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Edited Transcript of KEN earnings conference call or presentation 8-Apr-19 1:00pm GMT

Full Year 2018 Kenon Holdings Ltd Earnings Call

Apr 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Kenon Holdings Ltd earnings conference call or presentation Monday, April 8, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Giora Almogy

OPC Energy Ltd. - CEO

* Mark Hasson

Kenon Holdings Ltd. - CFO

* Robert L. Rosen

Kenon Holdings Ltd. - CEO

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to the Kenon Holdings Ltd. conference call to discuss the fourth quarter and full year 2018 results of Kenon. (Operator Instructions) As a reminder, this conference is being recorded.

Kenon published its press release with Q4 and full year results earlier today. The press release as well as summary financial information of Kenon, OPC and Qoros have been publicly submitted to the Securities and Exchange Commission on Form 6-K. 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 line 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. 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'd 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 fourth quarter and full year 2018 results release. These statements are only estimates or plans, and there is no guarantee 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 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.

I would now -- and with that, I would like to hand over the call to Rob. Rob, go ahead, please.

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Robert L. Rosen, Kenon Holdings Ltd. - CEO [2]

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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 fourth quarter and full year 2018 results.

Starting with Qoros. Earlier this year, we announced an agreement to sell 12% of our remaining stake in Qoros to the majority shareholder for about USD 227 million. The sale is still subject to obtaining customary relevant third-party consents and other closing conditions, including approvals by relevant government authorities. Also, as a reminder, Kenon has the right to cause Qoros' majority shareholder to purchase Kenon's remaining equity stake in Qoros for a similar amount.

In terms of financial results, Qoros' revenue in 2018 increased to approximately USD 800 million as compared to approximately USD 280 million in 2017, reflecting a significant increase in car sales from 15,000 in 2017 to 62,000 in 2018. A substantial portion reflects purchases from an entity introduced by Qoros' majority shareholder.

Moving to OPC. The company completed a very successful year, both operationally and financially.

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

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Giora Almogy, OPC Energy Ltd. - CEO [3]

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Thank you, Rob. So first, in terms of business development, OPC to OPC-Hadera is constructing a 148-megawatt co-generation plant. The total investment is estimated at NIS 1 billion, which is approximately $267 million. As of the 31st of December 2018, we have invested NIS 822 million, which is approximately $219 million. And we have substantially completed the construction of the power plant, and we are now in the testing and the commissioning phase.

Another project, OPC Tzomet. OPC is developing a 396-megawatt power plant in Israel. In January 2019, we entered an agreement to purchase the remaining 5% shares from the minority shareholders, reaching 100% holding in the company.

Early in 2018, we signed an EPC agreement with Pratt & Whitney Power Systems to construct the Tzomet power plant for approximately cost -- for approximate cost of $300 million.

Finally, on Tzomet, we have been granted a conditional -- last week, the Tzomet has been granted a conditional license, which still requires the signing of the Minister of Energy.

In terms of financial results, before I touch upon the results of 2018, I would like to point out that in the fourth quarter, we had a major maintenance, which is a scheduled maintenance and is performed once every 6 years. During this maintenance, we have to still serve our PPAs, and to do that, we are buying electricity from Israel Electric, and therefore, we are not receiving the margins that we would have made if we would have been generating this electricity, and therefore, there is a negative impact scheduled on the fourth quarter.

In terms of OPC's EBITDA, we finished the year with a $91 million EBITDA compared to EBITDA of $86 million in 2017. The major impact on that is the -- on the EBITDA -- in the improvement of the EBITDA are the electricity prices that increased between '18 and '17 and which was partially offset by the maintenance, which I described before.

In terms of OPC's net profit, we finished 2018 with a net profit of $26 million compared with a net profit of $14 million in 2017.

Furthermore, in March 2019, OPC declared a dividend of $2 -- of $10 million. Please note that all these results -- OPC's results are published in New Israeli Shekels and are slightly different from those published by Kenon, which are in U.S. dollars and did not include the impacts of exchange rate fluctuations on the translation of the results from Shekels to U.S. dollars.

That ends my summary, and will now hand over to Mark, the CFO of Kenon. Please go ahead, Mark.

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Mark Hasson, Kenon Holdings Ltd. - CFO [4]

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Thanks, Giora. Kenon's consolidated results are largely made up of the consolidated results of OPC, which were just described by Giora, as well as the gain due to the third-party investment in Qoros at the beginning of 2018. The results of Qoros and ZIM are reflected on the results from associates.

In 2018, Kenon incurred a net profit of $445 million compared to a net profit of $269 million in 2017. You can find additional details in our 6-K, which was filed earlier today.

In terms of liquidity and capital resources, as of December 31, 2018, Kenon's cash balance was $38 million, and this is following the dividend of approximately $100 million in the fourth quarter of 2018, which took our total cash distributions for 2018 to approximately $765 million.

As of December 31, 2018, Kenon does not have any debt. And finally, as a reminder, Kenon is the beneficiary of a 4-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 of December 31, 2018, the total amount is $189 million, including principal and accrued interest.

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

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Questions and Answers

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Operator [1]

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

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Robert L. Rosen, Kenon Holdings Ltd. - CEO [2]

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Thank you, operator. On behalf of the management of Kenon Holdings, I'd like to thank each of you for your interest in our company. If you have any questions, please feel free to contact Kenon's Investor Relations team, whose contact details are on the press release. I thank you, again, and farewell from me. Have a nice day.

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Operator [3]

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Thank you. This includes the Kenon Holdings conference call. Thank you for your participation. You may go ahead and disconnect.