Dalia 2 and Avshal: How Much Financing Flexibility Is Really Left as the Dual Buildout Moves Forward
This follow-up shows that Dalia 2 has already moved out of bridge financing, but it is still far from becoming a source of accessible cash. Avshal already has a conditional license, a financing MOU, and a bridge facility, yet the full close is still ahead of the group, which makes real financing flexibility narrower than the consolidated cash picture suggests.
What This Follow-Up Is Isolating
The main article already argued that the existing assets are still funding the next growth phase, while the value embedded in Eshkol is not yet truly accessible. This follow-up isolates only the financing stack, because that is where the current gap sits between what looks comfortable in the consolidated accounts and what can actually reach the listed-company layer.
The core read is straightforward:
- Dalia 2 is already out of bridge financing.
- Avshal is still not out of the documentation, approval, and first-draw phase.
- The bottleneck is not currently at the public-bond covenant level, but at the level of which project vehicle is even allowed to distribute cash, and when.
That matters now because year-end 2025 and late March 2026 describe two very different financing realities. At year-end, the consolidated balance sheet showed almost NIS 925 million of cash, cash equivalents, short-term deposits, and restricted cash, while also showing negative working capital of roughly NIS 375 million. By March 2026, part of the accounting picture had already been cleaned up because the Dalia 2 bridge had been repaid against longer-dated senior debt. But an accounting cleanup is not the same thing as opening a cash valve. The money remains subject to project-level debt, reserve accounts, coverage tests, and distribution restrictions.
| Layer | What is already in place | What is still missing | Why it matters for the listed-company creditors |
|---|---|---|---|
| Dalia 2 | Senior debt agreement signed at the end of December 2025, Electricity Authority approval for financial close in March 2026, first draw and full bridge repayment | Commercial operation, distribution lockup period, debt service history, and reserve build | The project no longer carries immediate bridge-financing risk, but it also does not create accessible parent cash in the near term |
| Avshal | Conditional license, senior-debt MOU, short-term bridge, EPC and equipment agreements | Binding financing documents, financial close, tariff approval, and first draw | This is still where the real financing test of 2026 sits |
| Eshkol Energies and the land layer | Specific refinanced debt, a dedicated Avshal-related loan layer, indemnities and equity-support mechanics | Loan repayment or a real opening of the distribution gates | Even if value exists at the site, the documents direct it inward first, not upward |
| Listed company | Comfortable headroom in the public-bond covenants | Ongoing dependence on subsidiary cash flows | The question is less covenant pressure and more upstream pressure |
Dalia 2: The Shift From Bridge To Senior Solved A Timing Problem, Not An Accessibility Problem
Between December 30, 2025 and March 19, 2026, Dalia 2 crossed the three financing gates that matter most. First, the senior debt agreement was signed. Then, on March 16, 2026, the Electricity Authority confirmed that the conditions for financial close had been met effective March 8, 2026. Finally, on March 19, 2026, the first draw took place and the bridge was repaid in full in the amount of about NIS 773 million. That is a real shift, because year-end 2025 still carried the bridge as a short-term funding feature, while March 2026 already moved the project into a much more conventional senior-debt framework.
The Dalia 2 debt package is large and clearly structured. The financing agreement includes roughly EUR 1 billion of construction funding plus additional facilities of about NIS 800 million for debt-service reserves, guarantees, hedging, working capital, VAT, and other customary project-finance uses. At the same time, the company said at the end of December 2025 that it had already invested about NIS 780 million into Dalia Harchava through equity and use of the bridge, while the investor presentation rounds the amount invested by year-end to about NIS 800 million. In other words, this is no longer a paper project. Both equity and debt are already inside the structure.
But this is exactly where the common reading goes wrong. Moving from bridge to senior debt does not turn Dalia 2 into a source of free parent cash. It does the opposite. The financing documents say Dalia Harchava may distribute only six months after commercial operation, only after two quarterly debt repayments under the long-term facilities, and only if excess-cash, reserve-account, and coverage-test conditions are met. In the company presentation, Dalia 2 is still targeting commercial operation in the fourth quarter of 2028, and the senior debt runs for 24.5 years from commercial operation. So the correct read of March 2026 is simple: it removes near-term funding risk, but it does not bring project cash any closer to the parent layer.
