It is hard to miss the new trend that has started to grow in the real estate industry in recent years.
Quietly, real estate companies, management companies and investors began to spread risks and squint towards investments in the energy industry - production and sale of electricity.
In recent years, the Israel Lands Authority has announced its entry into the energy sector (see box).
This is also the practice of old real estate companies whose main occupation until now has been in the field of yielding real estate, logistics and trade.
This is how the construction and housing real estate company has been operating for years, which established the 'Shikun and construction energy' company and leads the field, as well as old real estate companies such as the Azrieli Group, Big, and Mega Or.
These, and many others, found another way to improve the properties they own after all the rights in the land have been exhausted.
Governments around the world are committed to reaching zero carbon emissions by 2050, to reduce the effects of climate change.
Considering that almost 40% of carbon dioxide emissions in the world come from real estate - governments see this as a binding order of the hour.
As far as the real estate companies that enter the field are concerned, there is great investment potential here for the coming years and they have to face a double challenge: generating returns and reducing emissions.
At this stage, they seem to be succeeding.
At least as far as producing returns is concerned.
It is enough if we look at the profits recorded in recent months by the Shikhun and Binui company, which sold 3.5% shares of 'Shikhun and Binui Energy' for approximately NIS 100 million.
'Shikhon Vabinui Energy' was issued on the stock exchange last August at a value of NIS 2.2 billion and is currently traded at a value of approximately NIS 3 billion.
The company recently announced the expansion of its activities in the US in the field of energy and solar installations. The scope of the deal in the US is estimated at tens of millions of dollars and the percentage return on capital is expected to be 9-10%.
The Shikun and Binui company is a leader in Israel in the field of infrastructure and real estate and is considered the largest private energy company in Israel.
After the Electric Company, Shikhon and Binui holds a market share of 12%.
The company owns two power plants for the production of conventional electricity (in collaboration with Adeltec) and in the field of renewable energies, the company has a wide spectrum of all possible technologies for the production of renewable energy, in photovoltaic, thermo-solar projects, storage projects, natural gas, hydro and towards development in the wind worlds.
"The Shikhun and Binui Energy Company is the largest private energy company in Israel that operates several power plants with a capacity of 5 gigawatts in commercial operation",
Tamir Cohen, CEO of Shikun Vabinui explains.
"Our knowledge in the field, combined with knowledge and experience in the fields of real estate and infrastructure, allow us to operate successfully in this arena as well, and to provide our customers with the highest quality housing with the most advanced solutions in the field of green energy."
After the technology companies
Let's go back to the real estate companies: the entry of the companies into the energy field is quite natural. After all, they build the real estate assets, both have to adjust the property to meet energy efficiency standards and also, in some cases, own the property and manage it.
The advantage of a green building that is run with energy efficiency ultimately translates into one word: money.
Buildings that emit a high rate of carbon translate to high energy costs, and hence to an increase in the operating expenses of the properties.
So who would want to rent space in a tower that wastes the renters' money?
It turns out that no self-respecting company, let alone the international technology companies such as Apple, Amazon, Google or Intel, will rent space in towers that are not energy efficient, because they are simply not profitable for them financially.
A general overview of the policies of international companies shows that most of them have implemented rules and procedures related to renewable energy, and therefore, when coming to rent space in Israel, buildings that do not meet green standards of energy efficiency will be immediately rejected.
In the global technology company Apple, for example - all of the company's facilities, from retail stores to data centers spread over more than 40 countries in the US, have been powered by renewable energy since 2014. The fight against climate change remains one of the company's urgent priorities, and it promotes New initiatives and investments that help reduce carbon in the global economy, promote climate solutions, invest in renewable energy, and partner with businesses transitioning to green energy.
The technology company 'Google' has been committed for years to climate actions and environmental management, when already in 2018 it matched 100% of the electricity consumption of its global operations with renewable energy.
In the last year, she joined the corporate advisory board of the leading companies in the field and signed a deal to supply electricity through solar energy.
At Amazon, the company's founder, Jeff Bezos, announced that he intends to donate most of his fortune, amounting to 124 billion dollars, to the fight against climate change.
