Ellomay Capital in the First Quarter: The Dorad Exit Buys Time, the New Portfolio Still Has to Prove Cash Flow

Ellomay Capital did not publish an ordinary profit-decline quarter. It published a transition quarter between two different companies. Until May 10, 2026, the financial statements still included Ellomay’s share in Ellomay Luzon, whose main asset was a 33.75% holding in Dorad, but after the balance-sheet date the holding was sold for about NIS 560 million and the secured Series E bonds were repaid early for about NIS 170 million. That converts value tied to a large cash-generating power asset into accessible cash and reduces secured debt, but it does not yet turn continuing operations into a self-funding business. Without Dorad, Ellomay’s remaining portfolio is solar, biogas, storage, and Manara, and the first quarter shows relatively stable revenue but negative gross profit, negative operating cash flow, and clear reliance on financing. The positive side is that the pipeline in Italy, the United States, the Netherlands, and Spain already includes advanced projects, contracts, and regulatory mechanisms that can improve results over the next few years. The bottleneck is that this improvement still has to pass through construction, grid connection, prices, financing, and regulation. From here, the market will measure Dorad less and focus more on how Ellomay uses the cash, how quickly new projects start contributing, and whether cash flow after debt and investment is enough to justify the transition.

Company Overview

Ellomay Capital is an energy and infrastructure company that owns and develops solar, biogas, storage, and pumped-storage assets. Before the sale of Ellomay Luzon, Dorad was a central value layer: a large power asset that was not fully consolidated in Ellomay’s statements, but shaped the read of asset value, debt, and future cash access. After the sale, the company looks more like an international project platform that has to replace a mature cash-flow asset with projects still moving through construction, permitting, grid connection, and early operation.

That changes the screening lens. For a renewable-energy company, project debt, power-price volatility, and a backlog that is not yet connected to the grid are normal parts of the model. They are not, by themselves, the edge. What is unusual here is the combination of a major asset monetization after the quarter, continuing operations that still do not cover themselves, and a large pipeline that requires more capital before it can produce stable cash flow.

The Quarter Closed One Question and Opened a Larger One

The prior analysis of the transaction focused on the final consideration and the use of cash. The current filing closes the first part: the transaction was completed on May 10, 2026, and the consideration was about NIS 560 million, about €164 million on that date. At the same time, the company executed an early repayment of Series E, which had been secured by a pledge over the Ellomay Luzon shares, for an aggregate amount of about NIS 170 million including accrued interest and the early repayment fee.

The meaning is not only debt reduction. Ellomay sold an asset that is now presented as discontinued operations, so a simple comparison with prior periods will be less useful from the next quarters onward. Dorad’s profit contribution will no longer be part of results, and investors will have to measure the company by the remaining portfolio and by the way it deploys the sale proceeds.

Dorad’s own numbers show why the monetization matters. Dorad reported first-quarter revenue of NIS 592.4 million, down about 3% year over year, but net profit declined to NIS 31.4 million from NIS 56.0 million, a drop of about 44%. Operating cash flow remained positive at NIS 131.3 million, but it declined about 31% year over year. Ellomay is exiting an asset that still produces cash, but also one exposed to demand, financing-cost, and currency volatility. The sale therefore improves access to cash, while also removing the most mature asset from the portfolio.

Without Dorad, the Remaining Business Still Needs Funding

The number that needs careful reading is continuing revenue. It was €8.7 million, almost unchanged from €8.9 million in the comparable quarter. Under that line, profitability weakened: gross profit turned into a €0.9 million loss, EBITDA declined to €2.1 million from €2.9 million, and loss from continuing operations was €12.5 million versus profit of €5.6 million in the comparable quarter.

A large part of the loss is not clean operating deterioration. Net finance expenses were €8.2 million, compared with net finance income of €7.2 million in the comparable quarter. The gap was driven mainly by currency: the current quarter included €2.9 million of foreign-exchange expenses, while the comparable quarter included €10.7 million of foreign-exchange income, a total swing of €13.6 million. That matters because it prevents a simplistic reading of the loss as if the entire operating business collapsed.

Still, segment data shows that the company after Dorad still has to prove profitability. Dorad appears in the segment table with gross profit of €2.0 million, but it is eliminated from consolidated continuing results. Without Dorad, the other segments together are around gross loss territory, mainly because of Talasol in Spain and the United States activity that has started to enter the numbers but is not yet changing the profile.

