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Kenon Holdings Ltd.
Quarterly Report • Aug 30, 2018
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Quarterly Report
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF A FOREIGN ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934
August 30, 2018
Commission File Number 001-36761
Kenon Holdings Ltd.
1 Temasek Avenue #36-01 Millenia Tower Singapore 039192 (Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If ''Yes'' is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
EXHIBITS 99.1 AND 99.2 TO THIS REPORT ON FORM 6-K ARE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-201716) OF KENON HOLDINGS LTD. AND IN THE PROSPECTUSES RELATING TO SUCH REGISTRATION STATEMENT.
Exhibits
99.1 Press Release, dated August 30, 2018: Kenon Holdings Reports Q2 2018 Results and Additional Updates 99.2 Q2 2018 Summary Financial Information of Kenon, OPC and Qoros and Reconciliation of Certain Non-IFRS Financial Information
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KENON HOLDINGS LTD.
| Date: August 30, 2018 | By: | /s/ Barak Cohen |
|---|---|---|
| Name: Barak Cohen | ||
| Title: | Co-Chief Executive Officer | |
| KENON HOLDINGS LTD. | ||
| By: | /s/ Robert L. Rosen | |
| Name: Robert L. Rosen | ||
| Title: | Co-Chief Executive Officer | |
| 3 |
Exhibit 99.1
Qoros' car sales increased by over 500%; OPC demonstrated solid results
Kenon Holdings Reports Q2 2018 Results and Additional Updates
Singapore, August 30, 2018. 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.
EBITDA1 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.
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.
OPC
The following discussion of OPC's results of operations is based on OPC's consolidated financial statements.
Summary Financial Information of OPC
| Q2 2018 | Q2 2017 | |
|---|---|---|
| (\$ millions) | ||
| Revenue | 84 | 84 |
| Cost of sales (excluding depreciation and amortization) | 62 | 67 |
| Finance expenses, net | 9 | 16 |
| Net profit / (loss) | - | (10) |
| EBITDA | 18 | 14 |
Revenue
| For the 3 months ended June 30, | |||
|---|---|---|---|
| 2018 | 2017 | ||
| \$ millions | |||
| Revenue from energy generated by OPC and sold to private customers | 56 | 46 | |
| Revenue from energy purchased by OPC and sold to private customers | 4 | 10 | |
| Revenue from private customers in respect of infrastructures services | 20 | 23 | |
| Revenue from energy sold to the System Administrator | - | 1 | |
| Revenue from sale of steam | 4 | 4 | |
| Total | 84 | 84 |
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.
Cost of Sales (Excluding Depreciation and Amortization)
| For the 3 months ended June 30, | |||
|---|---|---|---|
| 2018 | 2017 | ||
| \$ millions | |||
| Natural gas and diesel oil consumption | 32 | 28 | |
| Payment to IEC for infrastructure services and purchase of electricity | 24 | 33 | |
| Natural gas transmission | 2 | 2 | |
| Operating expenses | 4 | 4 | |
| Total | 62 | 67 |
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.
Qoros2
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.
2 Convenience translations of RMB amounts into US Dollars use a rate of 6.62: 1.
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 EBITDA1 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.
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.
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: | 31583851 |
|---|---|
| US: | 1-888-281-1167 |
| Israel: | 03- 9180685 |
| UK: | 0-800-917-9141 |
| International: | +65-31583851 |
At: 9:00 am Eastern Time, 6:00 am Pacific Time, 2:00 pm UK Time, 4:00 pm Israel Time and 9:00 pm Singapore Time.
For those unable to participate, the teleconference will be available for replay on Kenon's website at http://www.kenon-holdings.com beginning 24 hours after the call.
About Kenon
Kenon is a holding company that operates dynamic, primarily growth-oriented businesses. The companies it owns, in whole or in part, are at various stages of development, ranging from established, cash-generating businesses to early stage development companies. Kenon's businesses consist of:
OPC Energy (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.
