Company Quick10K Filing
Kenon Holdings
20-F 2019-12-31 Filed 2020-04-30
20-F 2018-12-31 Filed 2019-04-08
20-F 2017-12-31 Filed 2018-04-09
20-F 2016-12-31 Filed 2017-04-19
20-F 2015-12-31 Filed 2016-04-22

KEN 20F Annual Report

Item 17 ☐ Item 18 ☐
Part I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Note 1 - Financial Reporting Principles and Accounting Policies
Note 2 - Basis of Preparation of The Financial Statements
Note 2 - Basis of Preparation of The Financial Statements (Cont'D)
Note 3 - Significant Accounting Policies
Note 3 - Significant Accounting Policies (Cont'D)
Note 4 - Determination of Fair Value
Note 5 - Cash and Cash Equivalents
Note 6 - Short - Term Deposits and Restricted Cash
Note 7 - Trade Receivables
Note 8 - Other Current Assets
Note 9 - Investment in Associated Companies
Note 9 - Investment in Associated Companies (Cont'D)
Note 10 - Subsidiaries
Note 10 - Subsidiaries (Cont'D)
Note 11 - Long - Term Prepaid Expenses
Note 12 - Other Non - Current Assets
Note 13 - Deferred Payment Receivable
Note 14 - Property, Plant and Equipment, Net
Note 14 - Property, Plant and Equipment, Net (Cont'D)
Note 15 - Intangible Assets, Net
Note 15 - Intangible Assets, Net (Cont'D)
Note 16 - Loans and Debentures
Note 16 - Loans and Debentures (Cont'D)
Note 17 - Trade Payables
Note 18 - Other Current Liabilities
Note 19 - Right - of - Use Assets and Lease Liabilities
Note 20 - Contingent Liabilities, Commitments and Concessions
Note 20 - Contingent Liabilities, Commitments and Concessions (Cont'D)
Note 21 - Share Capital and Reserves
Note 21 - Share Capital and Reserves (Cont'D)
Note 22 - Opc Energy Ltd's Initial Public Offering
Note 23 - Revenue
Note 24 - Cost of Sales and Services
Note 25 - Selling, General and Administrative Expenses
Note 26 - Financing Income (Expenses), Net
Note 27 - Income Taxes
Note 27 - Income Taxes (Cont'D)
Note 28 - Earnings per Share
Note 30 - Segment, Customer and Geographic Information
Note 30 - Segment, Customer and Geographic Information (Cont'D)
Note 31 - Related - Party Information
Note 31 - Related - Party Information (Cont'D)
Note 32 - Financial Instruments
Note 32 - Financial Instruments (Cont'D)
Note 33 - Subsequent Events
Note 33 - Subsequent Events (Cont'D)
Item 19. Exhibits
EX-2.3 exhibit_2-3.htm
EX-4.12 exhibit_4-12.htm
EX-8.1 exhibit_8-1.htm
EX-12.1 exhibit_12-1.htm
EX-12.2 exhibit_12-2.htm
EX-13.1 exhibit_13-1.htm
EX-15.1 exhibit_15-1.htm
EX-15.2 exhibit_15-2.htm

Kenon Holdings Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 zk2024212.htm 20-F


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 20-F


REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2019
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
          

Commission File Number: 001-36761


KENON HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
 
(Company Registration No. 201406588W)
Singapore
4911
Not Applicable
(Jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
 
1 Temasek Avenue #36-01
Millenia Tower
Singapore 039192
+65 6351 1780
 
 
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 


Copies to:
Scott V. Simpson
James A. McDonald
Skadden, Arps, Slate, Meagher and Flom (UK) LLP
40 Bank Street
London E14 5DS
Telephone: +44 20 7519 7000
Facsimile: +44 20 7519 7070
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Ordinary Shares, no par value
KEN
The New York Stock Exchange
 
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
53,858,498 shares
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes ☐ No ☒
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes ☐ No ☐
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such a shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files).
 
Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☐
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
 
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐
International Financial Reporting Standards as issued by the International Accounting
Standards Board ☒
Other ☐
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
 
Item 17 ☐ Item 18 ☐
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐ No ☒


 
TABLE OF CONTENTS
 

1
1
A.
Directors and Senior Management
1
B.
Advisers
1
C.
Auditors
1
1
1
A.
Selected Financial Data
1
B.
Capitalization and Indebtedness
6
C.
Reasons for the Offer and Use of Proceeds
6
D.
Risk Factors
6
49
A.
History and Development of the Company
49
B.
Business Overview
50
C.
Organizational Structure
95
D.
Property, Plants and Equipment
96
96
96
A.
Operating Results
103
B.
Liquidity and Capital Resources
108
C.
Research and Development, Patents and Licenses, Etc.
120
D.
Trend Information
120
E.
Off-Balance Sheet Arrangements
121
F.
Tabular Disclosure of Contractual Obligations
121
G.
Safe Harbor
122
122
A.
Directors and Senior Management
122
B.
Compensation
125
C.
Board Practices
125
D.
Employees
128
E.
Share Ownership
128
129
A.
Major Shareholders
129
B.
Related Party Transactions
130
C.
Interests of Experts and Counsel
130
131
A.
Consolidated Statements and Other Financial Information
131
B.
Significant Changes
131
131
A.
Offer and Listing Details.
131
B.
Plan of Distribution
131
C.
Markets
131
D.
Selling Shareholders
131
E.
Dilution.
131
F.
Expenses of the Issue
131

i

131
A.
Share Capital
131
B.
Constitution
131
C.
Material Contracts
145
D.
Exchange Controls
145
E.
Taxation
145
F.
Dividends and Paying Agents
150
G.
Statement by Experts
150
H.
Documents on Display
151
I.
Subsidiary Information
151
151
152
A.
Debt Securities
152
B.
Warrants and Rights
152
C.
Other Securities
152
D.
American Depositary Shares
152

153
153
153
153
154
154
154
154
155
155
155
155
155

156
156
156
156
156

ii


INTRODUCTION AND USE OF CERTAIN TERMS
 
We have prepared this annual report using a number of conventions, which you should consider when reading the information contained herein. In this annual report, the “Company,” “we,” “us” and “our” shall refer to Kenon Holdings Ltd., or Kenon, and each of our subsidiaries and associated companies, collectively, as the context may require, including:


OPC Energy Ltd. (“OPC”), an owner, developer and operator of power generation facilities in the Israeli power market, in which Kenon has a 70% interest;


Qoros Automotive Co., Ltd. (“Qoros”), a Chinese automotive company based in China, in which Kenon, through its 100%-owned subsidiary Quantum (as defined below), has a 12% interest;


ZIM Integrated Shipping Services, Ltd. (“ZIM”), an Israeli global container shipping company, in which Kenon has a 32% interest;


Primus Green Energy, Inc. (“Primus”), a New Jersey corporation which is a developer of an alternative fuel technology, in which Kenon, through IC Green (as defined below), has a 91% interest. In light of market conditions, Primus has decided to significantly reduce its operations.


I.C. Power Asia Development Ltd. (“ICP”), formerly I.C. Power Ltd., an Israeli company, in which Kenon has a direct 100% interest;
 

IC Power Ltd. (“IC Power”), formerly IC Power Pte. Ltd, a Singaporean company, in which Kenon has a direct 100% interest;
 

IC Power Distribution Holdings Pte. Ltd. (“ICPDH”), a Singaporean company, in which Kenon has an indirect 100% interest; and
 

 “Inkia” means Inkia Energy Limited, a Bermudian corporation and a wholly-owned subsidiary of Kenon, which was liquidated in July 2019. In December 2017, Inkia sold the Inkia Business (as defined below);
 
Additionally, this annual report uses the following conventions:
 

“Ansonia” means Ansonia Holdings Singapore B.V., a company organized under the laws of Singapore, which owns approximately 58% of the outstanding shares of Kenon;
 

“CDA” means Cerro del Águila S.A., a Peruvian corporation;
 

“DEOCSA” means Distribuidora de Electricidad de Occidente, S.A., a Guatemalan corporation, which was owned by Inkia prior to the sale of the Inkia Business in December 2017;
 

“DEORSA” means Distribuidora de Electricidad de Oriente, S.A., a Guatemalan corporation, which was owned by Inkia prior to the sale of the Inkia Business in December 2017;
 

“Hadera Paper” means Hadera Paper Ltd., an Israeli corporation, which is owned by OPC;
 

