SINGAPORE, May 31, 2018 /PRNewswire/ -- Kenon
Holdings Ltd. (NYSE: KEN, TASE: KEN) ("Kenon") announces
its results for Q1 2018 and additional updates to its
businesses.
Key Highlights
Kenon
- Kenon recognized a gain of $567
million in Q1 2018 in connection with the third party
investment in Qoros (described below).
OPC
- Revenue in Q1 2018 increased to $101
million, as compared to $93
million in Q1 2017.
- Net profit in Q1 2018 increased to $16
million, as compared to $11
million in Q1 2017.
- EBITDA[1] in Q1 2018 increased to $35
million, as compared to $28
million in Q1 2017.
- In March 2018, OPC completed the
acquisition of 95% of the shares of Tzomet Energy, which is
developing a natural gas-fired power station in Israel with a capacity of approximately 396
MW.
Qoros
- Qoros sold approximately 11,400 cars in the first quarter of
2018, an increase of over 200% as compared to the first quarter of
2017. In April 2018, Qoros sold
approximately 5,400 cars, a 400% increase as compared to
April 2017. Sales in 2018 include
orders from a leasing company introduced by the new majority owner
of Qoros (the "New Qoros Investor"), in accordance with the
investment agreement.
Discussion of Results for the Three Months ended March 31, 2018
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC
Energy Ltd. ("OPC"). The results of Qoros Automotive Co., Ltd.
("Qoros") and ZIM Integrated Shipping Ltd. ("ZIM") are reflected
under results from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated May 31, 2018 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; summary Qoros financial information; a reconciliation
of OPC's EBITDA (which is a non-IFRS measure) to net profit;
summary operational information of OPC's generation businesses; and
a reconciliation of Qoros' EBITDA (which is a non-IFRS measure) to
net loss.
OPC
The following discussion of OPC's results of operations is based
on OPC's consolidated financial statements.
Summary Financial Information of OPC
|
Q1
2018
|
|
Q1
2017
|
|
($
millions)
|
Revenue
|
101
|
|
93
|
Cost of
sales
|
63
|
|
63
|
Finance Expenses,
net
|
5
|
|
6
|
Net profit
|
16
|
|
11
|
EBITDA...........................................
|
35
|
|
28
|
- Revenue - increased by $8
million in Q1 2018, as compared to Q1 2017. As OPC's revenue
is denominated in NIS, translation of its revenue to US Dollars had
a positive impact of $8 million.
Excluding the impact of exchange rate fluctuations on the
translation of OPC's revenue from NIS into US Dollars, OPC's
revenue remained the same as in Q1 2017, as a result of (i) a
$2 million increase in sales of
energy to private customers due to an increase in the generation
component tariff in January 2018,
offset by (ii) a $2 million decrease
in collection of system services from private customers (which is
collected by OPC and paid to Israel Electric Company ("IEC")), due
to a decrease in the system cost tariff in January 2018;
- Cost of sales - $63
million in both Q1 2018 and Q1 2017. Translation of OPC's
cost of sales to US Dollars increased cost of sales by $5 million. Excluding the impact of exchange rate
fluctuations on the translation of OPC's cost of sales from NIS
into US Dollars, cost of sales decreased by $5 million as compared to Q1 2017. The decrease
was primarily due to (i) a $3 million
decrease in gas costs, as the gas price is indexed to the US
Dollar, and (ii) a $2 million
decrease in collection from private customers in respect of system
services, as discussed above;
- Financing Expenses, net - decreased by $1 million in Q1 2018, as compared to Q1 2017.
The decrease was primarily due to the impact of exchange rate
fluctuations;
- Net profit - increased by $5
million in Q1 2018, as compared to Q1 2017, primarily due to
the $8 million increase in revenue,
partially offset by (i) a $1 million
increase in general and administration expenses due to an increase
in professional and legal fees, as well as salary costs, and (ii) a
$2 million increase in taxes on
income as a result of higher profits; and
- EBITDA –increased by $7
million in Q1 2018, as compared to Q1 2017, primarily as a
result of the reasons discussed above.
Liquidity and Capital Resources
As of March 31, 2018, OPC had cash
and cash equivalents of $145 million,
deposits and restricted cash of $77
million, and consolidated indebtedness of $615 million, consisting of $31 million of short-term indebtedness and
$584 million of long-term
indebtedness.