Contact Info
Kenon Holdings Ltd. Jonathan Fisch Director, Investor Relations [email protected] Tel: +1 917 891 9855
Exhibit 99.2
Financial Information for the Three Months Ended June 30, 2018 of Kenon, OPC and Qoros and
Reconciliation of Certain Non-IFRS Financial Information
Table of Contents
- Appendix A: Summary Kenon consolidated financial information
- Appendix B: Summary OPC consolidated financial information
- Appendix C: Definition of OPC's EBITDA and non-IFRS reconciliation
- Appendix D: Summary financial information of OPC's subsidiaries
- Appendix E: Summary operational information of OPC
- Appendix F: Summary of Qoros' Unaudited Condensed Consolidated Financial Information
- Appendix G: Definition of Qoros' Adjusted EBITDA and non-IFRS Reconciliation
Summary Kenon consolidated financial information
Kenon Holdings Ltd and subsidiaries Consolidated Statements of Financial Position as of June 30, 2018 and December 31, 2017
| As of June 30, | As of December 31, 2017 |
|
|---|---|---|
| 2018 | ||
| \$ millions | ||
| Current assets | ||
| Cash and cash equivalents | 429 | 1,417 |
| Short-term investments and deposits | - | 7 |
| Trade receivables, net | 31 | 44 |
| Other current assets, including derivatives | 18 | 36 |
| Total current assets | 478 | 1,504 |
| Non-current assets | ||
| Investments in associated companies | 272 | 122 |
| Deposits, loans and other receivables, including derivative instruments | 226 | 107 |
| Deferred payment receivable | 182 | 175 |
| Property, plant and equipment, net | 609 | 616 |
| Intangible assets, net | 2 | 2 |
| Total non-current assets | 1,291 | 1,022 |
| Total assets | 1,769 | 2,526 |
| Current liabilities | ||
| Loans and debentures | 79 | 448 |
| Trade payables | 49 | 59 |
| Other payables, including derivative instruments | 9 | 83 |
| Investment obligation to Qoros | 93 | - |
| Provisions | - | 44 |
| Income tax payable | 4 | 173 |
| Total current liabilities | 234 | 807 |
| Non-current liabilities | ||
| Loans, excluding current portion | 485 | 504 |
| Debentures, excluding current portion | 79 | 85 |
| Deferred taxes, net | 57 | 52 |
| Income tax payable | 27 | 27 |
| Total non-current liabilities | 648 | 668 |
| Total liabilities | 882 | 1,475 |
| Equity | ||
| Share capital | 602 | 1,267 |
| Shareholder transaction reserve | - | 4 |
| Translation reserve | (11) | (2) |
| Capital reserve | 18 | 19 |
| Accumulated profit / (loss) | 211 | (305) |
| Equity attributable to owners of the Company | 820 | 983 |
| Non-controlling interests | 67 | 68 |
| Total equity | 887 | 1,051 |
| Total liabilities and equity | 1,769 | 2,526 |
Kenon Holdings Ltd and subsidiaries Consolidated Statements of Profit & Loss
| For the six months ended June 30, |
For the three months ended June 30, |
|||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| \$ millions | \$ millions | |||
| Revenue | 185 | 177 | 84 | 84 |
| Cost of sales and services (excluding depreciation) | (127) | (131) | (63) | (67) |
| Depreciation | (15) | (16) | (8) | (8) |
| Gross profit | 43 | 30 | 13 | 9 |
| Selling, general and administrative expenses | (11) | (22) | (5) | (15) |
| Operating profit / (loss) | 32 | 8 | 8 | (6) |
| Financing expenses | (17) | (44) | (11) | (24) |
| Financing income | 12 | 4 | 10 | 4 |
| Financing expenses, net | (5) | (40) | (1) | (20) |
| Gain on third party investment in Qoros | 504 | - | - | - |
| Fair value loss on derivative asset | (13) | - | (13) | - |
| Write back of financial guarantee | 63 | - | - | - |
| Share in losses of associated companies, net of tax | (50) | (22) | (22) | - |
| Profit / (loss) before income taxes | 531 | (54) | (28) | (26) |
| Income taxes | (7) | (4) | (1) | - |
| Profit / (loss) for the period from continuing operations | 524 | (58) | (29) | (26) |
| Profit for the period from discontinued operations (after tax) | - | 69 | - | 47 |
| Profit / (loss) for the period | 524 | 11 | (29) | 21 |
| Attributable to: | ||||
| Kenon's shareholders | 517 | (11) | (29) | 9 |
| Non-controlling interests | 7 | 22 | - | 12 |
| Profit / (loss) for the period | 524 | 11 | (29) | 21 |
| Basic/diluted (loss)/profit per share attributable to Kenon's shareholders (in dollars): | ||||
| Basic/diluted profit/(loss) per share | 9.60 | (0.21) | (0.53) | 0.17 |