“HelioFocus” means HelioFocus Ltd., an Israeli corporation, in which Kenon, through IC Green, held a 70% interest, and which was liquidated on July 6, 2017;
 
iii


“IC” means Israel Corporation Ltd., an Israeli corporation traded on the Tel Aviv Stock Exchange, or the “TASE,” and Kenon’s former parent company;
 

“IC Green” means IC Green Energy Ltd., an Israeli corporation and a wholly-owned subsidiary of Kenon, which holds Kenon’s equity interests in Primus and previously held Kenon’s equity interest in HelioFocus;
 

“IEC” means Israel Electric Corporation, a government-owned entity, which generates and supplies the majority of electricity in Israel, transmits and distributes all of the electricity in Israel, acts as the system operator of Israel’s electricity system, determines the dispatch order of generation units, grants interconnection surveys, and sets spot prices, among other roles;
 

“Inkia Business” means Inkia’s Latin American and Caribbean power generation and distribution businesses, which were sold in December 2017;
 

“Kallpa” means Kallpa Generación SA, a company within the Inkia Business. In August 2017, Kallpa merged with CDA, with the surviving entity renamed Kallpa Generación SA. Kallpa was owned by Inkia until December 2017;


“Majority Shareholder in Qoros” means the China-based investor related to the Baoneng Group that holds 63% of Qoros;
 

“OPC-Hadera” is the trade name of Advanced Integrated Energy Ltd., an Israeli corporation, in which OPC has a 100% interest;
 

“OPC-Rotem” means O.P.C. Rotem Ltd., an Israeli corporation, in which OPC has an 80% interest;
 

“our businesses” shall refer to each of our subsidiaries and associated companies, collectively, as the context may require;
 

“Quantum” means Quantum (2007) LLC, a Delaware limited liability company, is a wholly-owned subsidiary of Kenon and which is the direct owner of our interest in Qoros;
 

“Samay I” means Samay I S.A., a Peruvian corporation;
 

“spin-off” shall refer to (i) IC’s January 7, 2015 contribution to Kenon of its interests in each of IC Power, Qoros, ZIM, Tower, Primus, HelioFocus and the Renewable Energy Group, as well as other intermediate holding companies related to these entities, and (ii) IC’s January 9, 2015 distribution of Kenon’s issued and outstanding ordinary shares, via a dividend-in-kind, to IC’s shareholders;
 

“Tower” means Tower Semiconductor Ltd., an Israeli specialty foundry semiconductor manufacturer, listed on the NASDAQ stock exchange, or “NASDAQ,” and the TASE, in which Kenon used to hold an interest until June 30, 2015; and
 

“Tzomet” means Tzomet Energy Ltd., an Israeli corporation in which OPC has a 100% interest, following the acquisition of the remaining 5% interest in February 2020.
 
Additionally, this annual report uses the following conventions for OPC:
 

“Availability factor” refers to the number of hours that a generation facility is available to produce electricity divided by the total number of hours in a year.
 
iv


“COD” means the commercial operation date of a development project;
 

“cooperation arrangements” means one or more vessel sharing arrangements, swap agreements and slot sharing arrangements.
 

“distribution” refers to the transfer of electricity from the transmission lines at grid supply points and its delivery to consumers at lower voltages through a distribution system;
 

“EPC” means engineering, procurement and construction;
 

“firm capacity” means the amount of energy available for production that, pursuant to applicable regulations, must be guaranteed to be available at a given time for injection to a certain power grid;
 

“GWh” means gigawatt hours (one GWh is equal to 1,000 MWh);
 

“Hadera Energy Center” means Hadera Paper’s existing gas consuming facilities;


“installed capacity” means the intended full-load sustained output of energy that a generation unit is designed to produce (also referred to as name-plate capacity);
 

“IPP” means independent power producer, excluding co-generators and generators for self-consumption;
 

“kWh” means kilowatts per hour;
 

“MW” means megawatts (one MW is equal to 1,000 kilowatts or kW);
 

“MWh” means megawatt per hour;
 

“OEM” means original equipment manufacturer;
 

“OPC’s capacity” or “OPC’s installed capacity” means, with respect to each asset, 100% of the capacity of such asset, regardless of OPC’s ownership interest in the entity that owns such asset;
 

“PPA” means power purchase agreement;
 

“strategic alliance” means a more extensive type of cooperation arrangement and is longer-term than a strategic cooperation. It involves cooperation arrangements and usually includes all of ZIM’s East/West routes, such as Asia-Europe, Asia-Med, Cross Atlantic and Trans Pacific. The duration of a strategic alliance will typically be long-term, as long as 10 years;
 

“strategic cooperation” means a more extensive type of cooperation arrangement, generally being longer term and involving more trade routes. It involves some joint planning mechanism, but joint planning is less extensive as compared to a strategic alliance. A strategic cooperation can take the form of one or a combination of cooperation arrangements; and
 

“transmission” refers to the bulk transfer of electricity from generating facilities to the distribution system at load center station in which the electricity is stabilized by means of the transmission grid.
 
