SINGAPORE, April 8, 2019 /PRNewswire/ -- Kenon Holdings
Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon") announces
its results for 2018 and additional updates to its businesses.
Key Highlights
OPC
- OPC Energy Ltd. ("OPC") successfully completed its first
scheduled major overhaul maintenance treatment of the OPC-Rotem
power plant in Q4 2018.
- In April 2019, the Israeli
Electricity Authority (the "EA") published its decision to
grant a conditional license for the construction of the Tzomet
power plant.
- OPC's financial results for 2018:
-
- OPC's revenues in 2018 amounted to $363
million, reflecting no material change from 2017.
- OPC's net profit in 2018 increased to $26 million, as compared to $14 million in 2017.
- OPC's EBITDA[1] in 2018 increased to $91
million, as compared to $86 million in 2017.
- In March 2019, OPC declared a
dividend of approximately $10
million.
Qoros
- In January 2019, Kenon entered
into an agreement to sell half of its remaining interest in Qoros
Automotive Co., Ltd. ("Qoros") (i.e. 12%) to the majority
shareholder in Qoros for a purchase price of RMB1,560 million (approximately US$227 million). The sale is subject to obtaining
relevant third party consents and other closing conditions,
including approvals by relevant government authorities.
Discussion of Results for the Year ended December 31, 2018
Kenon's consolidated results include the consolidated results of
OPC which are described below. The results of Qoros and ZIM
Integrated Shipping Ltd. ("ZIM") are reflected under results
from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated April 8, 2019 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; a reconciliation of OPC's EBITDA (which is a non-IFRS
measure) to net profit and summary operational information of each
of OPC's generation businesses.
OPC
The following discussion of OPC's results of operations is
derived from OPC's consolidated financial statements.
Summary Financial Information of OPC
|
2018
|
2017
|
|
($
millions)
|
Revenues
|
363
|
365
|
Cost of
sales
|
258
|
266
|
Finance Expenses,
net
|
25
|
33
|
Net profit
|
26
|
14
|
EBITDA[2]..........................................
|
91
|
86
|
From September 25, 2018 until
November 10, 2018, OPC performed
major overhaul maintenance of the OPC-Rotem power plant, during
which the operation of the power plant was paused. Such maintenance
is performed once every six years. OPC's financial results were
negatively impacted by the maintenance, as OPC-Rotem had to
purchase energy to meet its obligations under PPAs during this
maintenance and therefore did not earn margins that it would have
earned using electricity that it generates.
Revenue
The table below sets forth our revenue for 2018 and 2017, broken
down by category.
|
|
For the year
ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
$
millions
|
|
Revenue from energy
generated by OPC and sold to private customers
|
|
|
225
|
|
|
|
233
|
|
Revenue from energy
purchased by OPC and sold to private customers
|
|
|
39
|
|
|
|
20
|
|
Revenue from private
customers in respect of infrastructures services
|
|
|
79
|
|
|
|
94
|
|
Revenue from energy
sold to the System Administrator
|
|
|
4
|
|
|
|
3
|
|
Revenue from sale of
steam
|
|
|
16
|
|
|
|
15
|
|
Total
|
|
|
363
|
|
|
|
365
|
|
OPC's revenue from the sale of electricity to private customers
derives from electricity sold at the generation component tariffs,
as published by the EA, with some discount. Accordingly, changes in
the generation component generally affect the prices paid under
PPAs by customers of OPC-Rotem and OPC-Hadera. The weighted-average
generation component tariff for 2018, as published by the EA in
January 2018, was NIS 0.2816 per KW hour. In 2017, the
weighted-average generation component tariff was NIS 0.264 per KW hour. This change in the
weighted-average generation component tariff is attributed to the
mix of consumption in the market. OPC's revenues from sale of steam
are linked partly to the price of gas and partly to the Israeli
Consumer Price Index (CPI).
Set forth below is a discussion of the changes in revenues by
category between 2018 and 2017.
- Revenue from energy generated by OPC and sold to private
customers – decreased by $8
million in 2018, as compared to 2017, primarily as a result
of (i) an $18 million decrease in
revenues due to the lower availability of the OPC-Rotem power plant
and (ii) $5 million one-off revenues
in 2017, partially offset by a $12
million increase in revenues due to the higher generation
component in 2018, as compared to 2017.