Business Developments
Update on the Construction of the OPC-Hadera
Plant
OPC-Hadera is constructing a 148 MW co-generation power plant in
Israel. OPC expects that the total
cost of completing the OPC-Hadera plant will be approximately
NIS 1 billion (approximately
$285 million) (including the cost of
the original acquisition of OPC-Hadera).
Construction of the OPC-Hadera plant began in June 2016, and the plant is expected to commence
commercial operations by the first half of 2019. As of March 31, 2018, OPC-Hadera had invested an
aggregate of NIS 629 million
(approximately $179 million) and
completed approximately 90% of the project.
Update on Tzomet Project
Tzomet Energy Ltd. ("Tzomet") is developing an open-cycle
natural gas-fired power station with capacity of approximately 396
MW in Israel. In March 2018, OPC completed the acquisition of 95%
of the shares of Tzomet. The total consideration for the
acquisition is estimated to be approximately $23 million, subject to certain adjustments.
Tzomet still requires (among other requirements) a license for
the project from the Israeli Electricity Authority ("EA"). For a
discussion of this license and the related correspondence with the
Israel Concentration Committee, see Kenon's Annual Report on Form
20-F for the year ended December 31,
2017.
Qoros[2]
Update Regarding Third Party Investment
In January 2018, Kenon announced
that the New Qoros Investor completed a transaction to purchase 51%
of Qoros from Kenon and Chery[3] for RMB3.315 billion (approximately $526 million), which is part of an investment
structure to invest a total of approximately RMB6.63 billion (approximately $1,052 million) by the New Qoros Investor, of
which RMB6.5 billion will ultimately
be invested in Qoros' equity. As a result, Kenon and Chery now have
24% and 25% stakes in Qoros, respectively. In connection with this
investment, Kenon received total cash proceeds of RMB 1.69 billion (approximately $268 million). Kenon used $20 million of the proceeds to repay a portion of
shareholder loans from Ansonia, Kenon's major shareholder. Kenon's
wholly-owned subsidiary Quantum (2007) LLC ("Quantum"), which holds
Kenon's interest in Qoros, currently holds approximately
$248 million (US dollar equivalent)
of these proceeds, which is designated to be used in connection
with the completion of the transaction described below. The
investment agreement provides that following the sale of equity
interests by Kenon and Chery, Qoros' shareholders (including the
New Qoros Investor) will invest a total of RMB6.5 billion in Qoros' equity in proportion to
their post-investment equity ownership.
The investment agreement also provides for repayment of existing
shareholder loans owing from Qoros in the principal amount of
RMB944 million (approximately
$150 million) to each of Kenon and
Chery, in two equal tranches.
In April 2018, the parties entered
into an agreement which provides that at the time that such
shareholder loans are converted to equity, and therefore not repaid
as required by the investment agreement, Kenon's and Chery's
obligation to invest the proceeds from the sale of their interests
in Qoros will be reduced by the amount of the loans not so repaid.
In such case, Kenon would retain (from the proceeds of its sale of
equity in Qoros) amounts equal to the shareholder loans that are
equitized and not repaid, ultimately resulting in a substantially
similar economic result as would result from Kenon investing the
full RMB1.56 billion (approximately
$248 million) and Qoros repaying the
shareholder loans in full as required by the investment agreement.
Qoros has applied to the relevant authorities to complete a capital
increase of RMB6.5 billion, including
the conversion of these existing shareholder loans.
The New Qoros Investor has advanced its proportionate share of
the required investment in Qoros. Chery has advanced its
proportionate share of the required investment in Qoros, after
offsetting the amount of shareholder loans owing to Chery which are
to be converted to equity. Kenon is expected to invest RMB616 million (approximately $98 million) in Qoros as part of the capital
increase, once approved, which is equal to the proceeds it is
required to invest in Qoros, less the amount of its shareholder
loans to be converted to equity (RMB944
million (approximately $150
million)).
Following the completion of the investment and related
transactions, a portion of the sale proceeds retained by Kenon will
be applied to the repayment of shareholder loans from Ansonia in
the amount of $55 million.