| Basic/diluted profit/(loss) per share from continuing operations | 9.60 | (1.11) | (0.53) | (0.47) |
| Basic/diluted profit per share from discontinued operations | - | 0.90 | - | 0.64 |
Kenon Holdings Ltd and subsidiaries Consolidated Statements of Cash Flows For the six months ended June 30, 2018 and 2017
| For the six months ended June 30, | ||
|---|---|---|
| 2018 | 2017 | |
| \$ millions | ||
| Cash flows from operating activities | ||
| Profit for the period | 524 | 11 |
| Adjustments: | ||
| Depreciation and amortization | 15 | 92 |
| Financing expenses, net | 5 | 117 |
| Share in losses of associated companies, net | 50 | 22 |
| Write back of financial guarantee | (63) | - |
| Gain on third party investment in Qoros | (504) | - |
| Fair value loss on derivative asset | 13 | - |
| Write back of other payables | (3) | - |
| Impairment of assets | - | 20 |
| Bad debt expense | - | 2 |
| Other capital gains, net | - | (9) |
| Share-based payments | 1 | - |
| Income taxes | 7 | 51 |
| 45 | 306 | |
| Change in inventories | - | 9 |
| Change in trade and other receivables | 17 | 6 |
| Change in trade and other payables | (14) | (83) |
| Changes in provisions and employee benefits | - | (2) |
| 48 | 236 | |
| Income taxes paid, net | (169) | (34) |
| Net cash (used in)/provided by operating activities | (121) | 202 |
Kenon Holdings Ltd and subsidiaries Consolidated Statement of Cash Flows, continued For the six months ended June 30, 2018 and 2017
| For the six months ended June 30, | ||
|---|---|---|
| 2018 | 2017 | |
| \$ millions | ||
| Cash flows from investing activities | ||
| Proceeds from sale of property, plant and equipment and intangible assets | - | 2 |
| Short-term deposits and loans, net | - | (22) |
| Investment in long term deposits, net | (1) | - |
| Cash paid for businesses purchased, less cash acquired | (2) | - |
| Acquisition of property, plant and equipment | (29) | (96) |
| Acquisition of intangible assets | - | (2) |
| Interest received | 2 | 3 |
| Proceeds from dilution of third party investment in Qoros | 260 | - |
| Receipt/(payment) to release financial guarantee | 18 | (72) |
| Payment of transaction cost for sales of subsidiaries | (49) | - |
| Energuate purchase adjustment | - | 10 |
| Sale of subsidiary, net | - | 1 |
| Net cash provided by/(used in) investing activities | 199 | (176) |
| Cash flows from financing activities | ||
| Dividend paid to non-controlling interests in a subsidiary | (6) | (15) |
| Capital distribution | (665) | - |
| Receipt of long-term loans and issuance of debentures | 3 | 661 |
| Repayment of long-term loans and debentures | (101) | (397) |
| Repayment of short-term credit from banks and others, net | (276) | (142) |
| Bond issuance expenses | - | (11) |
| Payment of consent fee and early prepayment fee | - | (6) |
| Interest paid | (14) | (91) |
| Net cash used in financing activities | (1,059) | (1) |
| (Decrease)/Increase in cash and cash equivalents | (981) | 25 |
| Cash and cash equivalents at beginning of the period | 1,417 | 327 |
| Effect of exchange rate fluctuations on balances of cash and cash equivalents | (7) | 14 |
| Cash and cash equivalents at end of the period | 429 | 366 |
Information regarding reportable segments
____________________________________
____________________________________
The following table sets forth selected financial data for Kenon's reportable segments for the periods presented:
| For the six months ended June 30, 2018 | |||||
|---|---|---|---|---|---|
| OPC | Quantum1 | Other2 | Adjustments3 | Consolidated Results |
|
| (in millions of USD, unless otherwise indicated) | |||||
| Sales | 185 | - | - | - | 185 |
| Depreciation and amortization | (15) | - | - | - | (15) |
| Financing income | 1 | 1 | 39 | (29) | 12 |
| Financing expenses | (15) | (2) | (29) | 29 | (17) |
| Write back of financial guarantee | - | 63 | - | - | 63 |
| Gain on third party investment in Qoros | - | 504 | - | - | 504 |
| Fair value loss on derivative asset | - | (13) | - | - | (13) |
| Share in losses of associated companies | - | (28) | (22) | - | (50) |
| Profit / (Loss) before taxes | 22 | 526 | (17) | - | 531 |
| Income taxes | (6) | - | (1) | - | (7) |
| Profit / (Loss) from continuing operations | 16 | 526 | (18) | - | 524 |
(1) Quantum is a wholly-owned subsidiary of Kenon and holds Kenon's interest in Qoros.
