PR Newswire
SINGAPORE, Sept. 7, 2016
SINGAPORE, Sept. 7, 2016 /PRNewswire/ -- Kenon Holdings Ltd. (NYSE: KEN, TASE: KEN) ("Kenon") announces the results of the second quarter of 2016 for I.C. Power Pte. Ltd. ("IC Power") and Qoros Automotive Co., Ltd. ("Qoros"), as reported by IC Power and Qoros, and additional updates relating to these businesses and Kenon.1
Key Highlights
IC Power
Qoros
Discussion of Results for Q2 2016
Set forth below is a discussion of the results of IC Power Pte. Ltd.3 and Qoros.
IC Power
IC Power's segments are Generation and Distribution. IC Power's Generation business is further segmented by geography: Peru, Israel, Central America and Other. See Appendix C for a breakdown of IC Power's generation businesses by geographic segment.
See Appendix A for a summary of IC Power's unaudited consolidated financial information. See Appendix B for the definition of IC Power's Adjusted EBITDA, which is a non-IFRS financial measure, and for a reconciliation to IC Power's, and each of its segments', net income. See Appendix C for summary operational information for each of IC Power's generation businesses. See Appendix D for summary unaudited financial information for each of IC Power's businesses.
The following discussion of IC Power's results of operations below is derived from IC Power's consolidated financial statements.
Revenues
IC Power's revenues increased by $126 million, or 38%, to $459 million in Q2 2016 from $333 million in Q2 2015. This increase was due to the acquisition of IC Power's distribution business on January 22, 2016, which contributed $139 million to IC Power's revenues in Q2 2016.
IC Power's revenues from its generation business were $320 million in Q2 2016, as compared to $333 million in Q2 2015. A discussion of revenues for IC Power's generation business by geographical segment for Q2 2016, as compared to Q2 2015 is as follows:
Cost of Sales (excluding depreciation and amortization)
IC Power's cost of sales (excluding depreciation and amortization) increased by $108 million, or 46%, to $342 million in Q2 2016 from $234 million in Q2 2015. This increase was primarily the result of the acquisition of IC Power's distribution business, which contributed $102 million to IC Power's cost of sales in Q2 2016.
IC Power's cost of sales from its generation business were $240 million in Q2 2016, as compared to $234 million in Q2 2015. A discussion of cost of sales for IC Power's generation business by geographical segment for Q2 2016, as compared to Q2 2015 is as follows:
Net Income (Loss)
IC Power recorded a net loss from continuing operations of $6 million (net loss attributable to Kenon: $7 million) in Q2 2016, compared to net income of $14 million (net income attributable to Kenon: $15 million) in Q2 2015. IC Power's distribution business contributed $12 million in net income in Q2 2016. IC Power's net loss from its generation business was $20 million in Q2 2016, as compared to net income of $14 million in Q2 2015.
The change was primarily the result of the changes in revenues and cost of sales as discussed above as well as the following factors:
Adjusted EBITDA
IC Power's Adjusted EBITDA in H1 2016 and Q2 2016 was $188 million and $88 million, respectively, as compared to $175 million and $90 million in H1 2015 and Q2 2015, respectively. The slight decrease in Q2 2016 as compared to Q2 2015 was primarily the result of a $26 million decrease from IC Power's generation business during Q2 2016, offset by the $24 million EBITDA contribution from IC Power's distribution business during the same period.
IC Power's Adjusted EBITDA from its generation business was $64 million in Q2 2016, as compared to $90 million in Q2 2015. A discussion of Adjusted EBITDA for IC Power's generation business by geographical segment for Q2 2016, as compared to Q2 2015 is as follows:
Capital Expenditures
IC Power's capital expenditures were $125 million in Q2 2016, primarily relating to expenditures on projects under construction and acquisitions of $94 million, consisting of CDA ($36 million), AIE ($16 million), Samay I ($13 million), Kanan ($4 million) and the final payment relating to the acquisition of Energuate ($24 million). During Q2 2016, IC Power's subsidiaries spent $21 million in capital expenditures for maintenance of existing facilities and a further $10 million for new projects, facility recovery and capitalized interest expense.
