Zephyrus 2025: Potegowo Holds Up The Numbers, But The Next Step Depends On Connection

Getting To Know The Company

At first glance, Zephyrus looks like a broad Polish renewable-energy platform. It has an operating wind farm, a solar project under construction, additional projects in advanced development, a DSO license for a local distribution network, and a signed control-sale agreement with Doral that could reshape both capital structure and strategic scope. That is only half the story. The economics of 2025 still rest overwhelmingly on one anchor asset, Potegowo, a roughly 257 MW wind project and the largest onshore wind farm in Poland.

What is working now? Potegowo still throws off cash. Project revenue rose to NIS 216.5 million in 2025, project EBITDA rose to NIS 141.6 million, and project FFO rose to NIS 109.0 million. At group level, operating cash flow was still positive at NIS 111.4 million, and the company ended the year with positive working capital of about NIS 120 million. Covenants, both at project level and at the bond level, are comfortably away from pressure.

What is the problem? Zephyrus has not yet proved that it can turn Potegowo from a single cash engine into a platform that connects more assets, more customers, and more layers of profit. As of the report approval date, Potegowo PV was not connected, Goliat and Reut had not started construction, and the DSO license still did not equal cash flow by itself. That is the active bottleneck. The story of 2026 and 2027 will not stand or fall on another pipeline slide. It will stand or fall on actual connections, actual financing, and the conversion of optionality into cash generation.

There is another point that is easy to miss. Reported earnings do not describe the quality of the operating asset very well. Zephyrus posted a net loss of NIS 19.6 million in 2025, but that came after a NIS 28.1 million loss from fair-value financial instruments and other items, including about NIS 6 million from revaluing listed warrants. A reader who looks only at the annual loss could read the year as operational deterioration. That would be wrong. Operations remained relatively stable. The gap sits mainly between asset economics and the way hedges, derivatives, and capital structure run through the accounts.

There is also a practical market constraint worth flagging early. The short book does not show an aggressive bearish bet, short float is only 0.85%, but days to cover stand at 9.22 and the latest daily trading turnover was about NIS 0.78 million. The friction here is liquidity, not crowded short positioning. In that kind of name, materially good or bad news can move the stock harder than the short data alone would suggest.

The Economic Map In One View

Strengths And Risks That Are Already Visible

Events And Triggers

Potegowo PV Has Moved From Promise To A Funded Construction Site

The most important move in 2025 was Potegowo PV shifting from a development concept into a funded construction project. On March 11, 2025, the group signed an EPC contract for infrastructure works worth about NIS 110 million, and on July 17, 2025 it issued the notice to proceed. On top of that, on July 11, 2025 the project won a guaranteed-tariff auction at roughly PLN 318 per MWh, indexed to Polish CPI, for 636,000 MWh, about 50% of the power the project is expected to produce over 15 years starting in 2027.

That matters for two reasons. First, it creates a basic layer of revenue visibility for part of the future output. Second, the project is no longer theoretical. The company had already invested about NIS 99 million in Potegowo PV by year-end 2025. But the story is still not clean. The operating target is mid-2026, while the grid-connection agreement sets the latest date for first energy delivery at September 10, 2026. Since the auction rules require first delivery no later than January 10, 2027, with a latest possible extension to April 9, 2028, any slippage starts turning from an execution risk into an economic and regulatory risk very quickly.

The DSO License Is A Structural Change, But Not Cash Yet

In March 2025 the group received a DSO license, and on April 1, 2025 an amendment to Potegowo’s connection agreement with PSE took effect. Strategically, that is a meaningful shift. Up to that point, Zephyrus was mainly a power producer with one strong wind asset. From here, it is trying to become the owner of a local network infrastructure that can carry additional projects, power trading, and eventually perhaps direct-customer connections.

