SINGAPORE, May 30, 2019 /PRNewswire/ -- Kenon Holdings
Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon") announces
its results for Q1 2019 and additional updates to its
businesses.
Key Highlights
OPC
- As previously reported, in April
2019 the Israeli Electricity Authority ("EA") granted OPC a
conditional license for the construction of the Tzomet power
plant.
- OPC's revenue of $97 million in
Q1 2019 was comparable to revenue of $101
million in Q1 2018.
- OPC's net profit of $14 million
in Q1 2019 was comparable to net profit of $16 million in Q1 2018.
- OPC's EBITDA[1] in Q1 2019 decreased to $30 million, as compared to $35 million in Q1 2018.
Qoros
- The process to obtain the required approvals for the previously
reported agreement to sell half (12%) of Kenon's remaining interest
(24%) in Qoros to the majority shareholder in Qoros for a purchase
price of RMB1,560 million
(approximately $226 million)
continues to progress.
Discussion of Results for the Three Months ended March 31, 2019
Kenon's consolidated
results 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 30, 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 OPC's
generation businesses.
OPC
The following
discussion of OPC's results of operations is based on OPC's
consolidated financial statements, which are denominated in New
Israeli Shekels (NIS) and translated into US dollars for purposes
of Kenon's reporting.
Summary Financial Information of OPC
|
Q1
2019
|
Q1
2018
|
|
$
millions
|
Revenues
|
97
|
101
|
Cost of
sales
|
61
|
63
|
Finance Expenses,
net
|
5
|
5
|
Net profit
|
14
|
16
|
EBITDA
|
30
|
35
|
Revenue
|
|
Q1
2019
|
|
|
Q1
2018
|
|
|
$
millions
|
Revenue from energy
generated by OPC and sold to private customers
|
|
|
71
|
|
|
|
72
|
Revenue from energy
purchased by OPC and sold to private customers
|
|
|
2
|
|
|
|
2
|
Revenue from private
customers in respect of infrastructures services
|
|
|
19
|
|
|
|
22
|
Revenue from energy
sold to the System Administrator
|
|
|
1
|
|
|
|
1
|
Revenue from sale of
steam
|
|
|
4
|
|
|
|
4
|
Total
|
|
|
97
|
|
|
|
101
|
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. The weighted-average
generation component tariff for 2019, as published by the EA in
January 2019, is NIS 0.2909 per KW hour. In
2018, the weighted-average generation component tariff was
NIS 0.2816 per KW hour. OPC's
revenues from sale of steam are linked partly to the price of gas
and partly to the Israeli Consumer Price Index (CPI).
- Revenue from energy generated by OPC and sold to private
customers – decreased by $1
million in Q1 2019, as compared to Q1 2018. As OPC's revenue
is denominated in NIS, translation of its revenue to US Dollars had
a negative impact of $4 million.
Excluding the impact of exchange rate fluctuations on the
translation of OPC's revenues, OPC's revenues increased by
$3 million, primarily as a result of
the increase of the generation component in January 2019.
- Revenue from private customers in respect of
infrastructures services – decreased by $3
million in Q1 2019, as compared to Q1 2018. Translation of
OPC's revenue to US Dollars had a negative impact of $1 million. Excluding the impact of exchange rate
fluctuations on the translation of OPC's revenues, OPC's revenues
decreased by $2 million, primarily as
a result of a decrease in the infrastructure services tariffs in
January 2019.
Cost of sales (Excluding Depreciation and
Amortization)
|
|
Q1
2019
|
|
|
Q1
2018
|
|
|
$
millions
|
Natural gas and
diesel oil consumption
|
|
|
35
|
|
|
|
34
|
Payment to IEC for
infrastructure services
and purchase of electricity
|
|
|
20
|
|
|
|
24
|
Natural gas
transmission
|
|
|
2
|
|
|
|
2
|
Operating
expenses
|
|
|
4
|
|
|
|
3
|
Total
|
|
|
61
|
|
|
|
63
|
- Natural gas and diesel oil consumption – increased
by $1 million in Q1 2019, as compared
to Q1 2018, primarily due to an increase in OPC's natural gas
price, reflecting the increase in the generation component, as
OPC's gas price is indexed to the generation component tariff.
- Payment to IEC for infrastructures services and purchase of
electricity – decreased by $4
million in Q1 2019, as compared to Q1 2018. Translation of
OPC's cost of sales to US Dollars had a negative impact of
$1 million. Excluding the impact of
exchange rate fluctuations, payment to the IEC for infrastructure
services and purchase of electricity decreased by $3 million, primarily due to a decrease in
the infrastructure tariffs in January
2019.