The structure of the debt itself explains why. During construction, the debt is priced on Euribor plus a 2.5% to 3.1% margin. After construction, 75% of the debt is meant to convert into longer-term debt priced off Euro swap plus the same margin, while 25% remains shekel-denominated. Dalia 2 is therefore out of the bridge, but now firmly inside a much heavier project-finance regime, with currency matching, reserve mechanics, and distribution restrictions designed to serve the project and its lenders first.
Avshal: There Is Bank Appetite, A Bridge, And A License, But Still No Close
Avshal sits one step earlier in the process. It is no longer abstract. It already has a conditional license, a financing MOU with Bank Hapoalim, a short-term bridge, major equipment, EPC, and LTSA agreements, and a company timeline that points to financial close and tariff approval in the second quarter of 2026 and commercial operation in the second quarter of 2029. Even so, none of that is the same thing as a completed financial close.
The Avshal conditional license was granted under an Electricity Authority decision dated January 7, 2026 and signed by the Minister of Energy on February 8, 2026. It runs for 66 months, or 36 months from financial close, whichever is earlier, and it only becomes effective after delivery of a bank guarantee. Beyond that, the company is explicit that Avshal still needs to satisfy multiple conditions, including permits, a building permit, financing agreements, financial close, and tariff approval. In other words, the license opened the door, but it did not remove the handle.
The January 15, 2025 MOU with Bank Hapoalim is a strong document, but it is still an MOU. It contemplates full underwriting of up to NIS 5.3 billion of senior debt, including project construction and the refinancing of about NIS 0.9 billion of existing debt related to the new unit. That is a critical detail because it means part of the future debt package is not just about funding steel and concrete. It is also about cleaning up older financing layers tied to the option and the pre-existing debt stack.
The more interesting part is the equity side. The company estimates that the regulatory equity requirement stands at about NIS 700 million, but argues that this amount had already been injected at the time of the Eshkol acquisition as shareholder loans and can therefore be recognized as equity, meaning that no additional sponsor equity would be required for construction if that treatment holds. The board report also shows that in 2025 a NIS 450 million shareholder loan to Avshal was converted into equity. That is an important clue. If that framing survives into the binding financing documents, Avshal may reach close without a fresh, large equity call. If it does not, then the entire “two projects in parallel without another major equity push” thesis will need to be revisited.
The Avshal bridge reinforces the same read. In May 2025, a bridge facility of up to NIS 600 million was signed in shekels and euros to fund project activity before close. By December 31, 2025, only NIS 21.203 million had been drawn. On one hand, that means the group had not yet burned large amounts of pre-close capital. On the other hand, it also means the heavy funding phase still lies ahead. This bridge must be repaid at the earlier of May 18, 2026 and the first draw under the senior financing. So Avshal has a real financing clock running.
Even the non-recourse language is only partial. The MOU says the bank will not have full recourse to shareholders, but sponsor exposure still remains in the debt-service reserve and guarantee facilities up to NIS 85 million in aggregate, of which the company’s share is about NIS 64 million, and there is additional exposure to pre-first-draw fees and adviser payments if Avshal does not cover them. The right way to read Avshal, then, is this: a project that is largely intended to finance itself, but that still leaves a sponsor-tail exactly where the structure is most fragile.
Where Cash Can Actually Move Up, And Where It Still Gets Stuck
The most important document for this continuation does not actually describe a new project. It describes the parent layer. The company itself says it does not engage in standalone electricity-generation activity and is therefore dependent on cash flows from subsidiaries, whether through dividends, shareholder-loan repayments, or capital-note repayments. In the same section, it explicitly warns that its ability to receive those flows may be limited by distribution restrictions embedded in the senior debt agreements. That is the key point. The real question is not how much value a project creates. The real question is which legal vehicle traps it first.
That is also why the right reading of financing flexibility is narrower than the headline numbers suggest. When the board explained in March 2026 why it did not see a liquidity problem, it relied on distributable cash flow from the existing Dalia station. Not from Dalia 2. Not from Avshal. Not from the data-center option. The existing Dalia plant remains the main active cash pipe for the parent. Everything else, at least for now, is value whose route upward is materially longer.