SALE OF THE INKIA BUSINESS
 
On December 31, 2017, our subsidiary Inkia completed the sale of substantially all of its businesses, the Inkia Business, consisting of power generation and distribution businesses in Latin America and the Caribbean. The sale is described in more detail under “Item 4.B— Business Overview——Discontinued Operations——Inkia Business——Sale of the Inkia Business.” As a result of this sale, our power generation business consists of our interest in OPC. The results of the Inkia Business are presented as discontinued operations in our audited financial statements for the year ended December 31, 2017.
 
v

 
FINANCIAL INFORMATION
 
We produce financial statements in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board, or IFRS, and all financial information included in this annual report is derived from our IFRS financial statements, except as otherwise indicated. In particular, this annual report contains certain non-IFRS financial measures which are defined under “Item 3.A Selected Financial Data” and “Item 4.B Business Overview—Our Businesses—OPC.
 
Our consolidated financial statements included in this annual report comprise the consolidated statements of profit and loss, other comprehensive income (loss), changes in equity, and cash flows for the years ended December 31, 2019, 2018 and 2017 and the consolidated statements of financial position as of December 31, 2019 and 2018. We present our consolidated financial statements in U.S. Dollars.
 
The results of the Inkia Business are presented as discontinued operations in our audited financial statements as of and for the year ended December 31, 2017. Our consolidated selected data as of and for the two years ended December 31, 2016 have been reclassified for comparative purposes to reflect the Inkia Business as discontinued operations. 
 
All references in this annual report to (i) “U.S. Dollars,” “$” or “USD” are to the legal currency of the United States of America; (ii) “RMB” are to Yuan, the legal currency of the People’s Republic of China, or China; and (iii) “NIS” or “New Israeli Shekel” are to the legal currency of the State of Israel, or Israel. We have made rounding adjustments to reach some of the figures included in this annual report. Consequently, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.
 
NON-IFRS FINANCIAL INFORMATION
 
In this annual report, we disclose non-IFRS financial measures, namely EBITDA and net debt, each as defined under “Item 3.A Selected Financial Data—Selected Reportable Segment Data” and “Item 3.A Selected Financial Data—Selected Reportable Segment Data—OPC” and “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations.” Each of these measures are important measures used by us, and our businesses, to assess financial performance. We believe that the disclosure of EBITDA and net debt provides transparent and useful information to investors and financial analysts in their review of our, or our subsidiaries’, operating performance and in the comparison of such operating performance to the operating performance of other companies in the same industry or in other industries that have different capital structures, debt levels and/or income tax rates.
 
MARKET AND INDUSTRY DATA
 
Certain information relating to the industries in which each of our subsidiaries and associated companies operate and their position in such industries used or referenced in this annual report were obtained from internal analysis, surveys, market research, publicly available information and industry publications. Unless otherwise indicated, all sources for industry data and statistics are estimates or forecasts contained in or derived from internal or industry sources we believe to be reliable. Market data used throughout this annual report was obtained from independent industry publications and other publicly available information. Such data, as well as internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified. In addition, in certain cases we have made statements in this annual report regarding the industries in which each of our subsidiaries and associated companies operate and their position in such industries based upon the experience of our businesses and their individual investigations of the market conditions affecting their respective operations. We cannot assure you that any of these statements are accurate or correctly reflect the position of subsidiaries and associated companies in such industries, and none of our internal surveys or information has been verified by independent sources.
 
