Enlight Renewable's Safe Harbor Guidance and Sell-Down Strategy Clash in Earnings Call

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $210 million, up 55% YOY

Guidance:

• Revenue guidance raised to range of $790M to $820M for 2026.
• Adjusted EBITDA guidance raised to range of $565M to $585M for 2026.
• Increased revenue outlook for 2026 driven by strong first half performance, electricity trading in Israel, and high electricity prices in Europe and Israel.

Business Commentary:

Strong Financial Performance and Revenue Growth:

• Enlight Energy reported record revenues and income of $210 million for Q2 2026, up 55% from $135 million in the previous year.
• This growth was attributed to new projects contributing $21 million from electricity sales and $19 million from tax benefits, alongside favorable exchange rates and increased electricity trading activity in Israel.

Expansion into New Markets and Project Milestones:

• Enlight Energy's project portfolio grew by 4.6% to a total of 43.1 factored gigawatts, with significant developments in the U.S. and Europe.
• The company completed the financial close for the CO bar complex, a $2 billion project, and expanded its European storage footprint by acquiring projects in Finland and Romania, positioning the company for growth in these new markets.

Increased Guidance and Strategic Positioning:

• Enlight Energy raised its 2026 annual guidance for revenues and adjusted EBITDA by 4.5% and 3.6%, respectively, reflecting strong first-half results and increased revenue outlook.
• This strategic move is supported by high electricity prices in Europe and Israel, and the company's ability to capitalize on market opportunities through its diversified platform and disciplined execution.

Focus on Energy Storage and Strategic Acquisitions:

• The company emphasized its energy storage capabilities, with projects in Finland and Romania offering high expected returns, including an unlevered return of approximately 16.5%.
• Enlight Energy's strategic acquisitions in these markets are aimed at capturing the growing demand for energy storage, driven by the increasing penetration of renewable energy sources.

Capital Allocation and Financial Flexibility:

• Enlight Energy's strong operating cash flow of $84 million in Q2 2026, up 34% year-on-year, supports its growth strategy and capital deployment.
• The company's solid financial position, with significant liquidity and credit facilities, enables it to continue executing its growth strategy, including substantial capital investments in construction and development projects.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated: 'The second quarter marked another period of strong execution... translated into record financial performance, revenues, and to deliver our business plans.' CFO highlighted: 'The second quarter of 26 was another strong quarter for Enite, up 55% from $135 million last year.' Management raised annual guidance due to strong performance and outlook.

Q&A:

• Question from Justin Clare (Roth Capital Partners): Could you help us understand the drivers of the step down in the updated H2 guidance versus H1, and how much reflects normal seasonality versus lower assumptions for electricity prices?
  Response: The guidance increase reflects growing electricity trading activity in Israel, which contributes to revenue but carries a lower EBITDA margin, and the partial EBITDA contribution from the sale of additional interest in the Sunlight cluster in Q2.

• Question from Justin Clare (Roth Capital Partners): Regarding the 2028 ARR target, the operating capacity target moved slightly lower to 12 factored gigawatts, but revenue potential increased. Why the lower capacity figure with higher revenue?
  Response: The lower factored gigawatt target is due to the acquisition of storage projects (which count at 3-3.5% of capacity) that add significant revenue but have a smaller capacity footprint; some projects were pushed into 2029, but they remain in the roadmap.

• Question from Justin Clare (Roth Capital Partners): With the first US PPA signed with a hyperscaler, do you anticipate an increasing mix of projects signed with hyperscalers, and how is the demand trend?
  Response: Yes, more PPAs with hyperscalers are expected as the company expands into new markets (SPP, PJM) beyond traditional utility PPAs, reflecting accelerating overall demand for electricity.

• Question from Christopher Salta (Tourist): Can you discuss the two new European projects in Finland and Romania? Are their returns higher than the portfolio average, and are they opportunistic to gain a foothold?
  Response: The projects are near/ready-to-build (not greenfield) acquisitions to quickly enter high-demand storage markets; returns are attractive with a focus on maximizing returns through careful revenue stack management and high leverage.

• Question from Christopher Salta (Tourist): How did you approach safe harbor decisions for earlier stage development pipeline projects approaching the 2030 deadline?
  Response: The company carefully selected projects for safe harbor, ensuring they could reach COD by 2030; only a few projects were added in Q2, and the majority of advanced development projects were already safe harbored.

• Question from Corinne Blanchard (Deutsche Bank): What are the expectations for merchant pricing in Europe, especially with recent geopolitical events, and what returns are targeted?
  Response: European merchant pricing remains favorable due to high renewable penetration creating a need for energy storage; the company focuses on markets with accelerating renewable growth and targets high returns through battery capacity and ancillary services.

