Kenon Holdings Ltd. | CIK:0001611005 | 3

  • Filed: 4/9/2018
  • Entity registrant name: Kenon Holdings Ltd. (CIK: 0001611005)
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    • ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory

    Note 11 – Subsidiaries
     
    A.
    Investments
     
    1.
    I.C. Power
     
    a.
    Subsidiaries acquired in 2016
     
    On December 29, 2015, IC Power Distribution Holdings Pte, Limited (hereinafter - “ICP Distribution”), a wholly owned subsidiary of I.C Power, entered into an agreement with Deorsa-Deocsa Holdings Ltd. to acquire 100% of the shares of Estrella Cooperatief BA, a holding company that indirectly owned two distribution companies in Guatemala (90.6% of Distribuidora de Electricidad de Occidente S.A.-DEOCSA and 92.68% of Distribuidora de Electricidad de Oriente S.A.-DEORSA) and 100% of two smaller related businesses (Redes Electricas de Centroamerica S.A.-RECSA and Comercializadora Guatemalteca Mayorista de Electricidad S.A.-GUATEMEL), collectively referred as “Energuate” for a purchase price equal to (i) the base purchase price, plus (ii) the deferred payment, and (iii) the final adjustment amount. On January 22, 2016, ICP Distribution closed the acquisition of Estrella Cooperatief BA for a total consideration of $266 million which included a base price of $242.5 million paid at the closing date and a deferred payment of $23.7 million paid on April 12, 2016. The consideration agreed was subject to working capital adjustments.
     
    On April 28, 2017, Ernst & Young LLP (“the consultant”) issued the Accountant Ruling in connection with the disagreement between Actis and the Company on the final working capital adjustment purchase price-consideration. As a result of the consultant ruling, a $10.2 million adjustment was required to be made in favor of the Company. The Company has recorded such amount as other income in the consolidated statement of profit or loss.
     
    On May 12 and May 17, 2017, Actis paid $272 thousand and authorized the release of $10 million from Escrow account, respectively.
     
    As at December 31, 2017, these subsidiaries were disposed (See Note 29).
     
    1.
    Consideration transferred
     
    The following table summarizes the acquisition-date fair value of each major class of consideration transferred:
     
    In thousands of $
    		      
    Cash consideration
    		    
    242,536
    		  
    Deferred payment
    		    
    23,750
    		  
    Total consideration transferred
    		    
    266,286
    		  

    In thousands of $
    		      
    Total consideration transferred
    		    
    266,286
    		  
    Cash and cash equivalent acquired
    		    
    (60,227
    )
    Total
    		    
    206,059
    		  

    2.
    Identifiable assets acquired and liabilities assumed
     
    The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the date of acquisition:
     
    In thousands of $
    		      
    Property, plant and equipment
    		    
    392,495
    		  
    Intangibles
    		    
    195,148
    		  
    Deferred income tax assets, net
    		    
    20,289
    		  
    Trade receivables, net
    		    
    100,508
    		  
    Cash and cash equivalent
    		    
    60,227
    		  
    Other assets
    		    
    22,457
    		  
    Credit from bank and others
    		    
    (288,290
    )
    Deferred income tax liabilities
    		    
    (54,642
    )
    Trade payables
    		    
    (108,193
    )
    Guarantee deposits from customers
    		    
    (51,072
    )
    Other liabilities
    		    
    (39,418
    )
    Total identifiable net assets acquired
    		    
    249,509
    		  

    3.
    Measurement of fair value
     
    The Company has measured the value of the acquired assets and liabilities at fair value on January 22, 2016, the date in which the Company gained control over Estrella Cooperatief BA. Additional information regarding the fair value measurement of the main items acquired is as follows:
     
    §
    Fixed assets were valued considering the market value provided by an appraiser;
    §
    Intangibles were measured based on the valuation of its Concessions;
    §
    Deferred taxes were recorded based on the temporary differences between the carrying amount of the assets and liabilities and their tax basis; and,
    §
    Non-controlling interests were measured as a proportion of the net assets identified on the acquisition date.  

    4.
    Goodwill
     
    Goodwill arising from the acquisition has been recognized as follows:
     
    In thousands of $
    		      
    Total consideration transferred
    		    
    266,286
    		  
    Non-controlling interest
    		    
    20,325
    		  
    Fair value of identifiable net assets
    		    
    (249,509
    )
    Goodwill*
    		    
    37,102
    		  
     
    (*)
    This amount is not deductible for tax purposes and was determined in Quetzales.
     
    Goodwill is explained by the strategic interest of the Company to expand its presence in distribution business. The goodwill is attributable mainly to the synergies expected to be achieved from integrating this business into the Group.

