SINGAPORE, Aug. 31,
2022 /PRNewswire/ -- Kenon Holdings Ltd. (NYSE: KEN)
(TASE: KEN) ("Kenon") announces its results for Q2 2022
and additional updates.
Q2 and Recent Highlights
Kenon
- In July 2022, Kenon distributed
approximately $552 million
($10.25 per share) to
shareholders.
ZIM
- In August 2022, ZIM announced a
second quarter 2022 dividend of approximately $571 million, or $4.75 per ordinary share, to be paid in
September 2022. Kenon expects to
receive $118 million ($112 million net of tax).
- Financial results[1]:
- ZIM reported net profit in Q2 2022 of $1.3
billion, as compared to $0.9
billion in Q2 2021.
- ZIM reported Adjusted EBITDA[2] in Q2 2022 of
$2.1 billion, as compared to
$1.3 billion in Q2 2021.
OPC
- In July 2022, as part of a share
offering, OPC raised proceeds of NIS 331
million (approximately $94
million). Kenon participated in the offering for a total
investment of approximately NIS 136
million (approximately $39
million).
- In June 2022, OPC announced an
agreement to purchase a power plant in the Kiryat Gat Industrial
Zone for total consideration of NIS 535
million (approximately $160
million), subject to adjustments for cash balances and
working capital.
- Financial results:
- OPC's revenue in Q2 2022 increased to $121
million, as compared to $105
million in Q2 2021.
- OPC's net loss in Q2 2022 was $10
million, as compared to $34
million in Q2 2021.
- OPC's Adjusted EBITDA[2] in Q2 2022 was $5 million, as compared to $2 million in Q2 2021. OPC's proportionate share
in EBITDA of CPV associated companies was $21 million in Q2 2022 as compared to
$26 million in Q2 2021.
Discussion of Results for the Three Months ended June 30, 2022
Kenon's consolidated results of operations from its operating
companies essentially comprise the consolidated results of OPC
Energy Ltd. ("OPC"). Our share of the results of ZIM
Integrated Shipping Ltd. ("ZIM") are reflected under results
from associated companies.
See Exhibit 99.2 of Kenon's Form 6-K dated August 31, 2022 for a summary of Kenon's
consolidated financial information; a summary of OPC's consolidated
financial information; a reconciliation of OPC's Adjusted EBITDA
(which is a non-IFRS measure) to net profit (loss); summary of
financial information of OPC's subsidiaries; and a reconciliation
of ZIM's Adjusted EBITDA (which is a non-IFRS measure) to net
profit.
OPC
The following discussion of OPC's results of operations is
derived from OPC's consolidated financial statements, as translated
into US dollars.
Summary Financial
Information of OPC
|
|
OPC
|
|
Israel
|
U.S.
|
Total
|
Israel
|
U.S.
|
Total
|
|
Q2
2022
|
Q2
2021
|
|
|
$
millions
|
|
Revenue
|
105
|
16
|
121
|
92
|
13
|
105
|
Cost of sales
(excluding depreciation and amortization)
|
93
|
7
|
100
|
73
|
6
|
79
|
Finance
(expenses)/income, net
|
(8)
|
17
|
9
|
(12)
|
(17)
|
(29)
|
Share in losses of
associated companies, net
|
-
|
(10)
|
(10)
|
-
|
(4)
|
(4)
|
(Loss)/profit for the
period
|
(11)
|
1
|
(10)
|
(12)
|
(22)
|
(34)
|
Attributable
to:
|
|
|
|
|
|
|
Equity holders of
OPC
|
(13)
|
9
|
(4)
|
(10)
|
(16)
|
(26)
|
Non-controlling
interest
|
2
|
(8)
|
(6)
|
(2)
|
(6)
|
(8)
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
7
|
(2)
|
5
|
10
|
(8)
|
2
|
Proportionate share of
EBITDA of associated companies
|
-
|
21
|
21
|
-
|
26
|
26
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
For the three
months
ended June 30,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
$
millions
|
|
Israel
|
|
|
|
Revenue from sale of
energy to private customers
|
|
|
74
|
|
|
|
62
|
|
Revenue from private
customers in respect of infrastructure services
|
|
|
21
|
|
|
|
21
|
|
Revenue from sale of
surplus energy
|
|
|
4
|
|
|
|
5
|
|
Revenue from sale of
steam
|
|
|
5
|
|
|
|
4
|
|
Revenue from activities
of Gnrgy
|
|
|
1
|
|
|
|
-
|
|
|
|
|
105
|
|
|
|
92
|
|
U.S.
|
|
|
|
|
|
|
|
|
Revenue from sale of
electricity and provision of services in the U.S.
