of the internal auditor is approved by the board – examining the work plan before it is submitted to the board and suggesting revisions, (vii) assessing the company’s internal audit system and the performance of its internal auditor and whether the internal auditor has the resources and tools required to it for the performance of its role, taking into account, among others, the special needs and size of the company, (viii) examining the scope of work and compensation of the company’s independent auditor and (ix) setting procedures in connection with the method of dealing with complaints of employees regarding defects in the management of the company’s business and with the protection that will be provided to employees who have complained.
The actions and transactions that require audit committee approval pursuant to the Companies Law are: (i) proposed extraordinary transactions to which we intend to be a party in which an office holder has a direct or indirect personal interest, (ii) actions or arrangements which may otherwise be deemed to constitute a breach of fiduciary duty or of the duty of care of an office holder to us, (iii) certain transactions and extraordinary transaction of the company in which a “controlling shareholder,” that is, a shareholder holding the ability to direct the actions of the company, other than by virtue of being a director or holding a position with the company, including a shareholder holding twenty five percent or more of the voting rights of the company if there is no other shareholder holding over fifty percent of the voting rights of the company, has a personal interest, including certain transactions with a relative of the controlling shareholder and (iv) certain private placements of the company’s shares. In certain circumstances, some of the matters referred to above may also require shareholder approval. For more information concerning the approvals required in connection with transactions in which a controlling shareholder has a personal interest, see “Item 10.B: Memorandum of Association and Second Amended and Restated Articles.”
An audit committee may not approve an action or transaction with a controlling shareholder or with an office holder or in which they have a personal interest unless at the time of approval its composition is as required by the Companies Law.
Our Audit Committee assists our Board in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal accounting controls. Under the Sarbanes-Oxley Act of 2002, the Audit Committee is also responsible for the appointment, compensation, retention and oversight of our independent accountants and takes those actions as it deems necessary to satisfy itself that the accountants are independent of management. However, under the Companies Law the appointment of independent auditors requires the approval of our shareholders, accordingly, the appointment of the independent auditors is approved and recommended to the shareholders by our Audit Committee and Board and ratified by the shareholders. Furthermore, pursuant to our Articles, our shareholders have the authority to determine the compensation of the independent auditors (or empower the Board to establish their remuneration, as they have in the 2025 Shareholders Meeting) and such compensation is approved by our Board following a recommendation of the Audit Committee.
The Audit Committee discussed with the independent registered public accounting firm the matters covered by Statement on Auditing Standards No. 114, as well as their independence, and was satisfied as to the independent registered public accounting firm’s compliance with said standards.
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Compensation Committee
The Companies Law requires the board of directors of a public company to appoint a compensation committee that shall consist of no less than three members, that will include all of external directors (which will constitute a majority of its members of the committee), and that the remainder of the members of the compensation committee be directors whose terms of service and employment were determined pursuant to the Compensation Regulations. In addition, the Companies Law imposes the same restrictions on the actions and membership in the compensation committee as are discussed above under “Audit Committee” with respect to, among other things, the requirement that an external director serve as the chairman of the committee and the list of persons who may not serve on the committee. Our Compensation Committee currently consists of Daniel Vaknin, who is also the chairman of the Compensation Committee, Dorit Ben Simon and Gilad Mamlok.
The Companies Law sets forth the roles of the compensation committee as follows: (i) to recommend to the board on a compensation policy for office holders and to recommend to the board, once every three years, on the approval of the continued validity of the compensation policy for a period that was determined for a period exceeding three years; (ii) to recommend to the board to update the compensation policy from time to time and to examine its implementation; (iii) to determine whether to approve the Terms of Service and Employment of office holders that require the committee’s approval; and (iv) to exempt a transaction from the requirement for shareholders approval (as more fully described below).
The Companies Law provides that an audit committee that meets the criteria for the composition of a compensation committee, such as our Audit Committee, can also act as the compensation committee.
Indemnification, Exemption and Insurance of Executive Officers and Directors
Consistent with and subject to the provisions of the Companies Law, our Articles permit us to procure insurance coverage for our office holders, exempt them from certain liabilities and indemnify them, to the fullest extent permitted by law.
The Israeli Securities Law, 5728-1968, or the Securities Law, and the Companies Law, authorize the Israeli Securities Authority to impose administrative sanctions against companies and their office holders for certain violations of the Israeli Securities Law or the Companies Law. These sanctions include monetary sanctions and certain restrictions on serving as a director or senior officer of a public company for certain periods of time. The maximum amount of the monetary sanctions that could be imposed upon individuals is a fine of NIS 1 million (equivalent to approximately €0.25 million), plus payments to persons who suffered damages as a result of the violation in an amount equal to the higher of: (i) compensation for damages suffered by all injured persons, up to 20% of the fine imposed on the violator, or (ii) the amount of profits earned or losses avoided by the violator as a result of the violation, up to the amount of the applicable monetary sanction.
The aforementioned provisions of the Companies Law and the Securities Law generally provide that a company cannot indemnify or provide liability insurance to cover monetary sanctions. However, these provisions do permit reimbursement by indemnification and insurance of specific liabilities. Specifically, legal expenses (including attorneys’ fees) incurred by an individual in the applicable administrative enforcement proceeding and any compensation payable to injured parties for damages suffered by them as described in clause (i) of the immediately preceding paragraph are permitted to be reimbursed via indemnification or insurance, provided that such reimbursements are permitted by the company’s articles of association.
Indemnification
As permitted by the Companies Law, our Articles provide that we may indemnify an office holder in respect of a liability or expense which is imposed on him or incurred by him as a result of an action taken in his capacity as an office holder of the Company in connection with the following:
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Our Articles authorize us, from time to time and subject to any provision of the law, to undertake in advance to indemnify an office holder for any of the following: (i) any liability as set out in (a) above, provided that the undertaking to indemnify is limited to the classes of events which in the opinion of our Board can be anticipated in light of our activities at the time of giving the indemnification undertaking, and for an amount and/or criteria which our Board has determined are reasonable in the circumstances and, the events and the amounts or criteria that our Board deem reasonable in the circumstances at the time of giving of the undertaking are stated in the undertaking; (ii) any liability stated in (b) through (d) above; and any matter permitted by applicable law. Our Articles also authorize us to indemnify an office holder after the occurrence of the event which is the subject of the indemnity and with respect to any matter permitted by applicable law.
At our annual shareholders meeting held on June 21, 2018, or the 2018 Shareholders Meeting, our shareholders authorized us to revise the indemnification, insurance and exemption provisions of our Articles and further authorized us, following the approval of our Compensation Committee and Board of Directors, to provide amended indemnification undertakings and exemption to each of our current and future office holders. At our shareholders’ meeting held on December 17, 2020, our shareholders approved, with the requisite special majority, the grant of an indemnification undertaking to Mr. Ehud Gil as a relative of a controlling shareholder. At our 2024 Shareholders Meeting, our shareholders approved, with the requisite special majority, the grant and extension of indemnification undertakings to our office holders who may be deemed to be “controlling shareholders” (at the time Messrs. Nehama and Fridrich).
The indemnification undertakings provided by us are limited to certain categories of events and the aggregate indemnification amount that we shall pay (in addition to sums payable by insurance companies) for monetary liabilities imposed on, or incurred by, the director or officer pursuant to all the indemnification undertakings issued by us to our directors and officers is also limited. Under the indemnification undertakings provided by us prior to the 2018 Shareholders Meeting, the aggregate indemnification amount payable by us for monetary liabilities may not exceed an amount equal to the higher of: (i) fifty percent (50%) of our net equity at the time of indemnification, as reflected on our most recent financial statements at such time, or (ii) our annual revenue in the year prior to the time of indemnification. Under the indemnification undertakings provided by us subsequent to the 2018 Shareholders Meeting and in line with the limitation currently included in our Compensation Policy, the aggregate indemnification amount payable by us for monetary liabilities, shall not exceed an amount equal to 25% of our shareholders’ equity according to the latest reviewed or audited consolidated financial statements approved by our Board of Directors prior to the date on which the indemnification amount is paid. Our previous form of indemnification undertaking is attached hereto as Exhibit 4.3 and our current form of indemnification undertaking and exemption, granted to office holders commencing the 2018 Shareholders Meeting, is attached hereto as Exhibit 4.4, both under “Item 19: Exhibits.”
In such indemnification undertakings, we also, among other things, undertake to (i) produce collateral, security, bond or any other guarantee that the director or officer may be required to produce as a result of any interim legal procedure (other than criminal procedures involving the proof of criminal thought), all up to the maximum indemnification amount set forth above; and (ii) maintain a liability insurance policy with a reputable insurer to the extent permitted by the Companies Law, for all of our directors and officers, in a total amount of not less than $10 million during the period the recipient of the indemnity undertaking serves as a member of our board of directors or as an officer and for a period of seven years thereafter.
Based on the previous approvals of our Audit and Compensation Committee, Board and shareholders, we granted indemnification undertakings as explained above to each of our office holders and expect that we will provide them to our future office holders.
Exemption
Under the Companies Law, an Israeli company may not exempt an office holder from liability for a breach of his duty of loyalty, but may exempt in advance an office holder from his liability to the company, in whole or in part, for a breach of his duty of care, provided that in no event shall a director be exempt from any liability for damages caused as a result of a breach of his duty of care to the company in the event of a “distribution” (as defined in the Companies Law). Our Articles authorize us to, subject to the provisions of the Companies Law, exempt an office holder from all or part of such office holder’s responsibility or liability for damages caused to us due to any breach of such office holder’s duty of care towards us.
At our 2018 Shareholders Meeting, our shareholders authorized an amendment to our Articles, in line with the limitation currently included in our Compensation Policy, providing that we may not, subsequent to the 2018 Shareholders Meeting, grant exemption letters to office holders for an action or transaction in which a controlling shareholder (as such term is defined in the Companies Law) or any other office holder (including an office holder who is not the office holder we have undertaken to exempt) has a personal interest (as such term is defined in the Companies Law). At our 2018 Shareholders Meeting, our shareholders also approved a new form of Indemnification Undertaking and Exemption to be granted to all of our current and future office holders, which includes the foregoing limitation and further provides that no exemption will be granted in respect of any counterclaim of the Company filed against the office holder in response to a claim filed by the office holder against the Company, except if the office holder’s claim relates to his or her labor law rights and/or his or her individual employment agreement with the Company or any of its subsidiaries.
As noted above, we granted the new form of Indemnification Undertaking and Exemption to all our current directors and officers and intend to provide it to our future directors and officers.
Insurance
As permitted by the Companies Law, our Articles provide that we may enter into an agreement for the insurance of the liability of an office holder, in whole or in part, with respect to any liability which may imposed upon such office holder as a result of an act performed by same office holder in his capacity as an office holder of the Company, for any of the following: (a) a breach of a cautionary duty toward the Company or toward another person; (b) a breach of a fiduciary duty toward the Company, provided the office holder acted in good faith and has had reasonable ground to assume that the act would not be detrimental to the Company; (c) a monetary liability imposed upon an office holder toward another; (d) reasonable litigation expenses, including attorney fees, incurred by the office holder as a result of an administrative enforcement proceeding instituted against him (without derogating from the generality of the foregoing, such expenses will include a payment imposed on the office holder in favor of an injured party as set forth in Section 52[54](a)(1)(a) of the Securities Law and expenses that the office holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law or in connection with Article D of Chapter Four of Part Nine of the Companies Law, including reasonable legal expenses, which term includes attorney fees); and (e) expenses, including reasonable litigation expenses, including attorney fees, incurred by the office holder with respect to a proceeding in accordance with the Restrictive Trade Practices Law. Our Articles further permit us to enter into such an agreement with respect to any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an office holder in the Company.
As stated above, in the indemnification undertakings approved by our Audit and Compensation Committee, Board and shareholders and provided to our directors and officers, we have undertaken to maintain a liability insurance policy with a reputable insurer to the fullest extent currently permitted by the Companies Law and our Articles, for all of our directors and officers, in a total amount of not less than $10 million during the period the recipient of the indemnity undertaking serves as a member of our board of directors or as an officer, and for a period of seven years thereafter.
The current coverage of our directors’ and officers’ liability insurance policy is $15 million. At our 2025 Annual Meeting, our shareholders approved, following the approval of our Compensation Committee and Board, the terms and conditions for the renewal, extension and/or replacement, from time to time, of our directors’ and officers’ liability insurance policy for all current and future directors and officers (including office holders who may be deemed to be controlling shareholders or relatives of controlling shareholders, within the meaning of the Companies Law) as follows: (i) the coverage limit per claim and in the aggregate under the policy may not exceed $15 million; (ii) the premium paid for such policy for a 12 month period may be up to $900,000 per year, and (iii) our Compensation Committee is and will be authorized to increase coverage and/or the maximum annual premium set forth under (ii) above by up to 30% in any year, as compared to the previous year, without additional shareholders’ approval. Based on these and prior approvals, we obtained directors’ and officers’ liability insurance covering our directors and officers. Our Compensation Policy provides that our office holders will be covered by a Directors and Officers insurance liability policy, to be periodically purchased us, subject to the requisite approvals under the Companies Law, including run-off insurance for a period of up to seven years, and that the coverage limit per claim and in the aggregate under the policy may not exceed $15 million and our Compensation Committee is and will be authorized to increase coverage by up to 30% in any year, as compared to the previous year.
In addition, the Relief Regulations provide that in the event the compensation committee and board of an Israeli public company determine that the insurance provided to our office holders who are deemed to be controlling shareholders or to the chief executive officer is: (i) upon terms identical to those provided to the company’s other officers and directors, (ii) on market conditions, and (iii) not likely to materially affect the company’s profitability, assets or liabilities, the approval of shareholders for the provision of liability insurance to such office holders is not required.
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In connection with the change of control transaction in March 2026, our Audit and Compensation Committee and our Board of Directors approved the purchase of a runoff directors and officers liability insurance policy for a seven-year period and the purchase of a new directors and officers liability insurance policy commencing on the date of change of control. The approvals were in accordance with the terms of our Compensation Policy, the resolution approved at the 2025 Annual Shareholders Meeting and the provisions of the Relief Regulations, which provide that obtaining directors and officers liability insurance policies shall not require approval by the shareholders and may be approved by the Compensation Committee alone, provided that the terms of the engagement are set forth in the company’s compensation policy (that has been approved by the company’s shareholders with the requisite majority under the Companies Law); and provided further that the engagement is on market terms and is not likely to materially affect the company’s profitability, assets, or liabilities. In connection with the acquisition of the runoff policy and the new policy (for an 18-month period) we paid approximately $0.31 million (after an offset of approximately $0.33 million in connection with the cancellation of the policy that was in effect on the date of the change of control) and $0.385 million, respectively.
Limitations on Indemnification, Exemption and Insurance
The Companies Law provides that a company may not exempt or indemnify an office holder nor enter into an insurance contract which would provide coverage for liability incurred as a result of any of the following: (a) a breach by the office holder of his or her duty of loyalty (however, a company may insure and indemnify against such breach if the office acted in good faith and had reasonable cause to assume that his act would not prejudice the company’s interests); (b) a breach by the office holder of his or her duty of care if the breach was done intentionally or recklessly, unless made in negligence only; (c) any act or omission done with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary sanction or penalty levied against the office holder. According to the Securities Law, a company cannot insure or indemnify an office holder for an Administrative Enforcement procedure, regarding payments to victims of the infringement or for expenses expended by the officer with respect to certain proceedings held concerning him or her, including reasonable litigation expenses and legal fees.
Internal Auditor
Under the Companies Law, our Board is required to appoint an internal auditor proposed by the Audit Committee. The role of the internal auditor is to examine, among other things, whether our activities comply with the law and orderly business procedure. The internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder, and may not be a member of our independent auditor firm. The Companies Law defines the term “interested party” to include a person who holds 5% or more of the company’s outstanding share capital or voting rights, a person who has the right to appoint one or more directors or the general manager, or any person who serves as a director or as the general manager. Pursuant to our Articles, our Audit Committee reviews and approves the work program of our internal auditor. Mr. Adi Yarimi of Chaikin Cohen Rubin & Co., an Israeli accounting firm, serves as our internal auditor.
As of December 31, 2025 we had 29 employees, as of December 31, 2024 we had 26 employees and as of December 31, 2023 we had 26 employees. As of December 31, 2025, 14 employees were located in Israel, all in management, finance and administration positions, one employee, serving as project manager, was located in Spain, 3 employees, serving as project managers and another employee serving as accounting manager, were located in Italy, 9 employees are located in the Netherlands, all engaged in the administration and operation of our WtE plants and one part-time employee in Luxembourg.
All of our employees who have access to confidential information are required to sign a non-disclosure agreement covering all of our confidential information that they might possess or to which they might have access.
We believe our relations with employees are satisfactory. We have never experienced a strike or work stoppage. We believe our future success will depend, in part, on our ability to continue to attract, retain, motivate and develop highly qualified personnel.
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Israeli labor laws and regulations are applicable to our employees located in Israel. Israeli labor laws govern, among other things, the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, annual leave and sick days. In addition, the Israeli Severance Pay Law, 1963, or the Severance Pay Law, generally requires the payment of severance pay equal to one month’s salary, based on the most recent salary, for each year of employment or a prorated portion thereof upon the termination of employment of an employee. Unless otherwise indicated in the employment agreement or otherwise required by applicable law and labor orders, the employee is not entitled to severance pay in the event she or he willingly resigns. In order to fund (or partially fund as hereinafter explained) any future liability in connection with severance pay, we make payments equal to 8.33% of the employee’s salary every month, to various managers’ insurance policies or similar financial instruments.
In the event the employment agreement with an employee provides that the provisions of Section 14 of the Severance Pay Law will apply, our contributions for severance pay are in lieu of our severance liability and the employee is entitled to receive such contributions whether her or his employment is terminated by us, or she or he resigns. Therefore, upon fulfillment of our obligation to make a monthly contribution to the managers’ insurance policies or similar financial instruments in the amount of 8.33% of the employee’s monthly salary and of the other terms of the relevant permit with respect to this arrangement, no additional payments must later be made to the employee on account of severance pay upon termination of the employment relationship. As required by Israeli law, our employees are also provided with a contribution toward their retirement that amounts to 12.5% of wages, of which the employee contributes 6%. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social Security Administration, and additional sums towards compulsory health insurance.
Beneficial Ownership of Executive Officers and Directors
The following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of March 31, 2026, of (i) each of our directors and (ii) each member of our senior management. All of the information with respect to beneficial ownership of the ordinary shares is given to the best of our knowledge and has been furnished in part by the respective directors and members of senior management.
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Our currently serving directors hold, in the aggregate, options to purchase 9,033 ordinary shares. The options have a weighted average exercise price of approximately $19.52 per share and have expiration dates until 2036. During the years ended December 31, 2023, 2024 and 2025, each of our non-employee directors then serving, was granted options to purchase 1,000 shares (on August 1 of each of such years) and a pro rata portion of such number of options on the date of his or her appointment as a board member under the 1998 Plan. The exercise price for the underlying shares of such options is the “Fair Market Value” (as defined in the 1998 Plan) of our ordinary shares at the date of grant. The options expire ten years after their grant date. As described above under “Compensation - Compensation of Non-Executive Directors”, the options granted to our directors vest on the first anniversary of the grant date, provided that the recipient is a member of our Board on such anniversary. Of the options held by our directors, options to purchase 6,199 ordinary shares are currently exercisable, options to purchase 2,000 ordinary shares will become exercisable on August 1, 2026 and options to purchase 834 ordinary shares will become exercisable on March 4, 2027.
In November 2021, we granted Kalia Rubenbach options to purchase 9,000 ordinary shares, all of which are currently vested and have an exercise price of $29.36 per ordinary share. In January 2026, we granted Kalia Rubenbach options to purchase 64,500 ordinary shares, vesting in three installments (17,737 of the options will vest on January 12, 2027, 23,649 of the options will vest on January 12, 2028 and 23,114 of the options will vest on January 12, 2029), with an exercise price of $27.14.
Outstanding Options
1998 Share Option Plan for Non-Employee Directors
For more information concerning our 1998 Share Option Plan for Non-Employee Directors see “Item 6.B: Compensation.”
As of January 1, 2025, December 31, 2025 and March 31, 2026, there were 19,551, 15,551 and 16,717 ordinary shares, respectively, available for future grants under the 1998 Plan.
2000 Stock Option Plan
In 2000, we adopted the 2000 Stock Option Plan, or the 2000 Plan, to provide for grants of service and non-employee options to purchase ordinary shares to our officers, employees, directors and consultants. The 2000 Plan provides that it may be administered by the Board, or by a committee appointed by the Board, and is currently administered by our Board.
As amended, the 2000 Plan provides for the issuance of 1,772,459 ordinary shares. During 2008 we repurchased options to acquire approximately 990,000 ordinary shares from employees and such options were canceled, decreasing the amount of shares reserved for issuance the 2000 Plan. The 2000 Plan, as amended, currently terminates on August 31, 2028.
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Our Board has broad discretion to determine the persons entitled to receive options under the 2000 Plan, the terms and conditions on which options are granted, and the number of ordinary shares subject thereto. Our Board delegated to our management its authority to issue ordinary shares issuable upon exercise of options under the 2000 Plan. The exercise price of the options under the 2000 Plan is determined by our Stock Option and Compensation Committee, provided, however, that the exercise price of any option granted shall not be less than eighty percent (80%) of the stock value at the date of grant of such options. The stock value at any time is equal to the then current fair market value of our ordinary shares. For purposes of the 2000 Plan (as amended), the fair market value means, as of any date, the last reported closing price of the ordinary shares on such principal securities exchange on the most recent prior date on which a sale of the ordinary shares took place.
Our Board determines the term of each option granted under the 2000 Plan, including the vesting period; provided, however, that the term of an option shall not be for more than 10 years. Unless otherwise agreed by the parties, upon termination of employment, all unvested options lapse, and generally within three months from such termination all vested but not-exercised options shall lapse.
The options granted are subject to restrictions on transfer, sale or hypothecation. Options and ordinary shares issuable upon the exercise of options granted to our Israeli employees are held in a trust until the payment of all taxes due with respect to the grant and exercise (if any) of such options.
We have elected the benefits available under the “capital gains” alternative of Section 102 of the Israeli Income Tax Ordinance [New Version], 1961, or the Israeli Income Tax Ordinance. Pursuant to this election, capital gains derived by employees arising from the sale of shares acquired as a result of the exercise of options granted to them under Section 102, will be subject to a flat capital gains tax rate of 25% (instead of the gains being taxed as salary income at the employee’s marginal tax rate). However, as a result of this election, we will no longer be allowed to claim as an expense for tax purposes the amounts credited to such employees as a benefit when the related capital gains tax is payable by them, as we were previously entitled to do. We may change the election from time to time, as permitted by the Israeli Income Tax Ordinance. There are various conditions that must be met in order to qualify for these benefits, including registration of the options in the name of a trustee, or the Trustee, for each of the employees who is granted options. Each option, and any ordinary shares acquired upon the exercise of the option, must be held by the Trustee for a period commencing on the date of grant and ending no earlier than 24 months after the date of grant.
As of March 31, 2026, there were options to purchase 75,000 ordinary shares outstanding under the 2000 Plan. The number of additional ordinary shares available for issuance under the 2000 Plan, as of January 1, 2025, December 31, 2026 and March 31, 2026, was 547,206, 569,706 and 505,206.
Not applicable.
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ITEM 7: Major Shareholders and Related Party Transactions
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of March 31, 2026, by each person known by us to be the beneficial owner of 5.0% or more of our ordinary shares. Each of our shareholders has identical voting rights with respect to its shares. All of the information with respect to beneficial ownership of the ordinary shares is given to the best of our knowledge based on public filings by the shareholders (and on information provided by them).
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Significant Changes in the Ownership of Major Shareholders
On February 9, 2023, Mr. Dov Yelin, Mr. Yair Lapidot and Yelin Lapidot Holdings Management Ltd., or the Yelin Lapidot Reporting Persons, submitted an amendment to their Schedule 13G, indicating that as of December 31, 2022, they beneficially owned 1,741,299 ordinary shares, which at the time constituted approximately 13.5% of our outstanding ordinary shares. On January 31, 2024, the Yelin Lapidot Reporting Persons submitted an amendment to their Schedule 13G, indicating that as of December 31, 2023, they beneficially owned 1,632,040 ordinary shares, which at the time constituted approximately 12.7% of our outstanding ordinary shares. On November 10, 2025, the Yelin Lapidot Reporting Persons submitted an amendment to their Schedule 13G, indicating that as of September 30, 2025, they beneficially owned 1,584,920 ordinary shares, which at the time constituted approximately 11.5% of our outstanding ordinary shares. On February 5, 2026, the Yelin Lapidot Reporting Persons submitted an amendment to their Schedule 13G, indicating that as of December 31, 2025, they beneficially owned 1,411,082 ordinary shares, which at the time constituted approximately 10.2% of our outstanding ordinary shares.
On February 13, 2023, Clal submitted an amendment to its Schedule 13G indicating that as of December 31, 2022, it beneficially owned 1,422,498 ordinary shares (including 56,115 ordinary shares underlying warrants that are exercisable within 60 days of December 31, 2022), which at the time constituted approximately 11.0% of our outstanding ordinary shares. On February 14, 2024, Clal submitted an amendment to its Schedule 13G indicating that as of December 31, 2023, it beneficially owned 1,568,669 ordinary shares (including 56,115 ordinary shares underlying warrants that are exercisable within 60 days of December 31, 2023), which at the time constituted approximately 12.2% of our outstanding ordinary shares. On August 14, 2025, Clal submitted an amendment to its Schedule 13G indicating that as of June 30, 2025, it beneficially owned 1,940,045 ordinary shares (including 450,597 ordinary shares underlying warrants that are exercisable within 60 days of June 30, 2025), which at the time constituted approximately 14.6% of our outstanding ordinary shares.
On December 26, 2023, Phoenix submitted an amendment to its Schedule 13G indicating that it holds 700,802 ordinary shares, which at the time constituted approximately 5.5% of our outstanding ordinary shares, and on February 10, 2025 Phoenix submitted an amendment to its Schedule 13G indicating that it holds 1,306,161 ordinary shares, which at the time constituted approximately 10.2% of our outstanding ordinary shares. Phoniex thereafter provided the information that appears in the table below concerning its updated holdings to us.
On August 4, 2025, Menora Holdings and Menora Mivtachim Pensions & Gemel Ltd., or, together, Menora, submitted a Schedule 13G indicating that as of July 28, 2025 they held 972,346 ordinary shares, which at the time constituted approximately 7.1% of our ordinary shares. On February 10, 2026, Menora submitted an amendment to its Schedule 13G indicating that as of December 31, 2025 they held 1,195,025 ordinary shares, which at the time constituted approximately 8.7 of our ordinary shares. Menora thereafter provided the information that appears in the table below concerning its updated holdings to us.
Based on information available to us, during the year ended December 31, 2023, the 254,524 ordinary shares previously held by the estate of Mr. Hemi Raphael, constituting approximately 2% of our outstanding ordinary shares, were transferred to Ms. Anat Raphael and during the year ended December 31, 2025, Mr. Shlomo Nehama transferred his holdings in our ordinary shares to S. Nechama Investments (2008) Ltd., or Nechama Investments. On March 4, 2026, Nechama Investments, Ms. Raphael and Kanir Joint Investments (2005) LP, or Kanir, sold all of their holding in our ordinary shares (an aggregate of 6,318,946, constituting approximately 45.85%) to Nofar.
Record Holders
Based on a review of the information provided to us by our transfer agent, as of March 31, 2026, there were 23 record holders of ordinary shares, of which 9 represented United States* record holders holding approximately 53.9% of our outstanding ordinary shares (including approximately 53.8% of our outstanding ordinary shares held by the Depository Trust Company). This does not reflect persons or entities that hold ordinary shares in nominee or “street name” through various brokerage firms and does not reflect where the beneficial holders of our shares are located in part because the shares held by the Depository Trust Company include shares held for the Tel Aviv Stock Exchange Clearing House.
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2008 Shareholders Agreement
Pursuant to public filings made and information provided by the Company’s former controlling shareholders, Kanir and Nechama Investments and their affiliates (who sold their holdings in the Company to Nofar on March 6, 2026), on March 24, 2008, Kanir and Nechama Investments entered into a shareholders agreement, or the 2008 Shareholders Agreement, with respect to their holdings of our ordinary shares. The following summary is based on public filings made by the parties to the 2008 Shareholders Agreement, which include a more detailed description of the 2008 Shareholders Agreement and a copy of such agreement and that are not incorporated by reference herein.
The parties to the 2008 Shareholders Agreement agreed to vote all our ordinary shares held by them as provided in the 2008 Shareholders Agreement. Where the 2008 Shareholders Agreement is silent as to a matter brought before our shareholders, the parties will agree in advance as to how they will vote. In the event that the parties do not reach an agreement regarding any such matter, they will vote all of their ordinary shares against such matter. In addition, the parties agreed to use their best efforts to amend our articles to require that, if so requested by at least two of our directors, certain matters, such as related party transactions and any material change in the scope of our business, will require the approval of a simple majority of the outstanding ordinary shares. At our annual shareholders meeting held on December 30, 2008, our shareholders approved the adoption of our Second Amended and Restated Articles, as requested by Kanir and Nechama Investments and that includes, among other things, the revisions contemplated in the 2008 Shareholders Agreement. For more information, see “Item 10.B: Memorandum of Association and Second Amended and Restated Articles.”
The parties to the 2008 Shareholders Agreement further agreed to use their best efforts to ensure that the composition of our Board will be in accordance with the agreements set forth therein.
The 2008 Shareholders Agreement also contains certain agreements with respect to the ordinary shares held by each party that constitute, from time to time, 25.05% of the outstanding ordinary shares and, in the aggregate, 50.1% of the outstanding ordinary shares (these shares are defined in the 2008 Shareholders Agreement as the Restricted Shares), including a lock-up period, right of first refusal, tag along and a buy/sell notice mechanism.
The parties to the 2008 Shareholders Agreement agreed not to enter into any additional voting or similar agreements with any of our other shareholders during the term of the 2008 Shareholders Agreement, which will be in effect so long as (i) the parties hold more than 50% of our outstanding ordinary shares or (ii) each of the parties holds all of its Restricted Shares (unless the lending bank of the parties to the 2008 Shareholders Agreement forecloses on its pledge on the Restricted Shares of either party, causing the immediate termination of the 2008 Shareholders Agreement).
Registration Rights
We previously executed various registration rights agreements with certain entities and individuals, including former controlling shareholders, in connection with private placements of our securities. Registration rights with respect to a majority of the ordinary shares held by our current controlling shareholders were assigned from certain holders of such registration rights to our controlling shareholders, subject to the undertaking of the assignees to be bound by and subject to the terms and conditions of the registration rights agreement. In September 2014, we received a demand for registration from several shareholders, including our controlling shareholders, and filed a registration statement on Form F-3 with covering the resale of 6,421,545, currently approximately 50% of our ordinary shares, which became effective on November 17, 2014. In June 2020 and January 2025, we received additional demands to maintain the registration statement effective pursuant to the terms of the registration rights agreement dated September 12, 2005.
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Our prior controlling shareholders were a party to a Management Services Agreement with us, most recently approved at our 2024 Shareholders Meeting.
For further information concerning the Management Services Agreement and an Active Chairman Agreement executed with Mr. Ben Sheizaf, our Chairman of the Board, see “Item 6.B: Compensation.”
Employment of Mr. Asaf Nehama
Mr. Asaf Nehama, the son of Mr. Shlomo Nehama, who was one of our controlling shareholders until March 4, 2026, has been employed by us since October 1, 2022. At our 2022 Shareholders Meeting, our shareholders approved, following the approvals of our Audit and Compensation Committee and Board of Directors, the terms of employment for Mr. Asaf Nehama in an analyst position, effective October 1, 2022, which included a monthly gross salary of NIS 12,000 and other social and ancillary benefits as required under applicable law and customary in the Company.
During 2023, Mr. Asaf Nehama has taken on additional responsibilities and started acting as a project manager in connection with our development activities of photovoltaic fields in Texas, USA. At our 2023 Shareholders Meeting, our shareholders approved, following the approvals of our Audit and Compensation Committee and Board of Directors, the following updated terms of employment of Mr. Asaf Nehama, effective October 1, 2023:
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At our 2025 Annual Shareholders Meeting, our shareholders approved, following the approvals of our Audit and Compensation Committee and Board of Directors: (i) an increase in the monthly gross salary of Mr. Nehama effective October 1, 2025 to NIS 19,000 and an increase in the monthly lump sum payment for overtime for Mr. Nehama to NIS 10,000 (the monthly gross salary together with the monthly lump sum for overtime (i.e. NIS 29,000), will be referred to as the “Salary” for purposes of the description and social benefits included above), and (ii) a bonus for the year ended December 31, 2024 in the amount of two monthly Salaries (i.e., an aggregate bonus of NIS 58,000).
For a further discussion of transactions and balances with related parties see “Item 4.D: Property, Plants and Equipment” (with respect to the previous sublease of office space to a company controlled by Mr. Nehama), “Item 6.B: Compensation,” “Item 6.C: Board Practices” under “Indemnification, Exemption and Insurance of Executive Officers and Directors,” “Registration Rights” above and Note 15 to our consolidated financial statements, which are included elsewhere in this report.