Liquidity and Capital Resources
As of June 30, 2016, IC Power had cash and cash equivalents of $234 million, plus short-term deposits and restricted cash of $85 million, interest bearing financial liabilities of $2,943 million (excluding $225 million of debt (including interest) owed to Kenon), and net interest bearing financial liabilities (a non-IFRS financial measure, which is defined as interest bearing financial liabilities minus cash and short-term deposits and restricted cash) of $2,623 million.
Business Developments
Commencement of CDA's Commercial Operations
In August 2016, the three generating units of CDA, a 510 MW hydroelectric plant in Peru, reached commercial operation. With the completion of these units, IC Power is now the principal power producer in Peru in terms of installed capacity. As of July 31, 2016, IC Power had invested a total of $905 million in the construction of the plant.
CDA is party to three PPAs beginning in 2016, 2018 and 2022 for a significant portion of its capacity, contracting most of its firm energy between 2018 and 2027. As of June 30, 2016, the weighted average remaining life of CDA's PPAs based on firm capacity was 12 years.
Update on Samay I's Commercial Operations
In May 2016, Samay I commenced commercial operations. The plant has an installed capacity of 616 MW while operating on diesel oil, and is intended to operate as a reserve facility (with very limited dispatch) in its current initial phase until gas becomes available to the plant. As previously reported, recent inspections revealed damage to the shafts in three of the plant's four units, and as a result, all four units were declared unavailable to the system. IC Power, together with the EPC contractor for the plant and the equipment manufacturer, are in the process of determining the cause of the damage. IC Power has developed a plan to repair the units, and, based upon current estimates, IC Power expects that all four units should be operational within the next six months.
However, IC Power continues to assess the situation and there can be no guarantee as to when the units will return to operation.
Samay I continues to receive payments under its PPA, but such payments may be subject to adjustments depending on the amount of time the plant is unavailable when called for dispatch. IC Power intends to seek coverage for the costs of the outage, including repair costs, penalties and loss of profits, as appropriate, from the EPC contractor, equipment manufacturer and/or the insurance coverage (subject to deductibles), and believes it has a reasonable basis to recover these costs, including for loss of profits.
Update on the Construction of the AIE Plant
AIE currently operates an 18 MW co-generation steam turbine, and is constructing a 140 MW power plant. IC Power expects that the total cost of completing the AIE plant and the construction of the power station will be approximately $250 million (including the $16 million consideration for the acquisition of AIE). Construction of the AIE plant commenced in June 2016, and the plant is expected to commence commercial operations by the end of 2018.
In July 2016, AIE entered into a NIS 1 billion (approximately $261 million) loan agreement to finance the construction of AIE's power plant in Hadera. The financing consists of an approximately $200 million long-term facility intended to cover the cost of construction (representing approximately 80% of the total project cost) and approximately $61 million in additional facilities, and will mature 18 years after the completion of the construction period.
Agua Clara 50MW Wind Project
IC Power is starting development of a 50MW wind project in the Dominican Republic, which is expected to commence commercial operations in early 2018. A PPA has been signed with a government entity for a period of 20 years; the PPA is subject to the grant of a concession which remains outstanding. The company is still in the process of selecting an EPC contractor and lenders for the project. The total project cost is estimated to be approximately $100 million, of which approximately 70% is expected to be debt-financed.
Energuate Tax Claims
As previously reported, in July 2016, the Guatemalan Tax Administration (the "SAT") issued a claim against IC Power's distribution businesses Distribuidora de Electricidad de Oriente, S.A. and Distribuidora de Electricidad de Occidente, S.A. (which collectively operate under the trade name "Energuate") for back taxes for the years 2011 and 2012, alleging that these companies improperly deducted interest and amortization of goodwill relating to the acquisition of the Energuate companies in 2011 by their prior owners. The Energuate companies have paid approximately $17 million for back taxes for 2011 and 2012, and are required to pay interest and penalties for these years by mid-October 2016. The amount of interest and penalties for these years is estimated to be between $17 million and $24 million; however, the amount is still under discussion with the SAT. For the years 2013 to 2015, in order to prevent further claims and to reduce any resulting penalties by the SAT, the Energuate companies have paid the amounts that would be owed to the SAT (if the SAT claim described above had valid legal grounds) for these years (including interest claimed thereon), for a total amount of approximately $31 million. The total payments described above (covering 2011 through 2015) are estimated to be in the range of $65 million to $72 million in the aggregate, depending on the amount of interest and penalties for 2011 and 2012.
