SINGAPORE, April 2, 2018 /PRNewswire/ -- Kenon
Holdings Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon")
announces its results for 2017 and additional updates to its
businesses.
Key Highlights
Inkia Sale and Cash Distribution
- In December 2017, Inkia Energy
Limited, a wholly-owned subsidiary of IC Power Ltd. completed the
sale of its Latin American and Caribbean businesses to I Squared Capital, an
infrastructure private equity firm, for total consideration of
approximately $1,332 million, subject
to final closing adjustments and including deferred consideration
in the form of a four-year $175
million deferred payment obligation accruing 8% interest
payable in kind.
- As a result of the sale, Kenon's 2017 results attributable to
discontinued operations includes a net gain (after tax) on the sale
of discontinued operations of $397
million.
- In March 2018, Kenon made a cash
distribution of $665 million, or
$12.35 per share, to its
shareholders.
OPC
- OPC's financial results for 2017:
-
- OPC's revenues in 2017 increased to $365
million, as compared to $324
million in 2016.
- OPC's net income in 2017 was $14
million, as compared to $20
million in 2016.
- OPC's EBITDA in 2017 was $86
million, as compared to $67
million in 2016.
- 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. The total consideration for the acquisition is estimated at
approximately $23 million, subject to
adjustments and milestones. Tzomet Energy still requires (among
other requirements) a license from the Electricity Authority.
- In December 2017, OPC-Rotem and
OPC-Hadera signed agreements for the purchase of natural gas with
Energean Israel Ltd. ("Energean") for a period of fifteen years,
subject to adjustments.
Qoros Third Party Investment
- Qoros has confirmed that all remaining funds for the new
investment in Qoros, totalling RMB6.63
billion ($1,052 million), have
now been advanced by the new investor. In January 2018, Kenon announced that a China-based investor related to the Baoneng
group (the "New Qoros Investor") completed a transaction to
purchase 51% of Qoros from Wuhu Chery and Kenon for RMB3.315 billion ($526
million), which is part of an investment structure to
ultimately invest a total of approximately RMB6.63 billion by the New Qoros Investor. As a
result, Kenon now has a 24% stake in Qoros.
- In January 2018, Chery repaid
Kenon RMB120 million (approximately
$18 million) out of the total
RMB244 million (approximately
$38 million) previously advanced to
Chery.
- Qoros sold approximately 11,400 cars in the first quarter of
2018, an over 200% increase as compared to approximately 3,700 cars
sold in the first quarter of 2017. A substantial number of such
sales reflect purchase orders introduced by the New Qoros
Investor.
Discussion of Results for the Year ended December 31, 2017
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC as
well as results from discontinued operations of IC Power Ltd.
("IC Power"). The results of Qoros Automotive Co., Ltd.
("Qoros") and ZIM Integrated Shipping Ltd. ("ZIM")
are reflected under results from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated April 2, 2018 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; a reconciliation of OPC's EBITDA (which is a non-IFRS
measure) to net income and summary operational information of each
of OPC's generation businesses.
OPC
The following discussion of OPC's results of operations is
derived from OPC's consolidated financial statements.
Summary Financial
Information of OPC
|
|
2017
|
2016
|
|
($
millions)
|
Revenues
|
365
|
324
|
Cost of
sales
|
266
|
251
|
Finance Expenses,
net
|
33
|
20
|
Net income
|
14
|
20
|
EBITDA[1]
|
86
|
67
|
[1] EBITDA is a
non-IFRS measure. See Exhibit 99.2 of Kenon's Form 6-K dated April
2, 2017 for the
definition of OPC's EBITDA and a reconciliation to its total net
income for the applicable period
|
- Revenues - Revenues increased by $41 million in 2017, as compared to 2016. As
OPC's revenues are denominated in NIS, translation of its revenues
to US Dollars had a positive impact of $21
million. Excluding the impact of exchange rate fluctuations
on the translation of OPC's revenues from NIS into US Dollars,
revenues increased by $20 million,
primarily as a result of (i) a $17
million increase due to the higher electricity tariffs in
2017 as compared to 2016 and increased volume of sales, and (ii)
$3 million collected from customers
for sales in prior periods, which payments had been delayed due to
a delay in availability of relevant data;
- Cost of sales - Cost of sales increased by $15 million in 2017, as compared to 2016.
