SINGAPORE, Sept. 3, 2019 /PRNewswire/ -- Kenon Holdings
Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon") announces
its results for Q2 2019 and additional updates to its
businesses.
Key Highlights
OPC
- OPC's revenue of $85 million in
Q2 2019 was comparable to revenue of $84
million in Q2 2018.
- OPC's net profit was nil in Q2 2019, the same as in Q2
2018.
- OPC's EBITDA[1] was $18
million in Q2 2019, the same as in Q2 2018.
- OPC reported that the arbitration tribunal dismissed all of the
Tamar Group's claims against OPC-Rotem, resulting in the release to
OPC of $22 million in cash which had
been deposited in a trust account relating to the dispute, and the
award of certain legal fees and expenses.
Kenon
- Kenon's subsidiary received a favorable award of $30 million, plus pre-award interest, in a
commercial arbitration proceeding related to rights retained by
that subsidiary following the sale of the Inkia businesses. The
award is subject to tax.
Discussion of Results for the Three Months ended June 30, 2019
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC
Energy Ltd. ("OPC"). The results of Qoros Automotive Co., Ltd.
("Qoros") and ZIM Integrated Shipping Ltd. ("ZIM") are reflected
under results from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated September 3, 2019 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; a reconciliation of OPC's EBITDA (which is a non-IFRS
measure) to net profit; and summary operational and financial
information of OPC and its subsidiaries.
OPC
The following discussion of OPC's results of operations is based
on OPC's consolidated financial statements, as translated into US
dollars.
Summary Financial Information of OPC
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Q2
2019
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|
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Q2
2018
|
|
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$
millions
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Revenue
|
|
|
85
|
|
|
|
84
|
|
Cost of sales
(excluding depreciation and amortization)
|
|
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64
|
|
|
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63
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Finance expenses,
net
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10
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|
|
|
9
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|
Net profit
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|
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-
|
|
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-
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EBITDA
|
|
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18
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|
|
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18
|
|
Revenue
|
|
For the three
months
ended June
30,
|
|
|
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2019
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|
|
2018
|
|
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$
millions
|
|
Revenue from energy
generated by OPC and sold to private customers
|
|
|
56
|
|
|
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56
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|
Revenue from energy
purchased by OPC and sold to private customers
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5
|
|
|
|
4
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|
Revenue from private
customers in respect of infrastructures services
|
|
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19
|
|
|
|
20
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|
Revenue from energy
sold to the System Administrator
|
|
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1
|
|
|
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-
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Revenue from sale of
steam
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|
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4
|
|
|
|
4
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Total
|
|
|
85
|
|
|
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84
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|
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 the 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 – remained similar to Q2 2018. As OPC's revenue is
denominated in NIS, translation of its revenue into US Dollars had
a negative impact of $1 million.
Excluding the impact of exchange rate fluctuations, OPC's revenues
increased by $1 million, primarily as
a result of the increase of the generation component tariff in
January 2019.
- Revenue from energy purchased by OPC and sold to private
customers – increased by $1
million as compared to Q2 2018, primarily as a result of an
increase in energy consumption by customers during the period.
- Revenue from private customers in respect of infrastructures
services – decreased by $1
million as compared to Q2 2018, primarily as a result of a
decrease in the infrastructure services tariffs in January 2019.
Cost of Sales (Excluding Depreciation and
Amortization)
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|
For the three
months
ended June
30,
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|
|
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2019
|
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2018
|
|
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$
millions
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Natural gas and
diesel oil consumption
|
|
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34
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33
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Payment to IEC for
infrastructure services and purchase of electricity
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24
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24
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Natural gas
transmission
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2
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2
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Operating
expenses
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4
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4
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Total
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64
|
|
|
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63
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- Natural gas and diesel oil consumption – increased by
$1 million as compared to Q2 2018,
primarily due to an increase in OPC's natural gas price, reflecting
the increase in the generation component and an increase in the
USD:NIS exchange rate.
- Payment to IEC for infrastructures services and purchase of
electricity – remained similar to Q2 2018.
Liquidity and Capital Resources
As of June 30, 2019, OPC had cash
and cash equivalents and short-term deposits of $162 million, restricted cash of $88 million, and total outstanding consolidated
indebtedness of $618 million,
consisting of $36 million of
short-term indebtedness and $582
million of long-term indebtedness. All of OPC's debt is
denominated in NIS.
Business Developments
Update on Tamar Arbitration
In July 2019, OPC announced the
ruling in the arbitration proceedings commenced by the Tamar Group
against OPC-Rotem relating to the indexation of the natural gas
price formula for OPC-Rotem's gas supply agreement with the Tamar
Group. OPC reported that the arbitration ruling dismissed all of
the Tamar Group's claims against OPC-Rotem. The arbitration
tribunal agreed with OPC-Rotem's position regarding the applicable
tariff to be applied in calculating the contract price during the
disputed period.
In addition, the arbitration tribunal ordered the Tamar Group to
pay OPC-Rotem approximately $4
million for expenses incurred by OPC-Rotem in connection
with the arbitration proceedings. OPC-Rotem is also entitled to
receive the amounts it had deposited in May
2017 (approximately $22
million) in a trust account in connection with the dispute,
and any interest accrued since such time.
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
$274 million).
As of June 30, 2019, OPC-Hadera
had invested an aggregate of NIS 846
million (approximately $237
million) in the construction of the OPC-Hadera power plant
and related infrastructure.
OPC management expects the commercial operation date of the
OPC-Hadera plant to be in the fourth quarter of 2019 - this
takes into account delays that occurred during the plant's
construction, including the timetable for replacement of a faulty
component discovered during performance of the construction work.