Market data and statistics are inherently predictive and speculative and are not necessarily reflective of actual market conditions. Such statistics are based upon market research, which itself is based upon sampling and subjective judgments by both the researchers and the respondents. In addition, the value of comparisons of statistics for different markets is limited by many factors, including that (i) the markets are defined differently, (ii) the underlying information was gathered by different methods and (iii) different assumptions were applied in compiling the data. Accordingly, although we believe and operate as though all market and industry information presented in this annual report is accurate, the market statistics included in this annual report should be viewed with caution.
 
vi

 
PRESENTATION OF OPC CAPACITY AND PRODUCTION FIGURES
 
Unless otherwise indicated, statistics provided throughout this annual report with respect to power generation units are expressed in MW, in the case of the capacity of such power generation units, and in GWh, in the case of the electricity production of such power generation units. One GWh is equal to 1,000 MWh, and one MWh is equal to 1,000 kWh. Statistics relating to aggregate annual electricity production are expressed in GWh and are based on a year of 8,760 hours. Unless otherwise indicated, OPC’s capacity figures provided in this annual report reflect 100% of the capacity of all of OPC’s assets, regardless of OPC’s ownership interest in the entity that owns each such asset. For information on OPC’s ownership interest in each of its operating companies, see “Item 4.B Business Overview—Our Businesses—OPC.”
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This annual report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, and reflects our current expectations and views of the quality of our assets, our anticipated financial performance, our future growth prospects, the future growth prospects of our businesses, the liquidity of our ordinary shares, and other future events. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, and are principally contained in the sections entitled “Item 3. Key Information,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects.” These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements can be identified by terms and phrases such as “anticipate,” “should,” “likely,” “foresee,” “believe,” “estimate,” “expect,” “intend,” “continue,” “could,” “may,” “plan,” “project,” “predict,” “will,” and similar expressions.
 
These forward-looking statements relate to:
 

our goals and strategies;
 

our capital commitments and/or intentions with respect to each of our businesses;
 

our capital allocation principles, as set forth in “Item 4.B Business Overview”;
 

the funding requirements, strategies, and business plans of our businesses;
 

the potential listing, offering, distribution or monetization of our businesses;
 

expected trends in the industries and markets in which each of our businesses operate;
 

our expected tax status and treatment;
 

statements relating to litigation and/or regulatory proceedings, including expected settlement amounts;
 

statements relating to the sale of the Inkia Business including the pledge of OPC’s shares, the deferred payment agreement and Kenon’s guarantee and risks related thereto, and statements with respect to claims relating to the Inkia Business sale retained by Kenon;
 

the expected effect of new accounting standards on Kenon;
 

the expected effects of the coronavirus, including the effect of any current or future force majeure notices, on our businesses;
 
vii


with respect to OPC:


the expected cost and timing of commencement and completion of development and construction projects, as well as the anticipated installed capacities and expected performance (e.g., efficiency) of such projects, including:
 

the Tzomet project, including the license and approvals for the development of the project, financing and the expected payment of the remaining consideration, and
 

the OPC-Hadera project, including the expected financing, total cost of construction, expected capacity, COD date, expected level of energy utilization, efficiency, and energy source of the OPC-Hadera power plant;
 

the OPC restructuring, including statements with respect to Kenon’s expectation in relation to future tax liability;
 

expected macroeconomic trends in Israel, including the expected growth in energy demand;
 

potential expansions (including new projects or existing projects);
 

its gas supply agreements;
 

its strategy;
 

expected trends in energy consumption;
 

regulatory trends;
 

its anticipated capital expenditures, and the expected sources of funding for capital expenditures;
 

projections and expected trends in the electricity market in Israel; and
 

the price and volume of gas available to OPC and other IPPs in Israel;
 

with respect to Qoros:


Qoros’ expectation to renew or refinance its working capital facilities to support its continued operations and development;
 

statements with respect to trends in the Chinese passenger vehicle market, particularly within the C-segment, C-segment SUV and New Energy Vehicle, or NEV, markets;
 

Qoros’ expectation of pricing trends in the Chinese passenger vehicle market;
 

Qoros’ liquidity position;
 

Qoros’ ability to increase its production capacity;
 

the investment by the Majority Shareholder in Qoros into Qoros, including the various elements of the investment and expected timing thereof, including, the commitment by the investor or an affiliate to introduce vehicle purchase orders to Qoros, the requirement that Chery make payments to Kenon in connection with guarantee releases, the put option and investor’s right to make further investments under the investment agreement, and the Majority Shareholder in Qoros’ commitment to assume its proportionate share of Kenon and Chery’s guarantee and pledge obligations; and
 