- Revenue from energy purchased by OPC and sold to private
customers – increased by $19
million in 2018, as compared to 2017, primarily as a result
of increased energy purchased and sold by OPC in 2018 as compared
to 2017, resulting from the lower availability of the OPC-Rotem
power plant due to the maintenance at OPC-Rotem in 2018.
- Revenue from private customers in respect of infrastructures
services – decreased by $15
million in 2018, as compared to 2017, primarily as a result
of (i) an $11 million decrease in the
infrastructure tariffs in 2018, and (ii) a $2 million decrease due to past reconciliation of
OPC's customers in 2017.
- Revenue from energy sold to the System Administrator –
increased by $1 million in 2018, as
compared to 2017, primarily as a result of higher sales volume to
the System Administrator.
- Revenue from sale of steam – increased by $1 million in 2018, as compared to 2017,
primarily as of a result of higher steam consumption by
customers.
Cost of Sales (Excluding Depreciation and
Amortization)
|
|
For the year
ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
$
millions
|
|
Natural gas and
diesel oil consumption
|
|
|
118
|
|
|
|
130
|
|
Payment to IEC for
infrastructure services and purchase of electricity
|
|
|
118
|
|
|
|
114
|
|
Natural gas
transmission
|
|
|
7
|
|
|
|
7
|
|
Operating
expenses
|
|
|
15
|
|
|
|
15
|
|
Total
|
|
|
258
|
|
|
|
266
|
|
- Natural gas and diesel oil consumption – decreased by
$12 million in 2018, as compared to
2017, primarily due to (i) a $6 million decrease as a
result of scheduled maintenance at OPC-Rotem in 2018, (ii) a
$3 million decrease as diesel oil
consumption in 2017 was high due to a disruption in gas supply from
the Tamar reservoir, and (iii) a $2
million reimbursement from IEC for diesel oil cost in prior
years.
- Payment to IEC for infrastructures services and purchase of
electricity – increased by $4
million in 2018, as compared to 2017, primarily as a result
of an approximately $17 million
increase due to lower generation of the OPC-Rotem power plant,
partially offset by (i) a $9 million
decrease due to lower infrastructure service tariffs in 2018 and
(ii) a $2 million decrease due to
past reconciliation with OPC's customers in 2017.
Financing Expenses, net
Financing expenses, net decreased by approximately $8 million in 2018 as compared to 2017, primarily
as a result of a $6 million early
repayment fee incurred in 2017 in respect of the early repayment in
full of OPC's mezzanine loan.
Net profit
Net profit increased by $12
million to $26 million in
2018, as compared to $14 million in
2017. The increase is primarily due to the decrease in cost of
sales and finance expenses, partially offset by a decrease in
revenues, primarily for the reasons specified above.
EBITDA
EBITDA increased by $5 million in 2018, as compared to
2017, primarily for the reasons specified above.
Liquidity and Capital Resources
As of December 31, 2018, OPC had
cash and cash equivalents of $88
million, deposits and restricted cash of $98 million, and total outstanding consolidated
indebtedness of $587 million,
consisting of $23 million of
short-term indebtedness, including the current portion of long-term
indebtedness, and $564 million of
long-term indebtedness. All of OPC's debt is denominated in
NIS.
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 $267 million).
Construction of the OPC-Hadera plant began in June 2016. As of December
31, 2018, OPC-Hadera had invested an aggregate of
NIS 822 million (approximately
$219 million) in the project.
Update on Tzomet Project
Tzomet Energy Ltd. ("Tzomet") is developing an open-cycle
natural gas-fired power station with a 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 (not including project development
costs), subject to certain adjustments, of which $7.2 million has been paid to date.
In January 2019 OPC signed an
agreement to acquire the remaining 5% of Tzomet shares for total
consideration of $7 million, subject
to conditions.
In April 2019, the EA published
its decision to grant Tzomet a conditional license for a 66-month
term for the construction of a 396MW conventional open-cycle power
plant.[3] Pursuant to this decision, the license will become valid
following the Israeli Minister of Energy's approval and the deposit
of a guarantee by Tzomet.
The development of the Tzomet project is subject to conditions
and requirements that have not been met to date, including
assurance of the ability to transmit the electricity from the
project site and securing grid capacity for the project. In
addition, financial closing of the Tzomet project must occur by the
date required by the relevant statutory framework, which is
currently January 2020.