Translation of OPC's cost of sales to US Dollars increased its cost
of sales by $16 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 $1 million, primarily as
a result of (i) a $9 million decrease
in energy purchases due to the increased availability of the
OPC-Rotem station (in 2016 the OPC-Rotem power plant incurred a
scheduled major maintenance) and (ii) a $4
million decrease in gas costs, as the gas price is indexed
to the US Dollar (this impact was partially offset by higher
quantities of gas purchased in 2017). These effects were partially
offset by a $11 million increase in
payments to IEC due to the increase in infrastructure and system
cost rates and $1 million in payments
made to IEC in connection with payments made for prior periods
which had been delayed due to a delay in availability of relevant
data;
- Financing Expenses, net - Financing expenses, net
increased by approximately $13
million in 2017 as compared to 2016 primarily as a result of
(i) a $6 million early payment
(make-whole) fee incurred as a result of the early repayment in
full of OPC's mezzanine loan in May
2017, (ii) a $3 million
increase in financing expenses relating to OPC's August 2017 bond issuance (iii) a $3 million increase due to impact of exchange
rate fluctuations, and (iv) a $1
million increase in expenses as a result of fluctuations in
the CPI;
- Net income - Net income decreased by $6 million in 2017 as compared to 2016. The
decrease is primarily due to (i) a $15 million increase in
cost of sales, (ii) a $3 million
increase in selling, general and administrative expenses mainly due
to a $2 million increase in payroll
and directors fees and a one-off grant, and a $1 million increase in professional and legal
fees, (iii) a $13 million increase in
finance expenses, net, (iv) a $9
million increase in tax expenses, primarily as OPC's income
before tax from 2017 included losses for which OPC did not register
a deferred tax asset, and decrease of corporate tax rate in 2016,
which impacted OPC's deferred taxes, and (v) a $2 million increase in depreciation and
amortization due to an earlier than scheduled maintenance of
OPC-Rotem plant, which increased fixed assets. These increases were
partially offset by a $41 million
increase in revenues; and
- EBITDA - EBITDA increased by $19
million in 2017, as compared to 2016, primarily for the
reasons specified above.
Liquidity and Capital Resources
As of December 31, 2017, OPC had
cash and cash equivalents of $147
million, deposits and restricted cash of $76 million, and consolidated indebtedness of
$618 million, consisting of
$30 million of short-term
indebtedness and $588 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
$288 million) (including 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 December 31, 2017, OPC-Hadera had invested an
aggregate of NIS 562 million
(approximately $162 million) in the
project and completed approximately 83% of the project.
Update on Tzomet Project
In April 2017, OPC entered into
agreements (including an option agreement) for the acquisition of
95% of the shares of Tzomet Energy Ltd., which is developing a
natural gas-fired power station in Israel with capacity of approximately 396 MW.
In August 2017, the Israeli
Electricity Authority ("EA") received a letter from the Israel
Concentration Committee stating that it believed that, for reasons
of broad economy concentration (i.e. taking into account businesses
owned by related entities of Kenon's controlling shareholder), OPC
should not be granted a contingent license for the construction of
the Tzomet facility. In March 2018,
OPC completed the acquisition of 95% of the shares of Tzomet
Energy, although Tzomet still requires (among other requirements) a
license from the EA. The total consideration for the acquisition is
estimated at approximately $23
million, subject to certain adjustments, of which
$3.65 million was paid in
March 2018, an additional
$3.65 million is expected to be paid
in the second quarter of 2018, and the remaining consideration will
be paid at financial closing of Tzomet project.