(2) Includes the results of Primus; the results of ZIM, as an associated company; as well as Kenon's and IC Green's holding company and general and administrative expenses.
(3) "Adjustments" includes inter-segment financing income and expenses.
| For the six months ended June 30, 20171 | |||||
|---|---|---|---|---|---|
| Consolidated | |||||
| OPC | Quantum2 | Other3 | Adjustments4 | Results | |
| (in millions of USD, unless otherwise indicated) | |||||
| Sales | 177 | - | - | - | 177 |
| Depreciation and amortization | (16) | - | - | - | (16) |
| Financing income | - | - | 10 | (6) | 4 |
| Financing expenses | (22) | (7) | (21) | 6 | (44) |
| Share in profits / (losses) of associated companies | - | (23) | 1 | - | (22) |
| Profit / (Loss) before taxes | 4 | (30) | (28) | - | (54) |
| Income taxes | (3) | - | (1) | - | (4) |
| Profit / (Loss) from continuing operations | 1 | (30) | (29) | - | (58) |
(1) Results during this period have been reclassified to reflect the results of the Inkia power generation and distribution business (which was sold on December 31, 2017) as discontinued operations.
(2) Quantum is a wholly-owned subsidiary of Kenon and holds Kenon's interest in Qoros.
(3) Includes the results of Primus; the results of ZIM, as an associated company; as well as Kenon's and IC Green's holding company and general and administrative expenses.
(4) "Adjustments" includes inter-segment financing income and expenses.
For the three months ended June 30, 2018
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| OPC | Quantum1 | Other2 | Adjustments3 | Results | ||
| (in millions of USD, unless otherwise indicated) | ||||||
| Sales | 84 | - | - | - | 84 | |
| Depreciation and amortization | (8) | - | - | - | (8) | |
| Financing income | 1 | 1 | 21 | (13) | 10 | |
| Financing expenses | (10) | (1) | (13) | 13 | (11) | |
| Fair value loss on derivative asset | - | (13) | - | - | (13) | |
| Share in losses of associated companies | - | (13) | (9) | - | (22) | |
| Profit / (Loss) before taxes | 1 | (26) | (3) | - | (28) | |
| Income taxes | (1) | - | - | - | (1) | |
| Profit / (Loss) from continuing operations | - | (26) | (3) | - | (29) |
(1) Quantum is a wholly-owned subsidiary of Kenon and holds Kenon's interest in Qoros.
(2) Includes the results of Primus; the results of ZIM, as an associated company; as well as Kenon's and IC Green's holding company and general and administrative expenses.
(3) "Adjustments" includes inter-segment financing income and expenses.
| For the three months ended June 30, 20171 | |||||
|---|---|---|---|---|---|
| OPC | Quantum2 | Other3 | Adjustments4 | Consolidated Results |
|
| (in millions of USD, unless otherwise indicated) | |||||
| Sales | 84 | - | - | - | 84 |
| Depreciation and amortization | (8) | - | - | - | (8) |
| Financing income | - | - | 7 | (3) | 4 |
| Financing expenses | (16) | (2) | (9) | 3 | (24) |
| Share in losses of associated companies | - | (3) | 3 | - | - |
| Profit / (Loss) before taxes | (10) | (5) | (11) | - | (26) |
| Income taxes | - | - | - | - | - |
| Profit / (Loss) from continuing operations | (10) | (5) | (11) | - | (26) |
(1) Results during this period have been reclassified to reflect the results of the Inkia power generation and distribution business (which was sold on December 31, 2017) as discontinued operations.
(2) Quantum is a wholly-owned subsidiary of Kenon and holds Kenon's interest in Qoros.
(3) Includes the results of Primus; the results of ZIM, as an associated company; as well as Kenon's and IC Green's holding company and general and administrative expenses.
(4) "Adjustments" includes inter-segment financing income and expenses.