Nofar Energy
For information concerning a short-term loan obtained from Nofar, our controlling shareholder commencing March 4, 2026, in connection with the Dorad separation process and a transaction with entities affiliated with The Phoenix Insurance Company, see “Item 4.B: Business Overview” under “Execution of SPA in connection with the Company’s Indirect Holdings in Ellomay Luzon Energy.”
ITEM 8: Financial Information
Consolidated Statements
Our consolidated financial statements are set forth in Item 18.
We may from time to time become a party to various legal proceedings in the ordinary course of our business. While the outcome of these matters cannot be predicted with certainty, we do not believe they will have a material effect on our consolidated financial position, results of operations, or cash flows. In addition, we were involved in various legal proceedings in connection with our holdings in Ellomay Luzon Energy and indirect holdings in Dorad. For more information see “Item 4.B: Business Overview” under “The Dorad Power Plant” and Note 6 to our annual financial statements included elsewhere in this Report.
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On March 18, 2015, our Board of Directors adopted a dividend distribution policy, or the Policy, pursuant to which we intend to distribute a dividend of up to 33% of our annual distributable profits each year, either by way of a cash dividend, a share buyback program or a combination of both. Distributions or the amount or method of the distribution pursuant to the Policy are not guaranteed and are subject to the specific approval of our Board of Directors, based on various factors they deem appropriate including, among others, our financial position, our outstanding liabilities and contractual obligations, prospective acquisitions, our business plan and the market conditions. In addition, as described herein, distributions are subject to the restrictions in the deeds of trust governing our Debentures. Our Board of Directors may, subject to the circumstances and conditions stated above, declare additional dividend distributions, change the rate of a specific distribution or cancel a distribution (either as a revision to the Policy or on a more temporary basis). In addition, our Board of Directors may, in its absolute discretion and at any time, revise, update or terminate the Policy. Prior to the adoption of the Policy, we did not have a dividend distribution policy or distribute cash dividends in the past. We did not repurchase any of our ordinary shares or declare or pay a cash dividend during 2023-2025.
The terms of the deeds of trust governing our Debentures restrict our ability to distribute dividends (for more information see “Item 5.B: Liquidity and Capital Resources” and “Item 10.C: Material Contracts”). In addition, under Israeli law, the payment of dividends is generally made from accumulated retained earnings or retained earnings accrued over a period of the last two years (after deducting prior dividends to the extent not already deducted from retained earnings), and in either case, provided there is no reasonable concern that the dividend will prevent the company from satisfying current or foreseeable obligations as they become due. Notwithstanding the foregoing, in the event a company does not have sufficient accumulated retained earnings, dividends or repurchases of shares may be made with the approval of a court and a repurchase of shares is also permissible under certain conditions, provided that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.
Except as otherwise disclosed in this Report, no significant changes have occurred since December 31, 2025.
ITEM 9: The Offer and Listing
Our ordinary shares are listed on the NYSE American LLC and the TASE under the symbol “ELLO.”
Our ordinary shares are listed on the NYSE American LLC under the trading symbol “ELLO” and are listed for trading on the Tel Aviv Stock Exchange under the symbol “ELLO.”
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ITEM 10: Additional Information
Memorandum of Association and Second Amended and Restated Articles
Set forth below is a brief description of certain provisions contained in the Memorandum of Association, the Second Amended and Restated Articles, adopted by our shareholders at our general meeting held on December 30, 2008, as amended, as well as certain statutory provisions of Israeli law. The Memorandum of Association and the Articles are incorporated by reference herein. The description of certain provisions does not purport to be a complete summary of these provisions and is qualified in its entirety by reference to such exhibits and to Israeli law.
Authorized Share Capital
Our authorized share capital is three hundred million (300,000,000) New Israeli Shekels, divided into thirty million (30,000,000) ordinary shares, NIS 10.00 par value per share.
Due to the fact that we were incorporated prior to 1999, the year the Companies Law was enacted, a special majority of 75% of the shares voting on the matter is generally required in order to amend our Memorandum, however, pursuant to our Memorandum, changes to our capital structure, such as an increase in our authorized capital, only require the vote of a majority of the shares voting on the matter.
Purpose and Objective
We are a public company registered under the Companies Law as Ellomay Capital Ltd., registration number 52-003986-8. Pursuant to Article 3.1 of our Articles, our objective is to undertake any lawful activity, including any objective set forth in our Memorandum of Association. Pursuant to Article 3.2 of our Articles, our purpose is to operate in accordance with commercial considerations with the intentions of generating profits. In addition, we may contribute reasonable amounts for any suitable purpose even if such contributions do not fall within our business considerations. The Board may determine the amounts of the contributions, the purpose for which the contribution is to be made, and the recipients of any such contribution.
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Board of Directors
Under the Companies Law, our Board is authorized to determine our strategy and supervise the performance of the duties and actions of our chief executive officer. Our Board may not delegate to a committee of the Board or the chief executive officer the right to decide on certain of the authorities vested in it, including determination of our strategy, distributions, certain issuances of securities and approval of financial reports. The powers conferred upon the Board are vested in the Board as a collective body and not in each one or more of the directors individually. Unless otherwise set forth in a resolution of the shareholders, our Articles provide that our Board shall consist of not less than four (4) nor more than eight (8) directors (including any external directors whose appointment is mandated under the Companies Law).
Pursuant to the Companies Law, publicly traded companies must appoint at least two external directors to serve on their board of directors and audit committee. For further information concerning external directors see “Item 6.C: Board Practices.”
The Companies Law codifies the fiduciary duties that an office holder has to a company. An office holder’s fiduciary duties consist of a duty of loyalty and a duty of care. For more information concerning these duties, the approval process of certain transactions and other board practices see “Item 6.C: Board Practices.”
Our directors generally cannot approve compensation to themselves or any members of their body without the approval of our compensation committee and our shareholders. For more details concerning the approval process of Terms of Service and Employment of office holders see “Item 6.C: Board Practices” under “Compensation Committee.” Borrowing powers exercisable by the directors are not specifically outlined in our Articles.
No person shall be disqualified to serve as a director by reason of his not holding our shares in. Additionally, our Articles do not provide for an age in which directors are required to retire.
Rights of Shareholders
No preemptive rights are granted to holders of our ordinary shares under the Articles or the Companies Law. Each ordinary share is entitled to one vote on all matters to be voted on by shareholders, including the election of directors.
The directors, other than external directors who are elected for three-year terms, are elected annually at a general meeting of shareholders and remain in office until the next annual meeting at which time they retire, unless their office is previously vacated as provided in the Articles. A retiring director may be reelected. If no directors are elected at the annual meeting, all of the retiring directors remain in office pending their replacement at a general meeting. Holders of the ordinary shares do not have cumulative voting rights in the election of directors. Consequently, the holders of ordinary shares in the aggregate conferring more than 50% of the voting power, represented in person or by proxy, will have the power to elect all the directors (other than external directors, who are elected by a special majority as more fully described under “Item 6.C: Board Practices.”
Following the adoption of the Articles at our general meeting of shareholders held on December 30, 2008, Article 25.5 provides that for so long as the 2008 Shareholders Agreement is in effect, at the written request of any two directors with respect to any proposed action or transaction (including certain related party transactions, any amendments to our Memorandum of Association or Articles, any merger or consolidation of the Company, any material change in the scope of our business, the voluntary liquidation or dissolution of the Company, approval of annual budget or business plan and material deviations therefrom and any change in signatory rights on behalf of the Company), such action or transaction shall require the approval of our general meeting by a resolution supported by members present, in person or by proxy, vested with at least 50.1% of our outstanding shares, or by such higher approval threshold as may be required by Israeli law.
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Pursuant to the Companies Regulations (Relief for Companies whose Securities are Listed for Trading on a Stock exchange Outside of Israel), 2000, one or more shareholders holding at least 5% of the voting rights at the general meeting may request the Board of Directors to include the election of a nominee director or the removal of a director from office on the agenda of a future shareholders’ meeting. Pursuant to the Companies Law, other items may be included on the agenda of a future shareholders’ meeting at the request of one or more shareholders holding at least 1% of the voting rights to the extent such items are suitable for a general meeting.
Chairman of the Board
Our Articles provide that our Chairman of the Board shall have no casting vote.
Dividends and Liquidation Rights
Our Board of Directors is authorized to declare dividends, subject to applicable law. Dividends may be paid only out of profits and other surplus, as defined in the Companies Law, as of the end of the most recent financial statements or as accrued over a period of two years, whichever is higher. Alternatively, if we do not have sufficient profits or other surplus, then permission to effect a distribution can be granted by order of an Israeli court. In any event, a distribution is permitted only if there is no reasonable concern that the distribution will prevent us from satisfying our existing and foreseeable obligations as they become due.
Upon recommendation by the Board, dividends may be paid, in whole or in part, by the distribution of certain of our specific assets, of our shares or debentures, or shares or debentures of any other company, or in any combination of such manners. Subject to special or restricted rights conferred upon the holders of shares as to dividends, if any, the dividends shall be distributed in accordance with our paid-up capital attributable to the shares for which the dividend has been declared. Our obligation to pay dividends or any other amount in respect of shares may be set-off against any indebtedness, however arising, liquidated or non-liquidated, of the person entitled to receive the dividend. Any dividend unclaimed within the period of seven years from the date stipulated for its payment shall be forfeited and returned to us, unless otherwise directed by our Board. In the event of the winding up of Ellomay, then, after satisfaction of liabilities to creditors and subject to provisions of any applicable law and to any special or restricted rights attached to a share, our assets in excess of our liabilities will be distributed among the shareholders in proportion to the paid-up capital attributable to the shares in respect of which the distribution is being made. Dividend and liquidation rights may be affected by the grant of preferential dividends or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
For more information concerning our dividend distribution policy see “Item 8.A: Financial Information – Consolidated Statements and Other Financial information,” under the heading “Dividends.”
Redemption Provisions
We may, subject to any applicable law, issue redeemable securities and then redeem them.
Liability to Capital Calls
The liability of our shareholders for the indebtedness of the Company is limited to payment of the nominal value of the shares held by them.
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Certain Transactions with Controlling Persons
No provision in the Articles discriminates against an existing or prospective holder of securities, as a result of such shareholder owning a substantial amount of shares. However, the Companies Law extends the disclosure requirements applicable to office holders as described in “Board Practices” under “Management” above, to a controlling shareholder in a public company. For purposes of the issues described in these paragraphs, the Companies Law defines a controlling shareholder a shareholder who can direct the activities of the company, including a presumption that a person who holds 25% or more of the voting rights at the company’s general meeting, provided there is no other person that holds more than 50% of the voting rights in such company, is a controlling shareholder. If two or more shareholders are interested parties in the same transaction, their shareholdings are combined for the purposes of calculating the percentages held by them. If two or more shareholders are parties to a voting agreement, their interests are also generally combined for the purposes of calculating percentages.
“Extraordinary Transactions” (as such term is defined by the Companies Law and as set forth in “Board Practices” under “Management” above) of a public company with its controlling shareholder or with another person if the controlling shareholder has a personal interest in such transaction, including certain private offering of securities in which the controlling shareholder has a personal interest, a transaction between a company and a controlling shareholder or her or his relative, directly or indirectly, including through a company controlled by her or him, relating to the receipt by the company of services from her or him, and, if such controlling shareholder or her or his relative are office holders, a transaction in connection with their Terms of Service and Employment or, if he or she is an employee of the company and not an office holder, a transaction of the company with such person in connection with his or her employment by the company, all are required to be for the benefit of the company and require the approval of the audit committee, the board of directors and the shareholders. The shareholders’ approval of such a transaction requires a simple majority approval and the fulfillment of one of the following conditions: (i) at least a majority of the votes cast by shareholders who have no personal interest in the transaction and who vote on the matter are voted in favor of the transaction, or (ii) the votes cast by shareholders who have no personal interest in the transaction voted against the transaction do not represent more than two percent of the voting rights in the company. In addition, any such transaction with a term that exceeds three years requires approval as described above every three years, unless (with respect only to extraordinary transactions and not to other transactions that require the special approval process) the audit committee approves that a longer term is reasonable under the circumstances. For more information concerning the roles of the audit committee in connection with related party transactions, including a recent amendment to the Companies Law, see “Item 6.C: Board Practices.” For more information concerning the approval process and requirements in connection with the Terms of Service and Employment of controlling shareholders and their relatives see “Item 6.B: Compensation.”
Pursuant to the Relief Regulations, certain extraordinary transactions between a company and its controlling shareholder(s), certain undertakings of a company to its directors in connection with their terms of service and certain transactions between a company and its controlling shareholder(s) or their relatives in their capacity as office holders or employees of the company may be approved, if the conditions set forth in such regulations are met, without the requirement to obtain shareholder approval. The Relief Regulations require that the company’s audit committee and board of directors determine that the conditions set forth in the Relief Regulations are met. One of the alternative conditions for approving an extraordinary transaction with a controlling shareholder is that such transaction only benefits the company. Another available condition is that the transaction is in the ordinary course of business, on market terms, and does not harm the company.
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Changing Rights Attached to Shares
According to our Articles, in order to change the rights attached to any class of shares, unless otherwise provided by the terms of the class, such change must be adopted by a general meeting of the shareholders and by a separate general meeting of the holders of the affected class by the majority that is generally required for the amendment of the Articles or, if higher, the Memorandum. The provisions of the Articles relating to general meetings of our shareholders shall apply, mutatis mutandis, to any separate general meeting of the holders of the shares of a specific class; provided, however, that the requisite quorum at any such separate general meeting shall be one or more members present in person or by proxy and holding not less than thirty three and one third percent (33 1/3%) of the issued shares of such class.
Pursuant to the Companies Law, the quorum requirement for general meetings and for separate general meetings for holders of a specific class may be satisfied with the presence of at least two members present in person or by proxy and holding not less than 25% of the outstanding shares, or the shares of such class, as the case may be.
Annual and Extraordinary Meetings of our Shareholders
Pursuant to the Companies Law, an annual meeting of shareholders must be held once in every calendar year at such time (within a period of not more than fifteen months after the preceding annual meeting) and at such place as may be determined by the board of directors. The board of directors may, at any time, convene extraordinary general meetings of shareholders, and shall be obligated to do so upon receipt of a requisition in writing from any of the following: (i) two directors or one quarter of the directors holding office; (ii) one or more shareholders holding at least 10% of the issued capital and at least 1% of the voting rights in the Company; or (iii) one or more shareholders holding at least 10% of the voting rights in the Company. A requisition must detail the objects for which the meeting must be convened and shall be signed by the persons requisitioning it and sent to our registered office. When the board of directors is required to convene a special meeting, it shall do so within 21 days of the requisition being submitted. In the event the board of directors does not convene the extraordinary meeting despite the receipt of a valid requisition, the persons requisitioning the meeting may convene the meeting themselves, provided that such meeting shall not be held more than three months following the delivery of the requisition and will be convened, to the extent possible, in the same manner as general meetings are convened by the board of directors.
Prior to any general meeting a written notice thereof shall be made public as required by Israeli law. The Articles provide that we shall not be required to deliver notice to each shareholder, except as may be specifically required by Israeli law. The Articles further provide that a notice by us of a general meeting that is published in one international wire service shall be deemed to have been duly given on the date of such publication.
Two or more members present in person or by proxy and holding shares conferring in the aggregate more than 25% of the total voting power attached to our shares shall constitute a quorum at general meetings. If a meeting is adjourned due to the lack of a quorum, any two shareholders, present in person or by proxy at the subsequent adjourned meeting, will constitute a quorum. Unless provided otherwise by the terms of issue of the shares, no member shall be entitled to be present or vote at a general meeting (or to be counted as part of the quorum) unless all amounts due as of the date designated for same general meeting with respect to his shares were paid. A resolution shall be deemed adopted if the requisite quorum is present and the resolution is supported by members present, in person or by proxy, vested with more than fifty percent (50%) of the total voting power attached to the shares whose holders were present, in person or by proxy, at such meeting and voted thereon, or such other percentage required by law or set forth in the Articles from time to time.
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Limitations on the Rights to Own Securities in Our Company
Our Memorandum of Association and Articles and the laws of the State of Israel do not restrict in any way the ownership or voting of ordinary shares by non-residents, except that shares held by citizens of countries which are in a state of war with Israel will not confer any rights to their holders unless the Ministry of Finance consents otherwise.
Anti-takeover Provisions; Mergers and Acquisitions under Israeli Law
The Companies Law permits merger transactions with the approval of each party’s board of directors and generally requires shareholder approval as well. A merger with a wholly owned subsidiary does not require approval of the target company’s shareholders. A merger does not require approval of the surviving company’s shareholders if: (i) the merger does not require the adoption of amendments to the surviving company’s memorandum of association or articles and (ii) the surviving company does not issue more than 20% of its voting power in connection with the merger and as a result of the issuance no shareholder would become a controlling shareholder (for this purpose any securities convertible into shares of the surviving company that such person holds or that are issued to him in the course of the merger are deemed to have been converted or exercised). Shareholder approval of the surviving company would nevertheless be required if the other party to the merger, or a person holding more than 25% of the outstanding voting shares or means of appointing the board of directors of the other party to the merger, holds any shares of the surviving company. In accordance with the Companies Law, our Articles provide that a merger may be approved at a shareholders meeting by a majority of the voting power represented at the meeting, in person or by proxy, and voting on that resolution. The Companies Law provides that in determining whether the required majority has approved the merger, shares held by the other party to the merger, any person holding at least 25% of the outstanding voting shares or means of appointing the board of directors of the other party to the merger, or the relatives or companies controlled by these persons, are excluded from the vote. As described above, our Articles currently provide, under certain circumstances, including a merger of the Company, that two directors may require that, in addition to the majority prescribed by the Companies Law, a merger be approved by a resolution supported by shareholders present, in person or by proxy, vested with at least 50.1% of our outstanding shares. For additional voting requirements that may apply to us pursuant to Article 25.5 of our Articles in connection with a proposed merger see “Rights of Shareholders” above.
Under the Companies Law, a merging company must inform its creditors of the proposed merger. Any creditor of a party to the merger may seek a court order blocking the merger, if there is a reasonable concern that the surviving company will not be able to satisfy all of the obligations of the parties to the merger. Moreover, a merger may not be completed until at least 50 days have passed from the time that a merger proposal was filed with the Israeli Registrar of Companies and 30 days have passed from the shareholder approval of the merger in each merging company.
The Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would hold 25% or more of the voting rights in the company. This rule does not apply if there is already another holder of 25% or more of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would hold greater than 45% of the voting rights in the company, unless there is another shareholder holding more than 45% of the voting rights in the company. These requirements do not apply if, in general, the acquisition: (1) was made in a private placement that received shareholder approval as a private placement and was meant to grant the purchaser 25% or more of the voting rights of a company in which no other shareholder holds 25% or more of the voting rights, or to grant the purchaser more than 45% of the voting rights of a company in which no other shareholder holds more than 45% of the voting rights, (2) was from a holder of 25% or more of the voting rights in the company which resulted in the acquiror holding 25% or of the voting rights in the company, or (3) was from a shareholder holding more than 45% of the voting rights in the company which resulted in the acquiror becoming a holder of more than 45% voting rights in the company.
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If, as a result of an acquisition of shares, the acquiror will hold more than 90% of a company’s outstanding shares, the acquisition must be made by means of a tender offer for all of the outstanding shares, or a full tender offer. A full tender offer is accepted if either: (i) holders of less than 5% of the outstanding shares do not accept the tender offer and more than half of the offerees who do not have a personal interest in accepting the tender offer accepted it, or (ii) holders of less than 2% of the outstanding shares do not accept the tender offer. If the full tender offer is not accepted, then the acquiror may not acquire shares in the tender offer that will cause his shareholding to exceed 90% of the outstanding shares.
The Companies Law provides for appraisal rights in the event a full tender offer is accepted if the shareholder files a request with the court within six months following the consummation of a full tender offer. The acquirer may provide in the tender offer documents that any shareholder that accepted the offer and tendered his shares will not be entitled to appraisal rights.
Duties of Shareholders and of Controlling Shareholders
Under the Companies Law, a shareholder has a duty to act in good faith towards the company and other shareholders and to refrain from abusing his or her power in the company including, among other things, when voting in a general meeting of shareholders or in a class meeting on the following matters:
A shareholder also has a general duty to refrain from depriving any other shareholders of their rights as shareholders.
In addition, a duty to act with fairness towards the company is imposed on: (i) anyone who controls a company, i.e. a person that has the ability to direct the activity of a company, excluding an ability deriving merely from holding an officer or director or another office in the company (a person shall be presumed to control a corporation if he or she holds half or more of certain means of control, i.e. rights to vote at a general meeting and the right to appoint directors or general manager), (ii) any shareholder who knows that it possesses the power to determine the outcome of a shareholder vote and (iii) any shareholder who has the power to appoint or prevent the appointment of an office holder in the company. The Companies Law does not describe the substance of this duty of fairness.
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Management Services Agreement with Kanir and Keystone
For details concerning the Management Services Agreement, see “Item 6.B: Compensation.”
The description of the Management Services Agreement is only a summary and does not purport to be complete and is qualified by reference to the full text of the Management Services Agreement filed by us as Exhibit 4.16 under “Item 19: Exhibits.”
Agreements in connection with the Investment in Ellomay Luzon Energy and the Ellomay Luzon Energy Separation
Summaries of the material agreements executed in connection with our investment in Ellomay Luzon Energy are included as Exhibits 4.7, 4.8 and 4.25 under “Item 19: Exhibits.”
Deeds of Trust governing our Debentures
For a description of our debt agreements, including the Deed of Trusts governing our Series D Convertible Debentures, Series E Secured Debentures, Series F Debentures and Series G Debentures, see “Item 5.B: Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
The aforementioned descriptions of the Deeds of Trust governing our Debentures are only summaries and do not purport to be complete and is qualified by reference to the convenience translation of such Deeds of Trust and their amendments filed by us as Exhibits 4.15, 4.18, 4.22, 4.24 and 4.26-4.29 under “Item 19: Exhibits.”
Dividends, if any, paid by us to the holders of our ordinary shares, and any amounts payable upon our dissolution, liquidation or winding up, as well as the proceeds of any sale in Israel of our ordinary shares to an Israeli resident, may be paid in non-Israeli currency. If these amounts are paid in Israeli currency, they may be converted into U.S. dollars at the rate of exchange prevailing at the time of conversion. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.
The State of Israel does not restrict in any way the ownership or voting of ordinary shares of Israeli entities by non-residents of Israel, except with respect to subjects of countries that are in a state of war with Israel. In addition, there are currently no limitations on our ability to import and export capital.
Israeli Taxation
The following is a summary of the material Israeli tax consequences and Israeli foreign exchange regulations as they relate to our shareholders and us. This discussion is based on our best knowledge and interpretation of the Israeli Income Tax Ordinance, the regulations promulgated thereunder and Israeli tax law generally. To the extent that the discussion is based on new tax or other legislation that has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax or other authorities in question. The discussion is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.
General Corporate Tax Structure
Israeli companies are generally subject to corporate tax on their taxable income. The Israeli corporate tax rate has been 23% as from January 2018, according to section 126 of the Israeli Income Tax Ordinance.
Capital Gains Tax on Sales of Our Ordinary Shares
Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of capital assets by a non-resident of Israel if those assets (i) are located in Israel, (ii) are shares or a right to shares in an Israeli resident corporation, (iii) represent, directly or indirectly, rights to assets located in Israel, or (iv) are a right in a foreign resident corporation, which in its essence is the owner of a direct or indirect right to property located in Israel (with respect to the portion of the gain attributed to the property located in Israel), unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. The law distinguishes between real capital gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain, which is equivalent to the increase of the relevant asset’s purchase price, which is attributable to the increase in the Israeli consumer price index between the date of purchase and the date of sale Inflationary surplus is currently not subject to tax in Israel. The real capital gain is the excess of the total capital gain over the inflationary surplus.
Taxation of Israeli Residents
The tax rate applicable to real capital gains derived from the sale of shares, whether listed on a stock market or not, is the marginal tax rate according to Section 121 of the Israeli Income Tax Ordinance but up to 25% for Israeli individuals, and the real capital gain shall be deemed the highest bracket of the individual’s taxable income, unless such shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30%, until the promulgation of regulations setting forth the rules and conditions for deduction of real interest and linkage differentials pursuant to Section 101A(a)(9) and 101A(b) of the Israeli Income Tax Ordinance. Additionally, if such shareholder is considered a “significant shareholder” at any time during the 12-month period preceding such sale (i.e., such shareholder holds directly or indirectly, including jointly with others, at least 10% of any means of control in the company) the tax rate will be 30%. The reduced tax rate as stated above shall not apply to an individual whose income from the sale of securities constitutes “business income,” in accordance with the provisions of Section 2(1) of the Ordinance, in which case the marginal tax rate as prescribed in Section 121 of the Ordinance shall apply.
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An Israeli resident corporation that derives capital gains from the sale of shares or warrants in an Israeli resident company will generally be subject to tax on the real capital gains generated on such sale at the corporate tax rate (currently of 23%). Certain Israeli institutions that are exempt from tax under section 9(2) or section 129(C)(a)(1) of the Israeli Income Tax Ordinance (such as exempt trust funds and pension funds) may be exempt from capital gains tax from the sale of the securities.
Pursuant to the provisions of Section 94B of the Ordinance, and subject to the conditions set forth therein, a shareholder selling shares who is a company or an individual that was a substantial shareholder of the company at the time of the sale or at any time during the 12 months preceding the sale, may request that the tax rate applicable to the portion of the real capital gain corresponding to the portion of distributable profits, calculated as the ratio between the seller’s share in the rights to the profits of the company by virtue of the share and the total rights to profits in the company, be the tax rate that would have applied had such profits been received as a dividend immediately prior to the sale, in accordance with Sections 125B or 126(b) of the Ordinance, as applicable.
Taxation of Non-Israeli Residents
Non-Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale of shares of Israeli companies publicly traded on a recognized stock market in Israel, under Section 97(B2) of the Israeli Income Tax Ordinance, or on a recognized stock market outside of Israel, provided such shareholders did not acquire their shares prior to the issuer’s initial public offering and that the gains did not derive from a permanent establishment of such shareholders in Israel and that such shareholders are not subject to the Inflationary Adjustments Law. However, non-Israeli corporations will not be entitled to such exemption if an Israeli resident (i) has a controlling interest of 25% or more in such non-Israeli corporation, or (ii) is the beneficiary or is entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly as specified in Section 68A of the Israeli Income Tax Ordinance.
In addition, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) holding ordinary shares as a capital asset is also exempt from Israeli capital gains tax under the U.S.-Israel Tax Treaty unless either (i) the shareholder holds, directly or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding such sale, (ii) the shareholder, if an individual, is present in Israel for more than 183 days during the taxable year, or (iii) the capital gains arising from such sale are attributable to a permanent establishment of the shareholder located in Israel. If the above conditions are not met, the U.S. resident would be subject to Israeli tax, to the extent applicable; however, under the U.S.-Israel Tax Treaty, the gain would be treated as foreign source income for United States foreign tax credit purposes.
Taxation on Dividends paid to a Shareholder
Individuals who are Israeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, unless the recipient is a “significant” shareholder (as defined above) at any time during the 12-month period preceding the distribution, in which case the applicable tax rate is 30%. The company distributing the dividend is required to withhold tax at the rate of 25% (a different rate may apply to dividends paid on shares deriving from the exercise of stock options or other equity-based awards granted as compensation to employees or office holders of the company) or 30%, as applicable. For companies that are Israeli residents, dividends from another Israeli company will generally be exempt from tax, unless the source of such dividends is located outside of Israel, in which case tax will generally apply at the rate set forth in Section 126 of the Israeli Income Tax Ordinance. An exempt trust fund, pension fund or other entity that is exempt from tax under section 9(2) or section 129C(a)(1) of the Israeli Income Tax Ordinance is exempt from tax on a dividend.
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Non-residents of Israel are generally subject to Israeli income tax on the receipt of dividends paid on our shares at the rate of 25% or 30%, if such person (including a non-Israeli corporation) is a substantial shareholder at the time of recipient of the dividend or on any date in the 12 months preceding such date, which tax will be withheld at the source, unless a different rate is provided in a tax treaty between Israel and the shareholder’s country of residence, subject to obtaining appropriate approval from the Israel Tax Authority in advance, to the extent granted. Under the U.S.-Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) is 25%.
Surtax
Individual holders who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income, including, but not limited to, income derived from dividends, interest and capital gains, exceeding a certain threshold (currently NIS 721,560 for years 2024 through 2027, which amount will be updated annually starting January 1, 2028, based on the change in the Israeli consumer price index), or the Threshold Amount. An additional 2% tax applies to “capital income” earned as of January 1, 2025 (including capital gains, dividends, and interest) exceeding the Threshold Amount.
U.S. Tax Considerations Regarding Ordinary Shares
The following is a general summary of the material United States federal income tax consequences relating to the acquisition, ownership and disposition of our ordinary shares by a U.S. Holder (as defined below) that holds those ordinary shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code. This summary is based on the tax laws of the United States, and existing final, temporary and proposed Treasury Regulations, administrative pronouncements and judicial decisions, as in effect on the date hereof, all of which are subject to prospective and retroactive changes, and to differing interpretations. No ruling has been requested from the Internal Revenue Service, or the IRS, with respect to any of the U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will agree with the discussion set forth herein.
This summary does not address all federal income tax consequences that may be relevant to particular persons, and does not take into account the specific circumstances of any particular persons, including, but not limited to:
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If a partnership (including for this purpose any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of our ordinary shares, the U.S. tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of our ordinary shares that is a partnership and partners in such partnership should consult their individual tax advisors about the U.S. federal income tax consequences of holding and disposing of our ordinary shares.
This summary does not address any aspect of United States federal gift or estate tax or state, local or foreign tax laws.
ACCORDINGLY, PERSONS CONSIDERING THE PURCHASE OF ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of our ordinary shares that, for U.S. federal income tax purposes, is:
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Taxation of U.S. Holders
Distributions on Ordinary Shares. Subject to the discussion in “Passive Foreign Investment Company” below, distributions made by us with respect to ordinary shares generally will constitute dividends for federal income tax purposes and will be taxable to a U.S. Holder as a dividend to the extent of our undistributed current or accumulated earnings and profits (as determined for United States federal income tax purposes). Distributions in excess of our current and accumulated earnings and profits will be treated first as a nontaxable return of capital reducing the U.S. Holder’s tax basis in the ordinary shares, thus increasing the amount of any gain (or reducing the amount of any loss) which might be realized by such U.S. Holder upon the sale or exchange of such ordinary shares. Any such distributions in excess of the U.S. Holder’s tax basis in the ordinary shares will be treated as gain from the sale or exchange of our ordinary shares. Dividends paid by us generally will not be eligible for the dividends received deduction available to certain corporate U.S. Holders.
With respect to non-corporate U.S. Holders, dividends may qualify as “qualified dividend income” which is eligible for reduced rates of taxation provided that (1) we are eligible for the benefits of the income tax treaty between the United States and Israel or with respect to any dividend paid on our ordinary shares which are readily tradable on an established securities market in the United States; (2) we are not a PFIC (as defined below) for either the taxable year in which the dividend was paid or the preceding taxable year; (3) the U.S. Holder satisfies certain holding period requirements; and (4) the U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. A corporate U.S. Holder (and a non-corporate U.S. Holder that fails to satisfy the applicable holding period requirements) is taxable at ordinary rates on dividends received.
A dividend paid in New Israeli Shekel will be included in gross income in a U.S. dollar amount based on the NIS/U.S. dollar exchange rate in effect on the date the dividend is included in the income of the U.S. Holder, regardless of whether the payment, in fact, is converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in the gross income of a U.S. Holder through the date that payment is converted into U.S. dollars (or otherwise disposed of) will be treated as U.S. source ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. U.S. Holders should consult their own tax advisors regarding the availability of the reduced rates applicable to qualified dividend income in light of their particular circumstances.
Subject to certain conditions and limitations, any Israeli withholding tax imposed upon distributions which constitute dividends under United States federal income tax law will be eligible for credit against a U.S. Holder’s federal income tax liability. Alternatively, a U.S. Holder may claim a deduction for such amount, but only for a year in which a U.S. Holder elects to do so with respect to all foreign income taxes. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed with respect to our ordinary shares will generally constitute “passive income.”
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Sale or Exchange of Ordinary Shares. Subject to the discussion in “Passive Foreign Investment Company” below, a U.S. Holder of ordinary shares generally will recognize capital gain or loss upon the sale or exchange of the ordinary shares measured by the difference between the amount realized and the U.S. Holder’s tax basis in the ordinary shares. Any such capital gain will be long-term capital gain or loss if the U.S. Holder’s holding period in our ordinary shares is more than one year. Subject to the discussion in “Medicare Tax” below, tax rates for the long-term capital gain to an individual U.S. Holder will be at a maximum rate of 20%. Gain or loss will be computed separately for each block of ordinary shares sold (ordinary shares acquired separately at different times and prices). The deductibility of capital losses is restricted and generally may only be used to reduce capital gains to the extent thereof. However, individual taxpayers generally may deduct annually $3,000 of capital losses in excess of their capital gains.