Qoros’ expectation of the development of the NEV market in China, including expected trends regarding government subsidies for the purchase of NEVs and the growth of NEV infrastructure;
 
viii


with respect to ZIM:
 

the assumptions used in Kenon’s and ZIM’s impairment analysis with respect to Kenon’s investment in ZIM, and ZIM’s assets, respectively, including with respect to expected fuel price, freight rates, demand trends;
 

ZIM’s strategy with respect to its debt obligations;
 

ZIM’s expectation of modifications with respect to its and other shipping companies’ operating fleet and lines, including the utilization of larger vessels within certain trade zones and modifications made in light of environmental regulations;
 

International Maritime Organization, or IMO, regulations which came into effect in 2020 (“IMO 2020”) and other regulations, including the expected effects of such regulations;
 

statements regarding the 2M Alliance and expected benefits of the alliance; and
 

trends related to the global container shipping industry, including with respect to fluctuations in container supply, industry consolidation, demand, bunker prices and charter/freights rates; and
 

with respect to Primus, statements regarding the decision to significantly reduce its operations, including related alternatives and opportunities sought.
 
The preceding list is not intended to be an exhaustive list of each of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us and are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements which are set forth in “Item 3.D Risk Factors.” Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.
 
Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement included in this annual report should not be construed as exhaustive. You should read this annual report, and each of the documents filed as exhibits to the annual report, completely, with this cautionary note in mind, and with the understanding that our actual future results may be materially different from what we expect.
 
ix

PART I
 
ITEM 1.          Identity of Directors, Senior Management and Advisers
 
A.
Directors and Senior Management
 
Not applicable.
 
B.
Advisers
 
Not applicable.
 
C.
Auditors
 
Not applicable.
 
ITEM 2.          Offer Statistics and Expected Timetable
 
Not applicable.
 
ITEM 3.          Key Information
 
A.
Selected Financial Data
 
The following tables set forth our selected consolidated financial and other data as of and for the five years ended December 31, 2019. This selected financial data should be read in conjunction with our audited consolidated financial statements, and the related notes thereto, as of December 31, 2019 and 2018 and for the three years ended December 31, 2019, included elsewhere in this annual report, and the information contained in “Item 5. Operating and Financial Review and Prospects” and “Item 3.D Risk Factors.” The historical financial and other data included here and elsewhere in this annual report should not be assumed to be indicative of our future financial condition or results of operations.
 
Our consolidated financial statements as of and for the year ended December 31, 2017 reflect the Inkia Business as discontinued operations and our selected consolidated financials as of and for the year ended December 31, 2016 and 2015 set forth below have been reclassified for comparative purposes to account for the Inkia Business as discontinued operations.
  
Our financial statements presented in this annual report have been prepared in accordance with IFRS.
 
1

 
The selected financial data below also includes certain non-IFRS measures used by us to evaluate our economic and financial performance. These measures are not identified as accounting measures under IFRS and therefore should not be considered as an alternative measure to evaluate our performance.
 
   
Year Ended December 31,
 
   
2019
   
2018
   
2017
   
20161
   
20151
 
   
(in millions of USD, except share data)
 
Statements of Profit and Loss Data2
                             
Revenue          
 
$
373
   
$
364
   
$
366
   
$
324
   
$
326
 
Cost of sales and services (excluding depreciation)
   
(256
)
   
(259
)
   
(267
)
   
(251
)
   
(245
)
Depreciation          
   
(31
)
   
(30
)
   
(31
)
   
(27
)
   
(25
)
Gross profit          
 
$
86
   
$
75
   
$
68
   
$
46
   
$
56
 
Selling, general and administrative expenses          
   
(36
)
   
(34
)
   
(56
)
   
(47
)
   
(50
)
Gain from distribution of dividend in kind          
   
     
     
     
     
210
 
Write-back / (impairment) of assets and investments
   
     
     
29
     
(72
)
   
(7
)
Dilution gains from reduction in equity interest held in associates
   
     
     
     
     
33
 
Other expenses          
   
     
(1
)
   
     
     
(1
)
Other income          
   
6
     
2
     
1
     
1
     
4
 
Financing expenses          
   
(30
)
   
(30
)
   
(70
)
   
(47
)
   
(36
)
Financing income          
   
18
     
28
     
3
     
7
     
11
 
Financing expenses, net          
 
$
(12
)
 
$
(2
)
 
$
(67
)
 
$
(40
)
 