Also, in the last year, the company promoted several renewable solar energy projects throughout India for the production of electricity to the extent of over one million megawatt hours of clean energy every year. This amount may be enough to cover the electricity consumption of about 360,000 medium-sized houses in Delhi, in India.
Technology companies around the world are among the companies active in purchasing clean electricity and the three main active companies in the field are: Amazon, Meta, the parent company of Facebook and Google.
In total, it is about 326 foreign technology companies that have purchased by Sukh 2022 77.4 gigawatts of wind and solar energy - enough energy to power about 18 million homes in the US.
When this is the "business code", pressure is created on real estate companies Israelis act in a similar way and move towards energy efficiency.
Eitan Farnes, photo: Association of Green Energy Companies
According to Eitan Ferns, CEO of the Association of Green Energy Companies for Israel, "
Since the climate conference in Paris in 2015 and the Paris Convention that was formulated as a result, the entire world recognizes the need to deal with the climate crisis and is switching to green energy.
As far as real estate is concerned, this means that the largest companies in the world will not rent space in towers that are not managed according to a green label and operate with energy efficiency, which today requires every real estate company that builds to align with the new standards, otherwise it will be left without strong tenants."
Tamir Cohen, photo: Sion Pereg
According to Tamir Cohen, CEO of Shikun and Binui,
"The energy sector is a tangential sector to the residential sector, since every residential or employment project requires energy consumption, and therefore the projects allow companies that are able to build power plants to operate in this way.
In a few years we will be able to see large projects that are not permanently connected to the electricity grid but instead generate the electricity themselves, to reduce the load on the electricity grid.
We see what's happening in Europe and recognize the growing trend when it comes to self-production of electricity.
Israel is expected to adopt an electricity policy similar to that in Europe and to encourage the establishment of local energy production centers."
In housing and construction, this is already working, as mentioned.
This is how the CEO of Housing and Building Energy Didi Paz describes the way to disconnect from the electric company: "We can come to kibbutzim, moshavim or real estate companies that own many properties, such as a chain of shopping malls, hotels, chains of assisted living to data centers and desalination facilities , who consume huge amounts of electricity, and suggest that they establish a joint venture to optimize their energy consumption.
They will generate electricity for themselves while disconnecting from the electricity company and purchasing electricity from Yakhon and Binui.
Today we have a commercial department and employees whose job it is to come to a B2C end customer, or to domestic customers, and sell them energy solutions.
Shikun and Binui today knows how to set up an energy project with all that is implied, and to carry out energy efficiency to bring about savings in energy costs for the client/partner.
Today, real estate companies strive for green energy and it is important for them to show off green electricity that comes, for example, from a solar installation in the Western Negev. We know how to offer them that. ".
The entry of the real estate companies into the field is also due to their desire to diversify the company's property portfolio and of course - to increase the return. If by renting a yielding property you can reach a return ranging from 5-6 percent, in investments in renewable energy projects you can reach higher returns, exceeding 10%. Although, in this area as well, the investing companies have seen better days and reached yields of over 20%, this before the increase in interest rates and construction inputs.
A property that works 24/7
"The Electricity Sector Law allows the sale of electricity independently,
Which means that electricity can be bought cheaply and sold at a profit, so there is a new opportunity here,"
explains CPA Doron Gabor,
partner and head of Deloitte's real estate and renewable energies sector.
"The promotion of the electricity reform is expected to create a free market and those who have the means for this, the knowledge, technology and human capital, will be able to establish facilities for the production of solar electricity and supply it to customers."
The ultimate goal is that real estate assets such as plots of land, facilities, campuses and in the future also multi-purpose buildings can be energetically reset, and operate independently through the installation of solar systems to produce and supply a significant portion of the electricity needs of the place.
Slowly and gradually these properties will become a kind of microgrid - and will act as an independent "island" for electricity production through the sale of excess electricity production to consumers operating on that "island".
So that in the same property there will be several operations: of electricity production, distribution, storage, consumption and management.
"In recent years, the trend has arisen to build multi-purpose buildings, combining residences, offices, hotels and a commercial center.
So now they are considering adding solar energy to such a property which will work as a yielding property 24/7, producing independent energy.
The companies own the electricity meter and sell it to their consumers in the same building, earning additional profit," Gabor said.
