OPC Energy in the first quarter: EBITDA is rising, the funding test is just starting

OPC Energy opened 2026 with a quarter that strengthens the U.S. growth engine, but also explains why this is not only an EBITDA-growth story. Proportionately consolidated EBITDA rose to $124 million, adjusted net income rose to $33 million, and the U.S. portfolio is benefiting from higher PJM capacity prices and better market conditions in several regions. Still, reported FFO fell to negative $21 million, mainly because of a $70 million one-time CPV incentive payment, while the company continues to move large projects from development into land payments, equipment orders, guarantees and financing. The quarter therefore does not close the 2025 test. It sharpens it: operations look stronger, but shareholder value now depends on turning Hadera Expansion, Ramat Beka, Basin Ranch and Shay into funded projects without further erosion of group-level flexibility. The next proof points are close: Hadera financing, the remaining Ramat Beka land payment, Maryland consolidation from the second quarter, PJM auction results and progress on the Shay path.

The company is now a project machine, and FFO shows the transition cost

The company operates and develops power generation assets in Israel and the U.S. From the first quarter of 2026 it reports in U.S. dollars, so comparative figures were translated under currency-translation rules. That does not change the economics of the Israeli plants, whose functional currency remains the shekel, but it does change how group results are presented.

The company now has two economic engines. The first is an operating asset base that produces EBITDA and FFO: Israeli plants, U.S. gas plants and a smaller U.S. renewables activity. The second is a much larger project engine: Hadera Expansion, Ramat Beka, Basin Ranch, the U.S. gas development portfolio and renewables and storage projects. The quarterly report matters because it connects these engines. It shows that the operating assets are improving, while future growth is already requiring cash, guarantees, equipment purchases and debt.

In the previous annual analysis, the 2026 test was framed as funding and execution. The first quarter does not change that direction. It adds urgency: the U.S. portfolio is contributing more, but the large investments in Israel and the U.S. are moving into a stage where financing timing, drawdown pace and the ability to move cash upward matter as much as reported EBITDA.

The most comfortable number in the report is proportionately consolidated EBITDA of $124 million, up 10% from the comparable quarter. Adjusted net income also rose to $33 million, up 18%. But reported net income fell to $14 million, and reported FFO was negative $21 million, compared with positive $89 million in the comparable quarter.

The gap between reported FFO and adjusted FFO is the important point in the quarter. Management excludes working-capital movements and the one-time CPV incentive payment, which lifts adjusted FFO to $75 million, about 9% above the comparable quarter. That is a reasonable way to look at recurring cash generation from active assets, but it is not the all-in cash picture for the quarter. The CPV payment was a real cash use, and FFO itself excludes construction and development investment in projects that are not yet operating.

The quarter therefore says two things at once. The operating cash power of the existing asset base is improving, especially in the U.S. But shareholders need to separate normalized cash generation from cash flexibility after actual uses. In this report, that distinction is not technical, because the company is exactly in the years when projects move from potential into cash leaving the system.

The U.S. tailwind is real, but not all EBITDA moves upward

The U.S. activity is the main reason the report looks stronger operationally. Energy Transition EBITDA after proportional consolidation was $88 million, versus $77 million in the comparable quarter. PJM capacity prices rose sharply compared with 2024/2025, and the company also points to stronger energy margins in parts of the portfolio, the acquisition of the remaining Shore stake and first-time consolidation of Shore.

But it is too early to translate all of that improvement into accessible cash. Maryland contributed $16 million of EBITDA and $13 million of FFO on the group share, but availability fell because of planned maintenance that had been completed by the report approval date. Fairview availability fell to only 47.6% because of a transformer fault, with a return to full operation expected only in 2027. Shore generated $23 million of EBITDA and $7 million of FFO, but zero cash after debt service. It is a better asset after the buyout of the remaining stake, not immediate surplus cash.

The most positive cash signal came from Valley. The refinancing reduced the margin to 2.75% and changed the cash-sweep mechanism from a 100% sweep to a leverage-based structure. The result was a dividend and owner-loan repayment of about $100 million, of which CPV's share was about $50 million. That partly answers the question raised in the prior analysis of U.S. cash accessibility: some U.S. EBITDA is starting to be released, but the whole platform is not at the same stage.