Medicare Tax. Subject to specific requirements, certain U.S. Holders will be subject to a 3.8% Medicare tax (in addition to otherwise applicable federal income tax) on their investment income and gain, with limited exceptions. U.S. Holders should consult with their tax advisors regarding the effect, if any, of this tax on the ownership and disposition of our ordinary shares.
Passive Foreign Investment Company. A foreign corporation generally will be treated as a “passive foreign investment company,” or PFIC, if, after applying certain “look-through” rules, either (1) 75% or more of its gross income is passive income or (2) 50% or more of the average value of its assets is attributable to assets that produce or are held to produce passive income. Passive income for this purpose generally includes dividends, interest, rents, royalties and gains from securities and commodities transactions. The look-through rules require a foreign corporation that owns at least 25%, by value, of the stock of another corporation to treat a proportionate amount of assets and income of the other corporation as held or received directly by such foreign corporation. We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. The determination of whether or not we are a PFIC depends on the composition of our income and assets, including goodwill, from time to time. Accordingly, no assurance can be given regarding our PFIC status for any prior, current or future taxable year.
Based on our income and/or assets, we believe that we were a PFIC from 2008 through 2012. Based on our income and assets, we do not believe that we were a PFIC with respect to U.S. holders that initially acquired our ordinary shares in 2013 through 2025. However, there is a risk that the Internal Revenue Service may disagree with our determinations regarding our prior or present PFIC status. In addition, depending on future events, we could become a PFIC in future years. Our PFIC status is a factual determination that must be made annually.
U.S. Holders who own our ordinary shares during a taxable year in which we were or are a PFIC generally will be subject to increased U.S. tax liabilities and reporting requirements for that taxable year and all succeeding years, regardless of whether we continue to meet the income or asset test for PFIC status, although shareholder elections may apply in certain circumstances. U.S. Holders should consult their own tax advisors regarding our status as a PFIC and the consequences of investment in a PFIC.
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If we are a PFIC for any taxable year during which U.S. Holders hold ordinary shares, such U.S. Holders will be subject to special tax rules with respect to any “excess distribution” that they receive and any gain that they realize from a sale or other disposition (including a pledge) of the ordinary shares, unless such U.S. Holders make a “mark-to-market” election as discussed below. Distributions that each U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions that such U.S. Holder received during the shorter of the three preceding taxable years or such U.S. Holder’s holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:
The tax liability for amounts under (3) above that is allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as capital, even if a U.S. Holder holds the ordinary shares as capital assets. The portion of any distributions that are not treated as excess distributions are taxable as ordinary income in the current taxable year under the normal tax rules of the Code.
A U.S. Holder may not avoid taxation under the rules described above by making a “qualified electing fund” election to include such U.S. Holder’s share of our income on a current basis because we do not presently intend to prepare or provide information necessary to make such election.
Alternatively, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election for stock of a PFIC to elect out of the tax treatment discussed three paragraphs above. If a U.S. Holder makes a mark-to-market election for the ordinary shares, such U.S. Holder will include in income each year an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of such U.S. Holder’s taxable year over such U.S. Holder’s adjusted basis in such ordinary shares. A U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the stock included in a U.S. Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ordinary shares, and any loss in excess of such amount is treated as capital loss. Each U.S. Holder’s basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. The tax rules that apply to distributions by corporations which are not passive foreign investment companies generally would apply to distributions by us.
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The mark-to-market election is available only for stock which is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission or on Nasdaq, or an exchange or market that the U.S. Secretary of the Treasury determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. Holders should consult their tax advisors as to the availability of the mark-to-market election, based on the exchange on which we trade and the amount of trading of our ordinary shares, and the tax ramifications of such election (including the special rules that may apply to the gain realized in the year of the election).
Dividends paid by a PFIC (or by a company that was a PFIC in the year preceding the dividend) are not “qualified dividend income” for purposes of the preferential tax rate on dividends discussed above.
Special limitations may apply to the use of foreign tax credits arising in connection with distributions on PFIC shares as to which U.S. Holders should consult their tax advisors.
If a U.S. Holder holds ordinary shares in any year in which we are a PFIC, such U.S. Holder is generally required to file Internal Revenue Service Form 8621 every year. U.S. Holders should consult their tax advisors regarding their PFIC shareholder reporting obligation in connection with their investment.
U.S. Information and Backup Withholding. Dividends and proceeds from the sale or exchange of shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number on a properly completed Internal Revenue Service Form W-9 or otherwise properly establishes an exemption from backup withholding. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, if any, and such U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund and furnishing any required information to the Internal Revenue Service.
Foreign Financial Asset Reporting. United States return disclosure obligations (and related penalties) are imposed on U.S. individuals who hold certain specified foreign financial assets in excess of certain dollar thresholds. The definition of specified foreign financial assets would include our ordinary shares, unless they are held in an account at a domestic financial institution. U.S. Holders should consult with their tax advisors regarding the requirements of filing IRS Form 8938 under these rules.
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We are subject to certain of the reporting requirements of the Exchange Act, as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act. As a foreign private issuer, we are exempt from certain provisions of the Exchange Act. Accordingly, our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act. While our officers and directors are, effective March 18, 2026, required to make insider reports under Section 16(a) of the Exchange Act, our principal shareholders are exempt from the reporting under Section 16(a) of the Exchange Act, and our directors, officers and principal shareholders continue to be exempt from the “short-swing” profit recovery provisions contained in Section 16(b) of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we file with the Securities and Exchange Commission an annual report on Form 20-F containing financial statements audited by an independent accounting firm. We also submit to the Securities and Exchange Commission reports on Form 6-K containing (among other things) press releases and unaudited financial information. We post our annual report on Form 20-F on our website (http://www.ellomay.com) promptly following the filing of our annual report with the Securities and Exchange Commission. The information on our website is not incorporated by reference into this Report.
Any statement in this Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this report or any of our annual reports or to a registration statement or other documents filed by us, the contract or document is deemed to modify the description contained in this Report. You must review the exhibits themselves for a complete description of the contract or document. In the event any of the documents that are filed as exhibits to our annual reports are not in English, the original language version is on file in our offices and is available upon request.
You may review a copy of our filings with the SEC, including exhibits and schedules, and obtain copies of such materials at the SEC’s public reference room at Room 1580, 100 F Street, N.E, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that we file electronically with the SEC. These SEC filings are also available to the public from commercial document retrieval services. Our filings commencing October 2013 may also be found at the TASE’s website at http://maya.tase.co.il and at the Israeli Securities Authority’s website at http://www.magna.isa.gov.il.
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ITEM 11: Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of risks, including foreign currency fluctuations and changes in interest rates. We regularly assess currency and interest rate risks to minimize any adverse effects on our business as a result of those factors and periodically use hedging transactions in order to attempt to limit the impact of such changes.
We hold cash and cash equivalents and restricted cash in various currencies, including euro, NIS and USD. Our holdings in our European operating plants and projects under development are denominated in euro, our holdings in operating plants and projects under development in the USA are denominated in USD and our holdings in the Israeli projects under development and indirect holdings in Dorad are denominated in NIS. The financing we have in connection with our European operations and projects under development is denominated in euro and the financing we have in connection with our Spanish Solar Plants bears interest that is based on EURIBOR rate and the short-term financing we obtain in connection with our US operations are denominated in USD. Our Debentures and the project finance debt of the Manara PSP are denominated in NIS.
Inflation and Fluctuation of Currencies
We believe that the composition of our assets and liabilities, which are denominated in USD, Euro and NIS, sufficiently mitigates a substantial portion of our foreign currency risk.
Interest Rate
As noted under “Item 4.B: Business Overview” and “Item 5.B: Liquidity and Capital Resources,” we entered into various finance agreements that are based on EURIBOR rate and therefore we may be affected by adverse movements in interest rates. We utilize interest rate swap derivatives to convert certain floating-rate debt to fixed-rate debt. Our interest rate swap derivatives involve an agreement to pay a fixed-rate interest and receive a floating-rate interest, at specified intervals, calculated on an agreed notional amount that matches the amount of the original loan and paid on the same installments and maturity dates. In the future, we may enter into additional interest rate swaps or other derivatives contracts to further hedge our exposure to fluctuations in interest rates.
For more information concerning hedging transactions, including a sensitivity analysis, see “Item 5.B: Liquidity and Capital Resources” and Note 21 to our financial statements included elsewhere in this Report.
We do not otherwise believe the disclosure required by Item 11 of this report to be material to us.
ITEM 12: Description of Securities Other Than Equity Securities
Not Applicable (for a description of our Debentures and Series 2 Warrants see “Item 5.B: Operating and Financial Review and Prospects; Liquidity and Capital Resources” and “Item 10.C: Material Contracts”).
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PART II
ITEM 13: Defaults, Dividend Arrearages and Delinquencies
ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
ITEM 15: Controls and Procedures
(a) Disclosure Controls and Procedures
Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that the information required in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, our management used the criteria in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2025, our internal control over financial reporting is effective based on those criteria.
(c) Attestation Report of the Registered Public Accounting Firm
Our independent registered accounting firm, Somekh Chaikin, a member firm of KPMG International, has issued an audit report on the effectiveness of our internal control over financial reporting. The report is included in our audited consolidated financial statements set forth in “Item 18 - Financial Statements.”
(d) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16: [Reserved]
ITEM 16A: Audit Committee Financial Expert
Daniel Vaknin has been designated as the Audit Committee financial expert and was also determined to be “independent” under the applicable SEC and NYSE American LLC regulations.
ITEM 16B: Code of Ethics
We adopted a code of business conduct and ethics which is applicable to all of our officers, directors and employees, including our principal executive, financial and accounting officers and persons performing similar functions, or the Code of Ethics.
The Code of Ethics, in its current form, is posted on our website at the following web address: https://ellomay.com/wp-content/uploads/2020/03/Code_of_Business_Conduct_and_Ethics.pdf. We will provide a copy of the Code of Ethics to any person, without charge, upon written request addressed to our Chief Financial Officer at our office in Tel Aviv, Israel.
ITEM 16C: Principal Accountant Fees and Services
Fees paid to the Independent Registered Public Accounting Firm
Somekh Chaikin, a member firm of KPMG International, independent registered public accounting firm, located in Tel Aviv, Israel, PCAOB ID 1057, serves as our principal independent registered public accounting firm since December 2011.
The following table sets forth, for each of the years indicated, the aggregate fees paid for professional audit services and other services rendered by Somekh Chaikin and other KPMG member firms.
89.6
133.5
846.6
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Audit Committee’s pre-approval policies and procedures
Our Audit Committee nominates and engages our registered public accounting firm to audit our financial statements. See also the description under the heading in “Item 6.C: Board Practices.” In July 2003, our Audit Committee also adopted a policy requiring management to obtain the Audit Committee’s approval before engaging our independent auditors worldwide to provide any other audit or permitted non-audit services to us. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the Audit Committee pre-approves all specific audit and non-audit services and related fees in the categories audit service, audit-related service and tax services that may be performed by our independent auditors worldwide.
ITEM 16D: Exemptions from the Listing Standards for Audit Committees
ITEM 16E: Purchase of Equity Securities by the Company and Affiliated Purchasers
ITEM 16F: Change in Registrant’s Certifying Accountants
ITEM 16G: Corporate Governance
NYSE American LLC Company Guide and Home Country Laws
Section 110 of the NYSE American LLC Company Guide provides that the NYSE American LLC will consider the laws, customs and practices of an issuer’s country of domicile, to the extent not contrary to the federal securities laws, regarding such matters as: (i) the election and composition of the board of directors; (ii) the issuance of quarterly earnings statements; (iii) shareholder approval requirements; and (iv) quorum requirements for shareholder meetings. If we wish to seek relief under these provisions we are required to provide written certification from independent local counsel that the non-complying practice is not prohibited by our home country law.
Our corporate governance practices currently differ from those followed by U.S. companies listed on the NYSE American LLC in connection with:
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In addition, under the Companies Law we may not be required to obtain shareholder approval for certain issuances of shares in excess of 20% of our outstanding shares, as would be required in certain circumstances by the NYSE American LLC Company Guide. At this time, we do not have any intention to enter into any such transaction; however, we may in the future do so and opt to comply with the Companies Law, which may not require shareholder approval. Any such determination to follow the Companies Law’s requirements rather than the standards applicable to U.S. companies listed on NYSE American LLC will be made by us based on the circumstances existing at the time approval is required.
Controlled Company
We were a “controlled company” as defined in Section 801 of the NYSE American LLC Company Guide until July 2025. As a result, we were exempt from certain of the NYSE American LLC corporate governance requirements, including the requirement that a majority of the board of directors be independent, the requirement applicable to the nomination process of directors and the requirements applicable to the determination or recommendation of executive compensation by a committee comprised of independent directors or by a majority of the independent directors. Upon the expiration of our “controlled company” status, we elected to follow “home country laws” (i.e. Israeli law) instead of some of the applicable NYSE American LLC Company Guide requirements as described above.
ITEM 16H: Mine Safety Disclosure
ITEM 16I: Disclosure regarding Foreign Jurisdictions that Prevent Inspections
ITEM 16J: Insider Trading Policies
Weadopted an insider trading policy governing the purchase, sale and other dispositions of our securities by directors, senior management and employees that we believe is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and any listing standards applicable to the Company. Our insider trading policy is filed as an exhibit to this Report.
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ITEM 16K: Cybersecurity
Risk Management and Strategy
Our business operations rely upon secure information technology systems for data processing, storage and reporting. As a global energy company based in Israel, we face heightened risks of cybersecurity incidents, and we remain potentially vulnerable to known or unknown threats, which are constantly evolving. Although to date we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition, there can be no assurance that we will not experience such an incident in the future. See “Item 3.D: Key Information - Risk Factors” for additional information about the risks to our business associated with cybersecurity threats.
Our cybersecurity strategy emphasizes detection, analysis and recovery of cybersecurity threats, while increasing our resiliency against cybersecurity incidents and effective management of cybersecurity risks and events.
We adopted internal policies and procedures aimed at enhancing protection of our information system against cybersecurity risks and detecting and managing cybersecurity events. We maintain physical, administrative and technical safeguards of our information systems, and also maintain plans and procedures whose objective is to help us prevent and timely and effectively respond to cybersecurity threats or incidents. We implement our policies and procedures through employee training, software enhancements and improvements and management oversight.
We conduct periodic risk assessments to identify, document and mitigate cybersecurity risks, including penetration tests and risk surveys. These risk assessments are conducted by qualified third party service providers. In addition, employees receive periodic information security training.
Exposure of third-party service providers to our information systems is minimized and made on a “need to know” basis and subject to execution of non-disclosure agreements to protect the confidentiality of our information.
Although we conduct third-party examination and other procedures designed to assess the data privacy and cybersecurity practices of third-party vendors and service providers (including contractual protections), our ability to monitor or control the data privacy and cybersecurity practices of third parties is limited and there can be no assurance that we can detect, prevent, mitigate, or remediate the risk of any weakness, compromise or failure in the information systems, software, networks and other assets owned or controlled by our third-party vendors and service providers. When we do become aware that a third-party vendor or service provider has experienced any compromise or failure, we attempt to mitigate our risk, including by terminating such third party’s connection to our information systems and networks where appropriate.
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Governance
Our board of directors has overall responsibility for risk oversight, with its committees assisting the board in performing this function based on their respective areas of expertise. With the assistance of the audit committee, our board of directors oversees our cybersecurity and ensures that we adequately address and mitigate the evolving cybersecurity threats we face. Our management team, with the assistance of our external Information Technologies service provider, are responsible for identifying, considering and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and maintaining cybersecurity programs. Our external Information Technologies service provider has over twenty-five years’ experience in information technology systems, structure and support and over ten years’ experience in information security, and are experienced in overseeing implementation, certification and compliance processes of international standards of information security such as ISO27001, TiSAX, etc.
In addition, in the event of a potentially material cybersecurity event, the CEO and Chairman of the Board are notified and briefed, and meetings of the Audit Committee and/or full Board would be held, as appropriate.
As part of its oversight responsibilities, our Audit Committee receives periodic updates from our management and through the internal audit plan on our cybersecurity practices as well as technology, cybersecurity and information security risks.
Weengage a third-party consultant to help us assess and identify risks from cybersecurity threats, including the threat of a cybersecurity incident, and to assist us in establishing our cybersecurity defenses and policies and manage our cyber risk assessment program. Our third-party consultant monitors cybersecurity threats to our software.
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PART III
ITEM 17: Financial Statements
ITEM 18: Financial Statements
Our Financial Statements are included in pages F-1 – F-101 of this Report.
The audited financial statements of Dorad Energy Ltd. for the year ended December 31, 2025 are included in pages FD-1 – FD-59 of this Report.
ITEM 19: Exhibits
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Dated: April 30, 2026
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Ellomay Capital Ltd. and its Subsidiaries
Consolidated Financial StatementsAs at December 31, 2025
Consolidated Financial Statements as at December 31, 2025
F-1
KPMG Somekh Chaikin
KPMG Millennium Tower
17 Ha’arba’a street, PO Box 609
Tel Aviv 6100601 Israel
+972 3 684 8000
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Ellomay Capital Ltd.
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Ellomay Capital Ltd. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of profit or loss and other comprehensive income (loss), changes in equity and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Convenience Translation
The accompanying consolidated financial statements as of and for the year ended December 31, 2025, have been translated into United States dollars (“dollars”) solely for the convenience of the reader. We have audited the translation, and, in our opinion, the consolidated financial statements expressed in euro have been translated into dollars on the basis set forth in Note 3B of the notes to the consolidated financial statements.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
KPMG Somekh Chaikin, an Israeli partnership and a member firm of the KPMG global organization of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee.
F-2
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Fair value of the Dorad Licenses
As discussed in Notes 2E, 3A(3), and 6A to the consolidated financial statements, on July 22, 2025 Ellomay Luzon Energy Infrastructures Ltd. (Ellomay Luzon Energy), an equity accounted investee of the Company, completed the acquisition of an additional 15% of the outstanding share capital of Dorad Energy Ltd. (Dorad), an equity accounted investee of Ellomay Luzon Energy prior and after the acquisition. The consideration transferred for additional ownership interest in an equity method investee is allocated to the Company’s additional share of the fair value of the identifiable assets and liabilities of the investee at the transaction date. Where the Company’s additional share of the fair value of the investee’s net identifiable assets exceeds the consideration transferred, the resulting bargain purchase gain is recognized immediately in profit or loss at the acquisition date, after reassessing the identification and measurement of the investee’s identifiable assets and liabilities. Dorad’s net identifiable assets included intangible assets for a production and supply license related to Dorad 1 and a production license related to Dorad 2 (Dorad Licenses). The determination of fair value for intangible assets involves significant judgment and estimates, including assumptions regarding future revenue cash flow forecasts and discount rates. The Company recorded a gain on bargain purchase of Euro 14.371 million for the excess of the fair value of the net identifiable assets at the transaction date over the purchase price of the additional interest in Dorad.
F-3
We identified the evaluation of the transaction date fair value of the Dorad Licenses as a critical audit matter. Assessing the key assumptions used to estimate the fair value of the Dorad Licenses, specifically the revenue cash flow forecasts, comprised of forecasted sales volumes and sales prices, and the discount rates, involved a high degree of subjective auditor judgment. Changes to these assumptions could have had a significant effect on the Company’s assessment of the fair value of the Dorad Licenses and the recognized gain on bargain purchase. Additionally, the audit effort related to the discount rates involved the use of professionals with specialized skill and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the accounting for the acquisition of additional interest in Dorad. This included controls related to the key assumptions used in the valuation of the Dorad Licenses. We compared the revenue cash flow forecasts to the historical performance and results of Dorad and Dorad’s business plan. We compared forecasted sales volumes used in the revenue cash flow forecasts to historical performance. We compared forecasted sales prices used in the revenue cash flow forecasts of Dorad 1 to existing customer contracts, publicly available regulatory information, and future market growth assumptions. We compared forecasted sales prices used in the revenue cash flow forecasts of Dorad 2 to historical external data, regulatory information, and external future market growth projections. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rates by comparing them to discount rates that were independently developed using current market conditions in the relevant energy sector based on third-party market data for comparable entities.
Valuation of the Talasol power purchase agreement
As discussed in Notes 21E(3) and 21F(3) to the consolidated financial statements, in order to manage its exposure to changes in electricity prices, the Company hedged approximately 80% of Talasol Solar Plant’s output through a financial power swap for a period of the power purchase agreement (Talasol PPA). The fair value of the Talasol PPA is measured by discounting the future fixed and assessed cash flows over the period of the contract and is based on certain assumptions, including electricity future prices projections. The valuation technique for assessing electricity future prices projections takes into consideration unobservable market data and complex pricing models. As of December 31, 2025, the Company reported current maturities of derivatives liabilities and non-current derivatives assets of €675 thousand and €12,433 thousand, respectively, which included the financial power swap related to the Talasol PPA.
We identified the assessment of the valuation of the Talasol PPA as a critical audit matter. Assessing electricity future prices projections required a high degree of auditor judgment because changes to the electricity future prices projections could have had a significant effect on Talasol PPA’s valuation.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of a certain internal control related to the Company’s process related to the valuation of the Talasol PPA at fair value, which included the assessment of electricity future prices projections. We assessed the electricity future prices projections by comparing them to market quotes and to an independently developed range of electricity future prices projections, which was based on publicly available market data and other information about the electricity market.
April 30, 2026
F-4
Consolidated Statements of Financial Position
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Consolidated Statements of Profit or Loss and Other Comprehensive Income (Loss)
F-6
Consolidated Statements of Changes in Equity
F-7
Consolidated Statements of Changes in Equity (cont’d)
F-8
F-9
The accompanying notes are an integral parconsolidated financial statements.
F-10
Consolidated Statements of Cash Flows
F-11
Consolidated Statements of Cash Flows (cont’d)
F-12
Note 1 – General
Since 2009, the Company focuses its business in the renewable energy and power sectors in Europe, USA and Israel. To date, the Company has evaluated numerous opportunities and invested significant funds in the renewable, clean energy and natural resources industries in Israel, Italy, Spain, the Netherlands and Texas, USA.
As of December 31, 2025, the Company owns:
The address of the Company’s registered office is 18 Rothschild Blvd., Tel Aviv, Israel.
In these financial statements:
Consolidated companies/subsidiaries– Companies, including partnerships, the financial statements of which are fully consolidated, directly or indirectly, with the financial statements of the Company.
Investee companies – Subsidiaries and companies, including partnerships, the Company’s investment in which is accounted for, directly or indirectly, using the equity method.
Related party – Within its meaning in IAS 24 (2009), “Related Party Disclosures”.
Unless otherwise noted, all references to “€,” “euro” or “EUR” are to the legal currency of the European Union, all references to “USD,” “US dollar,” “dollars” and “$” are to United States dollars, and all references to “NIS” are to New Israeli Shekels.
Other than as specifically noted, all amounts translated into euro were translated based on the exchange rate as of December 31, 2025.
F-13
Note 2 – Basis of Preparation
The consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards (IFRSs) as issued by the International Accounting Standards Board (IFRS Accounting Standards).
The consolidated financial statements were authorized by the Company’s Board of Directors for issuance on April 30, 2026.
These consolidated financial statements are presented in euro, which is the Company’s functional currency, and have been rounded to the nearest thousand, except when otherwise indicated. The euro is the currency that represents the principal economic environment in which the Company operates.
The consolidated financial statements have been prepared on the historical cost basis, except for the following assets and liabilities:
The operating cycle of the Company is one year.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The determination of accounting estimates used in the preparation of the Company’s financial statements requires the Company’s management to make assumptions regarding circumstances and events that involve considerable uncertainty. The Company’s management prepares the estimates on the basis of past experience, various facts, external circumstances and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
F-14
Note 2 – Basis of Preparation (cont’d)
The key assumptions made in the financial statements with respect to the future and other reasons for uncertainty with respect to estimates that have a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities within the next financial year are discussed below:
Recoverable amount of cash generating unit:
The Company examines at the end of each reporting period whether there have been any events or changes in circumstances that indicate impairment of cash-generating units. When an indication of impairment is revealed, the Company checks whether the carrying amount of the cash-generating units is recoverable. An impairment loss is recognized if the carrying amount of the cash-generating unit exceeds its estimated recoverable amount. For more information see Note 6D1.
Fair value measurement of non-trading derivatives:
Within the scope of the valuation of financial assets and derivatives not traded on an active market, management makes assumptions about inputs used in the valuation models. Principal assumptions of this estimate are unobservable inputs used in the valuation model (especially standard deviation and discount rates) and a possible effect of this estimate is profit or loss from a change in the fair value of those financial assets and derivatives. For information on a sensitivity analysis of levels 2 and 3 financial instruments carried at fair value see Note 21 regarding financial instruments.
Recognition of deferred tax asset in respect of tax losses:
A principal assumption of this estimate is the probability that in the future there will be taxable profits against which carried forward losses can be utilized. A possible effect of this estimate is recognition or reversal of deferred tax asset in profit or loss. See Note 19 regarding taxes on income.
Purchase price allocation:
The Company applies the acquisition method and allocates the consideration transferred to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.
The determination of the fair values of identifiable intangible assets involves significant judgment and estimates, including, among others, assumptions regarding future revenue and cash flow forecasts, the expected utilization and regulatory terms of the licenses, expected operating costs, and discount rates reflecting the risks associated with the underlying assets. See note 6A regarding the purchase price allocation of Dorad’s shares.
Determination of fair value:
Preparation of the financial statements requires the Company to determine the fair value of certain assets and liabilities. Further information about the assumptions that were used to determine fair value is included in Note 15 regarding share-based payments and Note 21 regarding financial instruments.
F-15
Note 3 – Material Accounting Policies
The accounting policies set out below have been applied consistently for all periods presented in these consolidated financial statements.
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the acquiree and it has the ability to affect those returns through its power over the acquiree. Substantive rights held by the Company and others are taken into account when assessing control. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control is lost.
Non-controlling interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include additional components such as Issuance of capital notes only to the non-controlling interest and share options of subsidiaries.
Allocation of profit or loss and other comprehensive income to the shareholders
Profit or loss and any part of other comprehensive income are allocated to the owners of the Company and the non-controlling interests. Total comprehensive income is allocated to the owners of the Company and the non-controlling interests even if the result is a negative balance of non-controlling interests.
Transactions with non-controlling interests, while retaining control
Transactions with non-controlling interests while retaining control are accounted for as equity transactions. Any difference between the consideration paid or received and the change in non-controlling interests is included in the owners’ share in equity of the Company directly in Transaction reserve with non-controlling interests.
Associates are those entities in which the Company has significant influence, but not control or joint control, over the financial and operating policies. There is a rebuttable presumption that significant influence exists when the Company holds between 20% and 50% of another entity. Joint ventures are joint arrangements in which the Company has rights to the net assets of the arrangement.
The acquisition date is the date on which the acquirer obtains significant influence over the acquiree. Associates and joint ventures are accounted for using the equity method (equity accounted investees) and are recognized initially at cost. The cost of the investment includes transaction costs that are directly attributable to an expected acquisition of an associate or joint venture. The consolidated financial statements include the Company’s share of the income and expenses in profit or loss and of other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.
F-16
Note 3 – Material Accounting Policies (cont’d)
Long-term interests in associates and joint ventures that, in substance, form part of the net investment in the associate or joint venture, such as preferred shares and long-term loans that their repayment is not expected and is unlikely to occur in the foreseeable future, are first accounted for in accordance with the guidance of IFRS 9 and then the equity method is applied in accordance with the guidance of IAS 28.
When the Company increases its interest in an equity accounted investee while retaining significant influence or joint control, the transaction is accounted for in accordance with IAS 28.
The consideration transferred for additional ownership interest in an equity method investee is allocated to the Company’s additional share of the fair value of the identifiable assets and liabilities of the investee at the transaction date. Where the Company’s additional share of the fair value of the investee’s net identifiable assets exceeds the consideration transferred, the resulting bargain purchase gain is recognized immediately in profit or loss at the acquisition date, after reassessing the identification and measurement of the investee’s identifiable assets and liabilities.
Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency
at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognized in profit or loss, except for qualifying cash flow hedges to the extent the hedge is effective, which are recognized in other comprehensive income.
F-17
The assets and liabilities of foreign operations, including adjustments arising on consolidation, are translated at exchange rates at the reporting date. The income and expenses for each period presented in the statement of profit or loss and other comprehensive income (loss) are translated, for practical reasons, at average exchange rates for the presented periods, provided that such rates reasonably approximate the exchange rates at the dates of the transactions; however, if exchange rates fluctuate significantly, income and expenses are translated at the exchange rates at the date of the transactions.
Foreign currency exchange differences are recognized in equity as a separate component of other comprehensive income (loss): “foreign currency translation adjustments”.
When the foreign operation is a non-wholly-owned subsidiary of the Company, then the relevant proportionate share of the foreign operation translation difference is allocated to the non-controlling interests.
Foreign exchange gains and losses arising from a monetary item receivable from, or payable to, a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized in other comprehensive income (loss) and are presented within equity as part of the translation reserve.
For the convenience of the reader, the reported euro figures as of December 31, 2025 and for the year then ended, are also presented in dollars, translated at the representative rate of exchange as of December 31, 2025 (euro 1 = US$ 1.174). The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollars or convertible into dollars, unless otherwise indicated.
The Company initially recognizes receivables on the date that they are created. Receivables without a significant financing component are initially measured at the transaction price and subsequently measured at amortized cost, using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss.
The Company’s financial liabilities include loans and borrowings, trade payables, other payables, finance lease obligations, debentures, long-term loans and other long-term liabilities.
The Company initially recognizes debt securities issued on the date that they originated. All other financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
F-18
Financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.
Financial liabilities are derecognized when the obligation of the Company, as specified in the agreement, expires or when it is discharged or cancelled.
The Company holds both derivative financial instruments to hedge its interest rate risk exposures and fluctuating electricity prices risk exposures and derivatives that do not serve hedging purposes.
Hedge accounting
The Company designates certain derivatives as hedging instruments in order to hedge changes in cash flows that relate to highly probable forecasted transactions, and which derive from changes in fluctuation in the electricity prices and changes in interest on variable-rate loans. The Company continues to apply IAS 39 for hedge accounting.
The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, as to whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent.
Measurement of derivative financial instruments
Derivatives are recognized initially at fair value and attributable transaction costs are recognized in Profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
Cash flow hedges
When a derivative instrument is designated as a cash flow hedge, the effective portion of the changes in fair value of the derivative is recognized in Other comprehensive income, directly within a hedging reserve. The effective portion of changes in fair value of a derivative, recognized in Other comprehensive income, is limited to the cumulative change in fair value of the hedged item (based on present value), from inception of the hedge. The change in fair value in respect of the ineffective portion is recognized immediately in Profit or loss.
If the hedge no longer qualifies as an accounting hedge, or the hedging instrument is sold, expires, is terminated or exercised, hedge accounting is discontinued on a prospective basis. When hedge accounting is discontinued, the amounts accumulated in the past in the hedging reserve and cost of hedging reserve remain in the reserve, until such time as they are reclassified to Profit or loss in the period, or periods, in which the hedged forecasted future cash flows affect Profit or loss (for other cash flows hedges).
F-19
Economic hedges
Hedge accounting is not applied to derivative instruments that economically hedge financial assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognized in Profit or loss under financing income or expenses.
When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changes as a result of interest rate benchmark reform, the Company updates the effective interest rate of the financial asset or financial liability to reflect the change required by the reform. When changes are made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, in addition to adjusting the effective interest rate as a result of the reform the Company applies on accounting for substantial modifications in terms of debt instruments.
The value of CPI-linked financial assets and liabilities, which are not measured at fair value, is re-measured every period in accordance with the actual increase/decrease in the CPI.
Fixed assets items are measured at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the fixed asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the assets to a working condition for their intended use, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located, and capitalized borrowing costs (mainly specific). Project licenses are included in the cost of solar plants.
Capitalization of photovoltaic projects commences from the date the relevant project reaches a Ready to Build (“RTB”) status. A project is considered to have reached RTB when all required permits, land rights and documentation securing the connection to the electricity grid have been obtained. In Italy, RTB status is achieved provided that 120 days have elapsed from the publication of the relevant permits without any challenge being filed by any party under applicable law. Until such time, development costs are expensed as incurred.
The costs of replacing part of a fixed asset item and other subsequent expenses are capitalized if it is probable that the future economic benefits associated with them will flow to the Company and their cost can be measured reliably. The carrying amount of the replaced part of a fixed asset item is derecognized. The costs of day-to-day servicing are recognized in Profit or loss as incurred.
Gains and losses on disposal of a fixed asset item are determined by comparing the net proceeds from disposal with the carrying amount of the asset and are recognized in Profit or loss.
F-20
Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, or other amount substituted for cost, less its residual value. An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required for it to operate in the manner intended by management. Depreciation is recognized in Profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item.
The estimated useful lives are as follows:
The estimated useful life of the project licenses of solar plants that are carried at cost is 20-29 years for the Company’s subsidiaries. The estimated useful life of the project licenses of the Company’s Netherlands anaerobic digestion plants that are carried at cost is 25 years. The fixed assets residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted if appropriate.
