SINGAPORE, June 1, 2020 /PRNewswire/ -- Kenon
Holdings Ltd. (NYSE: KEN) (TASE: KEN)
("Kenon") announces its results for Q1 2020 and
additional updates to its businesses.
Key Highlights
OPC
- In May 2020, OPC announced that
SMS IDE Ltd. ("IDE") won a BOT tender for the construction
of a seawater desalination plant. OPC will develop a 99MW
cogeneration power plant at the premises of IDE's plant.
- OPC Energy Ltd.'s ("OPC") financial results for Q1
2020:
- OPC's revenue decreased to $89 million in Q1 2020, as compared to
$97 million in Q1 2019.
- OPC's net profit decreased to $11 million in Q1 2020, as compared to
$14 million in Q1 2019.
- OPC's EBITDA[1] decreased to
$27 million in Q1 2020, as compared
to $30 million in Q1 2019.
Qoros
- In April 2020, Kenon completed
the sale of half of its remaining interest in Qoros (i.e. 12%) to
the majority shareholder in Qoros Automotive Co., Ltd.
("Qoros") and received full payment of RMB1,560 million ($220
million). As a result, Kenon now holds a 12% interest in
Qoros, the majority shareholder holds 63% and Chery owns 25%.
- In addition, since December 2019,
Kenon received aggregate cash payments of $18 million from Chery in connection with
reductions in Chery's guarantee obligations.
Discussion of Results for the Three Months ended March 31, 2020
Kenon's consolidated results essentially comprise the
consolidated results of OPC. The results of Qoros (until
completion of the sale reducing Kenon's stake to 12%) and ZIM
Integrated Shipping Ltd. ("ZIM") are reflected under results
from associated companies.
See Exhibit 99.2 of Kenon's Form 6-K dated June 1, 2020 for summary Kenon consolidated
financial information; summary OPC consolidated financial
information; a reconciliation of OPC's EBITDA (which is a non-IFRS
measure) to net profit and summary operational information of OPC's
generation businesses.
OPC
The following discussion of OPC's results of operations is based
on OPC's consolidated financial statements, which are denominated
in New Israeli Shekels (NIS) and translated into US dollars for
purposes of Kenon's reporting.
Summary Financial
Information of OPC
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Q1
2020
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Q1
2019
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$
millions
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Revenues
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89
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97
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Cost of
sales
|
58
|
61
|
Finance Expenses,
net
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5
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5
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Net profit
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11
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14
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EBITDA
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27
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30
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[1] EBITDA is a non-IFRS measure. See Exhibit
99.2 of Kenon's Form 6-K dated June 1,
2020 for the definition of OPC's EBITDA and a reconciliation
to its net profit for the applicable period.
Revenue
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Q1
2020
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Q1
2019
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$
millions
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Revenue from energy
generated by OPC and sold to private customers
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|
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64
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71
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|
Revenue from energy
purchased by OPC and sold to private customers
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|
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-
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2
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|
Revenue from private
customers in respect of infrastructures services
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17
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19
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|
Revenue from energy
sold to the System Administrator
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3
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1
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Revenue from sale of
steam
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5
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4
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|
Total
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89
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97
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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 2020, as published by the EA in
January 2020, is NIS 0.2678 per KW hour. In
2019, the weighted-average generation component tariff was
NIS 0.2909 per KW hour. OPC's
revenues from sale of steam are linked partly to the price of gas
and partly to the Israeli Consumer Price Index (CPI).
- Revenue from energy generated by OPC and sold to private
customers – decreased by $7
million in Q1 2020, as compared to Q1 2019. As OPC's revenue
is denominated in NIS, translation of its revenue into US Dollars
had a positive impact of $3 million.
Excluding the impact of exchange rate fluctuations, revenues
decreased by $10 million primarily as
a result of (i) a $6 million decrease
in revenues due to the decrease in electricity tariffs in January,
and (ii) a $4 million decrease in
revenues due to lower consumption of OPC's customers, mainly
desalination customers that experienced unplanned maintenance in Q1
2020. The estimated impact of COVID-19 on OPC's customers'
electricity consumption in Q1 2020 was lower than $0.5 million.
- Revenue from energy purchased by OPC and sold to private
customers – decreased by $2
million in Q1 2020, as compared to Q1 2019, primarily as a
result of lower electricity consumption by OPC's customers.
- Revenue from private customers in respect of
infrastructures services – decreased by $2 million in Q1 2020, as compared to Q1 2019,
primarily as a result of (i) a $1
million decrease due to lower energy consumption, and (ii) a
$1 million decrease due to a decrease
in infrastructures services tariffs in January 2020.
- Revenue from energy sold to the System Administrator –
increased by $2 million in Q1 2020,
as compared to Q1 2019, primarily as a result of a higher volume of
electricity sold to the System Administrator.
Cost of sales
(Excluding Depreciation and Amortization)
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Q1
2020
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Q1
2019
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$
millions
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Natural gas and
diesel oil consumption
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35
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35
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Payment to IEC for
infrastructure services and purchase of electricity
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17
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20
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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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58
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61
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- Natural gas and diesel oil consumption – remained
similar to Q1 2019. Excluding the impact of exchange rate
fluctuations, natural gas consumption cost decreased by
$1 million, as a result of the
decrease in the generation component tariffs, as discussed
above.
- Payment to IEC for infrastructures services and purchase of
electricity – decreased by $3
million in Q1 2020, as compared to Q1 2019, primarily as a
result of (i) a $2 million decrease
due to lower electricity consumption of OPC's customers and lower
infrastructures services tariffs, and (ii) a $1 million decrease due to lower electricity
purchases from IEC.
