Alon Tavor After the Peaker: Operations Improved, but Cash Has Not Yet Reached Mivtach Shamir

The main article already framed Alon Tavor as one of Mivtach Shamir's cash engines, but the first quarter isolates a narrower point: the peaker is now improving MRC's operations, while the cash has not yet moved up to the parent. MRC's revenue rose to NIS 204.6 million, operating profit before depreciation and amortization rose to NIS 88.3 million, and operating cash flow reached NIS 91.4 million. Those are stronger numbers than in the comparable quarter, and they show that the asset is working better after the commercial operation of the peaker units began. But at Mivtach Shamir's level, the missing link is still the one that matters most for a holding company: an actual dividend from MRC. MRC paid no dividend in the first quarter, and Mivtach Shamir received no dividend from Alon Tavor, compared with NIS 30 million in the comparable quarter. The current read is therefore not that the peaker is failing. It is that the next proof point has to be cash moving up the chain, after debt service, the tariff election, and continued operation through gas disruptions and backup-fuel use.

The Operating Improvement Is Already Visible

MRC opened the year with a much cleaner operating quarter than the one it posted at the beginning of 2025. Revenue rose 23% to NIS 204.6 million, and operating profit before depreciation and amortization rose 51% to NIS 88.3 million. The improvement did not stop at one line item: operating profit rose to NIS 53.1 million, and MRC's net profit reached NIS 28.8 million, almost unchanged from the comparable quarter even though net financing moved from income of NIS 6.3 million to an expense of NIS 15.6 million.

That is where the peaker's value appears, but also where its limit begins. The commercial operation of the peaker units in the fourth quarter of 2025 lifted revenue and EBITDA, but it sits inside a structure with depreciation, debt, and financing costs. A rise in EBITDA therefore should not be translated automatically into cash that reaches Mivtach Shamir. For a holding company, a good asset still has to pass one more filter: how much of the result is free to distribute after all cash uses inside the investee.

Cash Was Generated at MRC, but Not Distributed Upward

The relevant cash framing here is all-in cash flexibility: operating cash flow, investing cash flow, interest, debt repayment, and actual dividends paid. On that basis, MRC had a strong asset-level quarter. Operating cash flow was NIS 91.4 million, investing cash flow was positive at NIS 8.8 million mainly after a reduction in pledged deposits, and financing cash flow was negative NIS 53.1 million after interest and loan repayments. Ending cash rose to NIS 193.1 million.

This is the distinction the quarter makes sharper. MRC is no longer only an asset reporting better operations. It is now an asset increasing its own cash balance. But Mivtach Shamir does not hold that cash directly. It owns MRC through Shamir Energy, with a look-through holding of about 23.92%, so an actual distribution is a separate economic step from the power plant's profit and cash flow.

The accounting treatment reinforces the need to separate profit from cash. In Mivtach Shamir's statements, MRC's results are presented after an adjustment to the group's accounting policy, which no longer separates the embedded derivative linked to the euro-indexed pricing mechanism. On that basis, MRC's profit for the period is presented as NIS 52.6 million and the group's share of profit as NIS 17.5 million, while the current contribution table shows an MRC contribution of NIS 12.6 million. Those figures support profit, but they do not replace the simple fact: no dividend came in this quarter.

Gas Disruptions and Tariff Timing Keep Distribution From Being Obvious

Alon Tavor proved operating resilience during the quarter despite an external disruption. During February and March 2026, operations at certain natural gas reservoirs were temporarily suspended for security reasons, and MRC purchased gas from alternative reservoirs and operated certain generating units for a limited period using backup fuel. MRC does not expect a material adverse effect on generation activity, but the move to alternative gas sources and diesel created additional operating costs. For the distribution thesis, that matters more than the headline: the asset can keep operating, but cash available for distribution still depends on operating cost during disruptions and on preserving the result after the event.

The second blocker is regulatory. MRC withdrew its High Court petition regarding caps on supplementary tariffs, but received an extension until August 2, 2026 to submit its election of the applicable tariff alternative. MRC does not expect a material adverse effect here either, but until that alternative is chosen, it is less clear how much of operating profitability becomes a stable distribution base. That does not cancel the quarter's improvement. It only means the market should be careful about jumping from strong EBITDA to a conclusion that cash is already accessible to Mivtach Shamir.

The Next Proof Point Is Distribution, Not More EBITDA

The first quarter gives a positive read on Alon Tavor's operations after the peaker, but it does not close the cash-access question. MRC generated strong cash flow and increased its cash balance, but it did not distribute a dividend, and in a holding company that is the difference between an asset getting stronger and an asset already supporting the listed parent's capital flexibility. The next proof point is simpler than the accounting numbers: whether MRC can distribute cash upward over the coming quarters without relying on a one-off transition quarter, without increasing financing pressure, and after the tariff-election impact and backup-fuel costs become clearer.