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The Company views each solar plant and Biogas plant as a separate cash-generating unit.
The recoverable amount of an asset or cash-generating unit is the greater of its fair value less costs of disposal and its value in use.
An impairment loss is recognized in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount.
F-21
Contracts that award the Company control over the use of a leased asset for a period of time in exchange for consideration are accounted for as leases. Upon initial recognition, the Company recognizes a liability at the present value of the balance of future lease payments (these payments do not include certain variable lease payments), and concurrently recognizes a right-of-use asset at the same amount of the lease liability, adjusted for any prepaid or accrued lease payments, plus initial direct costs incurred in respect of the lease.
As the interest rate implicit in the Company’s leases is not readily determinable, the incremental borrowing rate of the lessee is used. Subsequent to initial recognition, the right-of-use asset is accounted for using the cost model and depreciated over the shorter of the lease term or useful life of the asset.
The Company has elected to apply the practical expedient by which short-term leases of up to one year and/or leases in which the underlying asset has a low value, are accounted for such that lease payments are recognized in profit or loss on a straight-line basis, over the lease term, without recognizing an asset and/or liability in the statement of financial position.
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it is reasonably certain that the lessee will or will not exercise the option, respectively.
Variable lease payments that depend on an index or a rate are initially measured using the index or rate existing at the commencement of the lease and are included in the measurement of the lease liability. When the cash flows of future lease payments change as the result of a change in an index or a rate, the balance of the liability is adjusted against the right-of-use asset. Other variable lease payments that are not included in the measurement of the lease liability are recognized in profit or loss in the period in which the event or condition that triggers payment occurs.
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements of the lease liability. Depreciation is calculated on a straight-line basis over the useful life or contractual lease period, whichever earlier. The main right of use assets are lands which are depreciated over 20-40 years.
F-22
Revenues are derived primarily from the sale of electricity and natural gas to customers. Revenues are recognized when the customer obtains control over the promised products, i.e., when the natural gas or electricity is delivered to the customer. The revenue is measured according to the amount of consideration to which the Company expects to be entitled in exchange for the products promised to the customer, other than amounts collected for third parties.
Revenues from the sale of electricity and natural gas are recognized when the units produced are transferred to the grid at connection points on the basis of a meter reading.
Revenues in respect of units produced and transferred to the grid in the period between the most recent meter reading and the date of the statement of financial position, are included based on an estimate.
In some of the Company’s facilities, the proceeds from the sale of electricity and gas also depend on the subsidies granted by the local government in accordance with changes in the market prices of electricity. The Company measures revenues while taking into account the increase or decrease of the subsidies it will receive as a result of changes in market prices throughout the current year. Revenue from subsidies is recognized when there is reasonable assurance that the subsidies will be received.
In some of the Company’s facilities in Spain and Italy, the proceeds from the sale of electricity also depend on the hedging transactions the Company executes in order to secure a fixed consideration from the sale of electricity. The effective gains and losses arising from the hedging instruments are recognized as revenue, together with the revenue from the hedged electricity sale. In this manner, the recognized revenue reflects the fixed price achieved through the hedging derivative.
Income tax consists of current tax and deferred tax. Current tax and deferred tax are recognized in Profit or loss except to the extent that the tax arises from items which are recognized directly in Equity. In such cases, the tax effect is also recognized in the relevant item in Equity.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for a limited number of exceptions, including differences relating to investments in subsidiaries, joint arrangements and associates, to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future, either by way of selling the investment or by way of distributing dividends in respect of the investment.
A deferred tax asset is recognized for unused tax losses, tax benefits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets that were not recognized are reevaluated at each reporting date and recognized.
F-23
Financing income comprises interest income on bank deposits and marketable securities, gains on changes in the fair value of financial assets at fair value through Profit or loss, gains on hedging instruments that are recognized in Profit or loss, the reclassification of net gains and losses previously recognized in other comprehensive income on cash flow hedge and exchange rate differences. Interest income is recognized as it accrues. Changes in the fair value of financial assets at fair value through Profit or loss also include income from dividends and interest.
Financing expenses consist of bank charges, interest expenses on borrowings and debentures, changes in the fair value of financial assets at fair value through Profit or loss, losses on hedging instruments that are recognized in Profit or loss, and exchange rate differences.
Borrowing costs, which are not capitalized to qualifying assets, are recognized in Profit or loss using the effective interest method. Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either Financing income or Financing expenses depending on whether foreign currency movements are in a net gain or net loss position.
In the statements of cash flows, interest received and interest paid are presented as part of Cash flows from operating activities. Financing costs that were capitalized to qualifying assets are presented as part of Cash flows from investment activities.
As part of service concession arrangements with government bodies for the construction and operation of a facility in consideration for fixed and variable payments, the Company recognizes a financial asset commencing from the start of the construction of the facility when it has an unconditional right to receive cash or some other financial asset for the construction services. The financial asset reflects the unconditional payments receivable in the future from the government body and bears an appropriate rate of interest for risk that is determined based on the risk of the customer. The aforementioned financial assets are stated at fair value upon initial recognition and at amortized cost in subsequent periods.
In projects accounted for using the financial asset model, when at the end of the construction period there is an unconditional right (other than that of the passing of time) to receive consideration for the construction services, the contract asset is classified to Receivables (financial asset) according to the carrying amount of the contract asset.
The Company classifies an operation as a discontinued operation when it meets the criteria to be classified as held for sale. The discontinued operation is a component of the Company’s business that represents a separate major line of business. The comparative income statement is restated as if the operation had been discontinued from the start of the earliest comparative period.
F-24
A provision for claims is recognized if, as a result of a past event, the Company has a present legal or constructive obligation and it is more likely than not that an outflow of economic benefits will be required to settle the obligation and the amount of obligation can be estimated reliably. When the value of time is material, the provision is measured at its present value.
Government grants are recognized only when there is reasonable assurance that the Company will comply with the conditions attached to the grants and that the grants will be received.
Investment tax credits (ITC) and similar investment-based tax incentives are accounted for as government grants in accordance with IAS 20. Amounts receivable under such arrangements are recognized as deferred income and are recognized in profit or loss over the period in which the associated conditions are expected to be met or the economic benefits from the incentive are realized, in a manner that reflects the substance of the arrangement.
Income recognizedfrom government grants and investment-based tax incentives is presented within other income or another appropriate line item in profit or loss, depending on the nature of the grant.
The Amendments provide clarifications relating to the date of recognition and derecognition of financial instruments. In accordance with the Amendments, an exception is added regarding the timing of derecognizing financial liabilities settled by electronic cash transfers, as well as clarification relating to disclosure requirements for financial instruments with contingent features that are not directly related to changes in the basic risks/cost of the instrument. The Amendments are effective for annual reporting periods beginning on or after January 1, 2026. The Company is examining the effects of the Amendments on the financial statements with no plans for early adoption.
The Standard replaces the international accounting standard IAS 1 Presentation of financial Statements and includes new disclosure and presentation requirements as well as requirements that were taken from IAS 1. As part of the new disclosure requirements, it is required to present two subtotals in the income statement: operating profit and profit before financing and taxes. In addition, income statement items will be classified into three defined categories: operating, investment and financing. The Standard also includes a requirement to provide a separate disclosure in the financial statements regarding the use of management-defined performance measures (MPMs) (“non-GAAP” measures), and specific instructions were added for the grouping and splitting of items in the financial statements and in the notes. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with an option for early adoption. The Company is examining the effects of the Amendment on the financial statements with no plans for early adoption.
F-25
Note 4 - Cash and Cash Equivalents
The Company’s exposure to credit, interest rate and currency risks, and a sensitivity analysis for financial assets, are included in Note 21 regarding financial instruments.
Note 5 - Restricted Cash and Deposits
Note 6 - Investee Companies and other investments
Ellomay Luzon Energy Infrastructures Ltd. (“Ellomay Luzon Energy”) –
Since November 2010, the Company indirectly (through Ellomay Clean Energy LP (“Ellomay Energy LP”)) holds 50% of Ellomay Luzon Energy (formerly U. Dori Energy Infrastructures Ltd.), and as of December 31, 2025, Ellomay Luzon Energy holds 33.75% of Dorad Energy Ltd. (“Dorad”), which owns an approximate 850 MWp dual-fuel operated power plant in the vicinity of Ashkelon, Israel (the “Dorad Power Plant”). The investment in Ellomay Luzon Energy is accounted for under the equity method.
As of December 31, 2025, Dorad provided, through its shareholders at their proportionate holdings and as required by the financing agreements executed by Dorad, guarantees in favor of the Israeli Electricity Authority, NOGA – electricity system management and Israel Natural Gas Lines Ltd. The Company’s indirect share of guarantees provided on behalf of Dorad by Dorad’s shareholders is approximately NIS31,300 thousand (approximately €8,357 thousand). As of On April 16, 2026, Dorad replaced the guarantees provided by its shareholders, including the guarantees provided by Ellomay Luzon Energy.
F-26
Note 6 - Investee Companies and other investments (cont’d)
Ellomay Luzon Infrastructures Ltd. (“Ellomay Luzon Energy”) (cont’d) –
Dorad’s revenues and operating expenses are affected by the average production component as determined by the Israeli Electricity Authority. The average production component was decreased by approximately 0.7% commencing January 1, 2023, decreased by approximately 1.2% commencing February 1, 2023, decreased by approximately 1.4% commencing April 1, 2023, decreased by approximately 1% commencing February 2024, decreased by approximately 2.2% commencing January 2025 and decreased by approximately 1.7% commencing January 1, 2026.
Dorad’s financing expenses are affected by the indexation to the Israeli CPI of its Project Finance. The Israeli CPI increased by approximately 2.6% in 2025, by approximately3.2% in 2024 and by approximately 3% during 2023.
On November 22, 2020, the IEC filed a third-party notice against Dorad in connection with a request to approve a class action submitted against the IEC claiming that the IEC was negligent in overseeing the private electricity manufacturers thereby damaging the electricity consumers at an amount of NIS 330 million (€88 million) as estimated in the request. The IEC did not include in its third-party notice the amount it attributes to Dorad.
The claim against the IEC alleges that the private electricity manufacturers provided false reports in the consumption plans they submitted to the system manager in the IEC, based on the standards set by the Israeli Electricity Authority. On February 24, 2025, the District Court ruled that, given the nature of the appeal pending before the Supreme Court, there is no reason to proceed with the class action as long as the appeal remains unresolved. On December 11, 2025, a new hearing date for the appeal was set for June 9, 2026. If the appeal is accepted in full, the hearing on the motion to certify the claim as a class action will take place with Dorad participating therein as a third party.
Dorad estimates, based on the opinion of its legal advisors, that at this stage, it is not possible to reasonably assess the outcome of the appeal. Therefore, no provision has been recorded in Dorad’s financial statements.
Dorad and its shareholders were involved in several legal proceedings.
On June 28, 2023 an arbitration award was issued in connection with three proceedings between Dorad’s shareholders and Dorad that commenced in 2015, as follows:
F-27
Ellomay Luzon Energy Infrastructures Ltd. (“Ellomay Luzon Energy”) (cont’d)–
F-28
The net impact of the amounts on Dorad’s profit or loss statement for 2024 amounts to a profit of approximately NIS 280 million before the effect of taxes (profit of approximately NIS 215.6 million after the effect of taxes). The Company’s share of the after-tax profit is in the amount of approximately NIS20 million (approximately €5.3 million). Dorad estimated, based on the opinion of its legal advisors, that the likelihood of its position, that the amounts received in the arbitration are not subject to Israeli VAT (currently 18%) being accepted is greater than the likelihood of it being rejected. Accordingly, Dorad has not recorded a VAT provision for these payments in its financial statements. On November 13, 2025, Dorad received an approval from the Israeli Tax Authority confirming that the amounts received under the arbitration award are not subject to Israeli VAT. In addition, Ellomay Luzon Energy received an amount of NIS 10 million as reimbursement of legal expenses based on the arbitrator’s ruling. The Company’s share was approximately NIS 5 million (approximately €1.3 million).
Potential Expansion of the Dorad Power Plant (“Dorad 2”)
Dorad is examining the possibility of constructing an additional power plant within the area of the existing Dorad Power Plant, that will become part of the existing plant. On May 28, 2023, the Israeli Government approved the national infrastructures plan (NIP 11/b) which governs, among other issues, the expansion of the power plant owned by Dorad by approximately 650-720 MW. On February 19, 2024, Dorad received a planning survey to receive the expansion of the power plant from the System Manager, which allows electricity to be taken out commencing October 2028.
On September 10, 2024, Edelcom Ltd. submitted a claim against Dorad and the other shareholders of Dorad to the Israeli District Court in Tel Aviv requesting the court to provide the following declaratory judgements: (1) to declare that based on Dorad’s articles of organization the general meeting of the shareholders of Dorad is the authorized body for approving any resolution relating to the change in the field of operations of Dorad, including any planning or construction of a new power plant or the expansion of the capacity of the existing power plant and any budget and preliminary feasibility tests, including the “Dorad 2” project, (2) to declare that based on the articles of organization of Dorad the board of directors of Dorad is the authorized body for advancing and managing the construction of a new power plant or the expansion of the existing power plant, including the “Dorad 2” project, following the approval by Dorad’s shareholders of a resolution to promote the project or perform preliminary feasibility testing, and of a related budget, (3) to declare that any resolution of the shareholders or the board of directors of Dorad in the aforementioned subjects will be approved only if all of the shareholders or all of the directors, as the case may be, voted in favor of the resolution, and (4) to declare that any resolution in connection with the “Dorad 2” project adopted since 2018 and until a ruling is given in connection with the claim, which was not adopted by the authorized bodies of Dorad as set forth in the claim, is null and void.
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Ellomay Luzon Infrastructures Ltd. (“Ellomay Luzon Energy”) (cont’d)–
Potential Expansion of the Dorad Power Plant (“Dorad 2”) (cont’d)
In addition, Edelcom requests that the court issue a permanent injunction instructing Dorad and its other shareholders (the defendants), including anyone on their behalf, not to do any action that relates to a change in Dorad’s field of operation, including planning and construction of a new power plant or the expansion of the existing power plant, including in connection with “Dorad 2” and approving budgets for these actions and/or performing any tests in connection therewith, unless these actions were unanimously approved by the shareholders of Dorad and that the court permit the plaintiff to bifurcate its requests as financial claims may arise in the future.
Following the submission of responses by Dorad, EAPC and Ellomay Luzon Energy and discussions concerning preliminary proceedings, on October 5, 2025, Edelcom notified Dorad that it intends to file a motion to amend its statement of claim and Dorad consented to a procedural amendment whereby the dates set for submission of affidavits of discovery will be postponed until after the decision on the motion to amend. On December 22, 2025, following the hearing held before the court on November 11, 2025, and further to Edelcom’s notice in the matter, the court ordered the dismissal of the claim without an order as to expenses (while reserving the parties’ arguments in this regard should a similar proceeding be initiated in the future).
On March 29, 2026, Dorad’s board of directors approved an agreement to secure a production slot with a heavy equipment supplier for the purchase of a new turbine as well as the related auxiliary equipment. In connection with this agreement, an amount that constitutes approximately 5% of the total cost of the Dorad 2 project (currently estimated at NIS 4–4.6 billion) and approximately 20% of the cost of the equipment to be procured from the heavy equipment supplier, will be deposited with the supplier and will be treated as a Reservation Deposit. Under the agreement, the supplier will undertake to supply the aforementioned equipment in accordance with the timelines and terms set forth therein, including scope of warranty, guarantees and the terms for their forfeiture, performance provisions, and more. At this stage, the Reservation Consideration for the main equipment will be paid from Dorad’s own sources. If the final required agreements for the purchase of the said equipment are executed by September 2026 or by the financial close date, whichever is earlier, the Reservation Deposit will constitute an advance payment toward the full payment for the main equipment and the related auxiliary equipment. If the required agreements are not executed within the aforesaid timeframe, the Reservation Deposit will be forfeited. This agreement is expected to be signed in the near future.
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The expansion of the Dorad Power Plant by building the Dorad 2 facility in a combined cycle technology will result in an aggregate capacity of the Dorad Power Plant of approximately 1,500-1,570 MW and the approved plan also enables adding batteries with a capacity of approximately 80 MW. The Company expects that if the Dorad 2 plan will materialize and the expansion will be completed, the expansion of the power plant will increase the revenues and income of Dorad. The expansion is subject to various conditions including obtaining financing.
Impact of War in Israel
On October 7, 2023, following a surprise attack by the terrorist organization Hamas against the State of Israel and its citizens, the Israeli government declared a war (the “Iron Swords War”), which continues as of the date of this report, and which has also expanded into a security conflict in the northern region. During the days of fighting, thousands of rockets were launched towards the State of Israel, and shrapnel fell several times in the territory of the power plant, which caused immaterial damage to property and equipment but did not impact the regular operation of the power plant. On June 13, 2025, the war significantly expanded to an additional front, when the State of Israel initiated a direct confrontation with Iran, or the June 2025 Iran Operation, upon the commencement of which the State of Israel declared a special state of emergency on the home front and closed its airspace. This confrontation further deepened the impact of the war on the activities of many companies in the economy. As a result of the June 2025 Iran Operation, Dorad’s revenues in June 2025 decreased by approximately22% compared to June 2024. The June 2025 Iran Operation ended on June 24, 2025, with a ceasefire agreement, and the economy returned to full activity. For information concerning the USA-Israel-Iran war that commenced on February 28, 2026, see Note 24C.
Changes in investments
F-31
On September 2, 2024, Dorad’s board of directors decided to distribute a dividend in the aggregate amount of NIS 50 million and such dividend was distributed during September 2024. In connection with such dividend distribution, Ellomay Luzon Energy received an amount of approximately NIS 9.4 million and shortly thereafter Ellomay Luzon Energy distributed a dividend to its shareholders in an amount of approximately NIS 7.6 million (the Company’s indirect share is approximately NIS 3.8 million).
On November 25, 2024, Dorad’s board of directors decided to distribute an additional dividend in the aggregate amount of NIS 75 million and such dividend was distributed shortly thereafter. In connection with such dividend distribution Ellomay Luzon Energy received an amount of approximately NIS 14 million and shortly thereafter Ellomay Luzon Energy distributed a dividend to its shareholders in approximately the same amount (the Company’s indirect share is approximately NIS 7 million).
In December 2024, the Ellomay Luzon Energy board of directors approved a dividend distribution in the amount of approximately NIS 8.5 million (the Company’s indirect share is approximately NIS 4.25 million) following receipt of a refund of legal expenses in connection with the arbitration procedure described.
On December 2, 2025, Dorad’s board of directors decided to distribute a dividend in the aggregate amount of NIS 200 million and such dividend was distributed on December 4, 2025. In connection with such dividend distribution, Ellomay Luzon Energy received an amount of approximately NIS 67.5 million.
Summary financial data for investees, not adjusted for the percentage ownership held by the Company
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Ellomay Luzon Energy Infrastructures Ltd. (“Ellomay Luzon Energy”) (cont’d) –
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Acquisition of Additional 15% of Dorad’s Share Capital
On July 22, 2025, Ellomay Luzon Energy completed the acquisition of an additional 15% of Dorad’s outstanding share capital pursuant to a Share Purchase Agreement executed in April 2025 (the “Dorad SPA”). Ellomay Luzon Energy acquired these shares from Zorlu Enerji Elektrik Üretim A.S (“Zorlu”) for an aggregate purchase price of approximately NIS 418.1 million (approximately €106.5 million as of the acquisition date), subject to certain adjustments.
The consideration for 15% of Dorad’s outstanding shares acquired by Ellomay Luzon Energy was funded by bank financing (the “EL Loan Agreement”), provided to Ellomay Luzon Energy consisting of three tranches as follows: (i) a loan in the amount of NIS 175 million (approximately €45 million at that time), bearing annual interest in the range of +0.5% to -0.5% of the Israeli Prime Rate (the “First Loan”), (ii) a loan in the amount of NIS 175 million (approximately €45 million at that time), bearing fixed annual interest rate between 5% and 6% (the “Second Loan”), and (iii) a loan in the amount of NIS 70 million (approximately €18 million at that time), bearing annual interest rate in the range of +0.5% to -0.5% of the Israeli Prime Rate (the “Third Loan”).
The First Loan is repayable in four semi-annual payments commencing December 31, 2031 and ending on June 30, 2033, and the interest on the First Loan is payable in semi-annual payments commencing December 31, 2025 and ending on the final repayment of the First Loan. The Second Loan is repayable in sixteen semi-annual payments commencing December 31, 2025 and ending on June 30, 2033, and the interest on the Second Loan is payable in semi-annual payment commencing December 31, 2025 and ending on the final repayment of the Second Loan. The Third Loan is repayable in one payment on December 31, 2025, unless the conditions set forth in the Loan Agreement will not be met, which will enable Ellomay Luzon Energy to ask for an extension until December 31, 2026. The interest on the Third Loan is payable on December 31, 2025 and, to the extent an extension is requested, in semi-annual payments thereafter until the final repayment of the Third Loan. During the year ended December 31, 2025, Ellomay Luzon Energy repaid an amount of NIS 30 million (€8 million) out of the Third Loan and requested an extension until December 31, 2026 for the remainder of the Third Loan. As of December 31, 2025, the outstanding amount on the loans was NIS 40 million (€11 million) (the Third Loan) and approximately NIS 336 million (€90 million) (the First Loan and Second Loan).
In connection with the Loan Agreement, Ellomay Luzon Energy granted the lender a first ranking fixed pledge on its rights in connection with an account with the lender, or the Pledged Account, in which all amounts due to Ellomay Luzon Energy from Dorad will be deposited. The Loan Agreement provides that when any dividend is received from Dorad: (i) Ellomay Luzon Energy will leave in the Pledged Account the amount required for the next payment to the lender, (ii) to the extent the amount received during a calendar year exceeds NIS 65 million (€17 million), then Ellomay Luzon Energy will make an early repayment of the First Loan and thereafter the Third Loan in the amount of 50% of the difference between the amount of receipts in the calendar year and NIS 65 million by no later than June 30 of the following year (pro rata over all future payments), and (iii) with respect to any amount in excess of the amounts required as stated in paragraphs (i) and (ii) – Ellomay Luzon Energy is entitled to use the funds deposited in the Pledged Account for any need, subject to the provisions of the law and the agreements with the lender.
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Acquisition of Additional 15% of Dorad’s Share Capital (cont’d)
The Loan Agreement provides that the First and Third Loans may be prepaid without an early repayment fee and the Second Loan may be prepaid subject to payment of fees as generally acceptable in the lender.
During the year ended December 31, 2025, Ellomay Luzon Energy performed a purchase price allocation in connection with the acquisition of 15% of Dorad’s shares. The purchase price allocation provided as follows:
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The Dorad SPA required the purchaser to deposit on the date of execution of the Dorad SPA an autonomous guarantee with an escrow agent in the amount of approximately NIS 414.1million (€105.5 million as of the acquisition date). To enable Ellomay Luzon Energy to provide the guarantee required under the Dorad SPA, the Company deposited in April 2025 an amount equal to 25% of its portion of the guarantee (pro rata to its holdings in Ellomay Luzon Energy), which served as collateral to the bank that issued the guarantee. In connection with the pledged deposit, the Company entered into a Commercial Paper Agreement enabling it to receive a short-term loan in the amount of NIS 60 million – NIS 210 million, with a variable annual interest rate equal to the Israeli Prime lending rate (currently 6%) + 0.5%. The commercial paper is for a term of one year and includes customary causes for early repayment. In addition, the Company and the holders of the commercial paper are entitled to effect early repayment without cause with a 45 business day prior notice. The Company withdrew an amount of NIS 60 million (€16million) under the Commercial Paper Agreement in April 2025. Following consummation of the acquisition of 15% of Dorad’s outstanding shares by Ellomay Luzon Energy as set forth below, the guarantee was released and the Company provided a notice of early repayment to the holder of the commercial paper.
For information concerning a separation process and an agreement to sell the Company’s indirect holdings in Ellomay Luzon Energy, see Note 24A.
Pumped-storage project in the Manara Cliff in Israel (“Manara PSP”) –
Ellomay Pumped Storage (2014) Ltd. (“Ellomay PS”), in which the Company directly and indirectly owns 83.333% (with the remaining 16.667% held by Ampa Ltd. (“Ampa”)), received a conditional license for the Manara PSP from the Israeli Minister of Energy and Infrastructures (the “Minister”) for the construction of a pumped storage plant in the Manara Cliff with a capacity of 156 MW (the “Conditional License”). The Conditional License permits Ellomay PS to construct the Manara PSP and includes several conditions precedent to the entitlement of Ellomay PS to receive an electricity production license. The Company and its affiliates did not pay any consideration upon the acquisition of the rights in the Manara PSP and undertook to pay certain consideration upon the fulfillment of certain conditions and milestones. As of December 31, 2025, the Company paid an amount of approximately NIS 27,590 thousand (approximately €7,366 thousand) on account of the consideration upon the acquisition.
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Pumped-storage project in the Manara Cliff in Israel (“Manara PSP”) (cont’d) –
The Conditional License was originally valid for a period of seventy-two (72) months commencing the date of its approval by the Minister, and as noted below such period was extended by sixteen (16) months in connection with the war in Israel. The continued validity of the Conditional License is subject to compliance by Ellomay PS with the milestones set forth therein and subject to other provisions set forth therein (including financial closing, provision of guarantees and construction of the pumped storage hydro power plant).
According to applicable law, the 72 months license period may be extended for up to three additional periods of 12 months each if required due to circumstances existing after the previous extension was approved and subject to the Minister’s approval at such time. Each extension may result in a forfeiture of up to 40% of the license guarantee which value currently amounts to approximately NIS 4,100 thousand (approximately €1,095 thousand). The guarantee amount is linked to the USD and is reduced over time upon fulfillment of certain interim project milestones.
On December 31, 2020, Ellomay PS received the conditional tariff approval for the project from the Israeli Electricity Authority that regulates the tariffs and formulas for purchasing energy from a pumped storage manufacturer connected to the transmission network for a period of 20 years beginning on the date of receipt of the permanent production license. The conditional tariff became effective following financial closing in February 2021. On February 11, 2021, the Manara PSP Project Finance reached financial closing. The Manara PSP Project Finance is provided by a consortium of Israeli banks and institutional investors, arranged and led by Mizrahi-Tefahot Bank Ltd. As of the date of the financial closing, the Manara PSP Project Finance was in the aggregate amount of approximately NIS 1.27 billion (approximately €0.317 billion at that time). This aggregate amount is linked to a synthetic composite index comprising a weighted average of the indices and currencies applicable to the Manara PSP’s construction costs (the “Project Index”).
As of December 31, 2025, the Manara PSP Project Finance (including reevaluation linkage to the Project Index) amounts to approximately NIS 1,443 million (approximately €385 million at that time). The owners of Ellomay PS undertook to provide, and provided, aggregate equity and shareholder’s loans financing to the project of NIS 353 million (approximately €94.1 million at that time), pro rata to their holdings in the Manara PSP, linked to the Project Index. Due to this indexation, additional shareholders’ loans were provided by the shareholders pro rata to their respective holdings in Manara PSP. As of December 31, 2025, the financing provided by the owners of Manara PSP amounted to approximately NIS 392,000 thousand (approximately €105,000 thousand).
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Manara PSP Project Finance (cont’d)
Ellomay and Ampa Investments Ltd. (“Ampa”), provided certain sponsor support undertakings towards the lenders commensurate with the size and complexity of the project and the length of the construction period, including a standby equity guarantee in the aggregate amount of approximately NIS 12,500 thousand (approximately €3,331 thousand at that time), pro rata to their holdings in the Manara PSP. This standby equity guarantee is linked to the Israeli CPI and adjusted to the Project Index. As of December 31, 2025, the standby equity guarantee, including linkage, amounts to NIS 13,830 thousand (approximately €3,692 thousand). Ellomay and Ampa also provided corporate guarantees in an amount similar to the amount of the standby equity guarantee.
In August 2021, the Israeli Electricity Authority issued a clarification letter relating to the method of calculation of certain dynamic benefits applicable to all pumped storage projects in Israel. The owners of the Manara PSP currently estimate that if the updates to the method of calculation will be implemented, the new calculation may reduce the cover ratios of the Manara PSP during the commercial operation period by up to 5 basis points. In order to mitigate such potential future effect, the owners of the Manara PSP agreed to provide the lenders with certain undertakings to inject additional equity to the Manara PSP in certain scenarios, subject to a cap which is currently estimated by the owners of the Manara PSP to be approximately NIS 46,000 thousand (approximately €12,280 thousand).
In February 2021, Ellomay PS executed the EPC agreement for the construction of the Manara PSP (the “Manara PSP EPC Agreement”), under a “turnkey” contract with Electra Infrastructure Ltd. (“Electra Infrastructure”), one of Israel’s largest construction companies. The aggregate consideration payable to Electra Infrastructure under the Manara PSP EPC Agreement is expected to be approximately NIS 1.13 billion excluding indexation (approximately €300 million). The majority of this amount is linked to the actual change in the Israel Residential Construction Index (“IRC”). A small portion of the price is denominated in Euros. Under the Manara PSP EPC Agreement, Voith Hydro, the world’s leading manufacturer of hydroelectric turbines, was nominated as the main subcontractor that will provide the electro-mechanical equipment to the Manara PSP. The construction period of the Manara PSP was originally expected to be 62.5 months. Due to the delays in connection with the war in Israel as set forth below, the construction period is currently expected to be extended by the sixteen months regulatory extension and an additional period of several months required for the ramp-up of the contractor’s operations.
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Due to the Iron Swords War, which has also expanded into a security conflict in the northern region, operations construction works at the Manara site were halted in October 2023. The planning works, the construction of the equipment off site, including the electro-mechanical equipment and the arrival of the equipment in Israel continue as usual.
The Electricity Authority granted a sixteen-month extension to the regulatory milestones and the duration of the general license. As part of the standards supporting financing, there is protection for the senior debt (principal and interest) and the developer’s expenses, subject to the approval of the Electricity Authority on the subject. Following the ceasefire achieved in November 2024 between Israel and Lebanon, the EPC contractor is preparing to resume construction work at the site. The works on the Manara PSP were resumed by the EPC contractor on April 7, 2025 entering into a ramp-up period. For information concerning the USA-Israel-Iran war that commenced on February 28, 2026, see Note 24C.
Framework Agreement
In December 2019, Ellomay Luxembourg executed a Framework Agreement (the “Framework Agreement”), with an established and experienced European developer. Pursuant to the Framework Agreement, the developer will provide Ellomay Luxembourg with development services with respect to solar greenfield projects in Italy in the scope of 350 MW with the aim of reaching an aggregate RtB authorized capacity of at least 265 MW over a forty-one month period.
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Framework Agreement (cont’d)
The Framework Agreement provides that the developer will offer all projects identified during the term of the Framework Agreement exclusively to Ellomay Luxembourg and that, with respect to each project acquired by Ellomay Luxembourg, the developer will be entitled to provide development services until it reaches RtB status.
The parties agreed on a development budget including a monthly development service consideration, to be paid to the developer and all other payments for the tasks required to bring the projects to RtB. In addition, Ellomay Luxembourg undertook to pay a success fee to the developer with respect to each project that achieves a RtB status.
Currently development is progressing as planned. In April 2021, the Framework Agreement was amended and the target of reaching an aggregate RtB authorized capacity of at least 265 MW was increased to 365 MW.
In May 2023, a notice to proceed was issued to the EPC contractor with respect to the first two projects, Ellomay Solar Italy One SRL (14.8 MW) and Ellomay Solar Italy Two SRL (4.95 MW), located in the Lazio Region, Italy. The Solar Plant owned by Ellomay Solar Italy Two SRL was connected to the grid in February 2024 and the Solar Plant owned by Ellomay Solar Italy One was connected to the grid in May 2024. An additional project owned by Ellomay Solar Italy Ten SRL (18 MW) was connected to the grid during January 2025. These projects are part of the Italian 198 MW Solar portfolio in which Clal became a partner during 2025 as explained below.
The Company capitalizes expenses in connection with such projects once RtB status is reached.
The Company executed construction agreements with the Engineering, Procurement and Construction (“EPC”) contractor for 160 MW that are RtB and such projects are currently under construction.
Ellomay Solar Italy One SRL, Ellomay Solar Italy Two SRL and Ellomay Solar Italy Ten SRL have entered into a long-term power purchase agreement (“Italy PPA”) for the physical supply of electricity. With respect to a defined portion of the contractual volumes, the agreements provide for a fixed electricity price. The fixed-price component exposure is considered an electricity price derivative component.
Financing Agreement
A financing agreement with a European institutional investor was executed on February 27, 2025 for the financing of the construction of 198 MW (including the projects connected to the grid and the projects for which the EPC agreements were executed, the “Italian 198 MW Solar Portfolio”) for 23 years with a fixed annual interest of 4.5% (see Note 11A). As of December 31, 2025, the Company utilized €32M out of a €110M credit line. Subsequent to the balance sheet date, in March 2026 an additional amount of €25M was withdrawn from the credit line.