Qoros[4]
Agreement to sell 12% of Qoros
In January 2019, Kenon entered
into an agreement to sell half of its remaining interest in Qoros
(i.e. 12%) to the majority shareholder in Qoros for a purchase
price of RMB1,560 million
(approximately US$227 million). The
sale is subject to obtaining relevant third party consents and
other closing conditions, including approvals by relevant
government authorities. Following completion of the sale Kenon will
hold a 12% interest in Qoros, the majority shareholder in Qoros
will hold 63% and Chery Automobile Co. Ltd. will own 25%.
Business Updates
Car Sales
Qoros sold approximately 62,000 cars in 2018, as compared to
approximately 15,000 cars in 2017. A substantial number of sales in
2018 reflect purchases from an entity introduced by the majority
shareholder in Qoros.
ZIM
Discussion of ZIM's Results for 2018
ZIM carried approximately 2,914 thousand TEUs in 2018,
representing an 11% increase as compared to 2017, in which ZIM
carried approximately 2,629 thousand TEUs. The average freight rate
per TEU in 2018 was $973 per TEU, as
compared to $995 per TEU in 2017.
ZIM's revenues increased by 9% in 2018 to approximately
$3.2 billion, as compared to
approximately $3.0 billion in 2017,
due to the increase in carried quantities. ZIM's operating expenses
and cost of services increased by 15% to approximately $3.0 billion, as compared to approximately
$2.6 billion in 2017, primarily as a
result of (i) a $150 million increase
in bunker expense, (ii) a $129
million increase in lease expense for vessels and
containers, (iii) a $94 million
increase in cargo handling related expense, and (iv) a $22 million increase in port expenses.
Additional Kenon Updates
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of December 31, 2018, Kenon's
cash balance was $38 million. There is no remaining debt at
the Kenon level.
Kenon is the beneficiary of a four-year deferred payment
agreement, effective December 31,
2017, reflecting deferred consideration from the sale of its
Inkia power businesses, accruing 8% interest, payable in kind
(total payable as at December 31,
2018 including principal and accrued interest is
$189 million). The deferred payment
is subject to tax.
As discussed above, in January
2019, Kenon entered into an agreement to sell half of its
remaining interest in Qoros (i.e. 12%) to the majority shareholder
in Qoros for a purchase price of RMB1,560
million (approximately US$227
million).
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on April 8, 2019, starting
at 9:00 am Eastern Time. Kenon's and
OPC's management teams 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: 1-888-281-1167
Israel: 03-918-0691
UK: 0-800-051-8913
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 (76% interest) – a leading owner, developer and operator of
power generation facilities in the Israeli power market;
- Qoros (24% interest[5]) – 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 receipt of the
conditional license, expected installed capacity, cost, and timing
of the completion and financing of the project, (ii) with respect
to Qoros, statements with respect to the agreement by Kenon to sell
half of its remaining interest in Qoros to the majority investor in
Qoros 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 license and other approvals required to proceed with the
Tzomet project, (ii) with respect to Qoros, risks relating to the
agreement to sell half of Kenon's remaining interest in Qoros to
the majority shareholder in Qoros, including risks relating to
closing of that transaction 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.
References:
[1] EBITDA is a non-IFRS measure. See Exhibit 99.2 of Kenon's
Form 6-K dated April 8, 2019 for the
definition of OPC's EBITDA and a reconciliation to its net profit
for the applicable period
[2] EBITDA is a non-IFRS measure. See Exhibit 99.2 of Kenon's Form
6-K dated April 8, 2019 for the
definition of OPC's EBITDA and a reconciliation to its net profit
for the applicable period
[3] The term of the license can be extended by the EA, subject to
the Israeli Minister of Energy's approval, and subject to the
regulation. The grant of a permanent generation license to Tzomet,
upon expiration of the conditional license, is subject to Tzomet's
compliance with the conditions set by law.
[4] Convenience translations of RMB amounts into US Dollars
use a rate of 6.87: 1.
[5] Kenon has agreed to sell half of its 24% interest to the
majority shareholder in Qoros; upon completion of this sale, Kenon
will hold a 12% interest in Qoros.
Contact Info:
Kenon Holdings Ltd.
Jonathan Fisch
Director, Investor Relations
jonathanf@kenon-holdings.com
Tel: +44(0)20-7659-4186
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SOURCE Kenon Holdings Ltd.