|
|
|
16
|
|
|
|
13
|
|
Total
|
|
|
121
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
OPC's revenue from the sale of electricity to private customers
derives from electricity sold at the generation component tariffs,
as published by the Israeli Electricity Authority ("EA"),
with some discount. Accordingly, changes in the generation
component tariffs generally affect the prices paid under Power
Purchase Agreements by customers of OPC-Rotem and OPC-Hadera. The
weighted-average generation component tariff effective February 1, 2022, as published by the EA, was
NIS 0.2869 per KW hour, which was
approximately 13.6% higher than the weighted-average generation
component tariff in 2021 of NIS
0.2526 per KW hour. In April
2022, due to a reduction in excise tax on use of coal and to
combat the high cost of living, the EA published a new weighted
average generation component tariff effective May 1, 2022 of NIS
0.2764 per KW hour, which is approximately 3.7% lower than
the rate effected on February 1,
2022. OPC's revenue from sales of steam are linked partly to
the price of gas and partly to the Israeli Consumer Price
Index.
Set forth below is a discussion of changes in revenue by
category between Q2 2022 and Q2 2021. OPC's revenues and costs are
denominated in NIS; translation of its revenue and costs in Q2 2022
did not have a material impact on results as presented in US
Dollars.
- Revenue from sale of energy to private customers –
increased by $12 million in Q2 2022,
as compared to Q2 2021, primarily as a result of (i) a $5 million increase reflecting the commencement
of virtual supply in September 2021
and (ii) a $8 million increase due to
an increase in the generation component tariff.
- Revenue from activities of Gnrgy – reflects the
commencement of operations of Gnrgy, which is engaged in the
business of charging services for electric vehicles, which was
$1 million in Q2 2022 compared to nil
in Q2 2021.
- Revenue from sale of electricity and provision of services
in the U.S. – increased by $3
million in Q2 2022, as compared to Q2 2021, primarily as a
result of (i) a $2 million increase
due to an increase in revenue from services and (ii) a $1 million increase due to increased sales of
electricity at Keenan.
Cost of Sales
(Excluding Depreciation and Amortization)
|
|
|
|
For the three
months
ended June 30,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
$
millions
|
|
Israel
|
|
|
|
Natural gas and diesel
oil consumption
|
|
|
31
|
|
|
|
39
|
|
Expenses for
acquisition of energy
|
|
|
32
|
|
|
|
4
|
|
Expenses for
infrastructure services
|
|
|
21
|
|
|
|
21
|
|
Natural gas
transmission
|
|
|
2
|
|
|
|
3
|
|
Operating
expenses
|
|
|
6
|
|
|
|
6
|
|
Costs from activities
of Gnrgy
|
|
|
1
|
|
|
|
-
|
|
|
|
|
93
|
|
|
|
73
|
|
U.S.
|
|
|
|
|
|
|
|
|
Operating costs and
cost of services in the U.S.
|
|
|
7
|
|
|
|
6
|
|
Total
|
|
|
100
|
|
|
|
79
|
|
- Natural gas and diesel oil consumption – decreased
by $8 million in Q2 2022, as compared
to Q2 2021, primarily as a result of a decrease of $10 million due to maintenance at the OPC-Rotem
power plant partially offset by an increase of $2 million due to an increase in the generation
component tariff.
- Expenses for acquisition of energy – increased by
$28 million in Q2 2022, as compared
to Q2 2021, primarily as a result of (i) a $12 million increase reflecting the commencement
of virtual supply in 2021 and (ii) a $16
million increase due to maintenance at the OPC-Rotem and
OPC-Hadera power plants.
- Costs from activities of Gnrgy – reflects the
commencement of operations of Gnrgy, which was $1 million in Q2 2022 compared to nil in Q2
2021.
- Operating costs and cost of services in the U.S.
– increased by $1 million in
Q2 2022, as compared to Q2 2021, primarily as a result of an
increase of $1 million due to salary
expenses.
Finance Expenses, net
Finance expenses, net decreased by $38
million in Q2 2022, as compared to Q1 2022, primarily as a
result of (i) a decrease of $6
million on interest expense due to the early repayment of
the OPC-Rotem's project financing debt in October 2021, (ii) a decrease of $22 million due to foreign exchange rate
movements on CPV's non-controlling shareholders' loan and (iii) a
decrease of $12 million due to the
purchase of remaining rights from the tax equity partner in CPV
Keenan in April 2021.