The truly interesting update came after the balance-sheet date. On February 26, 2026 the group received a draft for a further amendment to the connection agreement. If finalized, it would allow roughly 338 MW of PV and 200 MW of storage to connect through the group’s distribution infrastructure, and even allow end customers such as industrial users and data centers to connect directly for up to 60 MW. That is the heart of the growth option. But until it is signed, scheduled, and translated into real projects on the network, it remains an option rather than a proven earnings layer.

Potegowo’s Refinancing Improved Asset Quality, Not Necessarily Cash Accessibility

In December 2025 Potegowo signed a refinancing of its senior debt. The company secured three real improvements: the interest margin fell from 2.5% to 2.3% above 6-month WIBOR, final maturity was extended from October 2038 to October 2040, and the reserve structure moved from DSRA to DSRF alongside a conditional release of amounts from the SRA account. That is a real financing improvement for the core asset.

But both sides matter. Alongside better pricing and a longer amortization profile, Potegowo still carried a Cash Sweep balance of about PLN 215 million, roughly NIS 191 million, at end-2025. That means a meaningful share of distributable cash is still earmarked for accelerated debt repayment. This is the core distinction between value created and value accessible. Potegowo can look very strong on EBITDA and FFO and still not release that cash upstream to shareholders at anything like the pace a casual reader might assume.

The Doral Deal Changes The Frame Through Which The Stock Is Read

On March 5, 2026 a detailed agreement was signed to sell control, 56.34% of the share capital, to Doral for NIS 1.018 billion, or NIS 27.75 per share. The deal is on an AS IS basis, except for basic representations, with no indemnities, and is subject, among other things, to approval from the financing parties of the Polish wind project and approval from the Polish competition authority.

For the thesis, this is more than a change of hands. Doral has already stated that, if the deal is completed, it intends to combine its European renewable activities with Zephyrus. That means the market is not looking only at a control transfer, but at a possible expansion of the capital base, wider geographic reach, and a larger operating stack. Still, none of that is an operating fact yet. At this stage the Doral deal changes optionality and the strategic frame, not the 2025 earnings base.

Efficiency, Profitability And Competition

The central read of 2025 is that Zephyrus preserved operating stability, but did not yet produce a clean step-change. Revenue from electricity sales rose only 1% to NIS 198.4 million. The company itself explains that average electricity prices rose by about 12%, while production volumes fell by about 11%. Price offset volume. That is not bad, but it is not the kind of clean growth engine a platform story wants to show.

Other income jumped to NIS 18.1 million, partly because of a one-off insurance reimbursement of about NIS 10 million for turbine damage and about NIS 3 million of income from the grid operator. Helpful, yes, but clearly not a recurring earnings layer. On the other side, system maintenance rose to NIS 46.7 million and G&A rose to NIS 24.2 million, mainly because of development and origination activity in Poland. In other words, the company is spending to widen the platform, but for now that widening still sits more in the cost line than in the revenue line.

Potegowo Is Still Doing The Heavy Lifting

Instead of getting lost in accounting noise, the first question should still be how the anchor asset performed. On that basis, 2025 was a solid year.

Potegowo’s revenue rose to NIS 216.5 million, project EBITDA rose to NIS 141.6 million, and project FFO rose to NIS 109.0 million. FFO after debt service also rose, to NIS 57.1 million. That is exactly why 2025 should not be read as a business breakdown.

But this is where the more interesting sting sits. The company notes that 2025 project EBITDA and project FFO were still 10% and 7% below the last forecast it had published as of year-end 2024. The reason was not a collapse in pricing. On the contrary, average net power price was 16% above the price assumed in that forecast. The problem was production. Potegowo generated about 529 GWh in 2025, which was 22% below the production forecast for that period. That is the point a superficial reader can miss. Zephyrus is not driven only by electricity prices. It is still materially driven by what the wind actually gives it.

The quarterly profile sharpens another point. The company itself explains that autumn and winter should be the stronger wind periods, which is why Q1 and Q4 still carry such a large share of the year. That means the numbers remain seasonal and weather sensitive, so the market will keep reading each quarter through both price and physical generation.

