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Kenon Holdings Ltd (KEN) Q4 2019 Earnings Call Transcript

By Motley Fool Transcribers - Apr 30, 2020 at 1:30PM

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KEN earnings call for the period ending December 31, 2019.

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Kenon Holdings Ltd (KEN -5.24%)
Q4 2019 Earnings Call
Apr 30, 2020, 9:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Welcome to the Kenon Holdings Ltd. conference call to discuss the full-year 2019 results of Kenon.

[Operator Instructions]

Kenon published its press release with full-year results earlier today. The press release as well as summary financial information of Kenon and OPC have been publicly submitted to the Securities and Exchange Commission on Form 6-K. Kenon is also filing today its Annual Report on Form 20-F for 2019 with the SEC including audited financial statements for 2019. These documents can be accessed from the SEC's website, and have been filed with the Tel Aviv Stock Exchange and are available on the company's website.

With us on the call today are the management of Kenon and OPC Energy. This includes Mr. Robert Rosen, CEO of Kenon, Mr. Mark Hasson, CFO of Kenon, and Mr. Giora Almogy, CEO of OPC. Rob will first provide an update on Kenon and Qoros, Giora will then provide an update on OPC, followed by Mark, who will discuss the financial results of Kenon. We will then open the call for the question-and-answer session, followed by a concluding statement by Rob.

Before we start, I would like to point out that this conference call may contain forward-looking statements, including statements regarding expected events, developments or the expected performance of the company and its subsidiaries and associated companies, including those statements identified as forward-looking in Kenon's full-year 2019 results release, and its Annual Report on Form 20-F for 2019. These statements are only estimates or plans and there is no guarantee that they will in fact occur. Actual events or results may differ materially from those projected, including as a result of changing market trends, as well as other risks and uncertainties identified in the full-year release and the Risk Factors section of the company's Annual Report on Form 20-F filed with the Securities and Exchange Commission, and in the section entitled Caution Concerning Forward-Looking Statements in the earnings release.

In addition, this conference call includes certain non-IFRS measures including OPC's EBITDA. For the definition of such terms and a reconciliation to their most directly comparable IFRS measures, see Exhibit 99.2 to the Form 6-K furnished to the SEC today. The Form 6-K is available on the SEC website, as well as Kenon's website.

And with that, I will now hand over the call to Rob. Rob, please go ahead.

Robert L. Rosen -- Chief Executive Officer

Thank you, operator. I'd like to welcome all of you, and thank you for joining us today for our investor conference call to discuss Kenon's full-year 2019 results.

In light of the current global situation, we hope everyone is staying safe, and we thank you for making the effort to join us today. Starting with Qoros, we have some very positive news. We previously announced an agreement to sell 50% of our remaining stake in Qoros, which was 12% to the majority shareholder in Qoros. We are pleased to update that the sale has now been completed, and we have received a full payment of CNY1.56 billion, or $220 million. As a result, we now hold a 12% interest in Qoros, the majority shareholder hold 63% and Chery owns 25%.

In addition, we've also received aggregate cash payments of $17 million in December 2019 and April 2020 from Chery as a result of repayments on Qoros bank loans and corresponding reductions in Chery's obligations under the guarantees. We expect to receive an additional $1 million from Chery in connection with the 12% sale. Once this is received, we will be fully reimbursed for the cash collateral of CNY244 million, or about $36 million, that we have previously provided to Chery. The sale was completed despite some very challenging and particularly unusual circumstances, especially in China, which caused some delay in the completion of the process. We are very proud of the efforts of our team. And we're very grateful for the efforts of our partners in China. As a reminder, Kenon retains the right to coax [Phonetic] Qoros's majority shareholder to purchase Kenon's remaining 12% equity stake in Qoros.

And with that, I'd like to hand the call over to Giora to discuss the business developments and results of OPC. Giora, go ahead, please.

Giora Almogy -- Chief Executive Officer, OPC Energy Ltd.

Thank you, Rob.

In terms of business development, OPC-Hadera is in the process of commissioning 148 megawatt co-generation plant in Israel. The total cost of completing the OPC-Hadera plant is expected to be approximately ILS1 billion, or $289 million. Construction of the Hadera power plant has been completed and is currently in the late commissioning stage. Due to the spread of the COVID-19, Hadera's EPC contractor expects a delay in the completion of the acceptance tests of the power plant, which could result in a delay in the commercial operation of the Hadera power plant.

On Tzomet, OPC is developing an open-cycle natural gas-fired power station with a capacity of approximately 396 megawatts in Israel. We are progressing with the development of Tzomet Project. In February 2020, the Electricity Authority notified OPC that Tzomet met the financial close milestone. In addition, as a result of reaching financial closing, we completed the purchase of former [Phonetic] minority partners, and now OPC energy holds 100% of Tzomet. Last week, OPC issued a bond Series B in the amount of ILS400 million, which are approximately $113 million, bearing an annual interest rate of 2.75% linked to the Israeli CPI.

In terms of financial results, OPC's revenues in 2019 were $373 million as compared to $363 million in 2018, mainly due to higher availability in Rotem power plant in 2019 and an increase in electricity tariffs that was in the beginning of 2019. OPC's EBITDA in 2019 was $105 million as compared to $91 million in 2018. OPC's net profit was $34 million as compared to $26 million in 2018. OPC's net profit attributable to its equity shareholders in 2019 was $25 million as compared to $20 million in the previous year. Please note that OPC's results as published in new Israeli shekels by OPC, are slightly different from those published by Kenon in USD as they don't include the impact of exchange rate fluctuations on the translation of the results from shekels to US dollars.

That ends my summary, and now I'll hand over to Mark, Kenon's CFO, for the financial summary. Mark, please go ahead.

Mark Hasson -- Chief Financial Officer

Thank you, Giora.

Kenon's consolidated results are largely made up of the consolidated results of OPC, which have just been described by Giora. The results of Qoros and ZIM are reflected under results from associates. In 2019, Kenon earned a consolidated profit of $2 million. And you can find additional details in our earnings release and Form 6-K that we filed earlier today, and our annual report on Form 20-F for 2019 that we plan to file later today.

In terms of liquidity and capital resources, Kenon's cash balance as at December 31, 2019, was $33 million, and Kenon does not have any material debt. The balance of $33 million is prior to the receipt of $220 million from the sale of Qoros and an additional $6 million received from Chery in April 2020. Finally, as a reminder, Kenon is the beneficiary of a four-year deferred payment agreement, reflecting deferred consideration from the sale of its Inkia power business in 2017. Amounts under this agreement accrue interest at a rate of 8% per annum. And as at December 31, 2019, the accrued amount was $204 million.

That ends our summary, and we will now be happy to take your questions. Operator?

Questions and Answers:


[Operator Instructions]

There are no questions at this time. Mr. Rosen, would you like to make your concluding statement?

Robert L. Rosen -- Chief Executive Officer

Thank you, operator.

So on behalf of the management of Kenon Holdings, I would like to thank you for your interest in our company. If you have any follow-up questions after this call, please feel free to contact Kenon's Investor Relations team, whose contact details are on the press releases. Thank you again, and farewell from me. Have a good day, and we hope you are staying safe.


[Operator Closing Remarks]

Duration: 10 minutes

Call participants:

Robert L. Rosen -- Chief Executive Officer

Giora Almogy -- Chief Executive Officer, OPC Energy Ltd.

Mark Hasson -- Chief Financial Officer

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