Agreement for Purchase of Natural Gas
In December 2017, OPC-Rotem and
OPC-Hadera signed agreements for the purchase of natural gas with
Energean. Pursuant to this agreement, OPC-Rotem and OPC-Hadera will
purchase from Energean 5.3 billion m3 and 3.7 billion
m3, respectively, of natural gas over a period of
fifteen years (subject to adjustments based on their actual
consumption of natural gas) or until the date of consumption of the
full contractual quantity, commencing at the commercial operation
date of the Energean natural gas reservoir. According to Energean's
public disclosure, the supply of gas is currently expected to
commence in 2021, however there is no guarantee that the gas supply
will be available by such date.
Qoros[2]
Updates 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 ($268
million) and Chery received total cash proceeds of
RMB 1.625 billion ($258 million).
The investment agreement for the transaction provides that
following the sale of equity interests, 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 New Qoros
Investor has advanced their proportionate share totalling
RMB3.315 billion directly to Qoros.
As a result, all funds for the investment, totalling RMB6.63 billion, have now been advanced by the
New Qoros Investor.
Kenon and Chery will use proceeds they received from the sale of
their Qoros interests to fund their respective portions of the
investment in Qoros, or to partially fund together with the
conversion of existing shareholder loans. The transaction will not
involve any new money invested from Kenon or Chery. In total, Kenon
is required to invest RMB1.56 billion
and as a result retained RMB130
million, which funds were paid to Ansonia as further
detailed below.
The investment agreement 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. Qoros has applied to the relevant
authorities to complete a capital increase of RMB6.5 billion, including the conversion of these
existing shareholder loans. In connection with this process,
the parties are in advanced discussions for Kenon and Chery to
retain amounts equal to the amounts of these shareholder loans in
the event they are converted to equity and therefore not be
required to fund these amounts to Qoros, ultimately maintaining a
substantially similar economic result. A portion of the loan
repayments to Kenon or sale proceeds retained by Kenon will be
applied to the repayment of shareholder loans from Ansonia, as
discussed below.
[2]
|
Convenience
translations of RMB amounts into US Dollars use a rate of 6.3: 1,
unless otherwise
indicated.
|
[3]
|
For purposes of this
section, any references to Kenon will be deemed to include Quantum
(Kenon's
wholly-owned subsidiary which owns Kenon's interest in Qoros) and
any references to Chery will
be deemed to include Wuhu Chery (the direct owner of Chery's
interest in Qoros).
|
Guarantee Obligations
As part of the investment, the New Qoros Investor will assume
its pro rata share of the guarantees and equity pledges based on
post-investment equity ownership in Qoros, which will be subject to
further adjustment following any future changes in the equity
ownership in Qoros (including as a result of the exercise of the
put option or investment right by a shareholder under the
investment agreement). The New Qoros Investor has assumed its
proportionate obligations with respect to the RMB3 billion and RMB700
million loan facilities, and as a result, in January 2018, Chery repaid Kenon RMB120 million (approximately $18 million[4]) out of the total RMB244 million (approximately $39 million) previously advanced, and a
significant portion of the Qoros equity pledged by Kenon to Chery
was released. These repayments and releases of equity pledges were
required under the terms of the advances, which provided for
repayment of the advances and release of pledges to Chery upon a
reduction of guarantee obligations of Chery, and the investment by
the New Qoros Investor resulted in guarantee reductions for Chery
requiring such repayment and releases from the pledge. The
New Qoros Investor is still in the process of assuming its
proportionate obligations with respect to the RMB1.2 billion loan facility after which Kenon
will also be proportionately released from its pledge obligations
thereunder, subject to the Qoros bank lender consent.
Substantially all of Kenon's equity in Qoros is currently
pledged.