    5.
    Recognition of revenues and profit or loss
     
    During the period from the acquisition date to December 31, 2016 the revenues and profit contributed by Estrella Cooperatief BA. to the consolidated results are $515 million and $29 million, respectively. If the acquisition had occurred on 1 January 2016, management estimates that contribution to consolidated revenue would have been $551 million, and to consolidated profit for the period would have been $30 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on January 1, 2016.
     
    b.
    Subsidiaries acquired in 2015
     
    Advanced Integrated Energy Ltd. -
     
    On June 8, 2015, IC Power executed an agreement with Hadera Paper Ltd., pursuant to which IC Power agreed to acquire from Hadera Paper 100% of the shares in Advanced Integrated Energy Ltd. (hereinafter “AIE”) and the Hadera Paper’s energy center. AIE holds a conditional license for the construction of a 120MW cogeneration power station in Israel. The total payment amounted to NIS 60 million (approximately $15.6 million) which involved two transactions:
     
    i.          
    A business combination in the amount of NIS 36 million ($9.4 million) as follows: (i) On August 10, 2015, after fulfilling the conditions precedent contemplated in the aforementioned agreement, IC Power completed the acquisition of AIE and paid NIS 1.7 million (approximately $460 thousand) to Hadera Paper Ltd. for the acquisition of the shares. (ii) IC Power through AIE paid NIS 34 million (approximately $9 million) for the repayment of the loan between Hadera Paper Ltd. and its former shareholder.
     
    The purchase price allocation was as follows: Property, plant and equipment: $9 million; Intangible: $464 thousand; deferred tax liabilities: $123 thousand; and goodwill: $119 thousand.
     
    ii.           AIE acquired Hadera Paper’s energy center in the aggregate amount of NIS 24,000 (approximately $6 million). The Hadera Paper’s energy center generates electricity with a 18MW steam turbine.
     
    During 2016, AIE issued to IC Power several capital notes of NIS 130 million (approximately $33.7 million), according to their terms, the notes bear no interest and are repayable subject to the AIE’s sole discretion no earlier than five years after the issuance. Additional investments by IC Power will be required to enable AIE to complete construction of the power plant, which is expected to commence operations in the first half of 2019.
     
    2.
    I.C. Green Energy Ltd (I.C. Green)
    a.
    As of December 31, 2017, I.C. Green held 90.85% of the shares of Primus Green Energy Inc. (“PGE”). In 2016, I.C. Green granted PGE additional $7.5 million as convertible bridge financing agreement. On December 10, 2016, all of the convertible loans including interest have been consolidated to a convertible bridge financing agreement in the amount of $26 million with interest of 7% annually. During 2017 I.C. Green granted PGE additional $7.4 million as convertible bridge financing agreement. All of the convertible loans including interest have been consolidated to a convertible bridge financing agreement in the amount of $35 million with interest of 7% annually.
     
    B.
    The following table summarizes the information relating to each of the Group’s subsidiaries in 2017, 2016 and 2015 that has material NCI:
     
       
    As at and for the year ended December 31
    		  
        2017     2016*      2015*  
       
    OPC Energy Ltd.
    		    
    Samay I.S.A
    		    
    Nicaragua Energy Holding
    		    
    Kallpa Generacion S.A.
    		    
    Cerro del Aguila S.A.
    		    
    Samay I.S.A
    		    
    Nicaragua Energy Holding
    		    
    Kallpa Generacion S.A.
    		    
    Cerro del Aguila S.A.
    		  
       
    $ thousands
    		  
    NCI percentage
    		    
    24.18
    %
    		    
    25.10
    %
    		    
    35.42
    %
    		    
    25.10
    %
    		    
    25.10
    %
    		    
    25.10
    %
    		    
    35.42
    %
    		    
    25.10
    %
    		    
    25.10
    %
    Current assets
    		    
    204,461
    		      
    75,485
    		      
    41,630
    		      
    108,246
    		      
    53,843
    		      
    47,766
    		      
    43,390
    		      
    92,120
    		      
    23,841
    		  
    Non-current assets
    		    
    736,123
    		      
    380,947
    		      
    144,313
    		      
    611,928
    		      
    949,440
    		      
    344,052
    		      
    172,917
    		      
    638,325
    		      
    847,015
    		  
    Current liabilities
    		    
    (99,441
    )
    		    
    (73,846
    )
    		    
    (26,053
    )
    		    
    (55,323
    )
    		    
    (85,935
    )
    		    
    (36,075
    )
    		    
    (22,044
    )
    		    