The main operating reason is straightforward: power prices in Italy and Spain declined from the beginning of 2025 and during the first quarter of 2026, while expenses were added for projects in the Netherlands and for solar facilities in Italy and Texas that were connected to the grid during 2025. Some of the asset growth is already raising costs, but the revenue and profit contribution is not yet enough to change the bottom line.

The liquidity read requires separating two cash frames. All-in cash flexibility measures what remains after operating cash flow, investments, restricted cash, and repayments. In the first quarter, before the proceeds from the Ellomay Luzon sale, that frame was negative: operating cash flow was negative €1.9 million, investing activity used €31.9 million, including €11.2 million of fixed-asset purchases and €19.7 million of net restricted-cash investment.

The offset came from financing. The company drew short-term and long-term loans totaling about €45.3 million, repaid bonds and loans, and ended with €31.1 million of positive financing cash flow. After the currency effect, cash and equivalents declined by €3.9 million to €83.7 million.

The covenants do not show immediate pressure. Net financial debt to net CAP stood at 53.2% to 53.4% for the relevant bond series, and net financial debt to Adjusted EBITDA stood at 4.8. The company was in compliance. But the quarter also shows that covenants are not the only issue. As long as continuing operations do not generate positive cash after investments, the Dorad proceeds are mainly execution time: they allow the company to repay secured debt, fund projects, and reduce pressure, but they do not prove that the new portfolio already funds itself.

The Pipeline Sets the Proof Year

The positive side of the filing is in the pipeline and progress updates. In Italy, 38 MW held at 51% are fully operating, and another 160 MW at the same ownership level are under construction and expected to be completed by the end of 2026. Beyond that, the company has a fully owned portfolio of about 264 MW, of which 210 MW have reached ready-to-build status, and about 100 MW of those projects won the FER X tender that guarantees a 20-year power-sale contract at high prices. The company also signed a power purchase agreement with a leading European entity for the operating Italian projects.

The Netherlands is a different leverage point. The company received a license to increase production at the GGOT facility, and licenses for two additional facilities are in advanced stages. The plan is to increase existing production capacity from about 16 million cubic meters of gas per year to about 24 million cubic meters. The new regulation requiring the blending of green gas with fossil gas was delayed to January 2027, but first-year targets increased, and the company signed agreements to sell green certificates at about €1 per certificate. If this materializes, the Netherlands can become a clearer profitability-improvement source rather than only a small segment.

In the United States and Israel, the read is less clean. In the United States, the first four projects totaling 49 MW were completed, three were connected to the grid at the end of the first half of 2025, and the fourth is being connected. The 14 MW Hillsboro project is expected to complete construction and connect to the grid in September 2026, but the company does not provide a forecast beyond what has already been stated because of regulatory changes and tariff uncertainty. At Manara, tunneling resumed, but work on the upper and lower reservoir sites stopped because of war-related events in northern Israel, and the company is negotiating with the Electricity Authority for compensation for delays and war damage. These are not minor details, because they determine how quickly the pipeline becomes operating assets and how much new capital is absorbed during the transition period.

Conclusions

Ellomay entered this quarter as a holding company with a material power asset, and left it looking much more like a project company that has to prove the new portfolio. The Dorad monetization improves liquidity and removes secured debt, but it also raises the proof threshold: without Dorad, investors are left with solar, biogas, storage, and Manara, and those activities are not yet translating revenue into profitability and positive company-level cash flow. That does not make the transaction negative. It means value moved from a relatively mature asset into cash and a pipeline that now has to execute.

The current read is mixed, but clearer than it was before completion. The positive side is new liquidity, an advanced Italian pipeline, possible improvement in the Netherlands, and lower secured debt after Series E repayment. The pressure points are continuing operations with gross loss, negative operating cash flow before the sale, exposure to power prices and currencies, and projects that still need financing, connection, or regulation. In the next reports, the market will look for three things: a balance sheet after receipt of the consideration and repayment of the debt, signs that operating projects improve EBITDA and cash flow without Dorad, and real progress in Italy, the Netherlands, and the United States. If the cash turns into construction and connection of cash-generating assets, Ellomay can justify the transition. If it is consumed while the portfolio keeps losing money, the Dorad sale will look more like a temporary buffer than a turning point.