SINGAPORE, Aug. 30, 2018 /PRNewswire/ -- Kenon
Holdings Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon")
announces its results for Q2 2018 and additional updates to its
businesses.
Key Highlights
OPC
- Revenue in Q2 2018 amounted to $84
million, reflecting no material change from Q2 2017.
- Net profit in Q2 2018 was nil, as compared to a net loss of
$10 million in Q2 2017.
- EBITDA[1] in Q2 2018 increased to $18
million, as compared to $14
million in Q2 2017.
Qoros
- Car sales increased by over 500%, with approximately 19,200
cars sold in the second quarter of 2018, as compared to
approximately 3,000 cars sold in the second quarter of 2017. Sales
in 2018 include orders from a leasing company introduced by the New
Qoros Investor in accordance with the investment agreement.
- Revenue in Q2 2018 increased to approximately $276 million, as compared to approximately
$40 million in Q2 2017.
- Kenon retained a total of $150
million of cash proceeds following the completion of its
funding obligations and conversion of shareholder loans, of which
$57 million was used to repay the
outstanding balance owed to Ansonia.
Discussion of Results for the Three Months ended June 30, 2018
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC
Energy Ltd. ("OPC"). The results of Qoros Automotive Co., Ltd.
("Qoros") and ZIM Integrated Shipping Ltd. ("ZIM") are reflected
under results from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated August 30, 2018 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; summary Qoros financial information; a reconciliation
of OPC's EBITDA (which is a non-IFRS measure) to net profit;
summary operational information of OPC's generation businesses; and
a reconciliation of Qoros' Adjusted EBITDA (which is a non-IFRS
measure) to net loss.
OPC
The following discussion of OPC's results of operations is based
on OPC's consolidated financial statements.
Summary Financial
Information of OPC
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Q2
2018
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Q2
2017
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($
millions)
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Revenue
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84
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84
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Cost of sales
(excluding depreciation and amortization)
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62
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67
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Finance expenses,
net
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9
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16
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Net profit /
(loss)
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-
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(10)
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EBITDA
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18
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14
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Revenue
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For the 3 months
ended
June 30,
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2018
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2017
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$
millions
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Revenue from energy
generated by OPC and sold to private customers
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56
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46
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Revenue from energy
purchased by OPC and sold to private customers
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4
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10
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Revenue from private
customers in respect of infrastructures services
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20
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23
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Revenue from energy
sold to the System Administrator
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-
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1
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Revenue from sale of
steam
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4
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4
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Total
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84
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84
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OPC's revenue from the sale of electricity to private customers
stem from electricity sold at the generation component tariffs, as
published by Israeli's Electricity Authority ("EA"), with some
discount. The weighted-average generation component tariff for
2018, as published by the EA in January
2018, is 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, which differs from that of
the customers of OPC-Rotem and OPC-Hadera. In addition, 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 – increased by $10
million in Q2 2018, as compared to Q2 2017, primarily as a
result of (i) a $6 million increase
as a result of higher energy sales due to higher availability at
OPC-Rotem, as in 2017 the OPC-Rotem plant was undergoing
maintenance work, (ii) a $3 million
increase as a result of the generation component price increase, as
discussed above, and (iii) a $3
million increase due to higher consumption by OPC's
customers. The increase was partially offset by $2 million non-recurring income in 2017 related
to past reconciliation with private customers.
- Revenue from energy purchased by OPC and sold to private
customers – decreased by $6
million in Q2 2018, as compared to Q2 2017, primarily as a
result of higher availability of OPC-Rotem in 2018, as discussed
above.
- Revenue from private customers in respect of infrastructures
services – decreased by $3
million in Q2 2018, as compared to Q2 2017, primarily as a
result of a decrease in the infrastructure services tariffs in the
beginning of 2018, as compared to 2017.
- Revenue from energy sold to the System Administrator –
decreased by $1 million in Q2 2018,
as compared to Q2 2017, primarily as a result of higher energy
consumption of OPC's private customers.
Cost of Sales
(Excluding Depreciation and Amortization)
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For the 3 months
ended
June 30,
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2018
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2017
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$
millions
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Natural gas and
diesel oil consumption
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32
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28
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Payment to IEC for
infrastructure services and purchase of electricity
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24
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33
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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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62
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67
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- Natural gas and diesel oil consumption – increased by
$4 million in Q2 2018, as compared to
Q2 2017, primarily due to higher natural gas consumption, as a
result of the higher availability of OPC-Rotem in 2018, as
discussed above.