The Bottom Line Looks Weaker Than The Asset Economics

To understand 2025 properly, you need to split the operating asset from the accounting path of derivatives and financial instruments.

This is where the deeper read begins. The company finished 2025 with NIS 78.3 million of profit before financing, taxes, and the effect of financial instruments, and then moved through NIS 67.1 million of net finance expense and a NIS 28.1 million loss from fair-value instruments and other items. Inside that line sits about NIS 6 million from revaluing the listed warrants.

It is important not to fall into either extreme. You cannot say the net loss is just noise, because VPPA contracts, rate swaps, and warrants are part of the company’s actual risk structure. But you also cannot read it as a direct sign that the operating asset weakened. The right reading is that the generating asset stayed solid, while the market, hedging, and capital-structure layer dragged the reported earnings line lower.

Competition Has Not Gone Away, But It Is Not The Immediate Pain Point

Zephyrus operates in a very competitive market, with names such as Energix, Polenergia, EDP, QAIR, and PGE, and the company itself says its share of the Polish wind market is not material. But unlike businesses built around a single anchor customer, the immediate bottleneck here is not customer demand. Potegowo sells power into the electricity exchange and balancing market, and the group has also held internal trading capability since April 2024.

That is why the competitive issue currently sits less in sales and more in three places: grid access, auction wins, and construction costs. If Zephyrus can use the DSO framework to shorten the path from ready-to-build to connected asset, that becomes a real competitive advantage. If not, it remains another developer with a strong pipeline and a grid bottleneck.

Cash Flow, Debt, And Capital Structure

The right way to read 2025 is through the gap between cash created and cash left over. Those are not the same thing.

The Cash Picture: All-In Cash Flexibility

On an all-in cash flexibility basis, meaning how much cash remains after actual period cash uses, 2025 was an investment year rather than a harvest year. Operating cash flow was NIS 111.4 million, but investing cash flow was minus NIS 150.9 million. The company itself says that most of that outflow came from Potegowo PV and other advanced-development and early-stage projects, about NIS 107 million, as well as about NIS 60 million invested in marketable securities, offset by other inflows.

The message is straightforward. Current operations do not yet fund growth on their own. The gap in 2025 was bridged by capital markets and project debt. The company raised about NIS 170 million in public bonds and drew about NIS 33 million under Potegowo PV’s debt facilities. Against that, it paid about NIS 122 million of interest and principal on Potegowo’s senior debt and about NIS 5 million of bond interest.

That is not a sign of distress. It is a sign of phase. Zephyrus is not yet a mature asset story that can simply distribute surplus cash. It is still building the next layer, and that layer consumes real money.

Liquidity Is Reasonable, But Not Every Cash-Like Asset Is Truly Free Cash

At end-2025 the company showed NIS 139 million of cash, deposits, and short-term investments, alongside unused bank lines of about NIS 126 million. Positive working capital of about NIS 120 million is also a much more comfortable position than a year earlier. So this is not a story of immediate treasury pressure.

But jumping from that to a conclusion of full balance-sheet freedom misses the structure. Part of the financial-asset stack is restricted cash, debt-service reserves, short-term investments, and IRS assets. At the same time, group net financial debt rose to about NIS 691 million, up from about NIS 559 million at end-2024. That happened even though bank debt declined, because the structure now includes a new public bond layer, a larger lease burden, and a larger auction-related liability.

Covenants Are Not Tight, But Project Cash Does Not Flow Up Untouched

This is one of the least intuitive findings in the filing. At covenant level, Potegowo looks comfortable: historical DSCR of 1.43 against a 1.1 floor, forward DSCR of 1.51, LLCR of 2.38, and leverage of 67% against a 75% ceiling. At the public-bond level, headroom also looks wide: equity of NIS 502 million against a NIS 260 million floor, net debt to adjusted EBITDA of 4.7 against a ceiling of 14, and equity to adjusted net assets of 37.5% against a 19% floor.