• Question from Corinne Blanchard (Deutsche Bank): What is the view on the balance sheet and need for further capital to support growth?
  Response: The balance sheet is strong with ample liquidity and secured financing; internal resources and projected operating cash flow of ~$100M per quarter are sufficient to support growth through 2028 and beyond.

• Question from George Chiifi (Mizuho): How many solar modules and inverters have you procured, and what flexibility exists to pass on higher prices due to tariffs or import bans via PPAs?
  Response: Significant portions of modules for U.S. projects are already procured with diversified suppliers; near-term tariff impacts are minimal, and PPAs include mechanisms to adjust costs if new regulations affect project economics.

• Question from David Paz (Wolf): What is the expected EBITDA margin conversion rate for 2029, particularly given the 2028 run rate includes large projects?
  Response: The EBITDA margin is expected to be in the 70-80% range, influenced by tax benefits; as the U.S. segment grows, the company's overall EBITDA margin is expected to trend toward the higher end of this range.

Contradiction Point 1

Safe Harbor Target Trajectory

Guidance on the total safe harbored capacity by year-end appears to have shifted.

Christopher Saltal (Tourist) - Christopher Saltal (Tourist)

2026Q2: This cautious approach led to adding ~4.9 GW to safe harbor in the last quarter, reaching a total of 17.9 GW. - [Chief Corporate Development Officer](CCO)

How did you approach safe harbor decisions for early-stage projects with CODs near 2030? - Corinne Blanchard (Deutsche Bank AG)

2026Q1: There is an option to safe harbor an additional 2–4 factored gigawatts... potentially bringing the total to 15–17 factored gigawatts by year-end. - [Adi Leviatan](CEO) and [Jared McKee](CEO of Clēnera)

Contradiction Point 2

Project Capital Expenditure Strategy

The stated driver for improving project returns has shifted from cost optimization to supplier changes.

Justin Clare (Roth Capital Partners) - Justin Clare (Roth Capital Partners)

2026Q2: The acquired storage projects in Finland and Romania add significant revenue. These projects are expected to generate ~$110M in revenue in their first year of operation. - [Chief Corporate Development Officer](CCO)

How does the reduced operating capacity target (from 13 to 12 factored gigawatts) align with the increased 2028 ARR target of ~$100M? - Justin Clare (ROTH Capital Partners, LLC)

2026Q1: The return improvement is due to ongoing optimization work, including reducing capital expenditure on storage components (e.g., changing battery suppliers for CO Bar 4 and 5 to qualify for domestic content benefits). - [Adi Leviatan](CEO)

Contradiction Point 3

Future Asset Sales Expectations

In 2026Q2, the company explicitly states no further sell-downs are expected, contradicting 2025Q4's strategy that included potential for more minority sales.

Justin Clare (Roth Capital Partners) - Justin Clare (Roth Capital Partners)

2026Q2: No further sell-downs are expected in the second half of the year." and "No additional sell-downs are expected for the remainder of 2026. - [Chief Corporate Development Officer](CCO)

What factors are driving the implied EBITDA margin decline in the second half compared to the first half, and how much is due to normal seasonality versus lower electricity trading assumptions? - Michael Mcnulty (Deutsche Bank AG)

2025Q4: Minority sales or sell-downs are part of the company's strategy and are not a one-time event. - [Itay Banayan](CCO)

Contradiction Point 4

Safe Harbor Capacity Targets

The 2025Q4 roadmap projected adding 0.5-3.5 GW in 2026, aiming for a total of 14-17 GW, while 2026Q2 reported adding 4.9 GW in Q2 alone, implying a much larger total target.

Christopher Saltal (Tourist) - Christopher Saltal (Tourist)

2026Q2: This cautious approach led to adding ~4.9 GW to safe harbor in the last quarter, reaching a total of 17.9 GW. - [Chief Corporate Development Officer](CCO)

How did you determine safe harbor eligibility for early-stage projects with CODs near 2030? - Justin Clare (ROTH Capital Partners)

2025Q4: The company plans to safe harbor an additional 0.5 to 3.5 factored gigawatts in the first half of 2026. - [Adi Leviatan](CEO) and [Jared McKee](CEO of Clenera)

Contradiction Point 5

EBITDA Margin Targets

Contradiction on the expected EBITDA margin for the company's long-term run rate.

David Paz (Wolf) - David Paz (Wolf)

2026Q2: The company expects EBITDA margins to be around 80% in the first year of operation for the projects driving the 2028/2029 run rate. The overall company EBITDA margin will trend towards the higher end of the 70-80% range... - [Nir Yehuda](CFO)

What EBITDA margin is expected for the 2029 annual run rate, considering the 2028 run rate includes many large projects, and is it within the 70-80% range? - Michael Mcnulty (Deutsche Bank)

2025Q3: Project-level EBITDA margins are typically 75% to 80%... Corporate-level adjustments include headquarters expenses... - [Nir Yehuda](CFO)