- Payment to IEC for infrastructures services and purchase of
electricity – decreased by $9
million in Q2 2018, as compared to Q2 2017, primarily as a
result of (i) a $6 million decrease
due to higher availability of OPC-Rotem in 2018, as discussed
above, (ii) a $3 million decrease due
to a decrease in infrastructures services tariffs in the beginning
of 2018, and (iii) a $1 million
decrease related to a non-recurrent past reconciliation with
private customers in 2017. The decrease was partially offset by a
$1 million increase due to higher
consumption of private customers.
Financing Expenses, Net
Financing expenses, net decreased by $7
million in Q2 2018, as compared to Q2 2017. The decrease was
primarily due to (i) a $6 million
early prepayment fee in respect of a repayment of a mezzanine loan
in Q2 2017, and (ii) a $2 million
decrease due to the impact of changes in the US Dollar-NIS exchange
rate. The decrease was partially offset by a $1 million increase in OPC-Rotem's senior debt
interest expenses as a result of an increase in the CPI.
Net Profit
Net profit increased by $10
million in Q2 2018 to nil, as compared to a net loss of
$10 million in Q2 2017, primarily as
a result of the reasons discussed above.
EBITDA
EBITDA increased by $4 million in
Q2 2018 to $18 million, as compared
to $14 million in Q2 2017, primarily
as a result of the reasons discussed above.
Liquidity and Capital Resources
As of June 30, 2018, OPC had cash
and cash equivalents of $133 million,
deposits and restricted cash of $75
million, and consolidated indebtedness of $587 million, consisting of $23 million of short-term indebtedness and
$564 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
$274 million).
Construction of the OPC-Hadera plant began in June 2016. As of June 30,
2018, OPC-Hadera had invested an aggregate of NIS 700 million (approximately $192 million) in the construction of the Hadera
power plant and related infrastructure.
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 (not including project development
costs), subject to certain adjustments, of which $7.3 million has been paid to date.
Tzomet still requires (among other requirements) a license for
the project from the 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.
In June 2016, Tzomet submitted an
application to IEC relating to a feasibility study for connection
of the facility to the national electricity network (the
"Feasibility Study"). A positive feasibility study is required as
part of the development of the Tzomet power plant. According to the
results of the Feasibility Study received in August 2017, there is no certainty with respect
to the timetable for connection of the plant to the national
electricity network. Tzomet filed an appeal of the results of the
Feasibility Study with the EA. In May
2018, the EA issued its decision whereby no fault was found
with the results of the Feasibility Study, and, therefore, there
are no grounds to contest it. Tzomet believes it will be able to
obtain a positive feasibility study for connection to the national
transmission network. Accordingly, in June
2018, Tzomet submitted a request for a new feasibility
study. The results of the new feasibility study have not yet been
received.
In March 2018, the District Court
for Administrative Matters in Israel rejected an administrative petition
filed by the City of Kiryat Gat, relating to a change in regulation
in 2017 that allowed for the conversion of Tzomet power plant from
a combined cycle to an open cycle layout. In May 2018, the City of Kiryat Gat filed an appeal
of the decision with the Israeli Supreme Court. A hearing of the
appeal is set for November 2018.
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 for RMB3.315
billion (approximately $501
million), which was part of an investment structure to
invest a total of approximately RMB6.63
billion (approximately $1,002
million) by the New Qoros Investor of which RMB6.5 billion has been invested in Qoros'
equity. As a result, Kenon's stake in Qoros was reduced to 24%. In
connection with this investment, Kenon received total cash proceeds
of RMB 1.69 billion (approximately
$255 million). Kenon used
$20 million of the proceeds to repay
a portion of shareholder loans from Ansonia, Kenon's major
shareholder.
In July 2018, the relevant
authorities in China approved the
capital increase of RMB6.5 billion,
including the conversion of existing shareholder loans owing from
Qoros in the principal amount of RMB944
million (approximately $143
million) to each of Kenon and Chery. As part of the
investment, Kenon converted all of its shareholder loans to equity,
invested RMB616 million
(approximately $93 million) in Qoros
and retained a total of $150 million
of cash proceeds from the investment. Kenon does not have any
further obligations to invest in Qoros.
Quantum used a portion of these funds to repay the outstanding
balance of $57 million owed to
Ansonia, Kenon's major shareholder, which had previously been
loaned directly to Quantum to support its financing of Qoros.
In addition, Qoros is required to pay to Kenon net interest
payments on past shareholder loans as well as compensation for
foreign exchange fluctuations in the total net amount of
approximately $11 million, of which
$7 million has been received to
date.
For further information on 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 19,200 cars in the second quarter of
2018, an increase of over 500% as compared to approximately 3,000
cars sold in the second quarter of 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 Q2 2018
Qoros' revenue increased in Q2 2018 to RMB1,827 million (approximately $276 million), as compared to RMB272 million (approximately $40 million) in Q2 2017, primarily due to the
increase in car sales.