During the three-year period beginning from the closing of the
investment, Kenon has the right to cause the New Qoros Investor to
purchase up to 50% of its remaining equity interest in Qoros,
following the related capital increase, for up to RMB1.56 billion (approximately $248 million), being the price for 50% of Kenon's
remaining 24% interest in Qoros, subject to adjustments for
inflation. From the third anniversary of the closing until
April 2023, Kenon has the right to
cause the New Qoros Investor to purchase up to all of its remaining
equity interests in Qoros for up to a total of RMB3.12 billion (approximately $495 million) (for Kenon's full 24% interest in
Qoros), subject to adjustment for inflation. Another company within
the Baoneng group effectively guarantees this put option by also
serving as a grantor of the option. The put option requires six
months' notice for exercise.
For detailed disclosure of the investment in Qoros, see Kenon's
Annual Report on Form 20-F for the year ended December 31, 2017.
Car Sales
Qoros sold approximately 11,400 cars in the first quarter of
2018, an increase of over 200% as compared to the first quarter of
2017. In April 2018, Qoros sold
approximately 5,400 cars, a 400% increase as compared to
April 2017. Sales in 2018 include
orders from a leasing company introduced by the New Qoros Investor,
in accordance with the investment agreement.
Discussion of Qoros' Results for Q1 2018
Qoros' revenue increased by 161% in Q1 2018 to approximately
RMB1,059 million, as compared to
approximately RMB406 million in Q1
2017, primarily due to the increase in car sales.
Qoros' cost of sales increased by 164% to approximately
RMB1,260 million, as compared to
approximately RMB477 million in Q1
2017, mainly as a result of the increase in car production
including an increase in depreciation and amortization.
Qoros' net loss for Q1 2018 was approximately RMB419 million, as compared to approximately
RMB283 million in Q1 2017, due to the
above factors.
Qoros' EBITDA[4] decreased from negative RMB88 million in Q1 2017 to negative RMB106 million in Q1 2018, due to the factors
above.
ZIM
Discussion of ZIM's Results for Q1 2018
ZIM carried approximately 698 thousand TEUs in Q1 2018,
representing a 17% increase as compared to Q1 2017, in which ZIM
carried approximately 598 thousand TEUs. ZIM's revenue increased by
15% in Q1 2018 to approximately $751
million, as compared to approximately $655 million in Q1 2017, primarily due to the
increase in carried quantities. ZIM's operating expenses increased
by 22% to approximately $698 million
in Q1 2018, as compared to approximately $571 million in Q1 2017, primarily as a result of
an increase in cargo handling expenses and an increase in bunker
prices, as well as an increase in lease expenses of vessels and
containers and an increase in port expenses.
Additional Kenon Updates
Cash Distribution
In March 2018, Kenon distributed
$665 million to its shareholders as a
return of capital.
Gain from Qoros Third Party Investment
As a result of the third party investment in Qoros, Kenon,
through its wholly owned subsidiary Quantum, recognized a gain of
$504 million in Q1 2018, including a
gain on dilution, a gain in connection with the Qoros put option
and a gain in connection with the Qoros shareholder loans. In
addition, Kenon recognized a gain of $63
million related to a write-back of financial guarantees.
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of March 31, 2018, Kenon's
unconsolidated cash balance was $55
million. In addition, Kenon's wholly-owned subsidiary
Quantum, which holds Kenon's interest in Qoros, held cash of
approximately $248 million (US dollar
equivalent) as of March 31, 2018,
which reflects proceeds from the sale of its interest in Qoros to
the New Qoros Investor. Quantum has designated these funds to
be used in connection with the completion of the transactions
related to the investment by the New Qoros Investor, as discussed
above.
Following the repayment of Kenon's credit facility with Israel
Corporation in January 2018, there is
no remaining debt at the Kenon level.
Kenon is the beneficiary of a four-year deferred payment
agreement in the amount of $175
million, reflecting deferred consideration from the sale of
its Inkia power businesses, accruing 8% interest starting from
December 31, 2017, payable in kind.
The $175 million deferred payment is
subject to tax.
