Dalia Energy in the first quarter: gas and debt close the buildout, not the risk

Dalia Energy's first-quarter report does not change the company through the profit line. It changes it through the move of its growth projects into the stage where financing and fuel obligations become real. Revenue rose to NIS 666.7 million, but proportionately consolidated EBITDA fell to NIS 264.5 million and net profit fell to NIS 65.1 million, so the existing activity looks less clean than the top line suggests. At the same time, Dalia 2 has already received recognition of financial close and made a first senior-debt draw that repaid the bridge loan, while Avshal has signed financing documents but still has to meet drawdown conditions, receive tariff approval, and complete the actual financing step. The new Leviathan gas agreement through 2049 strengthens the fuel route for the H-Class units, but it also introduces a long-term dollar-linked obligation, a take-or-pay mechanism, and explicit dependency on Avshal's timetable. This quarter therefore turns Dalia from a company describing future growth into an infrastructure company that is starting to lock in the cost of that growth. The existing plants still fund the leap, but value must pass through project entities, covenants, and distribution conditions before it reaches shareholders. The next 2-4 quarters will be decided by Avshal's financial close, Ashkol's behavior under narrow DSCR headroom, possible recognition of exceptional diesel costs, and whether the Ashkol data-center option moves to a binding agreement.

The company is no longer measured only by operating plants

Dalia is a power infrastructure company that operates existing power plants and is developing a new capacity layer. The operating assets at Dalia Energies and Ashkol Yitzur generate revenue, EBITDA, and cash flow, but the risk value now sits in projects that are still under construction: Dalia 2, Ashkol Avshal, and the potential to use the Ashkol complex for power-intensive uses such as a data center.

In the 2025 annual analysis, the follow-up issue was straightforward: the existing plants had to fund the leap while the value at Ashkol was still not fully flowing up to the public-company layer. This quarter advances exactly that issue, but does not close it. Dalia 2 moved from bridge financing to a first senior-debt draw, Avshal signed senior financing documents, and the company signed a long-term gas agreement aimed mainly at the two new units under construction.

That means Dalia's economic machine is currently a combination of a leveraged infrastructure project platform and an existing cash-generating base. Reported profit matters, but less than the question of whether the projects reach commercial operation without adding too much debt pressure, future obligations, or limits on upstream cash. This is the point a quick read can miss: more certainty around construction is not the same as more accessible cash.

The quarter shows why revenue is not the story

Consolidated revenue rose in the first quarter to NIS 666.7 million, from NIS 626.1 million in the parallel quarter. The increase came mainly from private-customer sales at Dalia Energies, which rose to NIS 592.4 million, and from higher customer consumption. But that improvement did not flow through at the same rate to profitability: proportionately consolidated EBITDA fell from NIS 333.1 million to NIS 264.5 million, and net profit fell from NIS 87.7 million to NIS 65.1 million.

Two points explain the gap. The first is a high comparison base at Ashkol: in the parallel quarter of 2025, Ashkol Yitzur recorded about NIS 86 million from an Electricity Authority decision on the complementary tariff, so the decline in revenue and operating profit there is not just ordinary operating erosion. The second is the unusual 2026 quarter itself. Shutdowns in gas supply from Leviathan and Energean during part of March and part of April, against the security backdrop, forced Dalia and Ashkol to use diesel for limited hours and buy gas from Tamar at prices above the existing Leviathan and Energean contracts.

Dalia asked the Electricity Authority to recognize diesel cost gaps of about NIS 13.7 million at Dalia Energies and about NIS 4.3 million at Ashkol Yitzur. There is no certainty the request will be approved. The effect is therefore not only accounting: if the company does not receive cost recognition, part of the erosion stays with it. Heavy maintenance on Dalia Energies unit 21, which was delayed at GE's request while Dalia rejected GE's force-majeure claim, can also become a pressure point if most of it falls in the summer season.

Construction is advancing, and financing obligations rise with it

Dalia 2 is the cleaner part of the quarter. In March 2026, the building-permit and financing conditions were met, the Electricity Authority recognized financial close and approved the tariff, and on March 19 the project made its first senior-debt draw. That draw was used, among other things, to repay a bridge loan of about NIS 773 million. Dalia 2 is therefore no longer only a project with a fourth-quarter 2028 commercial-operation target. It is now a project on a senior-debt track, with actual investment and an availability tariff.