$
(25
)
Gain on third party investment in Qoros          
   
     
504
     
     
     
 
Fair value loss on put option          
   
(19
)
   
(40
)
   
     
     
 
Recovery / (provision) of financial guarantee          
   
11
     
63
     
     
(130
)
   
 
Share in losses of associated companies, net of tax
   
(41
)
   
(105
)
   
(111
)
   
(186
)
   
(187
)
(Loss) / profit from continuing operations before income taxes
 
$
(5
)
 
$
462
   
$
(136
)
 
$
(428
)
 
$
33
 
Income taxes          
   
(17
)
   
(11
)
   
(73
)
   
(2
)
   
(9
)
(Loss) / profit for the year from continuing operations
 
$
(22
)
 
$
451
   
$
(209
)
 
$
(430
)
 
$
24
 
Profit / (loss) from discontinued operations (after income taxes)3
   
24
     
(6
)
   
478
     
36
     
72
 
Profit / (loss) for the year          
 
$
2
   
$
445
   
$
269
   
$
(394
)
 
$
96
 
Attributable to:
                                       
Kenon’s shareholders          
   
(14
)
   
434
     
237
     
(412
)
   
73
 
Non-controlling interests          
   
16
     
11
     
32
     
18
     
23
 
Basic/diluted profit/(loss) per share attributable to Kenon’s shareholders (in Dollars):
                                       
Basic/diluted (loss)/profit per share          
   
(0.25
)
   
8.07
     
4.40
     
(7.67
)
   
1.36
 
Basic/diluted (loss)/profit per share from continuing operations
   
(0.71
)
   
8.17
     
(4.00
)
   
(8.08
)
   
0.24
 
Basic/diluted profit/(loss) per share from discontinued operations
   
0.46
     
(0.10
)
   
8.40
     
0.41
     
1.12
 
Statements of Financial Position Data
                                       
Cash and cash equivalents          
 
$
147
   
$
131
   
$
1,417
   
$
327
   
$
384
 
Short-term deposits and restricted cash          
   
33
     
50
     
7
     
90
     
309
 
Trade receivables          
   
39
     
36
     
44
     
284
     
123
 
Other current assets          
   
40
     
41
     
36
     
50
     
45
 
Income tax receivable          
   
     
     
     
11
     
4
 
Inventories          
   
     
     
     
92
     
51
 
Asset held for sale          
   
70
     
70
     
     
     
 
Total current assets          
   
329
     
328
     
1,504
     
854
     
916
 
Total non-current assets4          
   
1,179
     
1,127
     
1,022
     
4,284
     
3,567
 
Total assets          
 
$
1,508
   
$
1,455
   
$
2,526
   
$
5,138
   
$
4,483
 
Total current liabilities          
   
105
     
90
     
806
     
1,045
     
653
 
Total non-current liabilities          
 
$
691
   
$
649
   
$
669
   
$
3,199
   
$
2,566
 
Equity attributable to the owners of the Company
   
623
     
649
     
983
     
681
     
1,061
 
Share capital          
 
$
602
   
$
602
   
$
1,267
   
$
1,267
   
$
1,267
 
Total equity          
 
$
712
   
$
716
   
$
1,051
   
$
894
   
$
1,264
 
Total liabilities and equity          
 
$
1,508
   
$
1,455
   
$
2,526
   
$
5,138
   
$
4,483
 
Basic/Diluted weighted average common shares outstanding used in calculating profit/(loss) per share (thousands)
   
53,856
     
53,826
     
53,761
     
53,720
     
53,649
 
Statements of Cash Flow Data          
                                       
Net cash provided by operating activities          
 
$
86
   
$
52
   
$
392
   
$
162
   
$
290
 
Net cash (used in) / provided by investing activities
   
(5
)
   
(113
)
   
585
     
(400
)
   
(737
)
Net cash (used in) / provided by financing activities
   
(74
)
   
(1,217
)
   
97
     
175
     
233
 
Increase / (decrease) in cash and cash equivalents
   
7
     
(1,278
)
   
1,074
     
(63
)
   
(214
)


(1)
Results during these periods have been reclassified to reflect the Inkia Business as discontinued operations. For further information, see Note 29 to our financial statements included in this annual report.
 
(2)
Includes the consolidated results of OPC and Primus and, until its liquidation in July 2017, the consolidated results of HelioFocus.
 