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on May 31, 2018. Kenon's and
OPC's management will host the call and will be available to answer
questions after presenting the results. To participate, please call
one of the following teleconferencing numbers:
Singapore: 3158-3851
US:
1-888-407-2553
Israel: 03- 9180644
UK: 0-800-917-9141
International: +65-3158-3851
At: 9:00 am Eastern Time,
6:00 am Pacific Time, 2:00 pm UK Time, 4:00
pm Israel Time and 9:00 pm
Singapore Time.
For those unable to participate, the teleconference will be
available for replay on Kenon's website at
http://www.kenon-holdings.com beginning 24 hours after the
call.
About Kenon
Kenon is a holding company that operates dynamic, primarily
growth-oriented businesses. The companies it owns, in whole or in
part, are at various stages of development, ranging from
established, cash-generating businesses to early stage development
companies. Kenon's businesses consist of:
- OPC Energy (76% interest) – a leading owner, developer
and operator of power generation facilities in the Israeli power
market;
- Qoros (24% interest) – a China-based automotive company;
- ZIM (32% interest) – an international shipping company;
and
- Primus Green Energy, Inc. (91% interest) – an early
stage developer of alternative fuel technology.
Kenon remains committed to its strategy to realize the value of
its businesses for its shareholders. In connection with this
strategy, Kenon may provide its shareholders with direct access to
its businesses, which may include spin-offs, listings, offerings,
distributions or monetization of its businesses. Kenon is actively
exploring various ways to materialize this strategy in a rational
and expeditious manner. For further information on Kenon's
businesses and strategy, see Kenon's publicly available filings,
which can be found on the SEC's website at www.sec.gov. Please also
see http://www.kenon-holdings.com for additional information.
Caution Concerning Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements include, but are not limited to statements
about (i) with respect to OPC, statements with respect to the
OPC-Hadera and Tzomet projects, including expected installed
capacity, cost and timing of project completion, and statements
with respect to the pursuit of a licence from the EA for the Tzomet
project, (ii) with respect to Qoros, statements with respect to the
transactions relating to the investment by the New Qoros Investor,
including the agreement relating to the shareholder loans to be
repaid under the terms of the investment agreement and Kenon's
intention to repay the shareholder loans from Ansonia, and (iii)
other non-historical matters. These statements are based on Kenon's
management's current expectations or beliefs, and are subject to
uncertainty and changes in circumstances. These forward-looking
statements are subject to a number of risks and uncertainties, many
of which are beyond Kenon's control, which could cause the actual
results to differ materially from those indicated in such
forward-looking statements. Such risks include (i) with respect to
OPC, risks relating to a failure to complete the development of the
OPC-Hadera and Tzomet projects on a timely basis, within the
expected budget, or at all, including risks related to obtaining
the EA license and other approvals required to proceed with the
Tzomet project, (ii) with respect to Qoros, risks relating to
completion of the transactions relating to the investment by the
New Qoros Investor and the parties' ability to satisfy their
obligations under the agreements and (iii) other risks and factors,
including those risks set forth under the heading "Risk Factors" in
Kenon's Annual Report on Form 20-F filed with the SEC and other
filings. Except as required by law, Kenon undertakes no obligation
to update these forward-looking statements, whether as a result of
new information, future events, or otherwise.
[1] EBITDA is a non-IFRS measure. See Exhibit 99.2 of Kenon's
Form 6-K dated May 31, 2018 for the
definition of OPC's EBITDA and a reconciliation to its net income
for the applicable period.
[2] Convenience translations of RMB amounts into US Dollars use
a rate of 6.3: 1.
[3] For purposes of this section, references to Kenon include
Quantum and references to Chery include Wuhu Chery (the direct
owner of Chery's interest in Qoros).
[4] EBITDA is a non-IFRS measure. See Exhibit 99.2 of Kenon's
Form 6-K dated May 31, 2018 for the
definition of Qoros' EBITDA and a reconciliation to its net loss
for the applicable period.
Contact Info
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Kenon Holdings
Ltd.
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Jonathan
Fisch
Director, Investor
Relations
jonathanf@kenon-holdings.com
Tel: +1 917 891
9855
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External Investor
Relations
Ehud Helft / Kenny
Green
GK Investor
Relations
kenon@gkir.com
Tel: +1 646 201
9246
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SOURCE Kenon Holdings Ltd.