Enlight Renewable Energy Seeks U.S. IPO (Pending:ENLT)

A Quick Take On Enlight Renewable Energy Ltd.

Enlight Renewable Energy Ltd. (ENLT) has filed to raise $119 million in an IPO of its ordinary shares, according to an F-1 registration statement.

The firm acquires, develops and operates renewable energy projects worldwide.

ENLT has produced sharply growing revenue and operating profit but needs a lot of cash for its ambitions.

I’ll provide an update when we learn more IPO information from management.

Enlight Overview

Rosh Ha’ayin, Israel-based Enlight Renewable Energy Ltd. was founded to develop, acquire and operate wind and solar energy production projects and energy storage capabilities worldwide.

Management is headed by co-founder and CEO Gilad Yavetz, who has been with the firm since its inception in 2008 and was previously BP Marketing and Sales of BVR Systems, a simulation and training system company.

The company’s primary regional coverage includes:

• Israel

• Europe

• United States

The firm operates approximately 17.0 gigawatts of power generation projects and 15.3 GWh of energy storage capacity.

As of September 30, 2022, Enlight has booked fair market value investment of $765 million in equity from investors including Migdal Insurance and Financial Holdings, Harel Insurance Investments & Financial Services, Clal Insurance Enterprises Holdings, The Phoenix Holdings, Menor Mivtachim Holdings and Meitav Dash Investments.

The company acts as a project developer and power producer, controlling the entire project life cycle.

Enlight operates in nine countries in Europe, 17 U.S. states and Israel.

Selling, Marketing & Project Promotion expenses as a percentage of total revenue have trended lower as revenues have increased, as the figures below indicate:

Selling, Marketing & Project Promotion	Expenses vs. Revenue
Period	Percentage
Nine Mos. Ended September 30, 2022	1.9%
2021	3.5%
2020	3.2%

Click to enlarge

(Source – SEC)

The Selling, Marketing & Project Promotion efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, Marketing & Projection Promotion spend, rose sharply to 26.0x in the most recent reporting period, as shown in the table below:

Selling, Marketing & Project Promotion	Efficiency Rate
Period	Multiple
Nine Mos. Ended September 30, 2022	26.0
2021	8.9

Click to enlarge

(Source – SEC)

Enlight’s Market & Competition

According to a 2022 market research report by Grand View Research, the global market for renewable energy was an estimated $769 billion in 2021 and is forecast to reach $3.1 trillion by 2030.

This represents a forecast CAGR of 16.6% from 2022 to 2030.

The main drivers for this expected growth are an ongoing transition toward low-carbon sources of energy amid growing environmental regulations to reduce greenhouse gasses.

Also, the chart below shows the U.S. renewable energy market’s historical and projected future growth trajectory by product type:

Major competitive or other industry participants include:

• NextEra Energy

• Avangrid

• Cypress Creek Renewables

• Leeward Renewable Energy

• sPower

• RWE Renewables Americas

• Renewable Energy Systems Americas

• Florida Power and Light

• Suzlon

• EDP Renewables

• Others

Enlight Renewable Energy Ltd. Financial Performance

The company’s recent financial results can be summarized as follows:

• Growing topline revenue

• Increasing gross profit but uneven gross margin

• Higher operating profits

• Increasing cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Nine Mos. Ended September 30, 2022	$ 131,303,000	94.7%
2021	$ 102,461,000	45.7%
2020	$ 70,324,000
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Nine Mos. Ended September 30, 2022	$ 75,605,000	91.3%
2021	$ 61,238,000	51.7%
2020	$ 40,368,000
Gross Margin
Period	Gross Margin
Nine Mos. Ended September 30, 2022	57.58%
2021	59.77%
2020	57.40%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Nine Mos. Ended September 30, 2022	$ 67,838,000	51.7%
2021	$ 34,400,000	33.6%
2020	$ 28,374,000	40.3%
Comprehensive Income (Loss)
Period	Comprehensive Income (Loss)	Net Margin
Nine Mos. Ended September 30, 2022	$ (27,136,000)	-20.7%
2021	$ (25,288,000)	-19.3%
2020	$ (12,570,000)	-9.6%
Cash Flow From Operations
Period	Cash Flow From Operations
Nine Mos. Ended September 30, 2022	$ 53,404,000
2021	$ 52,023,000
2020	$ 38,810,000
(Glossary Of Terms)

Click to enlarge

(Source – SEC)

As of September 30, 2022, Enlight had $242.8 million in cash and $2.3 billion in total liabilities.

Free cash flow during the twelve months ended September 30, 2022, was negative ($529.5 million).

Enlight Renewable Energy Ltd. IPO Details

Enlight intends to raise $119 million in gross proceeds from an IPO of its ordinary shares, although the final figure may differ.

The company’s stock is currently listed on the Tel Aviv Stock Exchange under the symbol “ENLT.”

No existing shareholders have indicated an interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

We intend to use [an as-yet-undisclosed amount] of the net proceeds from this offering to fund our equity requirements for our Advanced Development Projects and [an as-yet-undisclosed amount] of the net proceeds from this offering for working capital purposes and general corporate purposes, and we may also use a portion of the proceeds to acquire or invest in businesses; however, we do not have agreements or commitments for any material acquisitions or investments at this time for which we intend to use any of the proceeds from this offering.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not a party to any legal proceedings that would have a material adverse impact on its financial condition or operations.

The listed bookrunners of the IPO are J.P. Morgan, BofA Securities, Barclays and other investment banks.

Commentary About Enlight’s IPO

ENLT is seeking U.S. public capital market funding to invest in new projects and for general corporate purposes.

The company’s financials have generated increasing topline revenue, growing gross profit but uneven gross margin, higher operating profits and growing cash flow from operations.

Free cash flow for the twelve months ended September 30, 2022, was negative ($529.5 million).

Selling, Marketing & Project Promotion expenses as a percentage of total revenue have trended lower as revenue has increased; its Selling, Marketing & Project Promotion efficiency multiple rose substantially to 26.0x in the most recent reporting period.

The firm currently plans to pay no dividends and to retain substantially all earnings in the foreseeable future to reinvest back into the company’s growth plans and working capital needs.

ENLT has been investing heavily in capital project development, so its CapEx has been extremely high compared to its operating cash flow.

The market opportunity is large for renewable energy projects as regions seek to reduce their carbon footprint and transition to cleaner sources of energy, so the company has strong industry growth dynamics in its favor.

J.P. Morgan is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 2.8% since their IPO. This is a middle-tier performance for all major underwriters during the period.

Risks to the company’s outlook as a public company include potential supply chain disruptions and increasing cost of capital assumptions by investors, making project total cost of ownership higher.

When we learn more IPO details from management, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.