At Eshkol, the gap is even sharper. On paper, the Eshkol Energies shareholders’ agreement says that all cash balances should be distributed annually to shareholders. But that same commitment is explicitly subject to financing restrictions, legal distribution tests, liquidity needs, the budget, the multi-year development plan, and the annual business plan. And once the specific financing section is opened, the answer becomes much harder-edged: the refinanced real-estate loan stands at NIS 780 million plus a NIS 50 million facility, the loan transferred into the Avshal layer stands at NIS 800 million plus NIS 160 million for accrued interest, and distributions are prohibited until the loans are repaid.
This is more than a distribution ban. The Eshkol documents also include mechanisms that redirect cash across vehicles inside the site, so that until the relevant loan is repaid, cash can move from Eshkol Yitzur toward Avshal, and in the event of a site sale certain remaining balances are meant to move from Eshkol Energies to Eshkol Yitzur. That means even if value is created at the site, it is not standing in a neat line waiting to move up to the parent. It first runs through Eshkol’s own internal pipework.
| Value source | What has to happen before it can reach the parent | What blocks it today |
|---|---|---|
| Existing Dalia plant | Continued compliance under the Dalia financing agreement and continued generation of distributable free cash | This is still the only active source the board explicitly relies on |
| Dalia 2 | Commercial operation, six months, two quarterly debt payments, full reserves, and passing coverage tests | The project only entered senior-debt mode in March 2026 |
| Avshal | Binding financing documents, financial close, tariff approval, first draw, and then surviving its own waterfall | The close is still not complete and the bridge is still running on a clock |
| Eshkol Energies and the land layer | Repayment of the relevant debt layers and release from the project-level distribution restrictions | Debt and site development still rank ahead of upstream cash |
The Problem Is Not Sitting In The Public Bonds Right Now
This is an easy point to miss. If the reader looks only at the trust deeds of the listed company, there is no immediate covenant squeeze. At year-end 2025, equity stood at NIS 2.608 billion, versus minimum thresholds of NIS 400 million for Series A, NIS 480 million for Series B, and NIS 900 million for Series C. The equity-to-balance-sheet ratio stood at 48.2% to 48.3%, versus a 22% floor across all three series. Net financial debt to EBITDA stood at 5.68 for Series A, 3.89 for Series B, and 4.09 for Series C, versus ceilings of 11.5, 11, and 11 respectively.
That is exactly the paradox. At the listed-company level, there is headroom. At the level of the vehicles driving future growth, there are lockups, conditions precedent, debt layers, reserve accounts, and internal waterfalls. So the right sentence on Dalia today is neither “the balance sheet is squeezed” nor “the balance sheet is free.” The right sentence is that freedom exists at the top, but most of the money is still not free at the bottom.
Conclusion
This follow-up sharpens the real financing test. The key question is no longer whether Dalia has financing. The key question is which kind of financing has actually opened and which kind is still not closed. Dalia 2 has already shifted out of bridge financing and into senior debt, which lowers its immediate funding risk. Avshal has not. It now has most of the pieces of a close, but until those pieces become binding financing documents, a tariff approval, and a first draw, it remains fundamentally a pre-close story.
That leads to the more important conclusion. Anyone reading 2026 through the consolidated cash line or through the headline debt facilities alone may miss the true bottleneck. Dalia still has financing flexibility, but that flexibility is narrower than it first appears because it still relies mainly on the existing Dalia plant, while the two growth projects and the Eshkol value layer remain locked behind project finance, reserves, and distribution restrictions.
Current thesis in one line: Dalia 2 has already removed bridge-financing risk, but the group’s real financing flexibility is still dictated by the fact that Avshal is not yet closed and most of the new value still cannot rise to the parent layer.
What must happen next: Avshal has to complete financing and tariff approval on time, Dalia 2 has to stay on schedule and on budget, and the Eshkol layer has to start showing a clearer route in which value is not only created at the site but also released from the structure that currently traps it.
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