Kenon Holdings Ltd (TASE:KEN: NYSE: KEN-WI), controlled by Idan Ofer with a 63% stake, is still accumulating losses on its holdings in subsidiaries Qoros and Zim Integrated Shipping Services Ltd. Kenon today reported that it had finished the first quarter of 2017 with a $20 million loss, following a $412 million loss for 2016.
Kenon fully owns power stations company IC Power (ICP), 50% of Chinese auto manufacturer Qoros, and 32% of Zim. Kenon's shareholders' equity shrank 1.5% to $671 million in the first quarter, after plummeting 36% last year.
ICP, which operates in Israel and in Latin America, is Kenon's main asset, and now accounts for all of its value. ICP's revenue grew 29% to $544 million in the first quarter, following the start of operations by two power plants in Peru in May and August 2016.
Following revenue growth and improvement in its business, ICP's operating profit shot up 47% to $146 million. On the other hand, a $20 million write-off on the sale of assets in Colombia limited ICP's first quarter net profit to $22 million, a 5% increase.
ICP's business in Israel set to expand
ICP operates in Israel through its ICPI subsidiary, which operates private power stations at Mishor Rotem and Hadera. The Hadera power plant was acquired last year from Hadera Paper Ltd. (TASE: AIP; Pink Sheets: HAIPF) for $16 million. ICPI has since concentrated on expanding this plant's production capacity to 140 megawatts with a $250 million investment.
ICP's attempt to hold an IPO on the New York Stock Exchange failed in early 2017, and the company is now devoting its efforts to an offering on the Tel Aviv Stock Exchange (TASE). Meanwhile, ICPI raised $89 million last month with a bond issue to investment institutions at 4.95% interest. Most of the proceeds will be used to repay existing debt.
ICP's business in Israel is expected to continue expanding, after ICPI signed an agreement in April to acquire 95% of the shares in Zomet Energy for $24 million. Zomet owns the franchise to operate a 396-megawatt natural gas-powered private power station near Kiryat Gat.
Kenon's second Israeli holding, Zim, posted $655 million in revenue in the first quarter of 2017, 4% more than in the corresponding quarter last year. Following the improvement in revenue, Zim's first quarter loss was down to $8 million, compared with a $20 million loss in the first quarter of 2016.
Kenon's main problem, however, continues to be its holding in Chinese auto manufacturer Qoros, which is still racking up big losses and burning tens of millions of dollars a quarter. Qoros lost $41 million in the first quarter, following a $647 million cumulative loss in 2015-2016.
In contrast to 2016, in which Qoros posted rapid growth in revenue, its revenue dropped by an alarming 21% to $59 million in the first quarter of 2017. The decrease is attributable to a 24% fall in sales of vehicles to 3,700 in the quarter, compared with 4,900 in the corresponding quarter last year.
Kenon injected $57 million more into Qoros in the first quarter, but the auto manufacturer finished the first quarter with only $9 million in cash. Kenon therefore injected a further $15 million in April, bringing the balance of Kenon's obligation to Qoros to $42 million.
Qoros, however, has a colossal $754 million debt, $528 million of which is classified as short-term debt. Qoros's financing banks have agreed to postpone the date for beginning repayment of a large proportion of the banks loans.
Kenon finished the first quarter with $43 million in cash, but also with a $228 million debt to Israel Corporation (TASE: ILCO), its fellow subsidiary, to which Kenon has granted a lien on ICP. Together with the additional capital injection into Qoros in April, Kenon borrowed $50 million from ICP.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 1, 2017
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