Clal Agreement
On April 9, 2025, the Company entered into an investment agreement (the “Clal Agreement”) with Clal Insurance Ltd., a leading Israeli institutional investor, and several of its affiliates (together, “Clal”) that was consummated in June 2025.
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ClalAgreement (cont’d)
In consideration for its undertaking to invest approximately €52 million in the Italian solar portfolio, Clal received a 49% interest in the portfolio (including outstanding shareholder’s loans, capital notes and equity). The entire amount was received in 2025. As this transaction did not result in a loss of control and was accounted for as an equity transaction, the Company recognized in equity (transaction reserve with non-controlling interests) an amount of approximately €9.1 million (net of taxes in the amount of approximately €0.9 million). Tax benefit was recorded in profit and loss in connection with the utilization of current losses to offset such taxes amounting to approximately €0.9million.
The Clal Agreement includes customary representations and warranties of the Company and Clal and an indemnification mechanism for breaches of representations, warranties and undertakings, subject to customary caps and limitations, as a sole remedy, subject to customary exceptions. The Clal Agreement provides Clal with a right of first look commencing with the consummation of the transactions contemplated by the Clal Agreement with respect to investment in other solar projects currently developed or that will be developed by the Company and its subsidiaries in Italy for an investment under similar terms as the Clal Agreement, mutatis mutandis. Pursuant to the right of first look mechanism, the Company will provide Clal certain information with respect to each project that has reached Ready-to-Build status and the Company decided to advance its construction, and Clal will have a few months to notify the Company that it is interested in investing up to 49% in such projects or any portion thereof upon the terms set forth in the notice provided to Clal by the Company.
Pursuant to the Clal Agreement, upon consummation of the transactions contemplated by the Clal Agreement, the Company and Clal signed a partners agreement (the “Clal PA”) and the Company issued Clal a warrant (the “Clal Warrant”). For more information about the Clal Warrant, refer to note 16A.
The Clal PA sets forth the relationship between the general partner and the limited partners, the governance and management of the Israeli LP, the funding and financing of the Israeli LP and the mechanism for future transfers of interests in the Israeli LP. Pursuant to the Clal PA, Clal undertakes to provide its pro rata portion of the amounts required for the development of the Italian 198 MW Solar Portfolio to the Israeli LP, which in turn will fund the Luxembourg subsidiary and the Italian project companies. the Company’s aggregate funding commitment in the Italian 198 MW Solar Portfolio has already been provided by the Company. The Clal PA also provides for the payment of annual management fees to the Company.
The Clal PA provides each limited partner with customary rights, including a full tag-along right in the event of a change in control of the Company and includes customary veto rights. The Clal PA provides that following repayment of partners’ loans, the Israeli LP’s surpluses will be distributed to the limited partners, pro rata to their holdings, on a semi-annual basis, subject to maintaining the working capital required by the Israeli LP for the two following quarters.
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Clal Agreement (cont’d)
The Clal Warrant covers 416,000 ordinary shares of the Company, with an exercise price of NIS 69.7 (approximately €18.6) per share. The Clal Warrant is for a term of twenty-six months and may only be exercised on a cashless basis. In the event the Company’s shares are traded at a price higher than NIS 80(approximately €21.2) per share when the Clal Warrant is exercised, the Company, at its discretion, may choose to issue shares on a cashless basis assuming a market price per share of NIS 80 (€21.3) and pay Clal the remainder in cash. As the exercise price is denominated in NIS, the option constitutes a liability and is revalued and recognized at fair value in each reporting period. As of the closing date the value of the Clal Warrant was approximately €474 thousand and as of December 31, 2025 the Clal Warrant was valued at €2,232 thousand.
Composition of Advances on account of investments
The Company owns three Waste-to-Energy (specifically Gasification and Bio-Gas (anaerobic digestion) projects in the Netherlands.
Groen Goor Anaerobic Digestion Project
Groen Gas Goor B.V. (“Groen Goor”), a project company operating an anaerobic digestion plant, with a green gas production capacity of approximately 3 million Nm3 per year, in Goor, the Netherlands (the “Groen Goor Plant”). The Groen Goor Plant commenced operations in November 2017.
On February 17, 2025, the local regulator announced its intention to collect a fine of €1,504,875 from Groen Goor due to an alleged deviation from the permitted manure input. As of December 31, 2024 a provision of €515 thousand was recorded in profit and loss in connection with such potential fine. Groen Goor filed an appeal and received a ruling in March 2026. Based on the advice of the Company’s legal advisors, Groen Goor reduced the provision to €50 thousand.
Groen Gas Oude-Tonge Anaerobic Digestion Project
Groen Gas Oude-Tonge B.V. (“Groen Gas Oude-Tonge”) a project company operating an anaerobic digestion plant, with a green gas production capacity of approximately 3.8 million per year, in Oude-Tonge, the Netherlands (the “Oude-Tonge Plant”). The Oude-Tonge Plant commenced operations in June 2018.
Groen Gas Gelderland Anaerobic Digestion Project
On December 1, 2020, the Company, through its wholly-owned subsidiary, Ellomay Luxembourg, acquired all issued and outstanding shares of Groen Gas Gelderland B.V. (“GG Gelderland”) a project company operating an anaerobic digestion plant, with a green gas capacity of approximately7.5 million Nm3 per year, in Gelderland, the Netherlands The actual production capacity of the plant is approximately 9.5 million Nm3 per year.
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Production increase
The Company is in the process of obtaining licenses to increase production capacity of the Bio-Gas plants from approximately 16 million Nm3 per year to approximately 24 million Nm3 per year.
During 2025, the Company assessed the recoverable amount of the Groen Goor Biogas plant in the Netherlands in light of operating losses suffered by these project in recent years and lower results than forecasted for 2025. The examination was conducted based on projected cash flows that were discounted at an after tax rate of 7.6%. The examination concluded that the value in use of the plants is higher than the carrying value of such plant and therefore there is no need for an impairment provision. The assumptions on which the examination was based could be affected by the Company’s inability to meet the budget in certain circumstances including increases in the prices of feedstock required in order to maintain the optimal mix of feedstock necessary to maximize performance of the plants, technical malfunctions and other circumstances that influence the operation of the plants and a delay in the legislative process of the legislative proposal concerning the Green Gas Blending Obligation. This legislation will require blending green gas with fossil gas and is expected to increase the profitability of operations at current production capacity.
Solar plants of Talasol Solar and Ellomay Solar –
The Company indirectly owns 51% of the share capital of Talasol Solar S.L.U (“Talasol”), which owns a solar plant with a peak capacity of 300 MW in the municipality of Talaván, Cáceres, Spain. 49% of the share capital of Talasol are owned by GSE 3 UK Limited and Fond-ICO Infraestructuras II, FICC (24.5% each). These changes in Talasol’s ownership interest did not result in a loss of control.
In June 2018, Talasol executed a financial power swap in respect of approximately 80% of the output of the Talasol Solar Plant for a period of 10 years (the “Talasol PPA”) whose accounting treatment is according to cash flow hedge. The power produced by the Talasol Solar Plant is sold by Talasol in the open market for the current market power price and the Talasol PPA is expected to hedge the risks associated with fluctuating electricity market prices by allowing Talasol to secure a certain level of income for the power production included under the Talasol PPA. The Talasol PPA became effective in March 2019 and will expire in October 2030 (more information in note 21).
In December 2021, Talasol entered into a Facilities Agreement in the aggregate amount of €175 million with European institutional lenders (the “Talasol Facilities Agreement”). Financial closing of the Talasol Facilities Agreement was achieved in January 2022 (see Note 11).
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Solar plants of Talasol Solar and Ellomay Solar (cont’d) –
The Company indirectly, through its subsidiary Ellomay Solar S.L.U. (“Ellomay Solar”), owns a solar plant with an installed capacity of 28 MW in the municipality of Talaván, Cáceres, Spain (the “Ellomay Solar Plant”). On June 24, 2022, the Ellomay Solar Plant was connected to the electricity grid and commenced production of electricity.
On May 28, 2024 Ellomay Solar entered into and reached financial closing of a project finance arrangement in the amount of €10 million with Bankinter, S.A. (see Note 11).
Ellomay Solar intends to commence the development of hybridization Project in accordance with the terms foreseen in the Spanish Royal Decree-Law 23/2020 of June 2020, for which it shall request the update of the access and connection permits of the Ellomay Solar for incorporating 10 Mw battery storage to be approved by Red Eléctrica.
Regulatory update–
The Spanish Royal Decree-Law 17/2021 of September 14, 2021, (“RDL 17/2021”), which entered into force on September 16, 2021, established the reduction of returns on the electricity generating activity of Spanish production facilities that do not emit greenhouse gases accomplished through payments of a portion of the revenues by the production facilities to the Spanish government). RDL 17/2021 was extended several times and was in effect until December 31, 2023. Starting from January 1, 2024, RDL 17/2021 is no longer applicable and the production of electrical energy is once again taxed at 7% energy tax.
On December 31, 2023, the Company executed an agreement to sell the holdings in the 9 MW solar plant located in Talmei Yosef, Israel. The sale of the Talmei Yosef Solar Plant was consummated on June 2, 2024. The net consideration paid at closing was approximately NIS 42.6 million (approximately €10.6 million). There were no subsequent adjustments of the consideration. Due to the sale, the results of the Talmei Yosef Solar Plant are presented in these financial statements as a discontinued operation. For more information, see Note 23.
During 2023, the Company entered into a Joint Development Agreement with a project development company experienced in the development of energy projects, site acquisition, capital markets and commercial management, and commenced development of solar projects in the vicinity of Dallas, Texas. Each of the solar projects under development is expected to have a capacity of approximately 10-14 MW. As of December 31, 2025, there are three projects with an aggregate capacity of approximately 29.59 MW, that were connected to the grid (the Fairfield, Talco and Malakoff projects), and two additional projects that are under construction with an aggregate capacity of approximately 20.38 MW (the Mexia and Hillsboro projects). Mexia (11.2 MW) was connected to the grid during March 2026 and Hillsboro (14 MW) is expected to be connected to the grid during the third quarter of 2026.
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On September 13, 2024, Ellomay USA Inc., the Company’s indirectly wholly-owned subsidiary which owns the US project companies, entered into an agreement to transfer Investment Tax Credits (ITCs) related to the Fairfield, Malakoff, Mexia and Talco solar projects, with a reputable financial institution, with vast experience in executing tax credit transactions.
Through this transaction, the Company received approximately $11.8 million (€10 million) from the sale of ITCs. The sale is facilitated under the Inflation Reduction Act’s transferability provisions, allowing the Company to retain 100% of the operating profits from these projects. The agreement includes customary indemnification obligations (for damages not covered by tax insurance policy), including in connection with certain continued eligibility requirements and scope of the ITCs, for which the Company provided a guarantee to the purchaser of the ITCs. A proportional share of deferred income related to tax credits in the amount of approximately €2.1million was recognized as other income.
The Company recognized other income of €1.7 million related to an agreed compensation from the EPC contractor due to delays in construction and from the recognition of a proportional share of deferred income related to tax credits.
Note 7 - Trade and Other Receivables
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Note 8 - Fixed Assets
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Note 8 - Fixed assets (cont’d)
Investment in Solar Plants
Presented hereunder are data regarding the Company’s investments in solar plants as at December 31, 2025:
The Company commences capitalization of expenses when it is probable that the Company will enjoy future economic benefits from the projects. For additional information see Notes 6C and 6D.
Investment in Pumped Storage Project
Commencing the fourth quarter of 2020, as it is probable that the Company will enjoy future economic benefits in connection with the Manara PSP (see Note 6B), expenses in connection with the Manara PSP are capitalized as assets.
Security
As of December 31, 2025, fixed assets of the Company’s subsidiaries with a carrying amount of €589,074 thousand are pledged as security for bank loans (see Note 11 regarding loans and borrowings with respect to terms and repayment dates).
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Capitalized borrowing costs
In the year ended December 31, 2025, borrowing costs in the amount of €5,799 thousand were capitalized to qualifying assets. Those expenses are related to the construction of the Manara PSP and solar plants in Italy and USA.
Acquisition of fixed assets on credit
During the year ended December 31, 2025, the Company acquired fixed assets on credit in the amount of €8,605 thousand. The cost of acquisition had not yet been paid at the reporting date.
During the year ended December 31, 2024, the Company acquired fixed assets on credit in the amount of €904 thousand.
Note 9 - Other Payables
Note 10 - Current maturities and short-term bank loans
Composed as follows:
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Note 11 - Loans
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Note 11 - Loans (cont’d)
Israel - Ellomay PS Loans (cont’d)
Such amount, as well as the standby facilities, is linked to a synthetic composite index comprising a weighted average of the indices and currencies applicable to the Manara PSP’s construction costs (the “Project Index”), on an annual basis during the first4 years of construction, and thereafter semi-annually until construction end.
The Manara PSP Project Finance facilities includes two Long-Term Facilities: (i) a Senior Secured A Tranche at a fixed rate of interest for each drawdown, with base interest rate equal to the yield to maturity of Israeli treasury bonds with like duration of the drawn loan, plus a spread of 3.25% per-annum during the Construction Period of the Project and a spread of 2.40% per-annum from the Actual Completion Construction Date. The Senior Secured Tranche is linked to the Israeli Consumer Price Index and is to be repaid over a period of 19.5 years from the commercial operation date; and (ii) a Subordinated Secured B Tranche at a floating rate of interest, with the base interest being the Bank of Israel rate, plus a spread of 4.35% per-annum during the construction period and a spread of 3.90% per-annum from the Actual Completion Construction Date. The stated maturity of the Tranche B loan is one year less than the maturity of the Senior Secured Loan with a cash sweep mechanism that shortens its maturity to approximately 12 years from the commercial operation date. The Manara PSP Project Finance also includes standby facilities (Tranche A and Tranche B).
The Manara PSP Project Finance includes customary terms in connection with early repayment, acceleration of payments upon certain breaches and limitations on distributions. The Manara PSP Project Finance also includes ancillary facilities such as VAT, Guarantees and Debt Service Reserve facilities in an aggregate amount of approximately NIS 64 million (approximately €17.1 million).
The Manara PSP Project Finance includes mandatory cash sweeps upon certain cover ratio and other events with respect to the Senior Secured Tranche, cash sweep payments in connection with the Subordinated Secured Tranche as mentioned above and other lender protection mechanisms. In addition, the Manara PSP Project Finance agreement permits the owners of the Manara PSP to drawdown a developers’ fee on the Actual Completion Construction Date (as such term is defined in the Manara PSP Project loan agreements) of the Manara PSP, subject to availability of funding in the Standby Facility at the time and provided the Average ADSCR at the time is not less than a ratio of 1.28.
Ellomay and Ampa provided a standby equity guarantee in the aggregate amount of approximately NIS 13,830 thousand (approximately €3,692thousand) as of December 31 2025, pro rata to their holdings in the Manara PSP. This standby equity guarantee is linked monthly to the Israeli CPI and adjusted (if applicable) in the same manner and timing as the Long-Term Facilities, as described above.
As of December 31, 2025, a total aggregate amount of NIS 245,656 thousand (€65,587 thousand)was drawn down under the Manara PSP Project Finance from the Senior Secured Tranche (annual interest rate range between 2.75%-4.78% linked to the Israeli Consumer Price Index) and a total aggregate amount of NIS 20,875 thousand (€5,573 thousand) was drawn from the Subordinated Secured B Tranche (floating annual interest rate based on the Bank of Israel Rate of 8.6% as of December 31, 2025).
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The Netherland - Bio Gas - Loans
In connection with the Goor Loan Agreement and the Oude Tonge Loan Agreement Ellomay Luxembourg, the Company’s wholly-owned subsidiary: (i) provided the following undertakings to Rabobank: (a) that Groen Goor and Groen Gas Oude Tonge, as applicable, will not make distributions to its shareholders for a period of two years following the execution of the Loan Agreement, (b) that Groen Goor will not make distributions or repurchase its shares so long as the equity (including owners loans) to total assets ratio of Groen Goor is less than 40%, (c) that in the event the equity (including owners loans) to total assets ratio of Groen Goor and Groen Gas Oude Tonge will be below 40%, its shareholders will invest the equity required in order to increase this ratio to 40%, pro rata to their holdings in Groen Goor and Groen Gas Oude Tonge, as applicable, and up to a maximum of €1.2 million, and (d) that they will provide the equity required for the completion of the Goor Project (ii) provided pledges on their respective rights in connection with the shareholders loans which each provided to Groen Goor and Groen Gas Oude Tonge, which loans shall also be subordinated by Ellomay Luxembourg in the favor of Rabobank. In addition, the Company provided a guarantee to Rabobank for the fulfillment of Ellomay Luxembourg’s undertakings set forth above.
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The Netherland - Bio Gas - Loans (cont’d)
In connection with the Gelderland Loan Agreement, the following securities were provided to Rabobank: (i) pledge on the present and future rights arising from the feedstock purchase agreement, the EPC agreement, the O&M agreement, the SDE subsidy, the various power and green gas purchase agreements, and the green gas certification supply agreement, (ii) pledge on all present and future (a) receivables arising from business and trade, and (b) stock and inventory including machinery and transport vehicles of GG Gelderland, and (iii) all rights/claims of GG Gelderland against third parties existing at the time of the execution of the Gelderland Loan Agreement, including rights from insurance agreements. In connection with the Gelderland Loan Agreement, Ellomay Luxembourg, the Company wholly-owned subsidiary, provided the undertaking to Rabobank that Ellomay Luxembourg will not sell the shares of GG Gelderland without the prior written consent of Rabobank.
Spain - Loans
On March 12, 2019, four of the Company’s Spanish subsidiaries (together, the “Subsidiaries”) entered into a €18.4million project finance Facility Agreement (the “Facility Agreement”). The €18.4 million principal amount is divided into: (i) four term loan facilities, one for each Subsidiary, in the aggregate amount of €17.6 million with terms ending in December 2037, and (ii) a revolving credit facility to attend the debt service if needed, for a maximum amount of euro 0.8 million granted to any of the Subsidiaries.
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Spain - Loans (cont’d)
The loans provided under the Facility Agreement bear an annual interest at the rate of Euribor 6 months plus a margin of 2% (with a zero interest floor) and repaid semi-annually on June 20 and December 20. The principal is repaid on a semi-annual basis based on a pre-determined sculptured repayment schedule.
The Facility Agreement provides for mandatory repayment upon the occurrence of certain events and includes various customary representations, warranties and covenants, including covenants to maintain a DSCR on an aggregate basis not lower than 1.05:1, and not to make distributions unless, among other things: (i) the DSCR, on an aggregate basis, is equal to or higher than 1.15:1.0, (ii) the first instalment of the Project Finance has been repaid, (iii) no amount under the revolving credit tranche has been withdrawn and not fully repaid and no drawdowns of the revolving credit tranche are expected within the next six months, and (iv) the Subsidiaries’ net debt to regulatory value (as such terms are defined in the Facility Agreement) ratio is equal to or higher than 0.7:1. The regulatory value of the Solar Plants owned by the Subsidiaries is approximately €23.5 million, compared to their aggregate nominal purchase price, which was approximately €14.85 million and their aggregate book value, which was approximately €14.6 million as of September 30, 2018. The Facility Agreements includes a cash-sweep payment mechanism and obligation that applies in the event the Subsidiaries’ net debt to regulatory value ratio is equal to or higher than 0.7:1.
As of December 31, 2025, the financial covenants were met.
On March 12, 2019, the Subsidiaries entered into swap agreements with respect to approximately €17.6 million (with a decreasing notional principal amount based on the amortization table) until December 2037, replacing the Euribor 6 month rate with a fixed 6 month rate of approximately 1%, resulting in a fixed annual interest rate of approximately 3%. Such swap transactions qualify for hedge accounting. See Note 21E regarding the effect of the expected transition away from Libor and Euribor.
The documents ancillary to the Facility Agreements require that security interests be provided in connection with the following: (i) the Subsidiaries’ shares (held by Ellomay Luxembourg), (ii) pledges over accounts, (iii) pledges over relevant agreements including hedging agreements; and (iv) promissory equipment mortgage.
Talasol - Loans
Principal and interest at a weighted average of approximately 3% repayment are made on a semi-annual basis, in June and December.
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Talasol - Loans (cont’d)
The agreements executed in connection with the Talasol Financing provide for mandatory prepayment upon the occurrence of certain events and various customary representations, warranties, and covenants, including covenants to maintain a Historic and Forecast DSCR equal to at least 1.05x. Moreover, Talasol undertook not to make distributions in the event that: (i) the Historic and Forecast DSCR will be lower than 1.10x until the expiration date of the Talasol PPA and equal to at least 1.25x thereafter and (ii) the Loan Life Cover Ratio will be lower than 1.30x from the expiration date of the Talasol PPA and until maturity.
The Talasol Facilities Agreement requires that security interests be provided in connection with the following: (i) Talasol’s shares (held by Ellomay Luxembourg and the other shareholders of Talasol), (ii) pledges over credit rights under certain accounts, (iii) pledges over credit rights under certain Talasol Solar Plant’s documents, (iv) pledges over credit rights under the shareholders loans, (v) security assignment of receivables in connection with the Talasol PPA, (vi) promissory equipment mortgage and (vii) mortgage on all solar modules and power inverters comprised in the project.
Ellomay Solar – Loan
In June 2024, Ellomay Solar entered into and reached financial closing of a project finance arrangement with Bankinter, S.A. (the “Project Finance”). The Project Finance is comprised of two facilities: (i) a senior term loan for an amount of €10 million (the “Term Loan”); and (ii) a revolving facility for an amount of €0.5 million (the “DSRF”). The Project Finance is for a term of 16 years and is repayable in semi-annual installments (principal and interest). The Project Finance includes a cash sweep mechanism that is expected to reduce the term of the Project Finance to approximately 13 years.
The Term Loan and DSRF (to the extent withdrawn) bear an annual interest of Euribor 6-month plus 2.5%. Ellomay Solar entered into a swap agreement with respect to the amount of the Project Finance until June 30, 2037, replacing the Euribor 6-month rate with a fixed 6-month rate of approximately 3%, resulting in a fixed annual interest rate of approximately 5.5%.
The Project Finance provides for mandatory repayment upon the occurrence of certain customary events and includes various customary collaterals, representations, warranties and covenants, including covenants to maintain a Debt Service Cover Ratio (“DSCR”) not lower than 1.05:1, and not to make distributions unless, among other things: (i) the DSCR is at least 1.20:1.0, (ii) the first instalment of the Project Finance will be repaid on December 31, 2024, and (iii) no amount under the DSRF has been withdrawn and not fully repaid.
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Ellomay Solar - Loan (cont’d)
Upon financial closing Ellomay Solar withdrew the Term Loan and distributed €9.7 million to Ellomay Luxembourg Holdings S.àr.l, the Company’s wholly-owned subsidiary and Ellomay Solar’s parent company.
Ellomay USA – Credit line
In August 2024, the Company’s indirectly wholly-owned subsidiary, Ellomay Texas Solar Projects, LP. (“Ellomay Texas Solar”) entered into a Revolving Loan Agreement with Israel Discount Bank of New York (“IDB NY”) for the extension of a $10 million line of credit with a term of up to one year, bearing an interest rate of Prime Rate minus 0.75% with a minimum Prime Rate of 5%. Ellomay Texas Solar repaid $5 million during the third quarter of 2025.
The Revolving Loan Agreement includes various customary representations, warranties and covenants that are similar to the covenants included in the deed of trust governing the Company’s Series F Debentures (see Note 12).
Italy – Loans
The Project Finance in an amount of up to €110 million will be provided by way of senior secured notes to be issued in multiple tranches during the construction phase by a wholly-owned subsidiary of Ellomay Luxembourg. All notes are due on December 31, 2047 and to be repaid in semi-annual installments. The notes bear interest from and including the issue date to and excluding the maturity date at the rate of 4.50% per annum, to be paid semi-annually in arrears. As of December 31, 2025, The Company utilized €32 million of the credit line.
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Note 12 - Debentures
Series C Debentures
On July 25, 2019, the Company issued Series C Debentures due June 30, 2025 in a public offering in Israel in the aggregate principal amount of NIS 89,065 thousand (approximately €22,690 thousand based on the Euro/NIS exchange rate at that time). The gross proceeds of the offering were NIS 89,065 thousand and the net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 87,600 thousand (approximately €22,317 thousand based on the Euro/NIS exchange rate at that time). The Company extended the Series C Debentures through public and private placements in Israel in October 2020, February 2021 and October 2021 in the aggregate principal amount of NIS 370,939 thousand.
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Note 12 – Debentures (cont’d)
Series C Debentures (cont’d)
The principal amount of Series C Debentures was repayable in five (5) unequal annual installments as follows: on June 30, 2021 10% of the principal shall be paid, on June 30 of each of the years 2022 and 2023, 15% of the principal shall be paid and on June 30 of each of the years 2024 and 2025, 30% of the principal shall be paid. The Series C Debentures originally bore a fixed interest at the rate of 3.3% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31 commencing December 31, 2019 through June 30, 2025 (inclusive) and on June 6, 2022, the holders of Series C Debentures approved an amendment to the Series C Deed of Trust, which provided for certain revisions to the financial covenants and for the increase of the annual interest rate payable on the principal of the Series C Debentures by 0.25% from 3.3% to 3.55%, commencing on June 6, 2022.
The Series C Debentures were fully repaid on June 30, 2025.
On February 23, 2021, the Company issued new Series D Convertible Debentures in a public offering in Israel in the aggregate principal amount of NIS 62,000 thousand (approximately €15,627 thousand based on the Euro/NIS exchange rate at that time). The principal amount of the Series D Convertible Debentures is repayable in one installment on December 31, 2026. The Series D Convertible Debentures bear a fixed interest at the rate of 1.2% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31 commencing June 30, 2021, through December 31, 2026 (inclusive). The Series D Convertible Debentures are convertible into the Company’s ordinary shares, NIS 10.00 par value per share, at a conversion price of NIS 165 (approximately €41.6 based on the Euro/NIS exchange rate at that time), subject to adjustments upon customary terms. The Series D Convertible Debentures are not rated. The gross proceeds from the offering were approximately NIS 62,600 thousand and the net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 61,800 thousand (approximately €15,577 thousand based on the Euro/NIS exchange rate at that time). Of the total proceeds, an amount NIS 7,504 thousand (approximately €1,890 thousand based on the Euro/NIS exchange rate at that time) was recognized in Other long-term liabilities in connection with the convertible component. As of December 31, 2025, the amount of the liability was €9 thousand (€36 as of December 31, 2024).
The Series D Deed of Trust includes customary provisions, including (i) a negative pledge such that the Company may not place a floating charge on all of the Company assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which the Company does not meet each standard and up to an increase of 0.75% in the annual interest rate.
The Series D Deed of Trust does not restrict the Company’s ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series D Convertible Debentures up to an aggregate par value of NIS 200 million provided that: (i) the Company is not in default of any of the immediate repayment provisions included in the Series D Deed of Trust or in breach of any of its material obligations to the holders of the Series D Convertible Debentures pursuant to the terms of the Series D Deed of Trust, (ii) the expansion will not harm the Company’s compliance with the financial covenants included in the distribution undertaking Series D Deed of Trust and (iii) to the extent the Series D Convertible Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series D Convertible Debentures.
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Series D Convertible Debentures (cont’d)
The Series D Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and includes a mechanism for the update of the annual interest rate of the Series D Convertible Debentures in the event the Company does not meet certain financial covenants. The financial covenants are as follows:
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The Series D Deed of Trust further provides that the Company may make distributions (as such term is defined in the Companies Law, e.g. dividends), to the Company’s shareholders, provided that: (a) the Company will not distribute more than 75% of the distributable profit, (b) the Company will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) the Company is in compliance with all of its material undertakings to the holders of the Series D Debentures and (d) on the date of distribution and after the distribution no cause for immediate repayment exists. The Company is also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series D Adjusted Balance Sheet Equity not lower than €85 million, (ii) Series D Ratio of Series D Net Financial Debt to Series D CAP, Net not to exceed 60%, and (iii) Series D Ratio of Series D Net Financial Debt to Series D Adjusted EBITDA, shall not be higher than 9, and the Company may not execute distributions unless it meets all of its material obligations to the holders of the Series D Convertible Debentures and unless no cause for immediate repayment exists on the date of distribution and after the distribution.
Series E Debentures
On February 1, 2023, the Company issued NIS 220 million (approximately €58.5 million based on the Euro/NIS exchange rate at that time) of the Series E Secured Debentures, due March 31, 2029, through a public offering in Israel. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 218 million (approximately €56 million based on the Euro/NIS exchange rate at that time). The Series E Debentures are secured by the following pledges:
The principal amount of Series E Secured Debentures is repayable in four equal installments on March 31 from 2026 through 2029 (inclusive). The Series E Secured Debentures bear a fixed interest at the rate of 6.05% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on March 31 and September 30, commencing March 31, 2023 through March 31, 2029 (inclusive).
The Series E Deed of Trust includes customary provisions, including (i) a negative pledge such that the Company may not place a floating charge on all of its assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which the Company does not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series E Deed of Trust does not restrict the Company’s ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series E Secured Debentures provided that: (i) The Company is not in default of any of the immediate repayment provisions included in the Series E Deed of Trust or in breach of any of its material obligations to the holders of the Series E Secured Debentures pursuant to the terms of the Series E Deed of Trust, (ii) the expansion will not harm its compliance with the financial covenants for purposes of the immediate repayment provision included in the Series E Deed of Trust, (iii) to the extent the Series E Secured Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series E Secured Debentures and (iv) the par value of the Series E Secured Debentures may not be higher than NIS 220 million following the expansion.
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Series E Debentures (cont’d)
The Series E Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event the Company does not meet certain financial covenants. The financial covenants are as follows:
The Series E Deed of Trust further provides that the Company may make distributions (as such term is defined in the Companies Law, e.g. dividends), to its shareholders, provided that: (a) the Company will not distribute more than 60% of the distributable profit, (b) the Company will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) the Company are in compliance with all of its material undertakings to the holders of the Series E Secured Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) the Company will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. The Company is also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series E Adjusted Balance Sheet Equity not lower than €90 million, (ii) Series E Ratio of Net Financial Debt to Series E CAP, Net not to exceed 60%, and (iii) Series E Ratio of Net Financial Debt to Series E Adjusted EBITDA, shall not be higher than 9, and the Company may not execute distributions unless it meets all of its material obligations to the holders of the Series E Secured Debentures and unless no cause for immediate repayment exists on the date of distribution and after the distribution.
Subsequent to the reporting date, the terms of the Series E debentures were amended (see note 24).
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On January 16, 2024, the Company issued in an Israeli public offering units consisting of an aggregate principal amount of NIS 170 million (approximately €41 million, as of the issuance date) of the Series F Debentures, due March 31, 2030, and Series 2 Warrants to purchase an aggregate of 1,020,000 ordinary shares at a price per share of NIS 80 (subject to customary adjustments), which expire on January 5, 2028. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 165million (approximately €40 million as of the issuance date). Of the total proceeds of the offering, an amount of NIS 10,046 thousand (approximately €2,449 thousand based on the Euro/NIS exchange rate at that time) was recognized in Current liabilities in connection with these Warrants. As of December 31, 2025, the amount of the liability was €3,687 (€1,410 thousand as of December 31, 2024).
On April 17, 2024, the Company issued NIS 40 million par value of its unsecured non-convertible Series F Debentures, in a private placement to Israeli classified investors for an aggregate gross consideration of approximately NIS 37.8 million, reflecting a price of NIS 0.946per NIS 1 principal amount Series F Debentures.
In August 2024, the Company issued in a private placement to Israeli classified investors NIS 52,029,136 par value of its unsecured non-convertible Series F Debentures, at a price of NIS 0.961 per NIS 1 principal amount of the Series F Debentures, for an aggregate gross consideration of approximately NIS 50 million (approximately €12 million as of the issuance date).
In November 2024, the Company issued in a private placement to Israeli classified investors NIS 66,061,600 par value of its unsecured non-convertible Series F Debentures, at a price of NIS 0.942 per NIS 1 principal amount of the Additional Series F Debentures, for an aggregate gross consideration of approximately NIS 62.2 million (approximately €15.2 million as of the issuance date).
Following completion of the private placement, the aggregate outstanding par value of the Company’s Series F Debentures is NIS 328,090,736. The principal amount of Series F Debentures is repayable in four non-equal installments on March 31 in each of the years 2027 to 2030 (inclusive) as follows: in each of the principal payments in the years 2027 and 2028 a rate of 30% of the principal will be paid, in the principal payment in the year 2029 a rate of 25% of the principal will be paid and in the principal payment in the year 2030 a rate of 15% of the principal will be paid. The Series F Debentures bear a fixed annual interest at the rate of 5.5% (that is not linked to the Israeli CPI or otherwise), payable semi-annually on March 31 and September 30, commencing March 31, 2024 through March 31, 2030 (inclusive).
The Series F Deed of Trust includes customary provisions, including (i) a negative pledge such that the Company may not place a floating charge on all of its assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which the Company does not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series F Deed of Trust does not restrict the Company’s ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables us to expand the Series F Debentures provided that: (i) the Company is not in default of any of the immediate repayment provisions included in the Series F Deed of Trust or in breach of any of its material obligations to the holders of the Series F Debentures pursuant to the terms of the Series F Deed of Trust, (ii) the expansion will not harm its compliance with the financial covenants for purposes of the immediate repayment provision included in the Series F Deed of Trust and (iii) to the extent the Series F Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series F Debentures.