That means the immediate issue is not covenant stress. The issue is value accessibility. As noted earlier, the refinancing still left a Cash Sweep balance of about PLN 215 million. That is a very large sum relative to the public-company layer, and it continues to direct part of the project’s distributable cash to accelerated amortization. So even if Potegowo produces strong FFO, that FFO still runs first through debt service, reserves, and a financing waterfall.

This is also where presentation metrics need to be handled carefully. Potegowo produces attractive project EBITDA and project FFO, but shareholders own Zephyrus, not an isolated project company. Between project EBITDA and cash truly available at public-company level sit overhead, development spend, debt service outside the project, and a financing regime that still prioritizes credit stability.

Outlook

The most important section in Zephyrus is not how large the pipeline is. It is what actually has to happen for the company to stop looking like one strong wind asset wrapped in a long presentation and start looking like a real platform. Before getting into the detail, four points matter most:

1. 2026 is a bridge year, not a clean breakout year. The forecast looks good, but it depends on Potegowo PV connecting in the middle of the year.
2. The DSO is an option on speed and mix, not proven cash flow. Until projects and customers are physically connected, it remains unproven.
3. Goliat and Reut can widen the earnings base materially, but for now they are still representative-year economics, not visible cash.
4. The Doral transaction could widen the capital base and strategic scope, but it should not be written into 2026 cash generation before completion.

What Management Is Pointing To For 2026 And 2027

Assuming Potegowo PV connects in mid-2026, the company expects Potegowo and Potegowo PV together to generate NIS 248 million of revenue in 2026 and NIS 270 million in 2027. Project EBITDA is expected at NIS 159 million and NIS 172 million, project FFO at NIS 123 million and NIS 134 million, and FFO after debt service at NIS 65 million and NIS 69 million.

Those numbers rely on a fairly hard set of assumptions: an ILS/PLN rate of 1.1, average inflation of about 3.6% in 2026, effective net power prices of PLN 345 and PLN 340 per MWh in 2026 and 2027, VPPA deployment through 2029, and of course a mid-2026 connection for Potegowo PV.

That is why this should not be read as a straight line. If the connection slips, if effective power prices come in lower, or if wind output again misses the P50 profile, part of the story moves immediately.

The Next Projects Look Good On Paper, But They Have Not Passed The Execution Test

The company has two advanced PV projects, Goliat at about 178 MW and Reut at about 160 MW. According to the company’s representative-year assumptions, Goliat should generate NIS 55 million of revenue, NIS 36 million of project EBITDA, and NIS 13 million of FFO after debt service. Reut’s equivalent figures are NIS 50 million, NIS 33 million, and NIS 12 million. The company says construction on both projects is expected to begin in 2026.

That table teaches two opposite things at once. On one hand, there is a real base here for building another layer of generation over Potegowo. On the other hand, the table also shows why Zephyrus is not there yet. Even if Potegowo PV comes online on time, its representative-year FFO after debt service is only NIS 6 million. The real step-up comes only if two or three separate moves work together, not if one project lands on schedule.

This Is A Bridge Year That Has To Become A Proof Year

If 2026 needs a label, it is a bridge year with a hard proof test inside it. Potegowo has already proved that it works. What the company now has to prove is something else: that it can connect PV on time, use the DSO framework to shorten future connection paths, move additional projects into construction, and translate a wider capital frame, whether through Doral or otherwise, into a real growth engine.

What will matter most to the market over the next two to four quarters?

Checkpoint one: Potegowo PV connecting in practice, not just more construction progress.

Checkpoint two: the draft amendment with PSE turning into a final agreement that expands Zephyrus’s network rights in practice.

Checkpoint three: Goliat and Reut moving from representative-year numbers into financing and construction decisions.

Checkpoint four: the Doral deal either completing, or a clear explanation of how Zephyrus funds and expands the platform without it.

Risks

The risk in Zephyrus is not currently whether Potegowo can keep producing electricity. It is whether the growth layer is built quickly enough to reduce dependence on that one asset.