    (188,291
    )
    		    
    (25,909
    )
    Non-current liabilities
    		    
    (667,996
    )
    		    
    (311,030
    )
    		    
    (100,834
    )
    		    
    (511,277
    )
    		    
    (618,219
    )
    		    
    (289,560
    )
    		    
    (121,142
    )
    		    
    (356,900
    )
    		    
    (556,277
    )
    Net assets
    		    
    173,147
    		      
    71,556
    		      
    59,056
    		      
    153,574
    		      
    299,129
    		      
    66,183
    		      
    73,121
    		      
    185,254
    		      
    288,670
    		  
    Carrying amount of NCI
    		    
    41,863
    		      
    17,961
    		      
    20,918
    		      
    38,547
    		      
    75,081
    		      
    16,612
    		      
    25,899
    		      
    46,499
    		      
    72,456
    		  
                                                                             
    Revenues
    		    
    365,395
    		      
    40,000
    		      
    90,017
    		      
    438,475
    		      
    49,646
    		      
    —
    		      
    111,428
    		      
    447,679
    		      
    —
    		  
    Profit/(loss)
    		    
    5,896
    		      
    548
    		      
    7,511
    		      
    35,820
    		      
    9
    		      
    (4,049
    )
    		    
    14,469
    		      
    44,088
    		      
    (8,579
    )
    Other comprehensive income/(loss)
    		    
    8,514
    		      
    4,825
    		      
    —
    		      
    —
    		      
    10,449
    		      
    (6,057
    )
    		    
    —
    		      
    (53
    )
    		    
    (1,079
    )
    Profit attributable to NCI
    		    
    1,425
    		      
    138
    		      
    2,660
    		      
    8,991
    		      
    2
    		      
    (1,016
    )
    		    
    5,125
    		      
    11,066
    		      
    (2,153
    )
    OCI attributable to NCI
    		    
    2,058
    		      
    1,211
    		      
    —
    		      
    —
    		      
    2,623
    		      
    (1,520
    )
    		    
    —
    		      
    (13
    )
    		    
    (271
    )
    Cash flows from operating activities
    		    
    110,290
    		      
    (1,276
    )
    		    
    17,737
    		      
    114,838
    		      
    25,629
    		      
    —
    		      
    42,480
    		      
    120,438
    		      
    —
    		  
    Cash flows from investing activities
    		    
    (154,194
    )
    		    
    (60,468
    )
    		    
    (931
    )
    		    
    (16,082
    )
    		    
    (69,372
    )
    		    
    (236,207
    )
    		    
    (5,088
    )
    		    
    (13,589
    )
    		    
    (180,771
    )
    Cash flows from financing activities excluding dividends paid to non-controlling interests
    		    
    165,107
    		      
    —
    		      
    (4,004
    )
    		    
    (16,943
    )
    		    
    —
    		      
    138,000
    		      
    (26,139
    )
    		    
    (91,084
    )
    		    
    95,000
    		  
    Dividends paid to non-controlling interests
    		    
    (4,159
    )
    		    
    47,088
    		      
    (26,440
    )
    		    
    (88,911
    )
    		    
    62,823
    		      
    —
    		      
    (4,401
    )
    		    
    (7,530
    )
    		    
    —
    		  
    Effect of changes in the exchange rate on cash and cash equivalents
    		    
    7,126
    		      
    373
    		      
    (348
    )
    		    
    198
    		      
    369
    		      
    (3,266
    )
    		    
    (489
    )
    		    
    (5,334
    )
    		    
    (2,929
    )
    Net increase/(decrease) in cash equivalents
    		    
    124,170
    		      
    (14,283
    )
    		    
    (13,986
    )
    		    
    (6,900
    )
    		    
    19,449
    		      
    (101,473
    )
    		    
    6,363
    		      
    2,901
    		      
    (88,700
    )
     
     
    * These entities are discontinued operations in 2017.
     
    C.
    Restrictions
     
    I.C. Power
     
    As at December 31, 2017, IC Power´s subsidiaries have no restrictions to transfer cash or other assets to the parent company as long as each subsidiary is in compliance with the covenants derived from the borrowing agreements described in Note 16.
     
    OPC had originally restrictions to transfer cash or paid dividends up to the third anniversary of Construction Completion. On October 13, 2015, OPC and its seniors lenders amended this restriction to pay dividends, which ended on June 30, 2015. Therefore, on October 19, 2015, OPC paid NIS 295 million (equivalent to $77 million). Out of this total, NIS 222 million (equivalent to $58 million) was paid as repayment of capital notes and NIS 72.5 million (equivalent to $19 million) as intercompany loan.