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Series F Debentures (cont’d)
The Series F Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event the Company does not meet certain financial covenants. The financial covenants are as follows:
The Series F Deed of Trust further provides that the Company may make distributions (as such term is defined in the Companies Law, e.g. dividends), to its shareholders, provided that: (a) the Company will not distribute more than 60% of the distributable profit, (b) the Company will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) the Company is in compliance with all of its material undertakings to the holders of the Series F Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) the Company will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. The Company is also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series F Adjusted Balance Sheet Equity not lower than €94 million, (ii) Series F Ratio of Net Financial Debt to Series F CAP, Net not to exceed 58%, and (iii) Series F Ratio of Net Financial Debt to Series F Adjusted EBITDA, shall not be higher than 9, and the Company may not execute distributions unless it meets all of its material obligations to the holders of the Series F Debentures and unless no cause for immediate repayment exists on the date of distribution and after the distribution.
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Subsequent to the reporting date, the terms of the Series F debentures were amended (see note 24).
On February 16, 2025, the Company issued in an Israeli public offering an aggregate principal amount of NIS 214,479,000 of its newly issued Series G Debentures, due December 31, 2032. The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 211.9 million (approximately €56.7 million as of the issuance date).
In December 2025, the Company issued in a private placement to Israeli classified investors NIS 130,000,000 par value of its unsecured non-convertible Series G Debentures, at a price of NIS 1.05 per NIS 1 principal amount of the Additional Series G Debentures, for an aggregate gross consideration of approximately NIS 136.5 million (approximately €36.4 million as of the issuance date). The net proceeds of the offering, net of related expenses such as consultancy fee and commissions, were approximately NIS 136.1 million (approximately €36.3million as of the issuance date). The consideration included an amount of approximately NIS 6.7 million (approximately €1.8 million as of the issuance date) in respect of accrued interest as of the issuance date.
Following completion of the private placement, the aggregate outstanding par value of the Company’s Series G Debentures is NIS 344,479,000. The principal amount of Series G Debentures is repayable in seven non-equal installment on December 31 in each of the years 2026 to 2032 (inclusive) as follows: 10% of the principal on the 2026 repayment date, 2.5% of the principal on each of the 2027 and 2028 repayment dates, 10% of the principal on the 2029 repayment date and 25% of the principal on each of the 2030, 2031 and 2032 repayment dates. The Series G Debentures bear a fixed interest at the rate of 6.34% per year (that is not linked to the Israeli CPI or otherwise), payable semi-annually on June 30 and December 31, commencing December 31, 2025 through December 31, 2032 (inclusive).
The Series G Deed of Trust includes customary provisions, including (i) a negative pledge such that the Company may not place a floating charge on all of its assets, subject to certain exceptions and (ii) an obligation to pay additional interest for failure to maintain certain financial covenants, with an increase of 0.25% in the annual interest rate for the period in which the Company does not meet each standard and up to an increase of 0.75% in the annual interest rate. The Series G Deed of Trust does not restrict the Company’s ability to issue any new series of debt instruments, other than in certain specific circumstances, and enables the Company to expand the Series G Debentures provided that: (i) the Company is not in default of any of the immediate repayment provisions included in the Series G Deed of Trust or in breach of any of its material obligations to the holders of the Series G Debentures pursuant to the terms of the Series G Deed of Trust, (ii) the expansion will not harm the Company’s compliance with the financial covenants for purposes of the immediate repayment provision included in the Series G Deed of Trust and (iii) to the extent the Series G Debentures are rated at the time of the expansion, the expansion will not harm the rating of the existing Series G Debentures.
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Series G Debentures (cont’d)
The Series G Deed of Trust includes a number of customary causes for immediate repayment, including a default with certain financial covenants for the applicable period, and as noted above a mechanism for the update of the annual interest rate in the event the Company does not meet certain financial covenants. The financial covenants are as follows:
The Series G Deed of Trust further provides that the Company may make distributions (as such term is defined in the Companies Law, e.g. dividends), to its shareholders, provided that: (a) the Company will not distribute more than 60% of the distributable profit, (b) the Company will not distribute dividends based on profit due to revaluation (for the removal of doubt, negative goodwill will not be considered a revaluation profit), (c) the Company is in compliance with all of its material undertakings to the holders of the Series G Debentures, (d) on the date of distribution and after the distribution no cause for immediate repayment exists and (e) the Company will not make a distribution for as long as a “warning sign” (as such term is defined in the Israeli Securities Regulations) exists. The Company is also required to maintain the following financial ratios (which are calculated based on the same definitions applicable to the financial covenants set forth above) after the distribution: (i) Series G Adjusted Balance Sheet Equity not lower than €97 million, (ii) Series G Ratio of Net Financial Debt to Series G CAP, Net not to exceed 58%, and (iii) Series G Ratio of Net Financial Debt to Series G Adjusted EBITDA, shall not be higher than 9, and the Company may not execute distributions unless it meets all of its material obligations to the holders of the Series G Debentures and unless no cause for immediate repayment exists on the date of distribution and after the distribution.
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Subsequent to the reporting date, the terms of the Series G debentures were amended (see note 24).
Note 13 - Other Long-term Liabilities
As of December 31, 2024, represents the portion of the consideration on account of the acquisition of rights in the Manara PSP. See Note 6B.
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Note 14 - Leases
Leases in which the Company is the lessee
The Company has lease agreements with respect to lands for the Solar Plants.
Information regarding material lease agreements entered into during the period
Solar Italy Eight leased land in Italy from private lessors for a period of 31 years. A right-of-use asset in the amount of €3,069 thousand have been recognized in 2025 in respect of this lease of land.
Solar Italy Eleven leased land in Italy from private lessors for a period of 31 years. A right-of-use asset in the amount of €7,067 thousand have been recognized in 2025 in respect of this lease of land.
Italy
Spain
Talasol
USA
Total
Bio Gas
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Note 14 – Leases (cont’d)
Maturity analysis of the Company’s lease liabilities
The remainder of the depreciation and the interest is capitalized to fixed assets, including the amount of €111 thousand recorded in the depreciation expenses that were presented as a discontinued operation and classified as held for sale for 2023.
As mentioned in Note 3F regarding material accounting policies, the Company, in accordance with the practical expedient, accounts for short-term leases and leases of low-value assets as expenses on a straight-line basis over the lease term, instead of a right-of-use asset and lease liability. These leases include office space in the amount of approximately €328 thousand.
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Note 15 - Transactions and Balances with Related Parties
The Management Agreement was valid until June 30, 2024. At the annual meeting of the Company’s shareholders held on July 25, 2024, the Management Agreement was extended through June 30, 2027 and the fees were updated based on indexation to the Israeli CPI to an annual payment of approximately NIS 1,541.3 thousand (approximately €412 thousand based on the Euro/NIS exchange rate as of December 31, 2025) to Meisaf and NIS 2,001.7 thousand (approximately €534 thousand) to Kanir and Keystone.
On November 25, 2024, Mr. Shlomo Nehama resigned his position as Chairman of the Board and the Management Agreement was immediately terminated pursuant to its terms with respect to Meisaf.
The Company sub-leases a small part of its office space to a company controlled by Mr. Nehama, a former controlling shareholder, at a price per square meter based on the price that it pays as a lessee. This sub-lease agreement was approved by the Company’s Board of Directors.
The Company employs the son of Mr. Shlomo Nehama as a project manager in connection with the development activities of solar plants in Texas, USA. The annual cost of employment of Mr. Nehama’s son, for the year ended December 31, 2025, as approved by the Company’s shareholders, is approximately NIS 465 thousand (approximately €120 thousand).
Certain directors and officers participate in the Company’s share option programs. For further information see Note 17 regarding share-based payments.
Compensation to key management personnel and interested parties that are employed by, or provide consulting services to, the Company:
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Note 15 - Transactions and Balances with Related Parties (cont’d)
On November 25, 2024, Mr. Ben Sheizaf was appointed as a Board member and the Chairman of the Board. At an extraordinary meeting of the Company’s shareholders held on January 30, 2025, its shareholders approved the execution of an Active Chairman Agreement with Mr. Sheizaf, effective November 25, 2024. Pursuant to the Active Chairman Agreement, Mr. Sheizaf is entitled to receive an annual fee of NIS 1,200 thousand (approximately €309 thousand based on the average exchange rate for 2025) for his services as an active Chairman at a 60% position, paid on a quarterly basis and updated based on changes in the Israeli CPI on December 1 of each year commencing December 1, 2025.
Compensation to directors (excluding compensation paid under the Management Agreement and the Active Chairman Agreement):
Note 16 - Equity
As of December 2025, 2024 and 2023 the Company’s share capital consisted of 30,000,000, 17,0000,000 and 17,000,000 authorized ordinary share (par value NIS 10.00), respectively, and 13,781,230, 12,852,585 and 12,852,585 issued and outstanding shares, respectively (net of 258,046 Ordinary shares held as treasury share, all of which have been purchased according to share buyback programs that were authorized by the Company’s Board of Directors).
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Note 16 - Equity (cont’d)
During 2025, 2,645 options to purchase 2,645 ordinary shares were exercised. No options were exercised during 2024 and 2023.
On January 16, 2024, the Company completed a public offering in Israel of Series F Debentures (see Note 12B) with an aggregate principal amount of NIS 170 million (approximately €41 million based on the Euro/NIS exchange rate at that time) and 1,020,000 Series 2 Warrants, tradable on the Tel Aviv Stock Exchange, to purchase the Company’s ordinary shares at an exercise price per share of NIS 80 (subject to adjustments upon customary terms), which expire on January 5, 2028. Of the total proceeds of the offering, an amount of NIS 10,046thousand (approximately €2,449 thousand based on the Euro/NIS exchange rate at that time) was recognized in current liabilities in connection with the Series 2 Warrants. As of December 31, 2025, the amount of the liability was €3,687 thousand.
On July 22, 2025, the Company issued 416 thousand warrants as part of Clal agreement. For more information, refer to note 6C and note 21F(3).
On July 28, 2025, the Company consummated a private placement of 926,000 ordinary shares of the Company to Israeli institutional and classified investors. The price per share in the private placement was $16.3 and the proceeds to the Company were approximately €12,663thousand.
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
The Company’s capital management objectives are:
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Note 17 - Share-Based Payment
The expenses recognized in the financial statements for services received from directors and employees is shown in the following table:
The share-based payments that the Company granted to its employees and directors are described below. There have been no modifications or cancellations to any of the share option plans during 2025, 2024 or 2023. The amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.
The fair value of the options is estimated using a Black-Scholes options pricing model with the following weighted average assumptions:
All options granted during 2025, 2024 and 2023 were granted with an exercise price equal to or higher than the market price on the date of grant. Weighted average fair values and exercise prices of options on dates of grant are as follows:
In December 1998, the Company’s shareholders approved the non-employee director stock option plan (the “1998 Plan”). Each option granted under the 1998 Plan originally vested immediately and expires after 10 years. Generally, the Company grants options under the plan with an exercise price equal to the market price of the underlying shares on the date of grant. An aggregate amount of not more than 75,000 ordinary shares was reserved for grants under the 1998 Plan. The original expiration date of the 1998 Plan pursuant to its terms was December 8, 2008 (10 years after its adoption). In January 2008 and June 2018, the term of the 1998 Plan was extended and as a result the current expiration date is December 8, 2028. In connection with the adoption of the Company’s compensation policy in 2013, the 1998 Plan was amended to provide that options granted under the 1998 Plan will become exercisable based on the vesting schedule determined in the approvals of the option grant.
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Note 17 - Share-Based Payment (cont’d)
During each of the years 2025, 2024 and 2023, the Company granted to directors options to purchase an aggregate amount of 4,000, 4,000 and 616ordinary shares, respectively, under the 1998 Plan.
As of December 31, 2025, options to purchase 20,865 ordinary shares are outstanding and 15,551 ordinary shares are available for future grants under the 1998 Plan. Options that are cancelled or forfeited become available for future grant.
In August 2000, the Company’s board of directors adopted the 2000 Stock Option Plan (the “2000 Plan”). The reserve under the 2000 Plan was increased several times. The options usually vest over a three-year period. The exercise price of the options under the 2000 Plan is determined to be not less than 80% of the fair market value of the Company’s ordinary shares at the time of grant, and they usually expire 10 years after the date of grant. In June 2008 and June 2018, the term of the 2000 Plan was extended by additional10-year periods and the current expiration date of the 2000 Plan is August 31, 2028.
As of December 31, 2025, options to purchase 10,500 ordinary shares are outstanding and 569,706 ordinary shares are available for future grants under the 2000 Plan. Options that are cancelled or forfeited become available for future grant.
The following table lists the number of share options, the weighted average exercise prices of share options during the current year:
The weighted average remaining contractual life for the share options outstanding as of December 31, 2025 was 6.8 years (as of December 31, 2024 was 7.98 years and as of December 31, 2023 was 8.23 years).
The range of exercise prices for share options outstanding as of December 31, 2025: $12.02-$34.44 (as of December 31, 2024: $8.95- $34.44and as of December 31, 2023: $8.41- $34.44).
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Note 18 - Details of the Statements of Profit or Loss and Other Comprehensive Income
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Note 18 - Details of the Statements of Profit or Loss and Other Comprehensive Income (Loss) (cont’d)
Note 19 - Taxes on Income
Israeli taxation
The tax rate that is relevant to the Company in the years 2023-2025: 23%.
Luxembourg taxation
Net wealth tax (NWT):
Italian taxation
As a rule, corporate income tax (IRES) is payable by all resident companies on income from any source, whether earned in Italy or abroad (also for branch established in other country), at the rate of 24%.
Both resident and non-resident companies are subject to regional income tax (IRAP), but only on income arising in Italy at the rate from 3.9% to 4.82%, depending on the region.
Italian companies are allowed to deduct financing expenses in an amount up to 30% of their EBITDA, with the remainder being carried forward to following years.
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Note 19 - Taxes on Income (cont’d)
Spanish taxation
As a rule, corporate income tax is payable by all resident companies on income from any source, whether earned in Spain or abroad at the rate of 25%. Spanish companies are allowed to deduct financing expenses in an amount up to 30% of their EBITDA from one million in financial expenses and up to one million of financial expenses can be deducted in the CIT without having to apply 30% of EBITDA, with the remainder being carried forward to following years.
Dutch taxation
Corporate income tax rate in the Netherlands is 19% on the first €200 thousand of taxable profits, and 25.8% on taxable profits exceeding that amount.
USA taxation
The federal tax rate is 21%, and the state tax rate in Texas is 0.75%.
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As of December 31, 2025, Ellomay Capital Ltd. had carry forward tax losses in the amount of approximately €8.5 million. In addition, Ellomay Capital Ltd. had carry forward capital tax losses in the amount of approximately €1.4 million, which have no expiration date. Deferred taxes of Ellomay Capital Ltd. have not been recognized because the Company’s management currently believes that as the Company has a history of losses it is more likely than not that the deferred tax regarding losses carry forward will not be utilized in the foreseeable future.
Deferred taxes are recognized by operating subsidiaries for unused tax losses, tax benefits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.
As of December 31, 2025, the Company’s Dutch subsidiaries had carry forward tax losses and deductions aggregating to approximately €15 million. Of such carry forward tax losses, a deferred tax asset amounting to approximately €1.3 million was not recorded.
As of December 31, 2025, the Company’s Italian subsidiaries had carry forward tax losses and deductions aggregating to approximately €14.2 million. Of such carry forward tax losses, a deferred tax asset amounting to approximately €1.1million was not recorded.
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As of December 31, 2025, the Company’s Luxembourg subsidiary had carry forward tax losses and deductions aggregating to approximately €1.8 thousands which deferred tax asset was not recorded.
As of December 31, 2025, Texas USA Solar subsidiaries had a federal net operating loss carry forward of approximately €12.8 million for which a deferred tax asset was recorded.
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Note 20 - Earnings Per Share
The calculation of basic earnings per share as at December 31, 2025, 2024 and 2023 was based on the profit attributable to the Company’s shareholders divided by a weighted average number of ordinary shares outstanding, calculated as follows:
As of December 31, 2025, 30,365 thousand options and warrants (in 2024 and 2023: 1,844 thousand and 794 thousand, respectively) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.
The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding.
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Note 21 - Financial Instruments
The Company has exposure to the following risks from its use of financial instruments:
This note presents quantitative and qualitative information about the Company’s exposure to each of the above risks, and the Company’s objectives, policies and processes for measuring and managing risk.
To manage these risks and as described hereunder, the Company executes transactions in derivative financial instruments. Presented hereunder is the composition of the derivatives:
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Note 21 - Financial Instruments (cont’d)
The following table sets forth the details of the Company’s financial power swap and swap contracts with banking institutions:
The Company’s management and board of directors have overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management of standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Company’s Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company’s Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
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As at December 31, 2025, the Company does not have any significant concentration of credit risk.
Cash and short-term deposits
As at December 31, 2025 and 2024, the Company had cash and cash equivalents in the amount of €87,614 thousand and €41,134 thousand, respectively. The Company’s cash and cash equivalents are deposited with financial institutions that received a credit rating (international rating scale). See also Note 4.
Restricted cash
As at December 31, 2025 and 2024, the Company had a balance of current restricted cash in an amount of €656 thousand, and a balance of non-current restricted cash of €16,071 thousand and €17,052 thousand, respectively. See also Note 5.
Trade and Revenue Receivables
As at December 31, 2025 and 2024, the Company had a balance of trade receivables of €958 thousand and €980 thousand, respectively. This balance mainly refers to the sale of electricity from the activity in Spain due within 7 days from issuance. As at December 31, 2025 and 2024, the Company had a balance of revenue receivables of €6,278 thousand and €4,413 thousand, respectively. The balance as of December 31, 2025 refers to amounts to be paid mainly from the facilities in the Netherlands related to gas subsidies due by July 2026, the deadline set by government authorities for settlement of income from 2025.
The Company’s management closely monitors the economic and political environment in which it operates. As per the Company’s management estimations, there are no significant credit risks assigned to the trade receivables and income receivables as these amounts are due by governmental agencies or by established companies that pay on a weekly or monthly basis.
Other receivables
As at December 31, 2025 and 2024, the Company had a balance of government authorities’ receivables of €8,495 thousand and €5,886thousand, respectively. This balance refers to VAT receivables in Spain, Italy, Israel and the Netherlands.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
As of December 31, 2025, the Company had a working capital of approximately €22,191 thousand.
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The cash surpluses held by Company that are not required for financing their current activity, are invested in interest-bearing investment channels such as short-term deposits. These investment channels are chosen by the Company’ managements based on future forecasts of the cash the Company will require in order to meet its liabilities. Cash flow forecasts are determined on both an individual company basis and a consolidated basis. The Company examines current forecasts of its liquidity requirements so as to make certain that there is sufficient cash for its operating needs, and it is careful at all times to have enough unused credit facilities so that the Company does not exceed its credit limits and is in compliance with its financial covenants.
These forecasts take into consideration matters such as the Company’s plan to use debt for financing its activity, compliance with required financial covenants, compliance with certain liquidity ratios, and compliance with external requirements such as laws or regulation.
The Company has contractual commitments due to debentures issued, financing agreements and EPC and O&M agreements of its subsidiaries in Spain, Italy, the Netherlands, USA and Israel. See also Note 6, Note 11 and Note 12.
The following are the contractual maturities of financial liabilities at undiscounted amounts and based on the spot rates at the reporting date, including estimated interest payments. This disclosure excludes the impact of netting agreements:
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Market risk is the risk that changes in market prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
The principal risks that the Company faces, as assessed by management, are as follows: a change in the regulation applicable to the area of activity, a change in the electricity prices or the tariffs as approved by the relevant electricity authorities in the countries in which the Company operates, changes in the situation of the electricity and gas market, and political and security events.
The Company uses hedging instruments in an attempt to manage interest rate, currency and other market-related risks. The majority of the Company’s derivative contracts are OTC derivatives, i.e., derivative contracts that are not transacted on an exchange. These derivatives are entered into under ISDA Master Agreements. If counterparty defaults on these contracts, the underlying exposure would no longer be effectively hedged, which could result in losses. Disruptions such as market crises and economic recessions may put a strain on the availability and effectiveness of hedging instruments.
As a result of the Company’s operations and presentation currency, the Company is exposed to the impact of exchange rate fluctuations of the Euro/USD and NIS/Euro on the Company’s balance sheet and profit and loss.
The Company holds cash and cash equivalents, short-term deposits, and restricted cash in various currencies, including Euro, USD and NIS. The Company’s holdings in its European Solar Plants and projects under development are denominated in Euro, its holdings in projects constructed and under development in the US are denominated in USD and its holdings in projects under development in Israel and its indirect holdings in Dorad are denominated in NIS. The Company believes that the composition of its assets and liabilities, which are denominated in USD, Euro and NIS, sufficiently mitigates a substantial portion of its foreign currency risk.
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The Company’s exposure to linkage and foreign currency risk was as follow:
NIS
USD
EURO
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Information regarding significant exchange rates:
A change as at December 31 in the exchange rates of the following euro against the USD and euro against the NIS, as indicated below would have increased (decreased) equity by the amounts shown below (after tax). This analysis is based on a foreign currency exchange rate that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.
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The Company is exposed to changes in fair value, as a result of changes in interest rate in connection with its loans and borrowings. The debt instruments of the Company bear interest at variable rates.
The Company entered into various project finance agreements that are based on EURIBOR rate, US prime rate and on the Bank of Israel interest rate and therefore it may be affected by adverse movements in interest rates. The Company utilizes interest rate swap derivatives to convert certain floating-rate debt to fixed-rate debt. The Company’s interest rate swap derivatives involve an agreement to pay a fixed-rate interest and receive a floating-rate interest, at specified intervals, calculated on an agreed notional amount that matches the amount of the original loan and paid on the same installments and maturity dates.
Sensitivity analysis
A change in interest rate would have increased (decreased) the profit in the financial statements by the amounts shown below:
As a result of the Company’s operations in the electricity market, the Company is exposed to the impact of changes in electricity prices.
Talasol PPA
In order to manage its exposure to changes in the electricity prices, in June 2018, Talasol executed the Talasol PPA. The power produced by the Talasol Solar Plant is expected to be sold by Talasol in the open market for the then current market power price and the Talasol PPA is expected to hedge the risks associated with fluctuating electricity market prices by allowing Talasol to secure approximately80% of its income for the power production included under the Talasol PPA. The hedge transaction becomes effective on Talasol requesting that the counter party fix the fixed price pursuant to the price adjustment mechanism. The Talasol PPA became effective in March 2019 and its accounting treatment is according to cash flow hedge.
The fair value of the Talasol PPA is measured by discounting the future fixed and assessed cash flows, over the period of the contract and using market interest rates appropriate for similar instruments. The value is adjusted for the parties’ credit risks. The valuation technique for assessing electricity future prices projections takes into consideration unobservable market data and complex pricing models.
In 2021, Talasol deposited €10 million in Talasol’s bank account as security for a letter of credit to the PPA provider. This security fund is reduced by 10% every year, up to a minimum amount of €3.5 million, which will be released at the expiration of the PPA.
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Italy PPA
As of 2024, we entered into long term PPAs for the physical supply of electricity. With respect to a defined portion of the contractual volumes (75% of the output), the agreements provide for a fixed electricity price. Settlement is effected through the physical delivery of electricity and invoicing based on the contractual price. The fixed price component applicable to 75% of the contractual volumes under the PPAs covers the exposure to electricity price risk. This exposure is treated as an electricity price related derivative component, with the same method applied for Talasol PPA.
The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, other accounts receivables, pledged deposits, financial derivatives credit from banks and trade payables and other accounts payables are the same or proximate to their fair value.
The fair values of the other financial liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:
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The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date plus an adequate credit spread, and were as follows:
The financial instruments presented at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of data used in the measurement:
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The table hereunder presents reconciliation from the beginning balance to the ending balance of financial instruments carried at fair value in level 3 of the fair value hierarchy:
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Note 22 - Operating Segments
The Company’s reportable segments, which form the Company’s strategic business units, are described below:
As of December 31, 2025, 38 MW solar (51% owned in partnership with Clal) are fully operating. 163 MW solar (51% owned in partnership with Clal) is under construction. The remainder of the portfolio developed by the Company (100% owned) is approximately 262 MW solar, of which210 MW have reached RTB status as of the date hereof and the rest are expected to receive permits in the future. Out of 210 MW that are RTB, approximately 100 MW (2 projects) won the FER X tender that guarantees a 20-year electricity sale contract at high prices. The Company signed a power purchase agreement (“PPA”) with a leading European entity for the operating projects with an aggregate capacity of 38 MW. The Company intends to continue to execute PPAs for the remainder of the portfolio.
Construction of the 4 solar plants (49 MW) has been completed, three of them were connected as of July 2025 and the fourth project is currently being connected. Hillsboro solar plants (14 MW) are under construction.
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Note 22 - Operating Segments (cont’d)
Factors that management used to identify the Company’s reportable segments
The Company’s strategic business units offer different products, and the allocation of resources and evaluation of performance is managed separately because they require different technology.
For each of the strategic business units, the Company’s chief operating decision maker (“CODM”) reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Company’s operating segments.
The Company presented the segments per geographical areas, as the information collected and analyzed by the CODM in connection with the segments is presented based on the physical location of the relevant operations.
The CODM reviews the NIS denominated information on Dorad and the Solar Plant located in Israel (See Note 23) and the information presented in the tables below is translated into euro. The CODM reviews the results of Dorad according to the Company’s share in Dorad. In the reports analyzed by the CODM, the Solar Plant located in Israel is presented under the fixed asset model and not under the financial asset model as per IFRIC 12, see the adjusted gross profit calculation.
Performance is measured based on segment adjusted gross profit as included in reports that are regularly reviewed by the chief operating decision maker. Segment adjusted gross profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
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Factors that management used to identify the Company’s reportable segments (cont’d)
Netherlands
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Financing income in connection with derivatives and warrants, net
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Geographical information
The Company is domiciled in Israel and it operates in Israel, Spain, Italy and USA through its subsidiaries that promote, develop and own Solar Plants, in the Netherlands through its subsidiaries that own anaerobic digestion plants and also in Israel through Ellomay Luzon Energy.
The following table lists the revenues from the Company’s operations in Italy, Spain, the Netherlands and the USA:
For the year ended December 31
2025
2024
2023
€ in thousands
The following table lists the non-current assets, net from the Company’s operations in Spain, Israel, USA, Italy and the Netherlands:
As at December 31
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Note 23 – Discontinued operation and Disposal Groups Held for Sale
On December 31, 2023, the Company executed an agreement to sell its holdings in the Talmei Yosef Solar Plant (the “Talmei Agreement”). The Talmei Agreement provides for the sale of the Company’s holdings in the Talmei Yosef Solar Plant to Greenlight Fund Limited Partnership and Doral Group Renewable Energy Resources Ltd., in equal parts, in consideration for NIS 44.75 million (approximately €11.2million), with an additional potential payment of up to NIS 4 million (approximately €1 million) in the event the Talmei Yosef Solar Plant will produce more than 18 million Kwh during 2024. The Agreement further provides for a cutoff date of June 30, 2023, and at closing the parties will determine whether an adjustment to the purchase price is required reflect the Company’s entitlement to revenues (net of expenses) up to such date, taking into account the results and the cash held by the project company. The Talmei Agreement includes customary representations and indemnification undertakings in connection with breaches of representations, which, other than with respect to customary exceptions, are subject to a cap of NIS 9 million (approximately €2.2 million) and limited to a period of 18 months from the closing date.
The sale of the Talmei Yosef Solar Plant was consummated on June 2, 2024. The net consideration paid at closing was approximately NIS 42.6million (approximately €10.6 million). There were no subsequent adjustments of such consideration.
In connection with the sale of the Talmei Yosef Solar Plant, the Company presents the results of the Talmei Yosef Solar Plant as a discontinued operation. The assets and liabilities of the Talmei Yosef Solar Plant were presented as held for sale for the year 2023 and 2022.
In 2023, an impairment loss of €2,565 thousand on the re-measurement of the disposal group to the lower of its carrying amount and its fair value based on Talmei Agreement, based on Talmei Agreement, less costs to sell, has been recognized in the Company’s statement of income. An additional loss of €602 thousand was recognized in the Company’s statement of income for the year ended December 31, 2024.
Assets of disposal groups classified as held for sale
Liabilities of disposal groups classified as held for sale
F-99
Note 23 – Discontinued operation and Disposal Groups Held for Sale (cont’d)
Results attributable to discontinued operation
For the five months ended June 3,
For the year endedDecember 31
€in thousands
F-100
Note 24 – Subsequent Events
On March 27, 2026, Ellomay Clean Energy LP and the Luzon Group entered into a share purchase agreement (the “Ellomay Luzon Energy SPA”), following a separation process initiated pursuant to the Ellomay Luzon Energy shareholders’ agreement. Pursuant to the Ellomay Luzon Energy SPA, the Luzon Group will acquire the Ellomay Luzon Energy shares indirectly held by the Company based on a Dorad valuation of NIS 4.4 billion, subject to the fulfillment of customary conditions to closing including the receipt of approvals from the Israeli Electricity Authority, the Israeli Competition Authority and Ellomay Luzon Energy’s lenders, all to the extent required. As of the date hereof, based on the Company’s indirect holdings in Dorad (through Ellomay Luzon Energy) and the current value of 50% of the other assets and liabilities of Ellomay Luzon Energy, the consideration is expected to be approximately NIS 560 million (€149.5 million).
The Ellomay Luzon Energy SPA provides that the sale will be consummated within two business days of fulfillment of the conditions to closing, and that the deadline for fulfillment of the conditions to closing is seven and a half months from signing of the Ellomay Luzon Energy SPA. In connection with the separation process, each party deposited a bank guarantee or cash in the amount of NIS 72 million (€19.2 million) in escrow. In connection with this requirement, on March 26, 2026, the Company received a short-term loan from O.Y. Nofar Energy Ltd. (“Nofar”), the Company’s principal shareholder in an amount of NIS47.5 million (€12.7 million) at a risk-free interest rate (the interest rate of Israeli governmental bonds with similar repayment terms). The Company’s deposit may be replaced by a bank guarantee, which, if replaced, will be issued by Nofar.
In preparation for the separation process, the Company agreed with The Phoenix Insurance Company and The Phoenix Pension and Provident Fund Ltd., both Israeli institutional investors, that they will assist the Company in financing the acquisition of Ellomay Luzon Energy’s shares in the event the separation process will result in us buying the shares. In consideration for their agreement to provide such financing, the Company agreed to pay such entities (in a division of 40.72% and 59.28%, respectively) an amount in cash that equals the difference between the five-day average of the closing price of the Company’s ordinary shares on the Tel Aviv Stock Exchange and NIS 76 (subject to certain customary adjustments), multiplied by up to an aggregate of 263,158. Each Phoenix entity can choose to request such cash payment, in whole or in part, until April 27, 2027.
The Ellomay Luzon Energy SPA provides that in the event a party materially breaches its undertakings or prevents the fulfillment of a condition to closing, and the breach is not repaired within a 14 day period, the other party will receive the amount deposited in escrow as liquidated damages and will also be entitled to purchase the Ellomay Luzon Energy shares held by the breaching party based on a Dorad valuation of NIS 3.5 billion. In the event the transaction is not consummated within seven and a half months other than due to a breach by any party, Ellomay Clean Energy LP may acquire the Luzon Group’s holdings in Ellomay Luzon Energy based on a Dorad valuation of NIS 4.4 billion.
In connection with a change in control of the Company in March 2026, and following discussions with the holders of the Company’s Debentures, on March 31, 2026 the holders of the Company’s Debentures approved certain amendments to the deeds of trust governing the Company’s Debentures. The amendments included: (i) an amendment to the immediate repayment cause in connection with a change in control of the Company replacing the Company’s previous controlling shareholders with Nofar and Mr. Ofer Yanay, (ii) an increase in the annual interest rate commencing June 4, 2026 (for Series E - from 6.05% to 6.15%, for Series F - from 5.5% to 5.75% (this increase will be eliminated in the event, and for as long as, the Series F Debentures are rated above Baa1.il (or an equivalent rating) and for Series G - from 6.34% to 6.59%, and (iii) decreases in the annual interest rate spread added to the Government Debenture Yield (as defined in the deed of trust governing the debentures) used to calculate the amount due to the holders of debentures in the event of an early redemption initiated by the Company (1.25% to 1% for series E; from 1.75% to 1.3% for Series F; and from 1.5% to 1.3% for Series G, all commencing June 4, 2026).
On February 28, 2026, Israel and the United States commenced a large-scale military campaign against Iran and on March 2, 2026, Hezbollah formally joined the war against Israel, attacking mainly northern Israel with rockets and missiles. During April 2026, a temporary ceasefire was agreed between Iran and Israel and the United States and thereafter (on April 17, 2026) a temporary ceasefire between Israel and Lebanon, however fighting has since resumed in southern Lebanon and mainly northern Israel.
Due to the ongoing hostilities in the area of the Manara PSP, works on the upper and lower reservoir have stopped, however tunneling works continue according to schedule.