Net profit
Net profit decreased by $2 million in Q1 2019 as compared to Q1 2018,
primarily as a result of the reasons discussed above, partially
offset by a $2 million decrease in
tax expenses.
Liquidity and Capital Resources
As of March 31, 2019, OPC had cash and cash equivalents
and short term deposits of $151
million, restricted cash of $80
million, and total outstanding consolidated indebtedness of
$603 million, consisting of
$28 million of short-term
indebtedness and $575 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 $275 million).
Construction of the OPC-Hadera plant began in June 2016. As of March 31,
2019, OPC-Hadera had invested an aggregate of NIS 837 million (approximately $230 million). Commercial operation of OPC-Hadera
plant is expected in the fourth quarter of 2019 - this takes into
account delays that occurred during the construction, including the
timetable for replacement of an additional faulty component
discovered during performance of the construction work. OPC-Hadera
is entitled to compensation from the EPC contractor in respect of
delay in completion of the construction, and OPC-Hadera has
insurance coverage for loss of profits.
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 April 2019, following the approval of the Business
Concentration Committee, the EA granted Tzomet a conditional
license for the construction of the Tzomet power plant.
Qoros[2]
Agreement to sell 12% of Qoros
As previously
reported, in January 2019, Kenon
entered into an agreement to sell half (12%) of its remaining
interest (24%) in Qoros to the majority shareholder in Qoros for a
purchase price of RMB1,560 million
(approximately $226 million). The
sale is subject to obtaining relevant third party consents and
other closing conditions, including approvals by relevant
government authorities. The parties are in the process of seeking
these consents and approvals. 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%.
Qoros Sales
Qoros reported that the entity introduced
by the majority shareholder in Qoros, which made significant
purchases during 2018, paused making purchases in Q1 2019 and
resumed purchase orders in Q2 2019 as per the internal
plan. Qoros also reported that orders from dealers were
negatively impacted this quarter by, among other factors, the
changing regulation in some provinces in China from the "China 5" to the "China 6" emission standard and by the general
challenging auto market conditions in China which saw a 14% year-on-year decline in
wholesale volumes in Q1. As a result of the foregoing, Qoros saw a
substantial decline in wholesale sales in the quarter, selling
approximately 800 cars in Q1 2019.
ZIM
Discussion of ZIM's Results for Q1 2019
ZIM
carried approximately 668 thousand TEUs in Q1 2018, representing a
4% decrease as compared to Q1 2018, in which ZIM carried
approximately 698 thousand TEUs. The average freight rate per TEU
in Q1 2019 was $1,019 per TEU, as
compared to $938 per TEU in Q1 2018,
representing a 9% increase.
ZIM's revenues increased by 6% in Q1 2019 to approximately
$796 million, as compared to
approximately $751 million in Q1
2018, due to the increase in the average freight rate. ZIM's
operating expenses and cost of services increased by 1% in Q1 2019
to approximately $703 million, as
compared to approximately $698
million in Q1 2018.
Additional Kenon Updates
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of March 31,
2019, Kenon's unconsolidated cash balance was $35 million. There is no remaining material 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 March 31, 2019
including principal and accrued interest is $193 million). The deferred payment is subject to
tax.
In March 2019, OPC declared a
dividend of approximately $10 million
which resulted in a dividend receipt by Kenon of approximately
$7 million in Q2 2019.
Investors' Conference Call
Kenon's management will
host a conference call for investors and analysts on May 30, 2019. 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:
|
1-866-652-8972
|
Israel:
|
03-9180687
|
UK:
|
0-800-051-8913
|
International:
|
+65-3158-3851
|
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[3]) – 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, expected cost, and expected timing of
the completion, commercial operation and financing of the project
as well as the impact of the delay in Hadera construction and
related compensation and insurance, (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 shareholder in
Qoros, that the parties are in the process of obtaining the
required approvals and statements with respect to market
conditions, regulations, sales and other trends impacting
Qoros' results 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 and reach commercial operation 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 and
costs associated with delays in reaching commercial operation, (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 the risk that the parties may be unable to
obtain required consents including regulatory approvals and other
risks relating to the closing of that transaction and risks
relating to Qoros' markets, regulation, sales and other factors
impacting its results (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 30, 2019
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 6.9: 1.
3 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 20 7659
4186
|
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SOURCE Kenon Holdings Ltd.