The outlook for the rest of 2026 is not simply open exposure to a strong market. For April through December 2026, the company shows hedges covering 71% of expected generation with about $122 million of net energy margin, and guaranteed capacity revenues covering 91% of plant capacity, at about $118 million. That gives the near-term revenue base more support, but the market will focus on what remains after maintenance, debt service, hedging and outages like Fairview.

In Israel the projects moved from promise to payments

At Hadera Expansion and Ramat Beka, the report no longer describes only future development. It shows a list of actions that require cash and deadlines. At Hadera Expansion, the company signed a binding agreement in February 2026 for main equipment and a long-term maintenance agreement with GE Vernova, received a grid-connection commitment in April, and received a conditional building permit. At the same time, it is negotiating project financing with Bank Leumi and the acquisition of land rights for about $142 million.

Timing is the sensitive point. Hadera's capacity tariff depends on when financing is completed: 3.31 agorot if financing is completed by June 2026, 3.18 agorot by December 2026, and 3.05 agorot by June 2027. The building permit is also subject, among other items, to arranging a betterment levy of about $67 million, which the company expects to challenge after paying half in cash and providing a bank guarantee for the balance. That does not cancel the project, but it turns the coming quarters into a timing test, not only an economic-feasibility test.

Ramat Beka tells a similar story. The project includes about 550 MW of solar capacity and up to about 3,850 MWh of storage, with estimated cost of about $1.4 billion. The company has already paid about $75 million to the Israel Land Authority, and expects to pay the remaining 80% of the consideration, about $0.37 billion, in mid-June 2026. It has also signed agreements for equipment, a substation and photovoltaic facilities, and is negotiating financing of up to 85% of project cost with Bank Hapoalim.

The Israeli projects are therefore no longer only a planning option. They are beginning to consume cash before they produce EBITDA. That strengthens the growth potential, but also raises the price of mistakes: a delay in financing, tariff quota or construction agreements could leave the company with interim spending and guarantees before a cash-generating asset exists.

The balance sheet strengthened, and obligations grew

The company entered this quarter with more equity and flexibility. In March 2026 it raised about $257 million gross in a share issuance to classified investors, and adjusted net financial debt to EBITDA fell to 2.8, compared with 3.1 at the end of 2025 on the dollar reporting basis. Group cash, deposits and restricted cash were $1.45 billion, and the energy holding level had about $330 million of net cash. In May 2026, Midroog also affirmed the A1.il rating and revised the outlook to positive.

Still, the other side of the same quarter is a larger obligation stack around growth. CPV acquired the remaining 30% of Basin Ranch in a transaction totaling about $371 million, and the project is now consolidated. CPV's Bank Leumi loan increased from about $300 million to about $430 million. CPV investment commitments increased by about $270 million during the quarter, and additional support and guarantee commitments of $232 million were approved through January 2027.

The dividend policy tells the same story. In March 2026, the board extended the suspension of the dividend policy until at least March 2028. That is a rational step for a company in heavy investment years, but it also makes clear that operating improvement is not expected to reach shareholders through near-term distributions. At this stage, value is being built mainly through assets and financing structures, not cash returns.

What will decide 2026

The first quarter improves the operating picture, but it does not remove the funding test. The first test is Hadera Expansion: financing by the end of June 2026 would preserve a higher capacity tariff, while a delay would reduce the tariff and extend the interim period. The second test is Ramat Beka, where the land payment, storage agreement, financing and tariff quota by June 2027 will determine whether the project moves on time from land and equipment into funded construction.

The third test is in the U.S. Maryland consolidation from the second quarter needs to show a contribution not only to EBITDA, but also to FFO and cash after debt service. Fairview needs to stop being a disruption before its expected return to full operation in 2027. Shay and PJM's RBP proposal could become a large growth engine, but at this stage they still require interconnection agreements, regulatory decisions, guarantees and possibly additional collateral. The current conclusion is therefore fairly clear: the company enters 2026 stronger operationally and financially, but the market will judge it less by one quarter's EBITDA and more by funding quality and the ability to turn the project backlog into assets that lift cash, not only obligations.