Connection, Connection, Connection

The central execution risk is grid connection. The company itself explicitly flags lack of transmission capacity as one of its company-specific risks. Even if the DSO license gives it more flexibility, the PSE amendment still has to be completed, and any delay there can push back Goliat, Reut, and additional development projects.

Power-Price Exposure Is Still Real, Even With Hedging

The company does have real protective layers. Potegowo won auction support covering about 72% of average expected production through 2037, and Potegowo PV won auction support covering about 50% of forecast production. On top of that, at the reporting date the company had VPPA contractual volumes of 280,320 MWh for 2026 and 105,120 MWh for 2027, at weighted-average contractual prices of PLN 324 and PLN 311 per MWh respectively.

But the small condition inside that protection matters. If actual output comes in below the contracted volume, the company may still have to settle price differences in cash even on power that was never generated. That is exactly why the derivatives are not just accounting noise.

FX And Rates Have Not Disappeared, They Are Simply Better Managed

The group is exposed mainly to PLN and EUR. Its own sensitivity analysis shows that a 5% move in the shekel would have changed profit and equity by about NIS 7.8 million. That is not existential, but it is meaningful in a period where reported profit is already volatile.

Rates are similar. The group has decent protection, about 70% of Potegowo’s expected interest payments are hedged through April 2030, and the Potegowo PV loan includes a requirement to hedge roughly 70% of the facility for at least five years. That reduces sensitivity, but it does not eliminate it.

Thin Liquidity Can Magnify Any Surprise

From a short-interest perspective, this is not currently an extreme negative setup. Short float has eased to 0.85%, close to the sector average of 0.95%. But days to cover at 9.22 are still high relative to the sector. The most sensible reading is that the stock is sensitive because it is not very liquid, not because it carries a deeply crowded bearish position. In a name like that, a successful connection, a financing update, or a regulatory delay can all translate into sharp reactions.

The Doral Deal Is Also A Risk, Not Only An Opportunity

The control sale could improve the capital base and widen the strategic frame, but at this point it also adds uncertainty. It depends, among other things, on approval from the financing parties of the Polish wind project and on antitrust approval. So if the market is building in Doral as a strategic shortcut, it also has to remember that this is not closed yet.

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Conclusions

Zephyrus exits 2025 as a company with an operating asset that is better than the bottom line suggests, and with a growth layer that is broader than the cash generation has yet proved. Potegowo still carries the operating economics, the refinancing improved asset quality, and covenants are comfortably clear of pressure. But the company still has to prove that the DSO, Potegowo PV, and the next projects actually turn the story into a multi-layer platform rather than a single-asset business wrapped in wide optionality.

Current thesis: Zephyrus is still a strong wind asset funding a transition into a wider growth platform, but it has not yet proved that the transition is already working.

What changed: Potegowo PV moved into funded construction, the DSO license created a real infrastructure option, and Potegowo’s refinancing improved the quality of the core asset. At the same time, the Doral control deal introduced a new capital and strategic frame.

Counter-thesis: The market may be assigning Zephyrus platform value too early, before the company has proved timely connection, additional project execution, and a real ability to move value above the project-finance layer.

What could change the market reading over the short to medium term: Potegowo PV coming online, the PSE amendment being finalized, financing and construction decisions on Goliat and Reut, and either completion of the Doral transaction or clarity on why it does not close.

Why this matters: Because the gap between a good project-level asset and value that is genuinely accessible to public shareholders is what determines whether Zephyrus becomes a broader renewable platform or remains, for quite a while longer, a one-asset story with many options around it.

What must happen over the next two to four quarters for the thesis to strengthen: Potegowo PV needs to connect on time, the DSO needs to turn into a finalized and usable connection framework, Goliat and Reut need to move from presentation economics into execution, and the Doral transaction needs to become clear. Delay on any of those fronts would not necessarily break the company, but it would very likely delay the proof point again.