SINGAPORE, Dec. 17, 2019 /PRNewswire/ -- Kenon Holdings
Ltd. (NYSE: KEN) (TASE: KEN) ("Kenon") announces
its results for Q3 2019 and additional updates to its
businesses.
Key Highlights
OPC
- OPC's revenue increased to $102
million in Q3 2019, as compared to $94 million in Q3 2018.
- OPC's net profit increased to $14
million in Q3 2019, as compared to $11 million in Q3 2018.
- OPC's EBITDA[1] increased to $33
million in Q3 2019, as compared to $29 million in Q3 2018.
Qoros
- Material government approvals and third party consents obtained
for the sale by Kenon of half (12%) of its remaining interest (24%)
in Qoros to the majority shareholder in Qoros. The parties have
agreed payment of the purchase price and closing to be made by the
end of Q1 2020.
Kenon
- Kenon paid a dividend of approximately $65 million in November
2019.
Discussion of Results for the Three Months ended September 30, 2019
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC
Energy Ltd. ("OPC"). The results of Qoros Automotive Co., Ltd.
("Qoros") and ZIM Integrated Shipping Ltd. ("ZIM") are reflected
under results from associates.
See Exhibit 99.2 of Kenon's Form 6-K dated December 17, 2019 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; a reconciliation of OPC's EBITDA (which is a non-IFRS
measure) to net profit; and summary operational and financial
information of OPC and its subsidiaries.
OPC
The following discussion of OPC's results of operations is based
on OPC's consolidated financial statements, as translated into US
dollars.
Summary Financial
Information of OPC
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|
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Q3
2019
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|
|
Q3
2018
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|
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$
millions
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Revenue
|
|
|
102
|
|
|
|
94
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|
Cost of sales
(excluding depreciation and amortization)
|
|
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69
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|
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61
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Finance expenses,
net
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5
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|
|
6
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Net profit
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|
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14
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11
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EBITDA
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|
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33
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29
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Revenue
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|
|
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Q3
2019
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Q3
2018
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$
millions
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|
Revenue from energy
generated by OPC and sold to private customers
|
|
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68
|
|
|
|
61
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Revenue from energy
purchased by OPC and sold to private customers
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9
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7
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Revenue from private
customers in respect of infrastructures services
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21
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21
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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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|
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4
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Total
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102
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|
|
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94
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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 – increased by $7
million as compared to Q3 2018, primarily as a result of (i)
a $2 million increase due to the
increase in the generation component tariff in 2019, (ii) a
$2 million increase in electricity
consumption by OPC's private customers and (iii) a $2 million positive impact from the translation
of OPC's revenue to US Dollars.
- Revenue from energy purchased by OPC and sold to private
customers – increased by $2
million as compared to Q3 2018 primarily due to an increase
in electricity consumption by OPC's private customers.
Cost of Sales
(Excluding Depreciation and Amortization)
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Q3
2019
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Q3
2018
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$
millions
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Natural gas and
diesel oil consumption
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33
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29
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Payment to IEC for
infrastructure services and purchase of electricity
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30
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27
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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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3
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Total
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69
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61
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- Natural gas and diesel oil consumption – increased by
$4 million as compared to Q3 2018,
primarily as a result of (i) a $2
million one-off diesel oil reimbursement from the Israel
Electric Corporation ("IEC") in Q3 2018, (ii) a $1 million increase due to higher gas prices, as
the gas price is indexed to the generation component tariff and
(iii) a $1 million increase due to
the impact of the translation of OPC's cost of sales to US
Dollars.
- Payment to IEC for infrastructures services and purchase of
electricity – increased by $3
million as compared to Q3 2018, primarily as a result of (i)
a $2 million increase in electricity
purchases due to higher consumption by OPC's customers and (ii) a
$1 million increase due to impact of
translation of OPC's cost of sales to US Dollars
Liquidity and Capital Resources
As of September 30, 2019, OPC had
cash and cash equivalents and short-term deposits of $251 million, restricted cash of $72 million, and total outstanding consolidated
indebtedness of $627 million,
consisting of $41 million of
short-term indebtedness and $586
million of long-term indebtedness. All of OPC's debt is
denominated in NIS.
Business Developments
OPC[2]
Update on the Construction of the OPC-Hadera
Plant
OPC-Hadera is in process of commissioning a 148 MW
co-generation power plant in Israel. OPC expects that the total cost of
completing the OPC-Hadera power plant will be approximately
NIS 1 billion (approximately
$286 million).