Liquidity and Capital Resources
As of March 31, 2020, OPC had cash
and cash equivalents and short-term deposits of $78 million, debt service reserves (out of
restricted cash) of $40 million, and
total outstanding consolidated indebtedness of $660 million, consisting of $105 million of short-term indebtedness,
including the current portion of long-term indebtedness, and
$555 million of long-term
indebtedness. All of OPC's debt is denominated in NIS.
Business Developments
Sorek 2 Cogeneration Plant
On May 26, 2020, IDE notified OPC
that it had won a build-operate-transfer (BOT) tender with the
State of Israel for the
construction, operation and maintenance of a seawater desalination
plant ("Sorek 2").
OPC, through a fully owned subsidiary, has an agreement with
IDE, that provides that should IDE sign an agreement with the
State of Israel as a result of
winning the tender, OPC will construct, operate and maintain a
gas-fired cogeneration power plant with a capacity of up to 99MW at
the premises of the desalination plant, and sell electricity to the
desalination plant for a period of 25 years. IDE is a part of the
IDE Technologies group, specializing in desalination and water
treatment plants, and holds three operating seawater desalination
plants in Israel.
Update on OPC-Hadera
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 $281 million). As of
March 31, 2020, OPC-Hadera had
invested an aggregate of NIS 854
million (approximately $240
million).
Construction of the Hadera Power Plant has been completed and it
is currently in the commissioning stage. Commercial operation of
OPC-Hadera plant is expected in June
2020 - this takes into account delays that occurred during
the construction, including the expected timetable for replacement
of faulty components discovered during construction.
In March 2020 the EPC contractor
of the OPC-Hadera power plant notified OPC that, due to the
quarantine procedures and limitations imposed on entry into
Israel as a result of the spread
of COVID-19, the EPC contractor expects that should a foreign
technical team be required for the completion of the acceptance
tests of the OPC-Hadera power plant, there may be a delay in the
commercial operation of the power plant beyond June 2020. So far, there has been no need to
bring in a foreign team.
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 2020, OPC paid the
remaining consideration of $15.8
million for the original purchase of 95% of Tzomet shares.
The balance on the remaining 5% of approximately $7.5 million was paid in February and
March 2020. OPC now holds 100% of
Tzomet's shares.
As of March 31, 2020, OPC had
invested an aggregate of NIS 410
million (approximately $115
million) in the Tzomet project.
Due to the continued restrictions in Israel and worldwide and the need for teams
and equipment from overseas, as a result of the spread of COVID-19,
OPC estimates that the construction period of the Tzomet power
plant could continue beyond 2022 and is currently expected to be
completed in the first quarter of 2023.
Ramat Hovav Tender
In May 2020 OPC Noy Ramat Hovav
Ltd., a joint venture company with 50% of its share capital held by
OPC and the remaining 50% held by Noy Power Plants Limited
Partnership, submitted a bid as part of the tender for the purchase
of the Ramat Hovav power facility in Israel. Ramat Hovav is a 1,137MW aggregate
capacity site, operated with natural gas.
Qoros
Qoros sold approximately 500 cars in Q1 2020 compared to
approximately 800 cars in Q1 2019.
ZIM
Discussion of ZIM's Results for Q1 2020
ZIM carried approximately 638 thousand TEUs in Q1 2020,
representing a 4% decrease as compared to Q1 2019, in which ZIM
carried approximately 668 thousand TEUs. The average freight rate
per TEU in Q1 2020 was $1,091 per
TEU, as compared to $1,019 per TEU in
Q1 2019, representing a 7% increase.
ZIM's revenues increased by 3% in Q1 2020 to approximately
$823 million, as compared to
approximately $796 million in Q1
2019, due to an increase in income from containerized cargo and
income from slots. ZIM's operating expenses and cost of services
decreased by 1% in Q1 2020 to approximately $698 million, as compared to approximately
$703 million in Q1 2019.
Additional Kenon Updates
Kenon's (Unconsolidated) Liquidity and Capital
Resources
As of March 31, 2020, Kenon's
unconsolidated cash balance was $31
million. There is no material debt at the Kenon level.
In April 2020, Kenon completed the
sale of half of its remaining interest in Qoros (i.e. 12%) to the
majority shareholder in Qoros and received full payment of
approximately $220 million. In
addition, in April and May 2020,
Kenon received aggregate cash payments of $7
million from Chery in connection with reductions in Chery's
guarantee obligations. As of May 31,
2020, Kenon's unconsolidated cash balance was $254 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 March 31,
2020 including principal and accrued interest is
$208 million). The deferred payment
is subject to tax.
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 (70% interest) – a leading owner, developer and operator of
power generation facilities in the Israeli power market;
- Qoros (12% 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. In light of market
conditions, Primus has decided to significantly reduce its
operations.
For further information on Kenon's businesses, 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
relating to the OPC-Hadera and Tzomet projects, including expected
installed capacity, cost, and timing of commercial operation and
acceptance tests of the projects and the expected impact of the
delay in OPC-Hadera's construction and related compensation and
insurance, the expected impact on such projects of the COVID-19
pandemic and statements with respect to the Ramat Hovav tender, the
Sorek 2 Cogeneration Plant 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 risks relating to a potential failure to complete the
development and reach commercial operation of the OPC-Hadera and
Tzomet projects on a timely basis, within the expected budget, or
at all, including risks related to costs associated with delays in
reaching commercial operation and other risks and factors
including the impact of the COVID-19 outbreak and
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
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Kenon Holdings
Ltd.
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Jonathan
Fisch
Director, Investor
Relations
jonathanf@kenon-holdings.com
Tel: +44 20 7659
4186
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SOURCE Kenon Holdings Ltd.