Kenon Holdings Reports Q2 2022 Results and Additional Updates
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 | ||||||||
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
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 | ||||||||
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
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 | ||||||||
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
OPC's share in losses of associated companies, net increased by
Liquidity and Capital Resources
As of June 30, 2022, OPC had cash and cash equivalents of
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
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
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
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
Discussion of ZIM's results for Q2 2022
For the period ended June 30, 2022, ZIM's revenue increased by
ZIM's net profit was
ZIM carried 856,000 TEUs in Q2 2022 representing a
Qoros
Sale of remaining
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
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
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
Following the completion of the capital reduction, Kenon's share capital is approximately
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
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
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.