As of September 30, 2019,
OPC-Hadera had invested an aggregate of NIS
853 million (approximately $244
million) in the construction of the OPC-Hadera power plant
and related infrastructure.
Construction of the OPC-Hadera power plant has been completed
and it is currently in the commissioning stage, which is expected
to continue during Q4 2019 and up to the end of January 2020. OPC's management expects that the
OPC-Hadera power plant will begin commercial operations
("Commercial Operations Commencement Date") in Q1 2020 – this takes
into account the delays that occurred due to defective components
discovered and actions required in order to complete the
commissioning stage.
In July 2019, the Minister of
National Infrastructures, Energy and Water approved the
postponement of the Commercial Operations Commencement Date
milestone stated in OPC-Hadera's conditional license to
March 2020, and OPC-Hadera's lenders
agreed to extend the Commercial Operations Commencement
Date in the OPC-Hadera loan agreement to the end of
March 2020. OPC's 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 the
delay in the Commercial Operations Commencement Date. As a result,
OPC's management does not expect the delay to result in a material
change to the estimated construction cost of the OPC-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 the 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. According to the
relevant regulation, the Tzomet project is required to reach
financial closing by January 1, 2020,
which requires additional approvals, including securing grid
connection, securing land rights, and obtaining certain
construction permits.
In September 2019, Tzomet received
the results of a connection study performed by the system
administrator unit of IEC. The connection study included a
limitation on output to the grid when the power plant is at full
capacity beyond a limited number of hours per year; this limitation
would apply until completion of certain transmission projects by
IEC, which are expected to be completed by the end of 2023. OPC's
management believes that notwithstanding this limitation on output,
the connection study complies with the regulatory requirements of
the Electricity Authority (EA).
In December 2019, Tzomet and a
consortium of financing institutions, led by Bank Hapoalim, signed
a financing agreement to fund the construction of the Tzomet power
plant. The overall credit facilities amount to up to NIS 1.37 billion ($391
million), and are comprised of long-term loans up to
NIS1.2 billion ($343 million) for the construction of the
project, including budget overruns, a standby facility up to
NIS57 million ($16 million), and smaller facilities, including
to fund working capital, VAT, guarantees, hedging and the debt
service reserve account. The credit facilities are denominated in
NIS, linked to the Israeli consumer price index or the US Dollar.
The interest on the loan-term facility and the standby facility are
at Israel Prime Interest rate plus margin of between 0.5% to
1.5%.
In December 2019, Tzomet and
Israel Natural Gas Lines Ltd signed an agreement for the transport
of natural gas to the Tzomet power plant. The annual transportation
cost is estimated at NIS25 million
($7 million).
OPC's management expects that Tzomet will comply with the
requirements and meet the deadline for financial closing.
Nonetheless, as some of the conditions have yet to be fulfilled and
are dependent on factors beyond Tzomet's control, uncertainty
exists as to whether the Tzomet project will be successfully
completed.
Amendment of Gas Supply Agreements
The gas supply agreements between each of OPC-Rotem and
OPC-Hadera and the Tamar Group were recently amended to (i) change
the provision which allowed OPC-Rotem and OPC-Hadera to exercise an
option to reduce gas consumption under the relevant agreement by
50% of the average annual self-gas consumption in the three years
prior to exercise of the option to 40% for OPC-Rotem and 30% for
OPC-Hadera, (ii) extend the time period when OPC-Hadera can
exercise the option from the end of 2020 to the end of 2022 and
(iii) increase certain gas consumption commitments of OPC-Rotem and
OPC-Hadera until the end of the Karish gas reservoir
commissioning.
In addition, the gas supply agreement between OPC-Rotem and
Energean (which has holdings in, among others, the Karish gas
reservoir mentioned above) was amended to increase the daily and
annual gas consumption from Energean, while keeping the same total
contractual gas quantity. The supply period was shortened from 15
years to 10 years (unless the total contractual quantity is
supplied earlier).
These amendments are intended to allow a reduction in the
quantity of gas that is being purchased under the agreements with
Tamar and an increase in the quantity that is being purchased under
the terms of the agreements with Energean, with the purpose of
decreasing the overall gas price of OPC-Rotem and OPC-Hadera.
Successful Tender for Capacity through Generation Capacity
to be Installed at Customers.
