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Ellomay Capital acquires Groen Gas Gelderland

Ellomay Capital Ltd (Ellomay), an Israeli-headed renewable energy investment company has recently announced that it, via its wholly-owned subsidiary Ellomay Luxembourg Holdings S.à.r.l. has acquired all issued and outstanding shares of the Dutch biogas company Groen Gas Gelderland B.V. (GG Gelderland). The acquisition is expected to double Elllomay’s processing capacity in the Netherlands, strengthening its position in this market.

The Dutch biomethane-to-grid plant and operator Groen Gas Gelderland B.V. (GG Gelderland) has been acquired by the Israeli renewable energy investor Ellomay Capital Ltd (Ellomay) via its wholly-owned subsidiary Ellomay Luxembourg Holdings S.à.r.l. The anaerobic digestion (AD) facility employs 8 staff and processes around 72 000 tonnes per annum of manure and other organic residues to produce 7.5 million Nm3 of biomethane (photo courtesy GG Gelderland).

Groen Gas Gelderland (GG Gelderland) owns an operating anaerobic digestion (AD) plant in Gelderland, the Netherlands, and according to Ellomay, it has been a distressed asset since the time it started operations approximately four years ago.

The plant has a permit that enables it to produce approximately 7.5 million Nm3 of biomethane annually although the actual production capacity of the plant is approximately 9.5 million Nm3 per annum. Ellomay intends to increase the permit to allow the production to reach the plant’s production capacity.

Complement existing Dutch AD assets

According to a statement, the acquisition will complement Ellomay’s existing biogas operations in the Netherlands and is expected to double its organic waste processing capacity in the Netherlands, from approximately 70 000 tonnes per annum to approximately 140 000 tonnes per annum based on the current permitted capacity of GG Gelderland, and therefore also improve Ellomay’s purchase bargaining position.

Ellomay currently wholly-owns Groen Gas Goor B.V. and Groen Gas Oude-Tonge B.V., both of which are project companies developing anaerobic digestion (AD) plants with an annual green gas production capacity of approximately 3 million Nm3 in Goor, and 3.8 million Nm3 in Oude Tonge, respectively.

Ellomay paid EUR 1.568 million for the shares and the repayment of shareholder loans. The previous owners of GG Gelderland are entitled to receive an additional amount from the Dutch Government for subsidy payments. This amount is estimated at EUR 0.493 million but will be determined and paid before June 2021. Ellomay has no liability to compensate the previous owners if the Dutch government pays less than the estimated amount.

Ellomay’s local Dutch team and its technical advisors from Fichtner have identified the main keys to improve the plant’s operations: professional management, improvement of the biology and purchase management, and strategic investments of approximately EUR 1 million in the plant that should
reduce costs associated with digestate removal, equipment rentals, and maintenance costs.

Financial restructuring

An important aspect of the recovery plan is related to changes in the financial structure of GG Gelderland, which was mainly financed by mezzanine loans bearing high-interest rates.

As part of the transaction, Ellomay reached an agreement with the lenders of the mezzanine loans to allow early repayment of the outstanding subordinated debt (approximately EUR 5.7 million) as part of the closing of the acquisition – thus significantly reducing the financial expenses and the leverage ratio to approximately 30-40 percent.

In parallel, Ellomay has reached an understanding with the senior lender of the project, which is also the senior lender in Ellomay’s other projects in the Netherlands, to reduce the interest rates of the existing senior loans, which were in line with the distressed status of the project, to similar levels to those of Ellomay’s other biogas projects.

If the expected improvements in the project’s financial results due to the recovery plan occur, Ellomay expects that it will increase the leverage through senior lending up to 60 percent – similarly to the gearing ratio of its other Dutch biogas projects.

Subject to certain conditions, including the availability and price of the feedstock required to operate the facility, and following the implementation of the recovery plan, which is expected to be implemented immediately after closing and completed by the end of 2021, Ellomay currently expects that the GG Gelderland facility will yield average annual revenues of approximately EUR 6.4 million, average annual net income of approximately EUR 1.2 million and average annual earnings before financial expenses, net, taxes, depreciation, and amortization (EBIDTA) of approximately EUR 2.3 million over the next ten years, not taking into account the potential 2 million Nm3 increase in annual capacity.

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