Information regarding associated companies
____________________________________
____________________________________
| Carrying amounts of investment in associated companies |
Equity in the net (losses) / earnings of associated companies | |||||
|---|---|---|---|---|---|---|
| as at | For the six months ended | For the three months ended | ||||
| June 30, 2018 | December 31, 2017 | June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |
| \$ millions | \$ millions | \$ millions | ||||
| ZIM | 97 | 120 | (22) | 1 | (9) | 3 |
| Qoros | 175 | 2 | (28) | (23) | (13) | (3) |
| 272 | 122 | (50) | (22) | (22) | - |
Appendix B
Summary OPC consolidated financial information1
OPC's Consolidated Statement of Profit
| For the six months ended June 30, |
For the three months ended June 30, |
|||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| (in millions of USD) | (in millions of USD) | |||
| Sales | 185 | 177 | 84 | 84 |
| Cost of sales (excluding depreciation and amortization) | (127) | (130) | (62) | (67) |
| Depreciation and amortization | (15) | (16) | (8) | (8) |
| Gross profit | 43 | 31 | 14 | 9 |
| General, selling and administrative expenses | (7) | (5) | (4) | (3) |
| Operating profit | 36 | 26 | 10 | 6 |
| Financing expenses | (15) | (22) | (10) | (16) |
| Financing income | 1 | - | 1 | - |
| Financing expenses, net | (14) | (22) | (9) | (16) |
| Profit / (loss) before taxes | 22 | 4 | 1 | (10) |
| Taxes on income | (6) | (3) | (1) | - |
| Net profit / (loss) for the period | 16 | 1 | - | (10) |
| Attributable to: | ||||
| Equity holders of the company | 12 | (1) | - | (9) |
| Non-controlling interest | 4 | 2 | - | (1) |
| Net profit for the period | 16 | 1 | - | (10) |
(1) Translations of NIS amounts into US Dollars use a rate of 3.59: 1 for 2018 and 3.58: 1 for 2017.
Summary Data from OPC's Consolidated Statement of Cash Flows
| For the six months ended June 30, |
For the three months ended June 30, |
|||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| (in millions of USD) | (in millions of USD) | |||
| Cash flows provided by operating activities | 66 | 50 | 39 | 15 |
| Cash flows used in investing activities | (39) | (62) | (17) | (25) |
| Cash flows provided by (used in) financing activities | (33) | 102 | (28) | 64 |
| (Decrease) / Increase in cash and cash equivalents | (6) | 90 | (6) | 54 |
| Effect of exchange rate fluctuations on balances of cash and cash equivalents | (8) | (4) | (6) | - |
| Cash and cash equivalents at end of the period | 133 | 114 | 133 | 114 |
| Investments in property, plant and equipment | (29) | (38) | (14) | (22) |
| Total depreciation and amortization | 15 | 16 | 8 | 8 |
Summary Data from OPC's Consolidated Statement of Financial Position
| As of | ||
|---|---|---|
| June 30, 2018 | December 31, 2017 | |
| (in millions of USD) | ||
| Total financial liabilities1 | 587 | 618 |
| Total monetary assets2 | 133 | 147 |
| Total equity attributable to the owners | 177 | 173 |
| Total assets | 901 | 941 |
-
Including loans from banks and others and debentures
-
Including cash and cash equivalents, short-term deposits and restricted cash.
Appendix C
Definition of OPC's EBITDA and non-IFRS reconciliation
This press release, including the financial tables, presents EBITDA, which is considered to be a "non-IFRS financial measure."
OPC defines "EBITDA" as for each period as net profit before depreciation and amortization, financing expenses, net, and income tax expense. EBITDA is not recognized under IFRS or any other generally accepted accounting principles as a measure of financial performance and should not be considered as a substitute for net profit or loss, cash flow from operations or other measures of operating performance determined in accordance with IFRS. EBITDA is not intended to represent funds available for dividends or other discretionary uses because those funds may be required for debt service, capital expenditures, working capital and other commitments and contingencies. There are limitations that impair the use of EBITDA as a measure of OPC's profitability since it does not take into consideration certain costs and expenses that result from OPC's business that could have a significant effect on net profit, such as financial expenses, taxes, depreciation, capital expenses and other related items.
OPC believes that the disclosure of EBITDA provides transparent and useful information to investors and financial analysts in their review of the company's, or its subsidiaries' operating performance and in the comparison of such operating performance to the operating performance of other companies in the same industry or in other industries that have different capital structures, debt levels and/or income tax rates.