At this stage, Dorad did not identify a significant impact on its financial results due to the recent war with Iran and Hezbollah but continues to regularly monitor the developments and is examining their potential effect on its operations and the value of its assets.
F-101
Dorad Energy Ltd.
Financial Statements
For the Year Ended December 31, 2025
Financial Statements as at December 31, 2025
Contents
FD-1
Somekh Chaikin
17 Ha’arba’a Street, PO Box 609
Tel Aviv 61006, Israel
Independent Auditors’ Report
The Board of DirectorsDorad Energy Ltd.
Opinion
We have audited the financial statements of Dorad Energy Ltd (“the Company”), which comprise the statements of financial position as of December 31, 2025 and 2024 and the related statements of profit or loss, changes in equity, and cash flows for the three-years ended December 31, 2025, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the three-years ended December 31, 2025 in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.
KPMG Somekh Chaikin, an Israeli partnership and a member firm of the KPMG global organization of independent memberfirms affiliated with KPMG International Limited, a private English Company limited by guarantee
FD-2
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Member Firm of KPMG International
Tel Aviv
February 25, 2026
FD-3
Statements of Financial Position
/s/ Amos Luzon
/s/ Eli Asulin
/s/ David Bitton
Date of approval of the financial statements February 25, 2026.
The accompanying notes are an integral part of the financial statements.
FD-4
Statements of Profit or Loss for the Year Ended December 31
FD-5
Statements of Changes in Equity
FD-6
Statements of Cash Flows for the Year Ended December 31
FD-7
Notes to the Financial Statements as at December 31, 2025
Dorad Energy Ltd. (hereinafter - “the Company”) was incorporated on November 25, 2002, with the aim of engaging in the production of electricity and construction of the infrastructure required for said operation. The Company’s official address is 13 Ben Gurion Street, Bnei Brak.
The Company’s shareholders are as follows:
The Phoenix Insurance Company Ltd. – 4.07%
The Phoenix Pension and Provident Funds Ltd. – 5.93%
Both companies are part of Phoenix Financials Ltd. (hereinafter- “The Phoenix”).
For information regarding the sale in 2025 of the shares previously held by Zorlu Enerji Elektrik Uretim A.S. (a foreign company) (hereinafter: “Zorlu”), see Note 13.A.18.
In these financial statements –
On April 13, 2014, upon completing the construction of the power plant, the Public Utilities Authority - Electricity (“PUA”) passed a resolution by which a permanent production license and a supply license will be granted to the Company, subject to the approval of the Minister of National Infrastructure, Energy and Water (“Minister of Energy”). Accordingly, on May 12, 2014, the Company issued production licenses for 20 years with an option to extend for an additional 10 years and a supply license for one year. On May 19, 2014, after receiving the licenses, the Company began commercial operation of the station.
On August 12, 2014, the Company submitted a request to the PUA to extend the supply license for an additional 19 years. On July 13, 2015, after the Company filed a petition with the High Court of Justice against the Minister of National Infrastructures and the PUA for issuance of a conditional order that will require extending the license for the said period, the license was received, which is effective up to May 11, 2034. The power plant has a capacity of approximately 850 MW.
FD-8
Note 1 – General (cont’d)
The “Iron Swords” war commenced on October 7, 2023, and has significantly affected the security and economic situation in the State of Israel. The continuation of the fighting and attacks against Israel, together with the measures taken by the government following the declaration of a state of war and the reserve mobilizations, led to a decline in the scope of business and economic activity throughout the country. These effects were reflected in disruptions to supply and production chains, shortages of manpower, and volatility in the value of financial assets and in foreign exchange rates against the NIS. In addition, the downgrade of Israel’s credit rating by international rating agencies, as well as the implications for the State budget, also affected the economy as a whole and the business activities of many companies and, consequently, financial reporting.
On June 13, 2025, the war significantly expanded to an additional front, when the State of Israel entered a direct confrontation with Iran as part of Operation “Am KeLavi” (hereinafter: the “Operation”), upon the commencement of which the State of Israel declared a special state of emergency on the home front and the closure of the airspace. This confrontation further intensified the implications of the war on the activities of many companies in the economy. As a result of the aforementioned Operation, the Company’s revenues in June 2025 decreased by approximately 22% compared to June of the previous year. The operation ended on June 24, 2025, with a ceasefire agreement, and the economy returned to full activity. In addition, in October 2025, a ceasefire was reached between Israel and Hamas in the Gaza Strip.
As of the reporting date and the date of approval of the financial statements, the Company has not identified any additional material effects on its results, however, it continues to monitor developments and examine their possible impact on its operations and the value of its assets.
FD-9
These financial statements have been prepared by the Company, in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). These financial statements were authorized for issue by the Company’s Board of Directors on February 25, 2026.
These financial statements are presented in NIS, which is the Company’s functional currency, and have been rounded to the nearest thousand. NIS is the currency that represents the principal economic environment in which the Company operates.
The financial statements have been prepared on the historical cost basis except for the following assets and liabilities:
For further information regarding the basis of measurement of the above assets and liabilities, see Note 3, regarding Significant Accounting Policies.
The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation of the Company’s financial statements requires management to make assumptions regarding circumstances and events that involve considerable uncertainty. Management of the Company prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about assumptions made by the Company with respect to the future and other reasons for uncertainty with respect to estimates that have a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next financial year are included in the following notes:
Useful lives of fixed assets and residual value
On May 19, 2014, the construction of the power plant was completed and is available for use as of that date and therefore as of that date, the systematic depreciation of the power plant began. Accordingly, the Company examined the useful life of each significant component of fixed assets as described in Note 3.C.3 below considering the expected residual value at the end of the useful life. Depreciation methods, useful lives and residual values are reviewed at least once at the end of each reporting year and adjusted when necessary. See Note 8.
FD-10
Assessment of the probability of contingent liabilities
The Company creates provisions or reverses provisions in respect of contingent liabilities Among other things, based on the premise whether it is more likely than not that an outflow of economic resources will be required in respect of those liabilities. See Note 13.
The Company’s normal operating cycle is one year. As a result, current assets and current liabilities include items the realization of which will take place within the Company’s normal operating cycle.
The accounting policies set out below have been applied consistently by the Company for all periods presented in these financial statements.
Transactions in foreign currencies are translated to the respective functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.
Classification and measurement of financial assets and financial liabilities, initial recognition and measurement
The Company initially recognizes trade receivables at the time of their creation. The rest of the financial assets and financial liabilities are initially recognized on the date that the Company becomes a party to the contractual terms of the instrument. In general, a financial asset or financial liability is initially measured at fair value plus, in the case of a financial asset not presented at fair value through profit and loss, transaction costs directly attributable to the acquisition or issue of the financial asset. A trade receivable that does not include a significant financing component is initially measured at the transaction price.
Financial assets - classification and subsequent measurement
The Company has balances of trade receivables and other receivables held within the framework of a business model whose objective is the collection of contractual cash flows. The contractual cash flows in respect of these financial assets include only principal and interest payments reflecting consideration for the time value of the money and the credit risk. Accordingly, these financial assets are measured at amortized cost, and their effect is carried to profit and loss.
FD-11
Derecognition of financial assets
Financial assets are derecognized when the contractual rights of the Company to the cash flows from the asset expire, or the Company transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset were transferred. When the Company retains substantially all of the risks and rewards of ownership of the financial asset, it continues to recognize the financial asset.
Non-derivative financial liabilities include loans and borrowings from banks, lease liabilities, and trade and other payables.
Initial recognition of financial liabilities
The Company initially recognizes debt securities issued on the date that they are originated. All other financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
Subsequent measurement of financial liabilities
Financial liabilities are recognized initially at fair value, less any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
Derecognition of financial liabilities
Offset of financial instruments
Financial assets and liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Company currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Economic hedging
Hedge accounting is not applied to derivative instruments used to economically hedge financial assets and financial liabilities denominated in foreign currency. Changes in the fair value of these derivatives are recognized in profit or loss, as financing income or expenses.
The value of CPI-linked financial assets and liabilities, which are not measured at fair value, is remeasured every period in accordance with the actual increase/decrease in the CPI.
FD-12
Fixed asset items are measured at cost less accumulated depreciation and accumulated impairment losses.
The cost of self-constructed assets includes costs directly attributable to the assets, direct labor, any other costs directly attributable to bringing the assets to a working condition for their intended use, estimates of dismantling and restoration costs of the items, and capitalized borrowing costs. During the commissioning period, the Company capitalized costs and revenues incurred as a result of competence tests attributed to the power plant.
Spare parts, auxiliary equipment and backup equipment are classified as fixed assets once they meet the definition of fixed assets in accordance with IAS 16, otherwise they are classified as inventory.
When major parts of a fixed asset item (including costs of major periodic inspections) have different useful lives, they are accounted for as separate items (major components) of fixed assets. Gains and losses on disposal of a fixed asset item are determined by comparing the proceeds from disposal with the carrying amount of the asset and are recognized net within “other income” or “other expenses”, as relevant, in profit or loss.
Changes in the obligation to dismantle and remove the items and to restore the site on which they are located, other than changes deriving from the passing of time, are added to or deducted from the cost of the asset in the period in which they occur. The amount deducted from the cost of the asset shall not exceed the balance of the carrying amount, and any balance is recognized immediately in profit or loss.
The cost of replacing part of a fixed asset item and other subsequent expenses are capitalized if it is probable that the future economic benefits associated with them will flow to the Company and their cost can be measured reliably. The carrying amount of the replaced part of a fixed asset item is derecognized. The costs of day-to-day servicing are recognized in profit or loss as incurred.
An asset is depreciated from the date it is ready for use, meaning the date it reaches the location and condition required for it to operate in the manner intended by management.
As mentioned in Note 1.C.1 the Company began depreciating the fixed assets on the day the power plant began operating in accordance with the depreciation rates listed below. Depreciation is recognized in the profit or loss statement on a straight-line basis (unless otherwise stated) over the estimated useful life of each significant part of the fixed asset, since this method most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
FD-13
The estimated useful lives for the current period are as follows:
Depreciation methods, useful lives and residual values are reviewed at least at the end of each reporting year and adjusted when necessary.
Non-financial assets
Timing of impairment testing
The carrying amounts of the Company’s non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
Determining cash-generating units
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
Measurement of recoverable amount
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the assessments of market participants regarding the time value of money and the risks specific to the asset or cash-generating unit, for which the estimated future cash flows from the asset or cash-generating unit were not adjusted.
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The carrying amount of the provision is adjusted each period to reflect the time that has passed and is recognized as a financing expense.
Provision for decommissioning and restoration – The Company recognized a provision for decommissioning and restoration costs regarding its obligation under the lease agreement of the land on which the power plant is located. Changes to this provision arising from changes in the interest rate are recognized against the fixed assets.
FD-14
The Company recognizes indemnification assets for damages and faults caused to turbines at the power plant and for loss of profits if it is virtually certain that the indemnity will be received.
The Company’s revenues mainly include revenues from selling electricity to end customers and to the IEC and from providing availability to the system manager.
The Company recognizes revenues when the customer obtains control over the promised goods or services, when the electricity reaches the customers and when the availability is put at the disposal of the system manager. The revenue is measured according to the amount of the consideration to which the Company expects to be entitled in exchange for the goods or services promised to the customer.
Identifying the contract
The Company accounts for a contract with a customer only when the following conditions are met:
Identifying performance obligations
On the contract’s inception date, the Company assesses the goods or services promised in the contract with the customer and identifies as a performance obligation any promise to transfer to the customer one of the following:
The Company identifies goods or services promised to the customer as being distinct when the customer can benefit from the goods or services on their own or in conjunction with other readily available resources and the Company’s promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract. In order to examine whether a promise to transfer goods or services is separately identifiable, the Company examines whether it is providing a significant service of integrating the goods or services with other goods or services promised in the contract into one integrated outcome that is the purpose of the contract. In contracts with customers for the sale of electricity, the Company has identified one performance obligation in each contract.
FD-15
Variable consideration
The transaction price includes fixed amounts and amounts that may change as a result of discounts, refunds, credits, incentives, penalties, and contract modifications that the consideration in their respect has not yet been agreed by the parties.
The Company includes variable consideration, or part of it, in the transaction price only when it is highly probable that its inclusion will not result in a significant revenue reversal in the future when the uncertainty has been subsequently resolved. At the end of each reporting period and if necessary, the Company revises the amount of the variable consideration included in the transaction price.
Satisfaction of performance obligations
Revenue is recognized when the Company satisfies a performance obligation by transferring control over promised goods or services to the customer. The Company transfers control over the services at a point in time, and accordingly recognizes revenues at a point in time.
Determining the transaction price
The transaction price is the amount of consideration that the Company expects to be entitled to in exchange for the transfer of goods or services promised to the customer, other than amounts collected for the benefit of third parties. When determining the transaction price, the Company takes into account the effects of all of the following: variable consideration and consideration payable to the customer.
Income taxes include current and deferred taxes.
Current tax is the amount expected to be paid (or received) on taxable income for the year, calculated based on the tax rates enacted or substantively enacted as of the reporting date.
Deferred taxes are recognized with respect to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognized for tax loss carry forwards, tax benefits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.
FD-16
On the inception date of the lease, the Company determines whether the arrangement is a lease or contains a lease, while examining if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right to control the use of an identified asset, the Company assesses whether it has the following two rights throughout the lease term:
For lease contracts that contain non-lease components, such as management fees, that are related to a lease component, the Company elected to account for the contract as a separate component from the lease.
Contracts that award the Company control over the use of a leased asset for a period of time in exchange for consideration, are accounted for as leases. Upon initial recognition, the Company recognizes a liability at the present value of the balance of future lease payments (these payments do not include certain variable lease payments that do not depend on an index or a rate), and concurrently recognizes a right-of-use asset at the same amount of the lease liability, adjusted for any prepaid or accrued lease payments, plus initial direct costs incurred in respect of the lease.
Since the interest rate implicit in the Company’s leases is not readily determinable, the incremental borrowing rate of the lessee is used. Subsequent to initial recognition, the right-of-use asset is accounted for using the cost model and depreciated over the shorter of the lease term or useful life of the asset.
Variable lease payments that depend on an index or a rate, are initially measured using the index or rate existing at the commencement of the lease and are included in the measurement of the lease liability. When the cash flows of future lease payments change as the result of a change in an index, the balance of the liability is adjusted against the right-of-use asset.
FD-17
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements of the lease liability. Depreciation is calculated on a straight-line basis over the useful life or contractual lease period, whichever earlier, as follows: land 20.4 years, and offices 3.5 years.
Financing expenses include interest expenses on borrowings, fees and changes in time value of provisions. In the statements of cash flows, interest received is presented as part of cash flows from investing activities. Interest paid and dividends paid are presented as part of cash flows from financing activities. Foreign currency gains and losses on financial assets and financial liabilities, changes in the fair value of financial assets at fair value through profit or loss, and gains (losses) on hedging instruments that are recognized in profit or loss are reported on a net basis as either financing income or financing expenses depending on whether foreign currency movements are in a net gain or net loss position.
This standard replaces IAS 1, Presentation of Financial Statements. The standard provides guidance for improving the structure and content of the financial statements, particularly the income statement.
The standard includes new disclosure and presentation requirements as well as requirements that were taken from IAS 1, Presentation of Financial Statements.
As part of the new disclosure requirements, it is required to present two subtotals in the income statement: operating profit and profit before financing and taxes. Furthermore, the results in the income statement will be classified into three new categories: an operating category, an investing category and a financing category.
In addition to the changes in the structure of the income statements, the standard also includes a requirement to provide separate disclosure in the financial statements regarding the use of management-defined performance measures (MPM).
Furthermore, the standard adds specific guidance for aggregation and disaggregation of items in the financial statements and in the notes.
The standard’s initial date of application is for annual reporting periods beginning on or after January 1, 2027, with earlier application being permitted
The Company is examining the effects of the standard on its financial statements with no plans for early adoption.
FD-18
Note 4 – Cash and Cash Equivalents
Note 5 – Trade Receivables and Accrued Income
Note 6 – Other Receivables
Note 7 – Long-Term Prepaid Expenses
FD-19
Note 8 – Fixed Assets
FD-20
Note 8 – Fixed Assets (cont’d)
See Note 13.C regarding a lien on the Company’s assets that serves as security for the liabilities of the Company and the shareholders to the funding groups.
During 2025, an update was made to the liability for restoration and decommissioning against a decrease in fixed assets in the amount of approximately NIS 19 thousand.
Note 9 – Loans from Banks
This note provides information regarding the contractual terms of the Company’s bank loans measured at amortized cost. Further information on the Company’s exposure to interest and liquidity risks is included in Note 19 on financial instruments (see also Note 13.A.1).
Loans and borrowings - details regarding interest rates and linkage
Note 10 – Trade Payables
FD-21
Note 11 – Other Payables
Note 12 – Taxes on Income
Deferred taxes for the reported periods are calculated according to the tax rates presented above.
FD-22
Note 12 – Taxes on Income (cont’d)
The deferred taxes are calculated using the tax rate expected to apply when reversed as stated above. The composition and movement in deferred tax assets and liabilities is attributable to the following items:
FD-23
The Company has final tax assessments up to and including 2020.
On December 30, 2021, the Company signed a final assessment agreement with the Tax Authority for the years 2015-2020 which determined the treatment of the power plant’s depreciation throughout the period of its operation. It was determined that the Company would adjust depreciation expenses in the amount of approximately NIS 1,871 million so that a tax liability was created for the Company for the 2020 tax year in the amount of approximately NIS 22 million including interest and linkage. According to the agreement, the amortization expenses adjusted as stated above will be allowed for deduction to the Company as a current business expense in equal parts starting from January 1, 2021, for a period of 5 years, i.e. NIS 374 million each year.
FD-24
Note 13 – Contingent Liabilities, Commitments and Guarantees
On November 29, 2010 (hereinafter: “the Financial Closing Date”), the Company signed a financing agreement and several related agreements with Bank Hapoalim Ltd. as the financial organizer, Clal Credit and Financing Ltd. from the Clal Insurance Enterprises Holdings Ltd. group as the organizer of the institutional consortium and a consortium of banks and institutional investors (hereinafter: “the Financing Parties”) to provide financing in the amount of up to NIS 3,850 million linked to the CPI, though not more than 80% of the costs of construction of a power plant for generating electricity in Ashkelon, subject to the terms of the provisions of the financing agreement and the related agreements (hereinafter: “the Financing Agreements”). Likewise, bank guarantees will be provided to third parties according to the project documents. The financing agreement includes representations and warranties concerning the Company and the project where breaching these representations and warranties is likely to lead, inter alia, to a demand for immediate repayment of the outstanding credit and/or a breach of the Company’s obligations and/or to the cancellation of the license.
Accordingly, the Company is required to comply with the following coverage ratios every May 27 and November 27:
As at December 31, 2025, in accordance with the Company’s cash flow forecasts, the Company is in compliance with the above coverage ratios.
According to the Company’s financing agreement, the annual interest rate on the Company’s debt to the financing corporations is updated every three years, according to the Company’s rating. On April 4, 2023, the rating Company S&P Maalot updated the Company’s debt rating outlook to ILAA-/Negative. The updating of the aforementioned outlook had no effect on the Company’s interest rate. Insofar as there is no change in the Company’s rating, the interest rate will continue to be about 5.1% and if the rating is lowered the interest rate will rise to about 5.5%.
On April 9, 2024, the rating company S&P Maalot updated the Company’s debt rating outlook from ILAA-/Negative to ILAA-/Stable. In accordance with the given rating, the interest rate will remain 5.1% until 2027.
On May 21, 2025, the Company received from the rating agency Midroog (“Moody’s”) a stable outlook for the Company’s debt rating of Aa3.il.
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Note 13 – Contingent Liabilities, Commitments and Guarantees (cont’d)
Within the framework of signing the Financing Agreements, other agreements related to the financing agreement were signed as follows:
These agreements include the obligation of the shareholders towards the Company and the Financing Parties, to inject, separately, and each according to their relative share, from time to time and in parallel with each request to draw from the financing facilities, a total of up to approximately 20% cash (hereinafter:” the Shareholders Investment”),
and this either for the issuance of shares or as shareholders’ loans, which in any case, will be subordinate to and pledged to the obligations of the Company towards the Financing Parties, according to the terms of the agreements. According to the capital injection agreement and as security for the commitment of the shareholders to provide their relative portion of the Shareholders’ Investment, the shareholders provided on the same date, cash and bank guarantees in the amount of their obligation to inject the Shareholders’ Investment; this, less any equity provided to the Company prior to that date. The capital injection agreement includes representations and obligations with regard to the shareholders and the project where their breach is likely to lead, inter alia, to a demand for immediate repayment of the outstanding credit and/or a breach of the Company’s obligations and/or to the cancellation of the license. Within the framework of the financing agreement, there is a lien on all the issued share capital of the Company in favor of Poalim Trust Services Ltd., as the trustee of the Financing Parties.
The agreement sets the establishment of the project accounts and sets out the distribution of the cash flows among the accounts. In addition, the agreement sets out terms and procedures for executing deposits and withdrawals from each account, determines the minimum balances in each of the reserve funds, and sets out the priorities with respect to payments between the accounts and other terms regarding the management of the accounts, including the issue of transfers between accounts. The reserve funds are a debt service fund, a heavy maintenance fund, a distribution fund and a fund for regulation fines. As at December 31, 2025, the balances of the deposits for the reserve funds are: NIS 246 million in the debt service fund, NIS 180 million in the heavy maintenance fund, NIS 57.5 million in the distribution fund and NIS 11.5 million in the regulation fines fund. These amounts are classified in the statement of financial position as “long-term restricted deposits”.
After the reporting date, on February 4, 2026, the Company notified the financing parties under the financing agreement dated November 29, 2010, of its intention to perform an early repayment of the full outstanding loan balance.
As part of the notice, the Company requested that the financing parties waive certain preconditions set forth in the financing agreement, including the requirement for 30 business days’ prior notice and the requirement to execute the repayment on the last business day of the month, in order to enable the Company to carry out the early repayment on a date to be selected by it within the period between February 16, 2026 and March 31, 2026.
The early repayment is expected to include, in addition to the outstanding principal, payment of interest accrued up to the repayment date, linkage differentials, an early repayment fee, as well as additional fees and expenses, all in accordance with the provisions of the financing agreement.
As an alternative to the early repayment, the Company requested to examine the possibility of transferring the rights and obligations of the other financing parties to Bank Hapoalim Ltd., such that Bank Hapoalim would become the sole lender under the financing agreement, subject to the consent of all lenders and the signing of the relevant transfer documents.
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As of the date of approval of the financial statements, final approval from all financing parties regarding the requested waivers and the alternative of transfer of rights has not yet been obtained; accordingly, the timing and manner of the final repayment are subject to the completion of the aforementioned consents. These actions are intended to streamline the Company’s financing structure. In the Company’s assessment, the early repayment is expected to occur by the end of February 2026.
In 2008 an agreement was signed between the Company and EAIS for the lease of 74.5 dunams of land for the power plant, for a period of 24 years and 11 months from the date of its commercial operation. In the same year and in the framework of the agreement, the Company paid EAIS an amount of NIS 3,047 thousand in respect of its share in the lease payments that were paid by EAIS to the Israel Lands Administration. During 2010 the Company signed an addendum to the agreement. According to the addendum to the agreement, in exchange for the lease of the land on which the power plant was constructed the Company will pay an annual amount of NIS 3,705 thousand linked to the Consumer Price Index over a period of 25 years from the date of commercial operation. See Note 21 Related Parties. The land lease is accounted for according to IFRS 16, see also Note 20, Leases.
In 2012, an agreement was signed between the Company and the Eilat-Ashkelon Power Plant Services Company - EAPPS (hereinafter: “the Maintenance Contractor”) (hereinafter: “Power Plant Operating and Maintenance Agreement”) for the operation and maintenance of the power plant for a monthly payment defined in the agreement for a period of 24 years and 11 months commencing the date of receipt of the production license. According to the agreement, the Maintenance Contractor will transfer some of the larger maintenance projects to a subcontractor (Zorlu O&M) under a separate agreement, however it will retain full responsibility towards the Company with respect to all of its obligations under the agreement.
During 2013, the Maintenance Contractor entered into a sub-contracting agreement with EZOM Ltd. (hereinafter: “the Operating Contractor”), a related company held by the Company’s shareholders, by which the current operation and maintenance work of the power plant will be transferred to it. The Maintenance Contractor retains full responsibility towards the Company regarding all its obligations pursuant to the agreement.
In December 2017, an assignment agreement was signed between EAPPS and EZOM Ltd. which replaced EAPPS. According to the agreement, EZOM Ltd. will pay a quarterly amount linked to the CPI to EAPPS.
On August 22, 2022, the operating contractor announced that on August 15, 2022, the name of the company was changed from EZOM Ltd. to Edeltech O&M Ltd. The Company was also informed that 25% of the ordinary shares in EZOM Ltd., were transferred to Edeltech Holdings 2006 Ltd., which from that date owns 100% of the issued and paid-up share capital of EZOM Ltd. which is held by a shareholder of the Company (Edeltech Ltd. is a shareholder in Edelcom Ltd.).
On November 29, 2022, the EAPPS agreement was assigned to EAIS.
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On November 25, 2010, the Company signed a standard agreement approved by the Gas Authority according to which the government Company Israel Natural Gas Lines Ltd. (“INGL”) connected the power plant to the natural gas pipeline. In accordance with the agreement, the Company paid connection fees in the amount of NIS 47 million which was recognized as long-term prepaid expenses and will be amortized over the operating period. In addition, according to the agreement, the Company is obligated to pay INGL, commencing from the date of completing the connection in November 2013, a monthly payment for the capacity in the pipeline and a variable payment for gas flowing through the pipeline and systemic payment, within the framework of a decision by the Gas Authority.
The Company has an agreement with Europe Asia Pipeline Company Ltd (hereinafter: “EAPC”) regarding storage of diesel on its premises and for transporting distillates to a power plant.
According to the agreement, the Company will store and distribute diesel at the quantities needed by it both as a backup of alternative fuel as required by Electricity Market Regulations and for the Company’s current needs in an overall estimated amount of 14,000 cubic meters pursuant to the conditions and periods set forth in the agreement.
On October 15, 2012, the Company entered into an agreement with the partners in the Tamar license (hereinafter: “Tamar”) by which, in accordance with the mechanisms set forth in the agreement, the Company will purchase natural gas from Tamar for operating the power plant it is constructing in Ashkelon.
According to the agreement, if the Company does not consume the minimum quantity it is committed to, it will be required to pay for that quantity, in addition to the minimum gas quantity the Company is obligated to consume each year. However, the Company will be allowed to consume the unused quantity over the following three years.
On April 2, 2019, the Company entered into an addendum to the agreement with Tamar according to which the gas quantities specified in the addendum to the agreement that the Company purchases from Tamar will not be included for the purpose of calculating the quantities of gas at the time of the reduction of the purchases from Tamar, in accordance with the instructions of the agreement with Tamar and in accordance with the instructions of the framework for increasing the quantity of natural gas produced from the Tamar natural gas field and rapid development of the Leviathan, Karish and Tanin natural gas fields and additional fields from August 16, 2015 (hereinafter: “gas framework”). The addendum to the agreement was subject to certain suspending conditions which were fulfilled in July 2019.
On March 22, 2021, the Company and Tamar signed an amendment to the agreement to purchase gas from the Tamar reservoir in which the parties agreed on the amount of gas that the Company will purchase from the Tamar reservoir as from January 1, 2022. The agreement also provides that in respect of that agreement the Company will be entitled to compensation in the amount specified in the agreement. The compensation was received in the third quarter of 2021 and was presented in the other payables item and in the long-term liabilities item.
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On April 5, 2021, the Company entered into an additional gas purchase agreement with Tamar pursuant to which the Company is entitled to purchase additional quantities of gas from Tamar over a period of 4 years ending on April 5, 2025. As part of the agreement, the Company will receive a grant in the amount specified in the agreement, which depends partly, among other things, on the amount of gas consumption quantities determined in the agreement. Half of the grant was received in the first quarter of 2022 and was presented in the other payables item and in the long-term liabilities item, and half on the date of termination of the contract after meeting the conditions according to the agreement.
The amendment to the agreement and the additional agreement were subject to certain suspending conditions that were met on July 14, 2021. The grant and the compensation were recognized in profit or loss as a decrease in energy costs over the periods specified in the amendment to the existing agreement and the additional agreement.
On May 4, 2025, the Company entered into an agreement with Tamar to extend until June 2025 the additional gas purchase agreement that was scheduled to expire in April 2025. In addition, an agreement was signed for an increase in the quantities of gas to be purchased by the Company in 2026.
On May 18, 2025, upon meeting the conditions of the agreement, the Company received the second half of the Tamar grant. The grant was recognized in the second quarter in the statement of profit or loss as a reduction of energy costs.
In 2025, the Company did not consume the full minimum annual quantity to which it committed under the agreement. Accordingly, the Company included in the statement of financial position a liability under other payables in the amount of NIS 66.8 million, representing the monetary value of the gap between the minimum quantity to which the Company is committed under the agreement and the quantity actually consumed during that year (the “Excess Gas Quantity”). Based on the Company’s assessment as of December 31, 2025, it will consume the full Excess Gas Quantity over the next three years, accordingly, the Company included in the statement of financial position, under long-term prepaid expenses, an asset in the amount of approximately NIS 66.8 million. The balance of long-term prepaid expenses as of December 31, 2025, in respect of the purchase of natural gas from Tamar amounts to approximately NIS 72.1 million, and includes balances relating to prior years as well.
On October 30, 2017, the Company signed an agreement with Energean Israel Ltd. (hereinafter: “Energean”) regarding the acquisition of natural gas, in a cumulative amount of approximately 6 BCM over a period of 14 years, from the Karish and Tanin reserves held by it that their construction was completed in 2022 (hereinafter: “the original agreement”). In November 2018, all the suspending conditions included in the agreement were fulfilled. The Company estimates that it will purchase from Energean about half of the gas required to operate the Company’s power plant in the said period, and the rest of the amount will continue to be supplied by Tamar. According to the agreement, if the Company does not consume the minimum quantity it committed to, it will be required to pay for that quantity, in addition to the minimum gas quantity the Company is obligated to consume each year. However, the Company will be allowed to consume the unused quantity over the following three years. At the beginning of November 2022, Energean began to flow gas to the Company’s power plant facility.
FD-29
In 2024, the Company did not consume the minimum annual quantity it had committed to under the agreement. As a result, the Company recognized a liability of NIS 4.5 million under the “other payables” section and a liability of NIS 51.7 million under the “other long-term liabilities” section in the statement of financial position. These amounts represent the monetary value of the shortfall between the minimum quantity the Company is obligated to purchase under the agreement and the actual quantity consumed during the year (hereinafter: “Excess Gas Quantity”).
On the other hand and according to the Company’s estimate as at December 31, 2024 that it will fully consume the Excess Gas Quantity over the next three years, the Company recognized an asset of NIS 4.5 million under “other receivables” and an asset of approximately NIS 51.7 million under “long-term prepaid expenses” in the statement of financial position.
On March 12, 2025, the Company entered into an amendment to the natural gas purchase agreement with Energean.
Pursuant to the amended agreement, the payment requirement for the minimum quantity of natural gas to which the Company committed but did not actually consume in 2024 was reduced. In addition, the daily quantity that the Company will be required to consume during the summer months of 2026 was reduced.
In April 2025, in accordance with the amended agreement, the Company made the aforementioned payment to Energean.
Pursuant to the aforementioned regarding the agreements with Energean, as of December 31, 2025, the balances of liabilities in respect of the Excess Gas Quantity presented under other payables and other long-term liabilities amount to approximately NIS 9.5 million and approximately NIS 200 thousand, respectively. The balances of assets in respect of the Excess Gas Quantity presented under other receivables and long-term prepaid expenses amount to approximately NIS 30.1 million and approximately NIS 600 thousand, respectively.
As at the reporting date the Company has agreements to sell electricity at the full production capacity of the power plant. The electricity delivery agreements are, mainly, based on a reduced rate compared to the rate applicable to electricity consumers in the general market, as defined by the Authority for Public Services-Electricity.
In 2015 the Company signed a settlement agreement with the Ashkelon Municipality which determined the annual municipal tax rate up to and including 2025.
On March 1, 2022, the Company received a municipal rate assessment from the Ashkelon Municipality for the years 2019-2022 in the amount of approximately NIS 18 million (of which a total of NIS 13.9 million is attributed to the years 2019-2021) that it claims is due to both an error in the size of the property of the Ashkelon power plant on which the Company pays municipal taxes and in its classification. On March 6, 2022, the Company filed an objection with
the Ashkelon Municipality’s municipal rate director regarding these charges. In this objection, it was argued, among other things, that in 2015 the Company had signed a compromise agreement with the Ashkelon Municipality that arranged the payment of municipal rates until 2025 and which must be acted upon and that there is no basis for correcting the assessment.
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The director of property taxes rejected that argument in reply to the objection, and an appeal was filed against this reply to the Appeals Committee for Property Tax Affairs. On November 12, 2024, a compromise agreement was approved for the years 2019-2024.