[4]
|
Convenience
translations of RMB amount into US Dollars in January 2018 of 6.5:
1.
|
Repayment of Loans to Ansonia
Kenon is party to loan agreements with Kenon's major shareholder
Ansonia, which were entered into in 2016 to provide loans to Kenon
to fund Qoros. The total outstanding amount of the loans owing from
Kenon to Ansonia was approximately $75
million (including interest) as of December 31, 2017.
Under the terms of these loan agreements, Kenon is required to
use the proceeds from realizations of certain investments in Qoros
and repayments of shareholder loans from Qoros to Kenon to repay
the loans with Ansonia. Accordingly, $20
million in proceeds retained by Kenon from the sale of
equity in Qoros to the New Qoros Investor was applied to the
partial repayment of the Ansonia loans in January 2018, leaving a balance of approximately
$55 million (linked to RMB proceeds
received by Kenon) of loans owing to Ansonia. Amounts retained
under the new investment, including a portion of any Qoros
shareholder loan repayments or amounts retained by Kenon from the
sale of its interest in Qoros to the New Qoros Investor, would
similarly be required to be applied to the repayment of the Ansonia
loans.
Kenon's Put Option; the New Qoros Investor's Right to make
Further Investments in Qoros
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 a detailed disclosure of the investment in Qoros, see
Kenon's report on Form 6-K submitted to the SEC on January 8, 2018.
Business Updates
Car Sales
For the year ended December 31,
2017, Qoros sold approximately 15,000 cars, as compared to
approximately 24,000 cars in 2016. Qoros sold approximately 11,400
cars in the first quarter of 2018, as compared to approximately
3,700 total cars sold in the first quarter of 2017, of which a
substantial amount reflect purchase orders introduced by entities
related to the New Qoros Investor.
ZIM
Discussion of ZIM's Results for 2017
ZIM carried approximately 2,629 thousand TEUs in 2017,
representing an 8% increase as compared to 2016, in which ZIM
carried approximately 2,429 thousand TEUs. ZIM's revenues increased
by 17% in 2017 to approximately $3.0
billion, as compared to approximately $2.5 billion in 2016, due to the increase in
carried quantities, as well as the increase in industry container
freight rates. ZIM's operating expenses and cost of services
increased by 9% to approximately $2.6
billion, as compared to approximately $2.4 billion in 2016, primarily as a result of an
increase in cargo handling expenses, as well as an increase in
bunker prices.
Additional Kenon Updates
Sale of Inkia Businesses
On November 24, 2017, Kenon,
through its subsidiaries Inkia and IC Power Distribution Holdings
Pte. Ltd. ("ICPDH") entered into a share purchase agreement with
Nautilus Inkia Holdings LLC which is an entity controlled by I
Squared Capital, pursuant to which Inkia and ICPDH agreed to sell
all of their interests in power generation and distribution
companies in Latin America and the
Caribbean (the "Inkia Businesses")
in consideration for $1,332 million,
consisting of (i) $935 million cash
proceeds paid by the buyer, (ii) retained cash at Inkia of
$222 million, and (iii) $175 million, which was deferred in the form of a
Deferred Payment Obligation bearing interest of 8% per annum,
payable in kind. The buyer also assumed Inkia's obligations under
Inkia's $600 million 5.875% Senior
Unsecured Notes due 2027. The final purchase price is subject to
certain adjustments, including adjustments for working capital,
debt and cash at closing.
The consideration that Inkia received in the transaction is
before estimated transaction costs, management compensation,
advisor fees, other expenses and taxes, which are estimated to be
in the aggregate approximately $263
million, of which $27 million
comprises taxes to be paid upon payment of the $175 million Deferred Payment Obligation.
In January 2018, Kenon used a
portion of the proceeds of the transaction to repay debt of IC
Power ($43 million of net debt
outstanding), and to repay its loan facility with Israel
Corporation ($240 million including
accrued interest, and $3 million
withholding tax).
The net proceeds to Kenon after the repayment of certain debt,
taxes and expenses amounted to $635
million.