Qoros' cost of sales increased in Q2 2018 to RMB1,955 million (approximately $295 million), as compared to RMB374 million (approximately $55 million) in Q2 2017, mainly as a result of
the increase in car production.
Qoros' gross margin improved to negative 8% in Q2 2018, as
compared to negative 37% in Q2 2017. Qoros' gross loss slightly
increased by RMB26 million
(approximately $5 million) to
RMB128 million (approximately
$20 million) in Q2 2018, as compared
to RMB102 million (approximately
$15 million) in Q2 2017, as a result
of an increase in depreciation and amortization, among others
Qoros' depreciation and amortization increased in Q2 2018 to
RMB163 million (approximately
$25 million), as compared to
RMB86 million (approximately
$13 million) in Q2 2017, mainly due
to the increase in car production.
Qoros' net loss for Q2 2018 was RMB322
million (approximately $49
million), as compared to RMB42
million (approximately $6
million) in Q2 2017, which included a one-off revenue
recognition of the amortized balance under the license agreement
with Chery of RMB 263 million
(approximately $39 million).
Qoros' Adjusted EBITDA[3] slightly decreased from negative
RMB125 million (approximately
negative $18 million) in Q2 2017 to
negative RMB136 million
(approximately negative $21 million)
in Q2 2018, due to the factors above.
ZIM
Discussion of ZIM's Results for Q2 2018
ZIM carried approximately 772 thousand TEUs in Q2 2018,
representing a 17% increase as compared to Q2 2017, in which ZIM
carried approximately 659 thousand TEUs. ZIM's revenue increased by
8% in Q2 2018 to $803 million, as
compared to $746 million in Q2 2017,
primarily due to the increase in carried quantities. ZIM's
operating expenses increased by 16% to $757
million in Q2 2018, as compared to $650 million in Q2 2017, primarily as a result of
(i) a $39 million increase in bunker
expense, (ii) a $30 million increase
in cargo handling expenses, (iii) a $21
million increase in lease expense of vessels and containers,
and (iv) a $16 million increase in
port expenses.
Additional Kenon Updates
Changes in Kenon's Management
In July 2018, Kenon announced that
Mr. Barak Cohen, co-chief executive
officer ("Co-CEO") of Kenon, will step down as Co-CEO of Kenon. Mr.
Cohen has been appointed as a member of the Board of Directors of
Kenon, with effect from his resignation as Co-CEO. Mr. Cohen will
remain a director of OPC and Qoros.
Mr. Robert L. Rosen, who is
currently Co-CEO of Kenon, will remain as CEO of Kenon following
Mr. Cohen's resignation.
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of June 30, 2018, Kenon's
unconsolidated cash balance was $45
million. In addition, Kenon's wholly-owned subsidiary
Quantum, which holds Kenon's interest in Qoros, held cash of
approximately $243 million (US dollar
equivalent) as of June 30, 2018,
which reflects proceeds from the sale of its interest in Qoros to
the New Qoros Investor.
Following the completion of the capital increase and the
fulfilment of Kenon's funding obligations, as discussed above,
Quantum retained cash of approximately $150
million. Quantum used a portion of these funds to repay the
outstanding balance of $57 million
owed to Ansonia, Kenon's major shareholder. In addition, as
discussed above, Qoros is required to pay to Kenon approximately
$11 million, of which approximately
$7 million has been received to date.
For a discussion of the repayment of loans to Ansonia, see Kenon's
Annual Report on Form 20-F for the year ended December 31, 2017.
Kenon has 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 ($182 million including accrued interest as of
June 30, 2018) deferred payment is
subject to tax.
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on August 30, 2018, 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:
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31583851
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US:
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1-888-281-1167
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Israel:
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03-
9180685
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UK:
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0-800-917-9141
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International:
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+65-31583851
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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 and cost, and statements with respect to the pursuit of a
licence from the EA for the Tzomet project, statements with respect
to the Feasibility Study, statements with respect to administrative
and regulatory proceedings and expectations of outcomes of such
proceedings, (ii) with respect to Qoros, statements with respect to
the transactions relating to the investment by the New Qoros
Investor, including Kenon's intention to repay the shareholder
loans from Ansonia with the proceeds of such investment, and
amounts payable to Kenon from 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 the Feasibility Study, obtaining the EA license
and other approvals required to proceed with the Tzomet project and
results of administrative and regulatory proceedings, (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 remaining 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 August [30], 2018 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 6.62: 1.
[3] Adjusted EBITDA is a non-IFRS measure. See Exhibit 99.2 of
Kenon's Form 6-K dated August 30,
2018 for the definition of Qoros' Adjusted EBITDA and a
reconciliation to its net loss for the applicable period.
Contact Info
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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SOURCE Kenon Holdings Ltd.