According to the compromise agreement, the Company will pay a one-time sum of NIS 4.39 million, and the calculation of property taxes will remain unchanged, subject to the terms of the agreement, until 2030. On November 29, 2024, the Company paid the amount.
On April 12, 2015, the Company received two letters from representatives of Dori Energy (hereinafter- “The Representatives”) that were addressed to the Company’s Chairman of the Board. In these letters, the Company is requested to take legal action to reveal the engagement between one of the shareholders of the Company, Zorlu Enerji Elektrik Uretim A.S. (“Zorlu”) and the construction contractor of the Dorad power station, Wood Group (hereinafter: “the EPC contractor”). On July 16, 2015, after the request of the Representatives was not accepted, the Representatives filed with the court a motion to approve a derivative claim in the name of the Company against Zorlu (including the representatives of Zorlu on the Company’s Board of Directors) and the EPC contractor. In the framework of the motion to which also the derivative claim was attached, the Representatives demanded that documents and information regarding the engagement between Zorlu and the EPC contractor be disclosed and handed over.
On November 15, 2015, the Company filed its reply in which it reiterated its position that the motion for approval of the derivative claim should be denied.
On January 12, 2016, the Representatives filed a motion to amend the motion for approval of a derivative claim (hereinafter: ‘the motion for amendment”). The motion for amendment raises new allegations by which Zorlu together with Ori Edelsburg and companies under his control supposedly conspired to deceive the Company by “inflating” the cost of the EPC agreement for the purpose of splitting between them the profits from such “inflation”. In addition, in the framework of the motion for amendment it is requested to add Mr. Ori Edelsburg and companies under his control as defendants to the amended motion for approval of a derivative claim and, also, to remove from the claim the representatives of Zorlu on the Company’s Board of Directors. It is noted that the motion for approval of a derivative claim as well as the amended motion for approval of a derivative claim that was attached to the motion for amendment, do not include any monetary relief rather request that the court give the Representatives permission to split the relief so that they may file a separate monetary claim in the future on behalf of the Company with respect to the Company’s financial damages, after they receive all the documents and information they are requesting.
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On December 27, 2016, following negotiations between the parties, an arbitration agreement was signed between the parties in which it was agreed to transfer the proceeding to arbitration and on January 3, 2017, the Representatives filed a notice and motion to cancel the proceedings which was approved by the Supreme Court on January 8, 2017.
On June 28, 2023, the arbitrator issued an arbitration ruling, according to which the requests for approval of a derivative claim on behalf of EAIS and Dori Energy were accepted, and also the derivative claim was accepted in part, according to which Zorlu, Mr. Ori Edelsburg, Edelcom and Edeltech (hereinafter: “the defendants”), jointly and severally, were required to return to the Company an amount of USD 100 million, which bears interest according to the Adjudication of Interest and Linkage Law and its regulations from January 1, 2013, until the actual date of payment. In addition, in the arbitration ruling, the defendants were required, jointly and severally, to pay expenses to the plaintiffs in the amount of NIS 20 million plus VAT as well as 80% of the Company’s actual expenses in respect of the arbitration, whereas EAIS, Dori Energy, Dori Group, Mr. Rani Friedrich and Ellomay, jointly and severally, will bear 20% of the Company’s actual expenses in respect of the arbitration.
On July 4, 2023, and on July 5, 2023, the parties to the arbitration (except the Company) applied to the Honorable Judge (retired) Mr. Asher Grunis (hereinafter: “Mr. Grunis”) to accept to act as an appeals court on the arbitration ruling of the Honorable Judge (retired) Yitzhak Inbar, according to the arbitration agreement. On July 6, 2023, Mr. Grunis announced that he accepts the appointment. On November 15, 2023, the parties filed appeals against the arbitrator’s ruling.
On November 13, 2024, the arbitration ruling in the appeal was issued, and in it the arbitrator ruled that the liability of the defendants should be reduced, so that they must pay to the Company a total of USD 94.375 million with the addition of interest in accordance with the Adjudication of Interest and Linkag Law, 1961, from January 1, 2013, until the actual payment date. The arbitrator also ruled that the liability for legal expenses determined in the first arbitration award will be left unchanged, that each party will bear its own expenses in the appeals, and that the arbitration expenses in the appeals will be divided equally between the parties.
During December 2024, the Company received the full amounts determined in the arbitration ruling, as follows:
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Below is a summary of the impact of the arbitration ruling on financial statement items for the year ended December 31, 2024 (in thousands of NIS):
The impact of the aforesaid amounts on the profit or loss statement for 2024 amounts to a profit of approximately NIS 280 million before taxes, and an addition of approximately NIS 215.6 million to profit after taxes. On November 13, 2025, the Company received approval from the Israel Tax Authority, pursuant to which the proceeds received under the arbitration award are not subject to VAT.
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b) Administrative petition
On June 24, 2025, the Company filed an administrative petition pursuant to the provisions of Section 5(1) and Item 2 of the First Schedule to the Administrative Courts Law, 2000, and pursuant to Section 17(a) of the Freedom of Information Law, 1998, in which the Court was requested to exercise its authority under Section 17 of the Freedom of Information Law and order the Public Utilities Authority (PUA) to provide the petitioner with Public Utilities Authority Decision No. 69505 from Meeting No. 695 dated September 2, 2024, concerning the tender for the establishment of a power plant at the Sorek site, in full and without redactions.
On September 17, 2025, the Public Utilities Authority (PUA), together with the Freedom of Information Officer, filed its preliminary response to the petition, opposing the Company’s request. A hearing on the Company’s petition was scheduled for January 6, 2026.
After the reporting period, on January 6, 2026, a hearing was held before the Jerusalem District Court, at the conclusion of which a judgment was rendered by consent of the parties and without an order as to costs, pursuant to which the redacted details in Decision 69505 will be disclosed to the Company (except for a specific item).
On January 12, 2023, the Company sent to the Company’s maintenance contractor a demand for compensation for the aforementioned damages that were caused to the Company in the amount of approximately USD 4.6 million, which are not insured, on the grounds that the damage was caused by the negligence of the maintenance contractor.
On February 5, 2023, the maintenance contractor rejected the Company’s demand and proposed an arbitration proceeding on the matter. On February 27, 2023, the Company decided to exercise the arbitration mechanism in accordance with the operation and maintenance agreement between the parties. On May 1, 2023, a preliminary discussion was held with the agreed arbitrator, and in it dates were set for meetings in March 2024. On August 6, 2023, the Company submitted a statement of claim to the agreed arbitrator as well as a request for permission to split remedies which was approved by the agreed arbitrator on August 16, 2023.
On March 18, 2024, the parties held a preliminary hearing in which several issues were discussed. At the recommendation of the honorable arbitrator, the parties entered into negotiations in order to attempt to reach a compromise agreement. Further to the above, the parties reached the terms of a compromise agreement in principle, according to which the maintenance contractor will pay the Company agreed compensation, and the parties agreed on certain arrangements in connection with a future allocation of liability in light of the terms of the plant’s latest insurance policy.
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On November 22, 2020, the Israel Electric Company (“IEC”) notified the Company that a motion to certify a class action had been filed against it, claiming that the IEC had been negligent in supervising the conduct of private electricity suppliers and thus caused damage to electricity consumers, in an amount estimated in the motion for certification at NIS 330 million. It is alleged that the private electricity suppliers gave false reports in the consumption plans submitted to the system manager at the IEC while utilizing the rules set by the PUA in the standards. On November 22, 2020, the IEC filed a third-party notice against the Company, in which it did not specify the specific amount it attributes to the Company. On October 31, 2021, a hearing was held on the request to send notices to third parties. On April 10, 2023, the court decided to reject the request to send a third parties notice from IEC. On June 11, 2023, IEC filled an appeal to the Supreme Court against the Court decision.
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On June 29, 2023, the Supreme Court decided that the respondents must submit a written answer to the appeal by March 14, 2024. On February 14, 2024, the petitioner in the certification motion submitted his response to the appeal. On March 28, 2024, the Company submitted its response to the appeal (following an extension granted by the court).
On February 24, 2025, the District Court ruled that, given the nature of the appeal pending before the Supreme Court, there is no reason to proceed with the case as long as the appeal remains unresolved. The District Court further instructed the parties to submit an appropriate request to examine the advancement of the appeal before the Supreme Court and to file an update with the District Court by March 31, 2025.
On March 26, 2025, the IEC filed a status update with the District Court, notifying it of the Supreme Court’s decision to schedule a hearing on the appeal for December 1, 2025. Subsequently, on March 27, 2025, the District Court ordered that an additional status update be submitted following the issuance of a decision in the appeal, or by year-end, whichever is earlier.
On December 6, 2025, the appeal hearing, which had been rescheduled for February 16, 2026, was postponed by the Court. On December 11, 2025, a new date for the appeal hearing was set for June 9, 2026. If the appeal is accepted in full, the hearing on the motion to certify the claim as a class action will take place with the Company as a third party thereto. In the Company’s assessment, based on the opinion of its legal advisors, at this stage it is not possible to reasonably estimate the outcome of the appeal, accordingly, no provision has been recognized in the financial statements.
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On July 17, 2023, a petition of Reindeer Energy Ltd (hereinafter: “Reindeer”) was received at the Company’s offices, it too regarding aforementioned Government Resolution 586 (High Court of Justice 5404/23) (hereinafter: “Reindeer Petition”). On July 19, 2023, a decision was made in the Reindeer petition, according to which the petitioner must inform the court by July 24, 2023, why its petition should not be deleted due to it being a premature petition, without an order for costs, with its arguments being reserved for when a final decision is made on the matter. On July 25, 2023, a copy of Reindeer’s notice was received at the Company’s offices by which the petition is not a premature petition, and that without the court’s intervention at this time.
The possibility of holding a competition for the construction of a power plant in the central region until 2035 will be eliminated, and under these circumstances, the court is not proposing a hearing with a reservation of rights but to deny rights without a hearing, as well as a violation of the public interest, which requires holding a hearing on the petition. On July 27, 2023, the High Court of Justice rejected Reindeer’s petition outright because it was a premature petition and stated that under these circumstances, there is no justification for hearing the petition now, when it is not possible to know what the National Infrastructure Committee’s recommendation will be after holding a repeat hearing on the matter. It is certainly not possible to know at this time what will be the final decision that will be made by the government afterwards, and what will be the factual and legal foundations underlying the final decision that will be made.
Following the government’s decision to approve National Infrastructure Plan (hereinafter: “NIP”) 11/B, the Company applied to the NIC for a building permit, however, on January 11, 2024, the Company was informed in an e-mail message from the NIC that its position is that as long as NIP 20/B or NIP 91 is not definitively rejected, it is not possible to issue a building permit for the new station, this being based on a legal opinion of legal advisers in the NIC and in the planning administration that were sent to the Company on January 15, 2024. On February 7, 2024, The Company, through its legal counsel, sent a letter, among other things, to the legal advisers of the NIC and the planning administration that had prepared the aforesaid legal opinion, arguing that the NIC’s refusal to grant the Company a building permit is illegal and contrary to the proper interpretation of NIP 11/B. On February 26, 2024, the Company received a reply letter from the NIC, which stands by the claim in the opinion that the issuance of building permits for the expansion of the station should not be promoted.
On February 19, 2024, the Company received a planning survey to receive the expansion of the power plant from Noga, which allows connecting the electricity to the grid from October 2028.
On March 13, 2024, the Company filed a petition with the High Court of Justice against the NIC, the Government of Israel, the Ministry of Energy and Infrastructure, and the Attorney General, requesting a conditional order against the NIC, ordering it to come and provide reasons why it will not handle the application for construction permits for the construction of the “Dorad 2” power plant, the plan for the construction of which was approved by the government within the approval of NIP 11/B on May 28, 2023. It also requested that, after issuing a conditional order, the order be converted into a definitive order addressed to the NIC, ordering it to handle the issuance of construction permits for the “Dorad 2” power plant in accordance with NIP 11/B. On March 13, 2024, the High Court of Justice ruled that a preliminary response from the respondents to the petition would be submitted by May 16, 2024. On May 2, 2024, the NIC’s legal advisor announced, that “at its meeting of April 17, 2024, the government decided to reject NIP 20/B - Hadera Power Station. Therefore, with the rejection of NIP 20/B and since it is not valid, it is possible to resume the process of issuing the permit by force of NIP 11/B at the National Licensing Authority”. In light of this, a request was submitted with consent to the High Court of Justice to delete the petition without an order for costs.
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On May 8, 2024, a judgment was issued deleting the petition without an order for costs.
On September 10, 2024, the Company received a statement of claim from Edeltech, a shareholder in the Company, against it and against Ellomay, EAIS and Zorlu, which was filed with the District Court (Economic) in Tel Aviv-Yafo, for a declaratory order, a restraining order and the splitting of remedies, in which the Court was requested to declare that, in accordance with the Company’s articles of association, the General Meeting is the organ that is authorized to approve any decision relating to a change in the Company’s field of activity, including the planning and construction of a new power plant or the expansion of the capacity of the existing power plant, including any decision in connection with “Dorad 2” and including the budgeting of the said project; that any such decision shall require the consent of all shareholders; and that any decision that was made in connection with the “Dorad 2” project is null and void. In addition, as part of an injunction, the court was requested to order the Company to refrain from performing any action relating to changing the Company’s field of activity, including planning and construction activities of the Dorad 2 project.
On December 17, 2024, the Company’s filed with the Honorable Court a request to dismiss the claim in limine and to extend the deadline for filing a defense, in light of the fact that this is a theoretical remedy since the Company’s management has not yet made a recommendation regarding the project and in any case it has not yet been submitted to the Company’s organs for approval, due to delay and abuse of legal proceedings.
On January 27, 2025, Edelcom filed its response to the Company’s request to dismiss in limine and on February 13, 2025, the court rejected the request, ruling that the Company must respond to the statement of claim within 30 days.
On September 14, 2025, the Company’s Board of Directors convened and approved the “Dorad 2” project, including its budget and the performance of the actions required in order to reach the financial close stage.
On October 5, 2025, following the postponement of the deadline for completion of preliminary proceedings, Edelcom notified the Company of its intention to file a motion to amend its statement of claim. The Edelcom motion to amend the statement of claim was sent to the Company for its response by November 16, 2025, and this deadline was extended at the consent of the parties until November 30, 2025. It was agreed by the parties and approved by the Court that the preliminary proceedings would be completed after a decision is rendered on the motion to amend.
On December 22, 2025, following the hearing held before the Court on November 11, 2025, and the Edelcom notice in this matter, the Court ordered the dismissal of the claim without an order as to costs (while reserving the parties arguments in this respect should a similar proceeding be initiated in the future). Accordingly, as of the reporting date, there are no claims or pending proceedings concerning the “Dorad 2” project.
FD-38
Furthermore, regarding the tariff approvals, it was determined that these will be granted to a maximum of three production units (instead of two), and the date for their granting was postponed from March 31, 2025, to June 30, 2026. The Company’s response submitted on February 17, 2025.
On March 26, 2025, the Electricity Authority published its decision on the matter, allowing for up to four production units to receive tariff approvals, and confirmed the extension of the deadline for tariff approvals for the purpose of entering the regulatory framework.
The decision set the updated availability tariff at 3.31 agorot per available kilowatt for a producer that obtains tariff approval and reaches a financial closing by June 30, 2026. For a producer that reaches a financial closing and obtains tariff approval between January 1, 2026, and June 30, 2026, the availability tariff will be 3.18 agorot per available kilowatt. For a producer that reaches a financial closing and obtains tariff approval between January 1, 2027, and June 30, 2027, the availability tariff will be 3.05 agorot per available kilowatt. The commercial operation deadline has been extended from December 31, 2028, to December 31, 2029. A producer that commences commercial operation before December 31, 2029, will be entitled to an additional 0.75% of the availability tariff for each month of early operation. Moreover, the first producer to reach a financial closing and obtain tariff approval within the specified timelines, and to construct the power plant in the area north of Gush Dan as defined in the map attached to the regulatory framework, will be entitled to an additional 0.5 agorot on the applicable availability tariff. The final deadline to reach financial closing and obtain tariff approval shall be no later than June 30, 2027.
.
On March 3, 2021, the Electricity Authority issued a resolution establishing a regulation for suppliers who do not have means of production and amended criteria for new suppliers (hereinafter: “virtual supplier”). According to the decision, in September 2021, the supply segment will open to competition gradually. Suppliers will purchase all the electricity supplied to their consumers from the system manager on a first-come, first-served basis. On July 19, 2021, the Company received a supply license for suppliers without means of production.
After the reporting period, on January 7, 2026, the Electricity Authority published Decision No. 73205 regarding the results of Competitive Proceeding No. 1 for determining the tariff for the purchase of availability certificates from the system manager. As part of the proceeding, a total capacity of 520 MW was allocated to ten different suppliers. The tariff determined is 9.32 agorot per kWh. As part of this proceeding, the Company was awarded an allocation of 60 MW.
FD-39
The Company has entered into agreements with several entities that provide services to household consumers and have a broad customer base, for the purpose of selling electricity to their household customers. Under the signed agreements, all customer-related risks are borne by the service-providing entities.
On August 21, 2023, the Company’s board of directors decided to distribute a dividend in the amount of NIS 70 million. At the said time, the Company paid a dividend in the amount of NIS 52.5 million to its Israeli shareholders. On September 7, 2023, upon the receipt of a withholding tax certificate, the Company transferred to its foreign shareholder its share in the dividend in the amount of approximately USD 4.6 million (approximately NIS 17.5 million that was converted by the Company into USD on the date of the payment to the Israeli shareholders).
On December 28, 2023, the Company’s board of directors decided to distribute an additional dividend in the amount of NIS 70 million. At the said time, the Company paid a dividend in the amount of NIS 52.5 million to its Israeli shareholders. On January 10, 2024, upon the receipt of a withholding tax certificate, the Company transferred to its foreign shareholder its share in the dividend in the amount of approximately USD 4.8 million (approximately NIS 17.5 million that was converted by the Company into USD on the date of the payment).
On September 2, 2024, the Company’s Board of Directors decided to distribute a dividend in the amount of NIS 50 million. On September 3, 2024, the Company paid a dividend in the amount of NIS 37.5 million to its Israeli shareholders. On September 9, 2024, the Company transferred to its foreign shareholder its share of the dividend in the amount of approximately USD 3.4 million (approximately NIS 12.5 million, which was converted by the Company into USD on the date of the decision).
On November 25, 2024, the Company’s Board of Directors decided to distribute an additional dividend in the amount of NIS 75 million. On November 26, 2024, the Company paid a dividend in the amount of NIS 56.2 million to its Israeli shareholders. On November 27, 2024, the Company transferred to its foreign shareholder its share of the dividend in the amount of approximately USD 5.1 million (approximately NIS 18.8 million, which was converted by the Company into USD on the date of the decision).
On December 2, 2025, the Company’s Board of Directors decided to distribute a dividend in the amount of NIS 200 million. On December 4, 2025, the Company paid the aforementioned dividend to its shareholders.
FD-40
According to the claim in the letter, which was sent to all producers in the market operating according to the market model, these price bids allegedly cause an increase in the wholesale market price (SMP) and an increase in payments paid to the producer in an unusual manner. In this way, the price bids increase the payments that suppliers without means of production are forced to pay for the energy purchased from the system operator in the wholesale market, as well as the electricity prices for the final consumer. This, according to the concern, amounts to conduct that is not in accordance with the provisions of the law and Electricity Sector Rules (Standards for the Level, Quality and Quality of Service Provided by an Essential Service Provider), 2018 (hereinafter: “the Standards”).
In light of the above, the letter stated that the system operator intends to examine ways to prevent the aforementioned phenomena, including in accordance with the provisions of Standard 106G of the Standards, such as failure to make payments.
On August 31, 2024, the Company responded to the letter it received from Noga, in which it rejected in all respects the claim implied in the letter that its actions could raise a concern, even the slightest, of harm to competition, with all this implies, and that given the Company’s small market share, it is clear that it cannot abuse it and that it will always continue to act in accordance with the guidelines and procedures established by the Company to prevent any violation of the law.
FD-41
On May 4, 2025, the Company entered into an updated agreement with a material customer for the supply of electricity at a reduced tariff (hereinafter: “the New Agreement”), which amends and replaces the agreement previously signed between the parties on April 28, 2010, as amended from time to time. Pursuant to the New Agreement, the Company undertakes to sell to the customer all the electricity it requires. The term of the agreement is effective retroactively from December 1, 2024, and will expire on May 31, 2029.
On March 6, 2025, the Company received a notice from Zorlu which holds 25% of the Company’s shares, regarding its entry into agreements for the sale of all its shares in the Company. Under these agreements, Zorlu agreed to sell 10% of its holdings in the Company to The Phoenix Insurance Company Ltd. and The Phoenix Pension and Provident Fund Ltd. (together: “The Phoenix”) and an additional 15% of its holdings to The Phoenix Insurance Company Ltd., The Phoenix Pension and Provident Fund Ltd., Hagoz (2015) Ltd. and Shahar Investments in Energy Limited Partnership, through its general partner – Y.L. Shahar Investments in Energy Ltd.
On March 20, 2025, a preliminary discussion regarding the sale was held during a meeting of the Company’s Board of Directors, which, pursuant to the Company’s articles of association, is authorized to determine whether the purchasers constitute a direct or indirect competitor. At that meeting, the Board determined that, according to the sale agreements, the purchasers do not compete with the Company.
On May 27, 2025, Decision No. 71201 was issued by the Israeli Electricity Authority regarding the “transfer of means of control” in the Company. It was resolved to approve Zorlu’s transfer of 10% up to 19.9% of its shares to The Phoenix Insurance Company Ltd. and to The Phoenix Pension and Provident Funds Ltd.
Due to regulatory restrictions, The Phoenix and the Company’s financing entities have reached a preliminary agreement whereby, instead of a pledge over the acquired shares, the financing entities will receive from The Phoenix an alternative package of rights (the “Proposed Arrangement”).
On May 29, 2025, the Company’s Board of Directors approved the proposed arrangement, and on June 4, 2025, the proposed arrangement was approved by the Company’s General Meeting of Shareholders. On June 26, 2025, the proposed arrangement was approved by the financing parties.
FD-42
Pursuant to the Company articles of association and the shareholders’ agreement, with respect to 15% of the Company’s issued share capital held by Zorlu, a right of first refusal is granted to the other shareholders of the Company (hereinafter – the ‘Offered Shares’). The Company’s shareholders, Ellomay and Edelcom, have notified of their intention to exercise their right of first refusal in relation to the entire Offered Shares. Accordingly, subject to receiving all the required regulatory approvals and the approval of the Company’s Board of Directors’ to the exercise of the right of first refusal by the shareholders and, consequently, the approval of the transfer of the shares to them, each of the shareholders is expected to purchase from Zorlu, upon completion of the acquisition, shares representing approximately 7.5% of the Company’s share capital.
On June 4, 2025, the Company received a statement of claim filed against it by a former director and a current director of the Company (both on behalf of Edelcom), seeking declaratory relief for the review of Company documents, a declaratory judgment that the Board resolutions concerning the sale of the shares by Zorlu are essentially void, and a declaration that the director on behalf of Edelcom is entitled to independent legal advice and representation with respect to his rights as a director, in particular regarding the transaction for the sale of Zorlu’s shares, retroactively as of April 14, 2025.
Shortly before the deadline for filing the Company’s response, counsel for the plaintiffs notified the Company of his intention to amend the statement of claim, and it was agreed that, pending such amendment, the deadline for filing the Company’s defense would be postponed. On November 10, 2025, the plaintiffs filed an amended statement of claim in light of the change in circumstances detailed below. On the same day, the Court denied the motion to amend and dismissed the claim.
On July 1, 2025, Zorlu approved an extension of the deadline for completion of the shareholders’ transaction until July 22, 2025. On July 10, 2025, the Company’s Board of Directors approved the transfer of 10% of the Company’s shares held by Zorlu to The Phoenix, as well as the transfer of 7.5% of the Company’s shares held by Zorlu to Ellomay.
On July 13, 2025, the transfer of shares from Zorlu to The Phoenix (10% of the Company’s shares) was completed, and an appropriate report was submitted to the Registrar of Companies and to the Electricity Authority.
On July 17, 2025, the Company learned incidentally, despite the fact that the applicant was required to notify the Company of the resolution, that on July 13, 2025, a director and a former director on behalf of Edelcom had applied to the Tel Aviv–Jaffa District Court seeking the cancellation of the July 10, 2025 resolution approving the transfer of the 10% shareholding to The Phoenix, on the grounds of alleged harm to competition. The Court dismissed the directors’ application on the same day, ex parte, and without requesting the Company’s position (which rejects the allegations).
On July 18, 2025, Edelcom sent a notice to the Company stating that it had transferred 1.25% of its shares to a trustee (I.B.I.), who would hold the voting rights attached to such shares and the right to receive dividends derived therefrom, until the completion of the sale of such shares to a private third party (Mr. Tamir Cohen). Concurrently, Edelcom notified the Company that it had withdrawn its application to the Israel Competition Authority for approval of the transfer of shares from Zorlu to Edelcom, claiming that such approval was no longer required for the transaction with Mr. Cohen. On July 20, 2025, the Company’s Board of Directors discussed the matter; however, it was not requested to approve any such share transfer, and in any event the Company’s share register was not amended accordingly or a report made to the Registrar of Companies.
FD-43
On July 20, 2025, Edelcom filed anex parte petition with the Tel Aviv District Court (Economic Division) for a temporary injunction (hereinafter: the “Edelcom Motion), requesting that the Court order the Company’s Board of Directors and General Meeting of Shareholders not to convene to approve the transfer of 7.5% of the Company’s shares held by Zorlu to any entity other than Edelcom, and to prohibit Zorlu from selling such shares to Ellomay or to The Phoenix. On the same day, the Court denied the motion and set deadlines for the filing of the parties’ responses (by July 29, 2025), as well as for the filing of a main proceeding by Edelcom (by July 27, 2025), while determining that there was no impediment to completing the sale of the shares, insofar as approved by the Company.
On July 21, 2025, being the final date for obtaining all approvals required for completion of the sale of Zorlu’s shares, the Company’s Board of Directors and its General Meeting of Shareholders convened and approved the transfer of an additional 7.5% of the Company’s shares from Zorlu to Ellomay.
On July 22, 2025, the transfer of 15% of the Company’s shares from Zorlu to Ellomay was completed.
On July 27, 2025, the Company received a statement of claim filed in the Economic Division of the Tel Aviv District Court by Edelcom against the Company and others (hereinafter: “the Statement of Claim”), seeking declaratory relief, including declarations that as of July 21, 2025 (the date of the meetings of the Company’s Board of Directors and General Meeting of Shareholders), the agreement between Zorlu and Edelcom for the sale of 7.5% of the Company’s shares was valid and binding and did not require any third-party approvals, that such agreement had been breached by Zorlu, that the Board resolutions approving the transfer of 7.5% of the Company’s shares to Ellomay were null and void, that the share purchase agreement between Zorlu and Ellomay with respect to 7.5% of the Company’s shares was void, and for mandatory injunctions ordering Ellomay to cancel their agreement with respect to such 7.5% shareholding, requiring Zorlu to sell the shares to Edelcom, and requiring the Company’s Board of Directors and shareholders to convene and approve the transfer of 7.5% of the Company’s shares to Edelcom, amend the Company’s share register accordingly, and grant any other relief necessary to complete the foregoing actions.
Pursuant to the parties’ agreement, the parties were required to respond to the Edelcom Motion for a temporary injunction, as described above, by August 4, 2025. On that date, Edelcom notified the Company and the Court that it was unilaterally withdrawing its motion for a temporary injunction. On August 11, 2025, the Court approved the withdrawal and ordered Edelcom to pay expenses in the amount of NIS 200 thousand (of which NIS 40 thousand was awarded to the Company).
The Company was required to respond to the statement of claim by November 13, 2025. A preliminary hearing in the action was scheduled for November 11, 2025. On November 18, 2025, Edelcom notified the Court that it was not pursuing its claim and consented to its dismissal. On November 19, 2025, the Court ordered the dismissal of the claim without an order as to costs.
As of the reporting date, there are no pending proceedings against the Company or its officers in connection with the sale of Zorlu’s shares.
FD-44
As of the report date, the Company, through its shareholders in proportion to their respective shareholdings in the Company, as required under the financing agreements, has provided bank guarantees in favor of INGL and the Public Utilities Authority – Electricity (PUA) for the purpose of complying with the terms of the licenses granted to the Company, as well as in favor of Noga – Electricity System Management Ltd. (hereinafter: “Noga”), as required under the agreement with Noga and in accordance with the standards published by the PUA. The total amount of guarantees provided by the Company as of December 31, 2025, amounts to NIS 182 million.
In addition, in order to comply with the terms of the virtual supplier supply license, the Company has provided guarantees in the amount of NIS 2 million in favor of the PUA and in the amount of NIS 8 million in favor of Noga in respect of availability certificates.
As of the reporting date, during February 2026, the amount of the guarantee in respect of the availability certificates was updated to NIS 4.8 million. In addition, the Company provided a guarantee in the amount of NIS 31 million in favor of Noga in respect of the Company’s prospective customers, pursuant to the Company winning the process for the allocation of 60 MW of capacity.
During the month of January 2011, the Company placed liens on its assets as collateral for the obligations of the Company and its shareholders as follows:
FD-45
Note 14 – Share Capital
Composition of the share capital in nominal values:
Note 15 – Revenues
Note 16 – General and Administrative Expenses
FD-46
Note 17 – Financing Income and Expenses, Net
Note 18 – Other Operating Costs
FD-47
Note 19 – Financial Instruments
The Board of Directors has overall responsibility for the establishment and oversight of the Company risk management framework. The Board has established a Financial Committee, which is responsible for defining a risk management policy. The committee reports regularly to the Board of Directors on its activities.
Credit risk is a risk for a financial loss caused to the Company if the counterparty of the financial instrument fails to meet its contractual obligations.
Cash and cash equivalents
As at December 31, 2025, the Company has cash and cash equivalents in the amount of NIS 695,247 thousand (December 31, 2024 – NIS 846,565 thousand). The Company’s cash and cash equivalents are deposited with a financial institution having a high credit rating (international rating scale).
Restricted deposits
As at December 31, 2025 the Company has deposits in the amount of NIS 495,192 thousand that are restricted according to the financing agreements (December 31, 2024 – NIS 531,569 thousand). The Company’s restricted deposits are held with a financial institution having a high credit rating (international rating scale).
Trade and other receivables (current assets)
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each business customer. The Company has established a credit policy under which each new customer is analyzed individually for credit worthiness, and if necessary, the customer will be examined individually again. The Company’s review includes external credit ratings, when available. Collection from the Company’s customers is carried out on a regular basis.
FD-48
Note 19 – Financial Instruments (cont’d)
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to its reputation.
The Company has contractual commitments due to the financing agreements, the O&M agreement, the gas purchase agreement, the gas pipeline agreement and lease agreements. For further information see Notes 13 and 20.
The following are the contractual maturities of financial liabilities at undiscounted amounts and based on the rates at the reporting date, including estimated interest payments.
FD-49
Market risk is the risk that changes in market prices will affect the Company’s income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
As of December 31, 2025, and since the beginning of commercial operation of the power plant, the management estimates that the main risks are changes in regulation applicable to the area of operations as approved by the Electricity Authority and particularly changes in load, system, and time tariffs (“TAOZ”), a change in gas purchase costs and other changes in the electricity and gas market, and political and security events. See Notes 1.C.2 and 1.D.
FD-50
As a result of the Company’s agreements with the maintenance contractor and gas suppliers as described in Note 13, the Company is exposed to changes in the dollar/NIS exchange rate. In order to reduce this exposure, the Company entered into forward transactions to purchase USD for NIS. Furthermore, as a result of loans from banks that are linked to the CPI, the Company is exposed to changes in the CPI. To reduce this exposure, the Company entered forward CPI transactions mainly for the portion that is expected to be paid during the year (see Note 17).
The Company’s exposure to linkage and foreign currency risk is as follows:
Unlinked
FD-51
FD-52
A change as at December 31 in the exchange rates of the following currencies against the NIS, and a change in the CPI, as indicated below, would have increased (decreased) profit or loss and equity by the amounts shown below. This analysis is based on changes in foreign currency exchange rates and in the CPI that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.
FD-53
The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, other accounts receivable, restricted deposits, long-term prepaid expenses, trade payables, other payables and other long-term liabilities are the same or proximate to their fair value.
The fair values of the financial liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:
The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date (level 2 of the fair value hierarchy) plus an adequate credit spread, and were as follows:
The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
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Note 20 – Leases
The Company has lease agreements with respect to the following items:
FD-55
Note 20 – Leases (cont’d)
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Note 21 – Related Parties
Transactions with related parties
Details of transactions and balances with related parties are presented below (all the transactions are at market terms):
FD-57
Note 21 – Related Parties (cont’d)
Transactions with related parties (cont’d)
Salary and benefits for the Company’s key management personnel
FD-58
Note 22 – Subsequent Events
As of the date of approval of the financial statements, given the preliminary stage of the proceeding, it is not possible to assess the possibility of the motion for certification or the claim being accepted. The Company may file its response to the motion for certification by April 26, 2026.
FD-59