OPC is working with certain customers in connection with the
successful tender for capacity of 65MW through the installation of
generation facilities on the premises of customers. The
arrangements with customers would provide for a discount on the
generation component tariff and savings of the infrastructure
services tariff. Each agreement, on its own, is not expected to be
material for OPC.
Qoros[3]
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 (the "purchaser") for a purchase price of RMB1,560 million (approximately $223 million).
The parties have recently obtained material government approvals
and third party consents for the sale. In December 2019, the parties entered into an
agreement which provides that the deadline for payment of the
purchase price shall be the end of Q1 2020. This
agreement includes provisions to secure the performance of the
purchaser, namely a guarantee to Kenon by another company within
the Baoneng group, guaranteeing timely performance of purchaser's
obligations under the sale agreement, and a deposit of RMB500 million (approximately US$71 million) by an associate of the purchaser
into a segregated bank account, and the parties have agreed that
such amounts may not be withdrawn without Kenon's consent. The
agreement also provides that if the purchase price is not paid by
the end of Q1 2020, the parties may, but have no obligation to,
discuss an extension and, in that case, an amount equal to the full
purchase price (including the prior amounts) is required to be paid
into a similar segregated bank account. Following completion
of the sale, Kenon will hold a 12% interest in Qoros.
Qoros Sales
Qoros sold approximately 11,300 cars in Q3 2019, primarily
reflecting orders from leasing companies introduced by Qoros'
majority shareholder.
ZIM
Discussion of ZIM's Results for Q3 2019
ZIM's revenue in Q3 2019 was $842
million, comparable to $841
million in Q3 2018. ZIM carried approximately 725 thousand
TEUs in Q3 2019, representing a 1% decrease as compared to Q3 2018,
in which ZIM carried approximately 730 thousand TEUs. The average
freight rate per TEU in Q3 2019 was $1,009 per TEU, comparable to $1,006 per TEU in Q3 2018. ZIM's operating
expenses decreased by 8% to $704
million in Q3 2019, as compared to $768 million in Q3 2018, primarily as a result of
(i) a $55 million decrease in bunker
expenses, (ii) a $23 million decrease
in port expenses and (iii) a decrease in agents' commissions of
$6 million. This was offset by (i) a
$25 million increase in cargo
handling expenses.
Additional Kenon Updates
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of September 30, 2019, Kenon's
unconsolidated cash balance was $29
million. There is no material debt at the Kenon level.
In October 2019 Kenon received
$30 million, as awarded by the
favorable ruling in an arbitration proceeding, and in November 2019 Kenon received $38 million (net of withholding tax) from a
dividend distribution of OPC. Following Kenon's payment of the
$65 million dividend in November 2019, Kenon retained cash of
approximately $26 million.
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 receivable as at September 30,
2019 including principal and accrued interest is
$201 million). The deferred payment
is subject to tax.
Investors' Conference Call
Kenon's management will host a conference call for investors and
analysts on December 17, 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:
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3158-3851
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US:
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1-866-229-7198
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Israel:
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03-9180692
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UK:
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0800-4048-418
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International:
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+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 10:00 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[4]) – 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, (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 and completion of
other stages of the projects, the impact of the delay 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 that OPC expects to comply with the Tzomet project
conditions, statements with respect to expected financing for the
projects and the payment of the remaining consideration, statements
with respect to the expected completion dates of the IEC
transmission projects and the expected compliance of the Tzomet
connection study with regulatory requirements, statements
regarding the amendments to the gas supply agreements and their
intended effects and statements regarding the expected benefits of
the installation of generation facilities on customer premises and
(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, and statements relating to
the amendment of that agreement including the extended deadline for
payment of the purchase price and related amendments, including the
provisions requiring a parent guarantee of the buyer's obligations
and the requirement to deposit funds into a segregated account.
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
projects and costs associated with delays in reaching commercial
operation, the failure to achieve the intended benefits of the gas
supply agreement amendments and the failure to complete the
installation of generation facilities on customer premises as
intended or at all (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
purchase price may not be paid by the extended deadline, risks
relating to required 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
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 December 17,
2019 for the definition of OPC's EBITDA and a reconciliation
to its net profit for the applicable period.
[2] Convenience translations of NIS amounts into US Dollars use
a rate of 3.50: 1.
[3] Convenience translations of RMB amounts into US Dollars
use a rate of 7.00: 1.
[4] 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.