Share of Profit of Associated Companies, net
The table below sets forth OPC's share of profit of associated
companies, net, consisting of five of the six operating plants in
which CPV has interests.
|
|
For the three
months
ended June 30
|
|
|
|
2022
|
|
|
2021
|
|
|
|
$
millions
|
|
|
|
|
|
Share in losses of
associated companies, net
|
|
|
10
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2022, OPC's
proportionate share of debt (including accrued interest) of CPV
associated companies was $930 million
and proportionate share of cash and cash equivalents was
$5 million.
OPC's share in losses of associated companies, net increased by
$6 million primarily as a result of a
decline in the results of CPV Valley by $5
million. For further details of the performance of
associated companies of CPV, refer to OPC's immediate report
published on the Tel Aviv Stock Exchange on August 25, 2022 and the convenience English
translations furnished by Kenon on Form 6-K on August 25, 2022.
Liquidity and Capital Resources
As of June 30, 2022, OPC had cash
and cash equivalents of $145 million
(excluding restricted cash), restricted cash of $25 million (including debt service reserves of
$14 million), and total consolidated
indebtedness of $1,172 million,
consisting of $55 million of
short-term indebtedness and $1,117
million of long-term indebtedness. As of June 30, 2022, a substantial portion of OPC's
debt was denominated in NIS.
Business Developments
Agreement to Purchase Power Plant in the Kiryat Gat
Industrial Zone
On June 2, 2022, OPC announced
that it had entered into an agreement with Dor Alon Energy Israel
(1988) Ltd. and Dor Alone Gas Power Plants Limited Partnership to
purchase a combined-cycle power plant powered by conventional
energy with installed capacity of 75 MW located in the Kiryat Gat
area. The consideration for the purchase is NIS 535 million (approximately $160 million), subject to adjustments for cash
balances and working capital. On August 24,
2022, the Israel Competition Authority approved the
acquisition. Completion of the acquisition remains subject to
conditions set forth in the purchase agreement, including other
regulatory approvals and third-party consents. The deadline for the
completion of this acquisition, pursuant to the purchase agreement,
is March 31, 2023. The details of the
transaction are discussed in more detail in Kenon's Form 6-K dated
June 2, 2022.
Investment Agreement with Veridis
On May 9, 2022, OPC announced that
it had entered into an agreement with Veridis Power Plants Ltd. to
form OPC Holdings Israel Ltd., which will hold and operate all of
OPC's business activities in the energy and electricity generation
and supply sectors in Israel. On
August 24, 2022, the Israel
Competition Authority approved the transaction. Completion of the
transaction remains subject to other conditions and approvals set
forth in the agreement. The details of the transaction are
discussed in more detail in Kenon's Form 6-K dated May 9, 2022.
Tariff Update
On August 1, 2022, an additional
update of the electricity tariffs of the EA for 2022 entered into
effect, increasing the generation component by 13.6% to
NIS 0.314 per KW hour.
Share offering
In July 2022, OPC issued 9,443,800
ordinary shares. The gross proceeds from the offering amounted to
approximately NIS 331 million
(approximately $94 million). Kenon
participated in the offering and was allocated 3,898,000 ordinary
shares for a total investment of approximately NIS 136 million (approximately $39 million). Kenon now holds approximately 58.0%
of the outstanding shares of OPC. The details of the offering are
discussed in more detail in Kenon's Form 6-K dated July 5, 2022.
ZIM
Announcement of Q2 2022 Dividend, Updated Dividend Policy
and Affirmation of its 2022 Guidance
In August 2022, ZIM announced a
second quarter 2022 dividend of approximately $571 million, or $4.75 per ordinary share, to be paid in
September 2022. Kenon expects to
receive $118 million ($112 million net of tax). ZIM also announced its
updated dividend policy and affirmed its previously published
full-year 2022 guidance.
Discussion of ZIM's results for Q2 2022
For the period ended June 30,
2022, ZIM's revenue increased by 44% in Q2 2022 to
$3.4 billion, as compared to
$2.4 billion in Q2 2021, primarily
due to elevated freight rates offset by lower volumes.
ZIM's net profit was $1.3 billion,
as compared to $0.9 billion in Q2
2021. ZIM's Adjusted EBITDA in Q2 2022 was $2.1 billion, as compared to $1.3 billion in Q2 2021.
ZIM carried 856,000 TEUs in Q2 2022 representing a 7% decrease
as compared to Q2 2021, in which ZIM carried 921,000 TEUs. The
average freight rate in Q2 2022 was $3,596 per TEU, as compared to $2,341 per TEU in Q2 2021.