Cash distribution
In March 2018, Kenon distributed
$665 million to its shareholders as a
return of capital resulting from a capital reduction.
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of December 31, 2017, cash,
gross debt, and net debt[5] (a non-IFRS financial measure, which is
defined as gross debt minus cash) of Kenon (unconsolidated) were
$62 million, $240 million and $178
million, respectively.
The net proceeds from the sale of the Inkia Businesses, after
repayment of certain debt, taxes and expenses, amounted to
$635 million, consisting of (i)
$935 million cash received from the
sale and (ii) $222 million retained
cash at Inkia, minus (iii) $243
million repayment of the full outstanding loan from Israel
Corporation Ltd. ($240 million paid
to Israel Corporation, plus $3
million withholding tax), (iv) $43
million net debt full outstanding of IC Power, and (v)
$236 million expenses related to the
Inkia sale. An additional $27 million
in taxes remains to be paid upon payment of the $175 million Deferred Payment Obligation.
In January 2018, Kenon received
total cash proceeds of RMB1.69
billion ($268 million) from
the New Qoros Investor from the sale of its Qoros interests, which
Kenon will use to fund all or a portion of its required investment
in Qoros and repayments to Ansonia. Furthermore, in January 2018, Kenon used $20 million from these proceeds towards partial
repayment of loans to Ansonia. See the discussion above for a more
detailed discussion of the third party investment in Qoros, and
repayment of the Ansonia loans.
In January 2018, Chery repaid
Kenon RMB120 million (approximately
$18 million) out of the total
RMB244 million (approximately
$39 million) previously advanced by
Kenon, and a significant portion of the Qoros equity pledged by
Kenon to Chery was released prior to the transfer to the New Qoros
Investor. See the discussion above for a more detailed discussion
of the third party investment in Qoros with respect to Kenon's
Qoros guarantee obligations.
In March 2018, Kenon made a cash
distribution of $665 million.
[5]
|
Kenon's gross debt
and net debt do not include Kenon's back-to-back guarantee
obligations in respect of
Qoros' indebtedness, discussed in Kenon's report on Form 6-K
submitted to the SEC on January 8, 2018.
|
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on April 10, 2018. Kenon's
and OPC's managements 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:
|
1-866-229-7198
|
Israel:
|
03-918-0691
|
UK:
|
0-800-4048-418
|
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) – 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, financing and timing of the completion, (ii) with
respect to the sale of the Inkia Businesses, the final purchase
price, use of proceeds, and expected expenses relating to the
transaction including expected taxes,(iii) with respect to Qoros,
statements with respect to the terms of the third party investment
in Qoros by the New Qoros Investor, including statements with
respect to proceeds from the sale of equity interests to the New
Equity Investor retained by Kenon, assumption by the New Qoros
Investor of its pro rata share of the guarantees and equity
pledges, repayment of the shareholder loans to Ansonia and the
advanced discussions by the parties for Kenon to retain proceeds
from this sale in lieu of shareholder loan repayments, and (iv)
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 the sale of the Inkia Businesses, the amount of
final closing adjustments and expenses, including taxes, payable in
connection with the transaction, (iii) with respect to Qoros, risks
relating to the completion of the transactions contemplated by the
investment agreement, including repayment of shareholder loans and
the put option, and the outcome of discussions on the retention of
proceeds by Kenon from its sale of equity in Qoros to the New Qoros
Investor and (iv) 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.
Contact Info
|
Kenon Holdings
Ltd.
|
Jonathan
Fisch
Director, Investor
Relations
jonathanf@kenon-holdings.com
Tel: +1 917 891
9855
|
|
External Investor
Relations
Ehud Helft / Kenny
Green
GK Investor
Relations
kenon@gkir.com
Tel: +1 646 201
9246
|
View original
content:http://www.prnewswire.com/news-releases/kenon-holdings-reports-full-year-2017-results-and-additional-updates-300622574.html
SOURCE Kenon Holdings Ltd.