Set forth below is a reconciliation of OPC's net profit to EBITDA for the periods presented. Other companies may calculate EBITDA differently, and therefore this presentation of EBITDA may not be comparable to other similarly titled measures used by other companies.
| For the six months ended June 30, | ||
|---|---|---|
| 2018 | 2017 | |
| (in USD millions) | ||
| Net profit for the period | 16 | 1 |
| Depreciation and amortization | 15 | 16 |
| Financing expenses, net | 14 | 22 |
| Income tax expense | 6 | 3 |
| EBITDA | 51 | 42 |
| For the three months ended June 30, | ||
| 2018 | 2017 | |
| Net profit /(loss) for the period | (in USD millions) - |
(10) |
| Depreciation and amortization | 8 | 8 |
| Financing expenses, net | 9 | 16 |
| Income tax expense | 1 | - |
| EBITDA | 18 | 14 |
Summary Financial Information of OPC's Subsidiaries
The tables below set forth debt, cash and cash equivalents, deposits and restricted cash for OPC's subsidiaries as of June 30, 2018:
| OPC Energy & | |||||
|---|---|---|---|---|---|
| OPC-Rotem | OPC-Hadera | Tzomet | Others | Total OPC | |
| Debt (excluding accrued interest) | 356 | 147 | - | 84 | 587 |
| Cash and cash equivalents | 38 | 12 | - | 83 | 133 |
| Short- and long-term deposits and restricted cash (including debt | |||||
| service reserves) | 51 | 2 | - | 22 | 75 |
| Debt service reserves | 29 | - | - | 12 | 41 |
The tables below set forth debt, cash and cash equivalents, deposits and restricted cash for OPC's subsidiaries as of December 31, 2017:
| OPC Energy & | ||||
|---|---|---|---|---|
| OPC-Rotem | OPC-Hadera | Others | Total OPC | |
| Debt (excluding accrued interest) | 381 | 144 | 91 | 616 |
| Cash and cash equivalents | 28 | 30 | 79 | 147 |
| Short- and long-term deposits and restricted cash (including debt service reserves) | 48 | 2 | 26 | 76 |
| Debt service reserves | 26 | - | 5 | 31 |
Appendix E
Summary Operational Information of OPC
The tables below set forth details of sales, generation and purchases of electricity by OPC and availability and net generation of OPC split by the Rotem plant and the Hadera energy center (kWh in millions):
| For the six months ended June 30, |
For the three months ended June 30, |
||||
|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | ||
| Sales to private customers | 1,973 | 1,932 | 1,000 | 956 | |
| Sales to the system administrator | 47 | 62 | 9 | 23 | |
| Total sales | 2,020 | 1,994 | 1,009 | 979 | |
| For the six months ended June 30, |
For the three months ended June 30, |
||||
| 2018 | 2017 | 2018 | 2017 | ||
| Net generation of electricity | 1,930 | 1,790 | 954 | 799 | |
| Purchase of electricity from the system administrator | 90 | 204 | 55 | 180 | |
| Total volume of electricity generated and purchases from the system administrator | 2,020 | 1,994 | 1,009 | 979 |
| For the six months ended June 30, | ||||
|---|---|---|---|---|
| 2018 | 2017 | |||
| Availability | Net generation | Availability | Net generation | |
| (%) | (kWh in millions) | (%) | (kWh in millions) | |
| 100% | 1,888 | 90% | 1,745 | |
| 96% | 42 | 95% | 45 | |
| For the three months ended June 30, | ||||
| 2018 2017 |
||||
| Availability | Net generation | Availability | Net generation | |
| (%) | (kWh in millions) | (%) | (kWh in millions) | |
| 100% | 936 | 81% | 778 | |
| 93% | 18 | 99% | 21 | |
| 12 |
Appendix F
Summary of Qoros' Unaudited Condensed Consolidated Financial Information
| For the six months ended June 30, |
For the three months ended June 30, |
|||
|---|---|---|---|---|
| In millions of RMB | 2018 | 2017 | 2018 | 2017 |
| Revenue | 2,886 | 677 | 1,827 | 272 |
| Cost of sales | (3,220) | (850) | (1,955) | (374) |
| Gross loss | (334) | (173) | (128) | (102) |
| Other income | 28 | 308 | 25 | 298 |
| Research and development expenses | (66) | (79) | (40) | (42) |
| Selling, general and administrative expenses | (257) | (201) | (156) | (101) |
| Other expenses | (1) | (9) | (1) | (1) |
| Loss from operation | (630) | (154) | (300) | 52 |
| Finance income | 19 | 6 | 17 | 1 |
| Finance costs | (130) | (177) | (39) | (95) |
| Net finance cost | (111) | (171) | (22) | (94) |