Among the real estate companies that have entered the energy sector in recent years, we can mention Israel Canada, the Azrieli Group, Ashstrom, Big, the Mega Or Group, the Mebane Group and Rani Zim.
In January 2023, the Electric Company amended the Electricity Sector Law that sets new standards in electricity trade.
Today there are over 30 electricity suppliers in Israel (which do not produce electricity, unlike Shikon and Binui, RNA), such as Cellcom, Supergas, Hot, Sonol and Bezeq, with the largest suppliers today being Partner's Power and Refak Energy, which hold about 50% of the market. At the beginning of January of this year, the company "Electra Power" announced
(formerly "Supergas") for starting electricity supply to private consumers.
This is the beginning of a revolution for electricity production in the free market.
The next step in the revolution will be completed next year, January 2024, when the electricity grid will allow the purchase of electricity from producers of green energy - renewable energy, so that any entity that has installed solar panels on its premises, for example, will be able to contract directly with an electricity supplier and sell the electricity to private consumers.
Tamir Cohen, CEO of Shikun and Binui: "Within a few years we will see large projects that are not permanently connected to the electricity grid but instead generate the electricity themselves" CPA Doron
Gabor, partner head of Deloitte's real estate and renewable energies sector: "The trend to erect buildings multi-purpose that operate 24/7,
pushes the companies to act for independent production of electricity" Eitan Ferns, CEO of the Association of Green Energy Companies for Israel: "Most of RMI's tenders are without certainty and the ability to establish a renewable energy facility"
"Rami introduces a dimension of gambling in tenders"
The calls for the dissolution of the Israel Lands Authority as an exclusive monopoly that today owns approximately 92 percent of the country's lands may come true, but it turns out that RMI will always remain, when in recent years the authority has begun to pave a path for itself towards marketing land for electricity production.
Depositphotos, photo: Depositphotos
In the past six years, the transactions department at the RMI has worked to increase the supply and market solar transactions on a wide scale. In the past two years, a record of 43 solar transactions were marketed. Among the
tenders marketed for the production and storage of solar energy in 2022 are two tenders in Ramat Hovav - which were won by Solgreen Ltd. m" for the production of electricity with solar energy in an area of 1,446 dunams and 1,400 dunams, with a capacity of about 280 megawatts.
The company paid over a billion shekels for winning the two tenders!
In the coming year, additional tenders are expected to be issued, mainly in peripheral areas, covering tens of thousands of dunams.
According to Eitan Farnes, CEO of the Association of Green Energy Companies for Israel, the Israel Land Authority markets many plots of land for solar energy production, but some of the tenders are disconnected from reality.
RMI markets land for solar energy, which is welcome, except that the land is marketed in places that are not connected to the electricity grid at all.
Since Israel's electricity grid has not been developed in the last 20 years, most of the tenders issued by RMI are without certainty and the ability to establish a facility for renewable energy and electricity production. It turns out that RMI introduces a dimension of uncertainty, of gambling, into the tenders.
In the meantime, the companies buy and pay exorbitant prices."
are getting stronger overseas
Despite the investment options, the Israeli regulation and bureaucracy manage to thwart every good plot and initiative.
The meaning is: spillover of real estate and energy companies overseas.
This year the Ashstrom company announced its entry into the field of green energy in the USA; the Big company promotes green energy activities in Romania; the Newmed Energy company (drilling fuel) controlled by the businessman Yitzhak Tshuva recently signed an agreement with the Enlight company to establish renewable energy projects in North Africa and the East The high school and the Rani Zim Renewable Energy company of the Rani Zim Group entered into an agreement to establish a solar project in Bulgaria.
Israeli activity overseas may also strengthen against the backdrop of the Russia-Ukraine war.
Russia was until 2021 the main exporter of natural gas to European countries, and now the war has changed the global energy game and caused the countries affected by the crisis to look for alternatives to renewable energy sources.
"Without a significant change in the regulation, we will see more and more Israeli companies going to Europe and the USA," explains Yaki Bovaron, a partner in the real estate department at EY Israel.
"We are in a period of financial uncertainty with interest rate increases and inflation that rears its head, so real estate companies that enter energy will seek to minimize risks and, among other things, find a solution overseas."
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