Idan Ofer again loses on EVs
Electric cars have become highly popular in Israel, with a flood of Chinese brands hitting the market. One in every five cars sold in Israel last year was electric. Nevertheless, power producer OPC, 55% owned by Idan Ofer’s Kenon Holdings (TASE: KEN), has not derived much joy from the ancillary field it entered three years ago – electric vehicle (EV) charging. The company has written its investment in Gnrgy, which develops, produces and installs EV charging stations, by NIS 44 million.
The main reasons for the difficulties of Gnrgy and other companies in the field are that EV charging in Israel has become very competitive, an absence of government support, and burdensome regulation. Among the public companies that have entered the field in the past few years are Afcon (TASE: AFHL), controlled by the Shmelzer family, and Inter Industries Plus (TASE: ININ), controlled by Barak Dotan, together with a host of privately-held companies.
OPC Energy, headed by Giora Almogy, bought 51% of Gnrgy in 2021 for NIS 67 million. In its 2022 financials, OPC recognized NIS 42 million goodwill in Gnrgy, but in last year’s financials, released in March, it wrote NIS 23 million off the investment.
OPC’s auditors stated in their report that, after an examination, it was concluded that the amount recoverable from the deal was lower than its value on the company’s books. This week, OPC reported that it would make a further write-down of NIS 21 million in its financials for the first quarter of 2024, in effect writing off all the goodwill recognized in the acquisition deal.
Gnrgy was founded in 2008 by Ran Eloya, who still heads the company, which, according to its website, is active in six countries. It sets up charging stations for private individuals and for business customers such as vehicle importers, commercial centers, fuel stations, technology companies, and others. Gnrgy also sets up public charging points, and offers energy management systems for multi-story buildings.
In January this year, OPC signed a non-binding memorandum of understanding with Eloya under which it had the possibility of buying the latter’s 49% stake. If this right is not exercised, Eloya will have a set period of time in which to buy OPC’s 51%.
At the same time, OPC agreed with an unnamed third party on a sale of Gnrgy against an allocation of rights. This week, OPC reported that the memorandum of understanding had not resulted in a binding agreement, that Eloya now had the right to buy its shares, and that it would make the additional write-down on its investment.
For Ofer, this is not the first investment in EVs to cause him losses. Ten years ago, the Better Place venture, led by Ofer and technology entrepreneur Shai Agassi, collapsed after accumulating losses of NIS 3 billion since its founding in 2007. Better Place was based on the concept of battery swapping installations and roadside services. Israel Corporation, controlled by Ofer, invested in the venture, which included development of EVs with Renault.
The investment in Gnrgy is far more modest, and the potential losses are correspondingly smaller. For OPC, which has a market cap of NIS 6.5 billion, and whose share price rose 11% last year, Gnrgy is a very minor part of its business. OPC’s main activity is the construction and operation of power plants. In a recent presentation to investors, OPC stated that its portfolio consisted of construction of natural gas-fueled power plants, and solar and wind power ventures, amounting to 10.1 gigawatts.
OPC had revenue of NIS 2.55 billion in 2023, 32% more than in 2022, and posted a net profit of NIS 152 million, 28% higher than in the previous year.
Published by Globes, Israel business news – en.globes.co.il – on May 9, 2024.
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