The Energuate companies are disputing the tax claims and are making the payments reserving all legal rights to seek restitution of such payments by contesting legally the merits of the SAT claims. The Energuate companies and their legal advisors are considering all available remedies to pursue in connection with these claims.
Qoros
The following discussion of Qoros' results of operations below is derived from Qoros' consolidated financial statements.
See Appendix E for Qoros' unaudited consolidated financial information.
Revenues
Revenues increased by RMB231 million, or 63%, to RMB599 million in Q2 2016 compared to RMB368 million in Q2 2015, primarily resulting from a 56% increase in vehicle sales to 5,076 vehicles in Q2 2016 from 3,256 vehicles in Q2 2015.
Cost of Sales
Cost of sales increased by RMB375 million, or 102%, to RMB741 million in Q2 2016 compared to RMB366 million in Q2 2015, primarily resulting from the increase in the number of vehicles sold in Q2 2016 as compared to Q2 2015, as well as an increase in the amortization of research and development costs relating to the newly launched Qoros 5 SUV.
Research and Development Expenses
Research and development expenses decreased by RMB21 million, or 29%, to RMB51 million in Q2 2016 compared to RMB72 million in Q2 2015.
Selling and Distribution Expenses
Selling and distribution expenses decreased by RMB7 million, or 5%, to RMB143 million in Q2 2016 compared to RMB150 million in Q2 2015, primarily resulting from a decrease in marketing and promotion expenses, consulting fees and personnel expenses offset by an increase in advertising expenses.
Administrative Expenses
Administrative expenses decreased by RMB34 million, or 23%, to RMB113 million in Q2 2016 compared to RMB147 million in Q2 2015, primarily resulting from a decrease in personnel fees and depreciation and amortization, partially offset by an increase in IT expenses.
Net Finance Costs
Net finance costs increased by RMB47 million, or 51%, to RMB140 million in Q2 2016, compared to RMB93 million in Q2 2015, primarily due to interest incurred in 2015 in connection with shareholder loans, partially offset by an increase in finance income.
Loss for the Period
For the reasons set forth above, as well as an approximately RMB100 million increase in depreciation and amortization in Q2 2016 as compared to Q2 2015, loss for the period increased by RMB105 million, or 22%, to RMB581 million in Q2 2016, compared to RMB476 million in Q2 2015.
Liquidity
As of June 30, 2016, Qoros had total loans and borrowings (excluding shareholder loans) of RMB5.6 billion. Also as of June 30, 2016, Qoros had current liabilities (excluding shareholder loans) of RMB4.4 billion, including trade and other payables of RMB3.2 billion and current assets of RMB1.7 billion, including cash and cash equivalents of RMB281 million. Qoros actively manages its trade payables, accrued expenses and other operating expenses in connection with the management of its liquidity requirements and available resources.
Qoros' principal sources of liquidity are cash flows received from financing activities, including long-term loans, short-term facilities and inflows received in connection with equity contributions or convertible or non-convertible shareholder loans, as well as cash flows received from vehicle sales. Qoros has drawn substantially all of the available amounts under its existing long term credit facilities and will require additional financing, including the renewal or refinancing of its working capital facilities, to fund its continued development and operations.
In April 2016, Kenon announced that Ansonia Holdings Singapore B.V. ("Ansonia"), a major shareholder in Kenon, entered into an agreement to provide loans of up to $50 million to Quantum (2007) LLC ("Quantum") to support Qoros' ordinary course working capital requirements (the "Loan Agreement"), subject to Wuhu Chery's provision of loans to Qoros in the same amount and on similar conditions. In April and June 2016, Ansonia provided Quantum with loans of approximately $50 million under the Loan Agreement (the "Initial Loans"). Quantum used the proceeds of the Initial Loans to make back-to-back loans in an aggregate principal amount of RMB300 million to Qoros to support Qoros' working capital requirements; Wuhu Chery provided loans to Qoros in the same amount.
