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Renewable energy push boosts bets on wind, solar in Israel

Where the government is pledging to spend more on cleaner alternatives.
Image: Angel Garcia/Bloomberg

Solar energy and renewable power storage stocks are outperforming oil and gas producers in Israel, where the government is pledging to spend more on cleaner alternatives just as investors seek to diversify away from fossil fuels.

Augwind Energy Tech Storage, Apollo Power and Brenmiller Energy are this year’s best performers among 32 energy shares listed in Tel Aviv, each rising more than four-fold. Trading volumes in the sector’s mostly smaller and mid-cap companies have surged in recent months as oil and gas stocks slumped alongside a sharp drop in prices.

Some of Israel’s biggest investors have become prominent shareholders in these companies as global attention increasingly turns to cleaner energy. The government has set a goal of getting almost a third of power supplies from solar by the end of this decade and to stop burning coal six years from now. That’s helped drive the stocks’ outperformance, said Ella Fried, senior analyst for Leumi Capital Markets in Tel Aviv.

“Usually, investors go conventional, but here it is obvious that the government targets for alternative energy are strong,” said Fried. “This is a global phenomenon and suddenly Israel has companies doing well, that look serious and are profitable. And, of course, there are very positive growth expectations.”

Extra impetus has come from institutional investors who felt over-exposed to the Israeli gas sector and are looking for new ways to build stakes in the energy industry, according to Fried.

No more coal

Israeli Energy Minister Yuval Steinitz said in June he plans to boost the proportion of solar energy to almost 30% of the country’s power sources by 2030. The intention is to invest 80 billion shekels ($24 billion) in reforms that will see coal phased out by 2026.

“We are going to make Israel number one in solar energy,” Steinitz said in an August 11 interview. “This means we will have to make an enormous investment in solar systems and energy storage.”

Here’s more about the companies benefiting from the cleaner energy push:

  • Augwind uses compressed air and water pumps to store and release wind or solar energy as required. It has two pilot projects operating in Israel.
    • Investor interest picked up late last year after Augwind completed a merger with the Tel-Aviv traded Biomedico Hadarim. The company, which had 2019 sales of 6.9 million shekels, has Pepsico and Seimens among its customers.
    • Psagot Investment House, among Israel’s largest investment firms, was the company’s biggest individual shareholder as of August 6.
  • Apollo Power surged since one of its units signed a memorandum of understanding last month to integrate its solar sheet technology into Audi and other Volkswagen car brands.
    • Company expects to start operation in the third quarter of a 6-megawatt a year production line in Israel.
  • Brenmiller uses crushed rocks to store solar and wind power, which can be released as steam to run turbines.
    • An Italian utility is due to start using the technology next year, while a similar project with a US power company is in development.
    • Trading in the stock surged after Rani Zim Shopping Centres provided 47 million shekels in funding in February. Brenmiller extended its gains in June after the company announced a joint venture with the Israeli Defense Ministry.
  • Energix Renewable Energies, a larger player in the sector with a market value of about $2 billion, raised more than 240 million shekels from institutional investors in a January share sale.
    • It counts publicly traded real estate company Alony Hetz Properties & Investments as its biggest shareholder.
    • It was added to Israel’s benchmark TA-35 index in August, when traditional energy shares such as Delek Drilling and Oil Refineries were removed.
© 2020 Bloomberg

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