| Loss for the period | (741) | (325) | (322) | (42) |
Qoros' Consolidated Statement of Financial Position
| As of June 30, |
As of December 31, |
|
|---|---|---|
| In millions of RMB | 2018 | 2017 |
| Assets | ||
| Property, plant and equipment | 3,723 | 3,875 |
| Intangible assets | 3,832 | 4,011 |
| Prepayments | 22 | 22 |
| Lease prepayments | 193 | 195 |
| Trade and other receivables | 91 | 91 |
| Equity -accounted investees |
1 | 2 |
| Non -current assets |
7,862 | 8,196 |
| Inventories | 208 | 389 |
| VAT recoverable | 702 | 828 |
| Other financial assets | 300 | - |
| Trade and other receivables | 1,563 | 38 |
| Prepayments | 169 | 173 |
| Pledged deposits | 75 | 26 |
| Cash and cash equivalents | 1,206 | 77 |
| Current assets | 4,223 | 1,531 |
| Total assets | 12,085 | 9,727 |
| Equity | ||
| Paid -in capital |
10,425 | 10,425 |
| Reserves | 53 | 54 |
| Accumulated losses | (12,459 ) |
(11,645 ) |
| Total deficit | (1,981 ) |
(1,166 ) |
| Liabilities Loans and borrowings |
3,803 | 4,228 |
| Deferred income | 155 | 161 |
| Trade and other payables | 4,061 | 1,208 |
| Provisions | 97 | 65 |
| Non -current liabilities |
8,116 | 5,662 |
| Loans and borrowings | 2,675 | 2,511 |
| Trade and other payables | 3,248 | 2,704 |
| Deferred income | 27 | 16 |
| Current liabilities | 5,950 | 5,231 |
| Total liabilities | 14,066 | 10,893 |
| Total equity and liabilities | 12,085 | 9,727 |
Appendix G
Definition of Qoros' Adjusted EBITDA and non-IFRS Reconciliation
This press release presents the Adjusted EBITDA of Qoros, which is a financial metric considered to be a "non-IFRS financial measure." Non-IFRS financial measures should be evaluated in conjunction with, and are not a substitute for, IFRS financial measures. The non-IFRS financial information presented herein should not be considered in isolation from or as a substitute for operating profit, net profit or per share data prepared in accordance with IFRS.
Qoros defines "Adjusted EBITDA" for each period as net loss for the period, excluding net finance costs and depreciation and amortization and Other Income-license rights. Adjusted EBITDA is not recognized under IFRS or any other generally accepted accounting principles as a measure of financial performance and should not be considered as a substitute for net profit or loss, cash flow from operations or other measures of operating performance or liquidity determined in accordance with IFRS. Adjusted EBITDA is not intended to represent funds available for dividends or other discretionary uses because those funds may be required for debt service, capital expenditures, working capital and other commitments and contingencies. Adjusted EBITDA presents limitations that impair its use as a measure of our profitability since it does not take into consideration certain costs and expenses that result from our business that could have a significant effect on our net profit, such as financial expenses, taxes, depreciation, capital expenses and other related charges.
Qoros believes that the disclosure of Adjusted EBITDA provides transparent and useful information to investors and financial analysts in their review of Qoros' operating performance and in the comparison of such operating performance to the operating performance of other companies in the same industry or in other industries that have different capital structures, debt levels and/or income tax rates.
Set forth below is a reconciliation of Qoros' net loss to Adjusted EBITDA for the periods presented. Other companies may calculate Adjusted EBITDA differently, and therefore this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures used by other companies.
| For the six months ended June 30, | For the three months ended June 30, | |||
|---|---|---|---|---|
| In millions of RMB | 2018 | 2017 | 2018 | 2017 |
| Net loss for the period | (741) | (325) | (322) | (42) |
| Net finance costs | 111 | 171 | 22 | 94 |
| Depreciation and Amortization | 388 | 203 | 164 | 86 |
| Other income – license rights | - | (270) | - | (263) |
| Adjusted EBITDA | (242) | (221) | (136) | (125) |