In September 2016, Ansonia amended the Loan Agreement and provided additional loans of RMB150 million (approximately $23 million) (the "Additional Loans") to Quantum to support Qoros' ordinary course working capital requirements. As with the Initial Loans, the Additional Loans from Ansonia were provided to Quantum, which made back-to-back on-loans to Qoros (the "On-Loan"). Wuhu Chery has committed to provide loans to Qoros in the same amount and on similar conditions. In the event of a third-party financing at Qoros that meets certain conditions, the Additional Loans may, at Ansonia's discretion, either (i) be converted into equity of Quantum at a 25% discount to the implied value of Qoros based upon the third-party financing or (ii) be repaid by Quantum (following Qoros' repayment of the On-Loan). Except as set forth above, the Additional Loans were provided to Quantum on the same terms as the Initial Loans, which terms are described in Kenon's Reports on Form 6-Ks furnished to the SEC on April 22, 2016 and June 29, 2016.
In light of Qoros' financing needs, Kenon believes that the Additional Loans are in the best interests of Kenon and its shareholders. As Ansonia is a major shareholder in Kenon, this transaction has been reviewed and approved by Kenon in accordance with its related party transaction policy. Qoros is continuing to seek additional financing for its operations.
Business Updates
Car Sales
In Q2 2016, Qoros' sales increased by approximately 56% to 5,076 vehicles, as compared to 3,256 vehicles in Q2 2015.
In July 2016, Qoros' sales increased by approximately 28% to 1,572 vehicles, as compared to 1,230 vehicles in July 2015.
Qoros 5 SUV Launch
In March 2016, Qoros launched the Qoros 5 SUV, a mid-sized SUV, designed and produced with international standards of quality, safety and performance for the fast-growing SUV market in China. From its launch until June 30, 2016, Qoros has sold 3,913 Qoros 5 SUV vehicles, representing approximately 52% of the 7,579 vehicles sold by Qoros during this period.
Dealerships
As of June 30, 2016, Qoros has a network of 91 dealerships, of which 84 were operational and 7 were in pre-sales mode. As of June 30, 2016, Qoros had also entered into memorandums of understanding for 12 additional dealerships.
China Vehicle Market Conditions
According to China Passenger Car Association, cumulative passenger vehicle wholesales in Q2 2016 increased by 12% YoY, as compared to 3% YoY in Q2 2015. The SUV segment continued to be a high-growth segment, as sales increased by approximately 33% YoY in Q2 2016, as compared to 45% YoY in Q2 2015.
Additional Kenon Business Updates
Sale of Tower Warrants
In August 2016, Kenon sold all of its 1,699,796 Series 9 warrants of Tower Semiconductor Ltd. (NASDAQ and TASE: TSEM) ("Tower") for approximately $11.4 million. As a result of the sale, Kenon no longer holds an equity interest in Tower.
Impairment Test of Kenon's Interest in ZIM
As a result of current conditions in the container shipping market, Kenon is conducting an impairment test of its 32% equity investment in ZIM as of June 30, 2016.
Kenon (Unconsolidated) Liquidity and Capital Resources
As of June 30, 2016, cash, gross debt, and net debt (a non-IFRS financial measure, which is defined as gross debt minus cash) at Kenon were $56 million, $216 million and $160 million, respectively.
Kenon has fully drawn its $200 million credit facility from Israel Corporation Ltd. As of June 30, 2016, $200 million, plus interest and fees of $16 million, was outstanding under the facility.
Kenon has provided back-to-back guarantees to Chery in respect of Chery's guarantees of certain Qoros indebtedness. Set forth below is an overview of the guarantees provided by Kenon in respect of Qoros' indebtedness:
Date Granted | Qoros Credit Facility | Kenon Guarantee Amount |
Spin-Off / November 2015 | RMB3 billion credit facility | RMB750 million1 |
May / November 2015 | RMB700 million EXIM Bank loan facility | RMB350 million (plus interest and fees of up to RMB60 million)2 |
Total | | RMB1,100 million (plus certain interest and fees)1,2 |
______________________________ | ||
1. In the event that Chery's liability under its guarantee exceeds RMB1.5 billion, Kenon has committed to negotiate with Chery in good faith to find a solution so that Kenon's and Chery's liabilities for the indebtedness of Qoros under this credit facility are equal in proportion. Werbung Mehr Nachrichten zur Kenon Holdings Ltd Aktie kostenlos abonnieren
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