Avshal is one step behind. In May 2026, senior financing documents were signed with Bank Hapoalim: a NIS 4.5 billion long-term debt facility, a NIS 500 million bullet facility, a NIS 250 million cost-overrun facility, and additional facilities of about NIS 490 million. But the first draw is still subject to conditions, including project agreements, a building permit, insurance, Electricity Authority recognition of financial close, and tariff approval. Part of the first draw is expected to repay bridge loans currently estimated at about NIS 650 million and option-purchase loans currently estimated at about NIS 900 million.

That matters because it changes the type of risk. Before signing the financing, the question was whether Avshal could be financed at all. After signing, the risk moves to drawdown conditions, timing, shareholder guarantees, and post-operation distribution limits. The financing agreement allows distributions only after an initial operating period and subject to conditions, so even operating success at Avshal will not immediately become free cash at the company level.

The gas agreement with the Leviathan partners adds another layer. It runs through the end of 2049, with expected annual cumulative quantities of about 1.3 BCM in the first period and about 1.7 BCM in the second period, mainly for Dalia 2, Avshal, and Dalia Energies. The price is dollar-denominated and linked to the uniform electricity tariff, the agreement includes take-or-pay, and total purchases over the full term are estimated at about USD 6.7 billion if all quantities are purchased. This is not only a fuel-security agreement. It is an obligation that works if the units are built on time and sell sufficient power, and becomes heavier if construction or demand does not keep pace with the commitments.

Ashkol still has to prove cash can move upward

Ashkol is where the gap between a large infrastructure asset and accessible cash remains visible. Ashkol Yitzur reported EBITDA of NIS 126.5 million on a 100% basis in the quarter, but also a net loss of NIS 16.4 million. Operating cash flow was strong at NIS 191.5 million, but after CAPEX of NIS 70.1 million, interest of NIS 59.5 million, lease-principal repayment of NIS 4.6 million, and debt repayments of NIS 63.3 million, the all-in cash picture is no longer wide. That does not mean Ashkol is operationally weak. It means the layer above EBITDA is still loaded with debt, investment, and financing conditions.

The covenants show this better than the headline does. Ashkol Yitzur complied with all ratios, but some headroom is narrow:

A DSCR of 1.09 is not a breach, but it is not comfortable headroom either. That reinforces the conclusion from the financing-layer continuation analysis: Dalia is advancing its projects, but value still has to pass through project debt, reserves, covenants, and distribution conditions. As long as that is the case, Ashkol EBITDA is an important operating measure, not a full measure of cash reaching shareholders.

The Ashkol data-center option is still in the same middle zone. The memorandum of understanding with Serverfarm and Israel Infrastructure Fund refers to a project of at least 130 IT MW, estimated land rent of NIS 30-50 million a year, and a possible Ashkol Energies stake of up to 30% in the venture. Those details explain why the site matters beyond power generation. But for now this is an exclusive negotiation toward a binding agreement, not an income-producing agreement. If no binding agreement is signed, the documents provide for no material compensation except limited exceptions.

Conclusions

The first quarter strengthens Dalia's strategic direction, but it also makes a simple reading harder. The company is advancing faster on the buildout side: Dalia 2 is already on a senior-financing track, Avshal has signed financing documents, and the Leviathan gas agreement provides a long-term fuel base. At the same time, the quarter reminds investors that the existing business is exposed to currency, gas-supply events, diesel, maintenance, and project debt. The question is therefore not whether the company is growing, but whether the growth arrives without eroding access to cash.

The current read is cautiously positive: Dalia delivered real milestones, not just management intent. The constraint is that value is still held inside project layers. For the picture to improve, Avshal needs to reach financial close and a first draw, Ashkol's covenants need to stay above the threshold through summer and maintenance, and the Electricity Authority needs to clarify whether the exceptional diesel costs will be recognized. If those three items advance without additional owner support or timetable slippage, 2026 will look like a healthy transition year. If not, the market will be looking at a company with real infrastructure growth, but with a higher financing and cash-flow cost than the headlines imply.