Qoros
Sale of remaining 12% interest
In April 2021, Kenon's subsidiary
Quantum (2007) LLC ("Quantum") entered into an agreement
with the China-based investor
related to the Baoneng Group, which holds 63% of Qoros (the
"Majority Shareholder"), to sell its remaining 12% interest
in Qoros for RMB 1.56 billion
(approximately $245 million). The
Majority Shareholder has failed to make required payments under
this agreement. Quantum subsequently exercised its put option over
its remaining stake in Qoros, which requires the Majority
Shareholder to immediately purchase Quantum's remaining 12%
interest in Qoros based on a similar valuation underlying the
purchase price in the sale agreement. In the fourth quarter of
2021, Quantum initiated arbitral proceedings against the Majority
Shareholder and Baoneng Group with China International Economic and
Trade Arbitration Commission. The proceedings are ongoing.
For more information on our agreement to sell our remaining
interest in Qoros, and on Qoros' loan agreements and our pledges
and guarantees, see Kenon's most recent annual report on Form 20-F
filed with the SEC.
Additional Kenon Updates
Kenon's (unconsolidated) liquidity and capital
resources
As of June 30, 2022, Kenon's
unconsolidated cash position was $1,045
million. As of August 31,
2022, Kenon's unconsolidated cash position was $453 million following Kenon's participation in
OPC's share offering described above and the capital reduction paid
in July 2022. Kenon expects to
receive additional cash of $112
million in September 2022
following payment of ZIM's Q2 2022 dividend.
Kenon's unconsolidated cash position includes cash and cash
equivalents, and fixed income and other treasury management
instruments.
Capital reduction and distribution
At its 2022 Annual General Meeting on May
19, 2022 and on June 14, 2022,
Kenon received the requisite shareholder approval and the approval
of the High Court of the Republic of Singapore, respectively, to return share
capital amounting to approximately $552
million to Kenon's shareholders ($10.25 per share). The distribution was paid on
July 5, 2022 to Kenon's shareholders
of record as of the close of trading on June
27, 2022.
Following the completion of the capital reduction, Kenon's share
capital is approximately $50
million.
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:
- OPC (58% interest) – a leading owner, operator and developer of
power generation facilities in the Israeli and U.S. power
markets;
- ZIM (21% interest) – an international shipping company;
and
- Qoros (12% interest[3]) – a China-based automotive company.
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. All statements other than statements of historical facts are
forward-looking statements. You can identify these forward-looking
statements by words or phrases such as "may," "will," "expect,"
"anticipate," "aim," "estimate," "intend," "plan," "believe,"
"likely to" or other similar expressions. These statements include
(i) statements relating to OPC, including the agreement to
purchase the power plant in Kiryat Gat, the Veridis transaction and
tariff rates, (ii) statements relating to ZIM, including
affirmation by ZIM of its previously published full-year 2022
guidance, updated dividend policy and the second quarter 2022
dividend declared by ZIM, (iii) statements relating to
Kenon's agreement, exercise of put option to sell its remaining
interest in Qoros, and legal disputes in respect of the foregoing
and (iv) other non-historical matters. These statements are based
on 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 (i) OPC's
agreement to acquire the power plant in Kiryat Gat, completion of
the Veridis transaction and tariff rates, (ii) payment of the
dividend declared by ZIM, and future dividend payments and results,
(iii) Kenon's agreement and exercise of put option to sell
its remaining interest in Qoros, including risks relating to
payments required to be made to Quantum which have not been made as
required and whether such payments will be received at all, risks
relating to meeting the conditions to the obligations under the
transaction, including risks relating to regulatory approvals,
risks relating to the outcome of any related legal disputes,
and other risks and (iv) those risks set
forth under the heading "Risk Factors" in Kenon's most recent
Annual Report on Form 20-F filed with the SEC and other filings.
The foregoing factors that could cause our actual results to differ
materially from those contemplated in any forward-looking statement
included in this press release should not be construed as
exhaustive. Any forward-looking statements that we make in this
press release speak only as of the date of such statements and we
caution readers of this press release not to place undue reliance
on these forward-looking statements. 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. Represents 100% of ZIM's results. Kenon's share of
ZIM's results for the three months ended June 30, 2022 was 21% (28% for three months ended
June 30, 2021).
2. Adjusted EBITDA is a non-IFRS measure. See Exhibit
99.2 of Kenon's Form 6-K dated August 31,
2022 for the definition of ZIM's Adjusted EBITDA and OPC's
and CPV's Adjusted EBITDA and a reconciliation to their respective
net profit for the applicable period.
3. Kenon has agreed to sell its remaining 12% interest
to the Majority Shareholder.
Contact Info
Mark
Hasson
Chief Financial Officer
Kenon Holdings Ltd.
markh@kenon-holdings.com
+65 9726 8628
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SOURCE Kenon Holdings Ltd.