In July 2019, the Minister of
National Infrastructures, Energy and Water approved the
postponement of the milestone date for the commercial operation
stated in OPC-Hadera's conditional license to March 2020, and OPC-Hadera's lenders agreed to
extend the commercial operation date in the OPC-Hadera loan
agreement to the end of March 2020.
OPC management expects that a portion of the costs and lost profits
deriving from the delay will be covered by OPC-Hadera's insurance
policy. In addition, OPC-Hadera is entitled to compensation from
the EPC contractor pursuant to the construction agreement in
respect of delay of the operation date. As a result, OPC management
does not expect the delay will result in a change to the estimated
construction cost of the Hadera Power Plant.
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, Tzomet was granted a conditional
licence for construction of the power plant. The licence is
conditional on compliance with various milestones including
reaching commercial operation within 66 months from the date of the
conditional license. Additional approvals are required for the
project to reach financial closing, including securing grid
connection and construction permits. According to the relevant
regulation, the Tzomet project is required to reach financial
closing by January 1, 2020.
Issuance of new shares in private placement
In June 2019, OPC issued 5,179,147
new ordinary shares (representing approximately 3.71% of OPC's
issued and outstanding share capital at the time on a fully diluted
basis) at a price of NIS 23.17 per
share, for total cash consideration of approximately NIS 120 million (approximately $33 million). OPC indicated that the proceeds of
the sale are expected to be used for general corporate purposes.
Following the sale, Kenon's interest in OPC decreased from 75.8% to
73.0% (71.8% on a fully diluted basis).
In September 2019, OPC issued
5,849,093 new ordinary shares (representing approximately 4.02% of
OPC's issued and outstanding share capital at the time on a fully
diluted basis) at a price of NIS
26.50 per share, for total cash consideration of
approximately NIS 155 million
(approximately $44 million). OPC
indicated the proceeds of the sale are expected to be used for
general corporate purposes. Following the sale, Kenon's interest in
OPC decreased from 73.0% to 69.9% (68.7% on a fully diluted
basis).
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 $220
million). The sale is subject to obtaining relevant third
party consents and other closing conditions, including approvals by
relevant government authorities. The parties are continuing 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 sold approximately 6,500 cars in Q2 2019, primarily
reflecting orders from a leasing company introduced by Qoros
majority shareholder.
ZIM
Discussion of ZIM's Results for Q2 2019
ZIM's revenue increased by 4% in Q2 2019 to $834 million, as compared to $803 million in Q2 2018. ZIM carried
approximately 731 thousand TEUs in Q2 2019, representing a 5%
decrease as compared to Q2 2018, in which ZIM carried approximately
772 thousand TEUs. The average freight rate per TEU in Q2 2019 was
$993 per TEU, as compared to
$907 per TEU in Q2 2018, representing
a 9% increase. ZIM's operating expenses decreased by 5% to
$719 million in Q2 2019, as compared
to $757 million in Q2 2018, primarily
as a result of (i) a $37 million
decrease in bunker expenses and (ii) a $22
million decrease in port expenses. This was offset by (i) a
$24 million increase in lease expense
of vessels, slots and containers (including a $36 million decrease related to the
implementation of IFRS 16) and (ii) a $6
million increase in cargo handling expenses.
Additional Kenon Updates
Favorable Ruling in Arbitration Proceeding
Kenon's subsidiary received a favourable ruling in July 2019 of $30
million, plus pre-award interest, in a commercial
arbitration proceeding related to rights retained by that
subsidiary following the sale of the Inkia businesses. The award,
which remains to be paid, is subject to tax. The arbitration
related to a dispute over an insurance claim. The proceeding is
described in more detail in Kenon's annual report on Form 20-F for
the year ended December 31, 2018
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of June 30, 2019, Kenon's
unconsolidated cash balance was $30
million. There is no material debt at the Kenon level.
Kenon's unconsolidated cash declined by approximately $5 million in Q2 2019 primarily as a result of
certain final tax payments relating to the sale of the Inkia power
business, together with legal expenses relating to certain claims
and proceedings retained by Kenon after the sale of the Inkia power
business, partially offset by the receipt of dividends from
OPC.
Kenon is the beneficiary of a four-year deferred payment
agreement, effective December 28,
2017, reflecting deferred consideration from the sale of its
Inkia power businesses, accruing 8% interest, payable in kind
(total payable as at June 30, 2019
including principal and accrued interest is $197 million). The deferred payment is subject to
tax.
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on September 3, 2019,
starting at 9:00 am Eastern Time.
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:
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1-888-668-9141
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Israel:
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03-9180609
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UK:
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0-800-917-5108
|
International:
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+65-31583851
|
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 (70% 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 expected installed
capacity, expected cost, and expected timing of commercial
operation of the projects as well as the impact of the delay in in
completion of the Hadera project including statements about
expected compensation and insurance and expectation that there will
be no variance in cost for the project as a result of the delay,
statements relating to the Tamar arbitration award and statements
relating to use of proceeds of the OPC capital raises, (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
seeking the required approvals and (iii) statements relating to the
arbitration ruling and 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 project and reach commercial operation of the
OPC-Hadera and Tzomet projects on a timely basis, within the
expected budget, or at all, including the risk that OPC may be
unable to obtain the required permits, licenses and other approvals
or meet the required milestones 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, including the timing thereof and the risk that
the sale is not completed and (iii) with respect to Kenon risks
relating to the arbitration ruling and enforcement thereof 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 September 3,
2019 for the definition of OPC's EBITDA and a reconciliation
to its net profit for the applicable period.
[2] Convenience translations of RMB amounts into US Dollars
use a rate of 7.10: 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.