2

(3)
Consists of the results of operations of the Inkia Business for 2015 through 2017.
 
(4)
Includes Kenon’s associated companies: (i) Qoros, (ii) ZIM and (iii) Tower (until June 30, 2015).
 
Selected Reportable Segment Data
 
Kenon is a holding company of (i) a 70% interest in OPC, (ii) a 100% interest in Quantum (Kenon owns a 12% interest in Qoros through Quantum), (iii) a 32% interest in ZIM, and (iv) a 91% interest in Primus. In light of market conditions, Primus has decided to significantly reduce its operations. Kenon used to also hold interests in (i) the Inkia Business, which was sold effective December 31, 2017, (ii) a 22.5% interest in Tower, which was distributed to Kenon shareholders in 2015 and (iii) HelioFocus, which was liquidated in July 2017.
 
The results of the following companies are included in Kenon’s statements of profit and loss as share in losses of associated companies, net of tax, for the years set forth below, except as otherwise indicated: (i) Qoros and (ii) ZIM.
 
Kenon’s segments are OPC, Quantum and Other. Kenon’s Other segment includes the results of Primus, IC Green (Company level), ZIM and Kenon (Company level).
 
The following table sets forth selected financial data for Kenon’s reportable segments for the periods presented:
 
   
Year Ended December 31, 2019
 
   
OPC
   
Quantum1
   
Other2
   
Consolidated Results
 
         
(in millions of USD, unless otherwise indicated)
 
Revenue          
 
$
373
   
$
   
$
   
$
373
 
Depreciation and amortization          
   
(31
)
   
     
     
(31
)
Financing income          
   
2
     
     
16
     
18
 
Financing expenses          
   
(28
)
   
     
(2
)
   
(30
)
Fair value loss on put option          
   
     
(19
)
   
     
(19
)
Recovery of financial guarantee          
   
     
11
     
     
11
 
Share in losses of associated companies
   
     
(37
)
   
(4
)
   
(41
)
Profit / (Loss) before taxes          
 
$
48
   
$
(45
)
 
$
(8
)
 
$
(5
)
Income taxes          
   
(14
)
   
     
(3
)
   
(17
)
Profit / (Loss) from continuing operations
 
$
34
   
$
(45
)
 
$
(11
)
 
$
(22
)
                                 
Segment assets3          
 
$
1,000
   
$
72
   
$
246
4 
 
$
1,318
 
Investments in associated companies
   
     
106
     
84
     
190
 
Segment liabilities          
   
762
     
     
34
5 
   
796
 


(1)
Subsidiary of Kenon that owns Kenon’s equity holding in Qoros. In January 2018, our ownership in Qoros was reduced from 50% to 24% in connection with the investment in Qoros by the Majority Shareholder in Qoros. In April 2020, we sold half of our remaining interest in Qoros (i.e. 12%) to the Majority Shareholder in Qoros and, as a result, Kenon currently has a 12% interest in Qoros.
 
(2)
Includes the results of Primus, the results of ZIM, as an associated company; as well as Kenon’s and IC Green’s holding company and general and administrative expenses.
 
(3)
Excludes investments in associates.
 
(4)
Includes Kenon’s, IC Green’s and IC Power holding company assets.
 
(5)
Includes Kenon’s, IC Green’s and IC Power holding company liabilities.

3


 
   
Year Ended December 31, 2018
 
   
OPC
   
Quantum1
   
Other2
   
Adjustments3
   
Consolidated Results
 
   
(in millions of USD, unless otherwise indicated)
 
Revenue          
 
$
363
   
$
   
$
1
   
$
   
$
364
 
Depreciation and amortization          
   
(30
)
   
     
     
     
(30
)
Financing income          
   
2
     
10
     
48
     
(32
)
   
28
 
Financing expenses          
   
(27
)
   
(2
)
   
(33
)
   
32
     
(30
)
Gain on third party investment in Qoros          
   
     
504
     
     
     
504
 
Fair value loss on put option          
   
     
(40
)
   
     
     
(40
)
Recovery of financial guarantee          
   
     
63
     
     
     
63
 
Share in losses of associated companies          
   
     
(78
)
   
(27
)
   
     
(105
)
Profit / (Loss) before taxes          
 
$
36
   
$
457
   
$
(31
)
 
$
   
$
462
 
Income taxes         
   
(10
)
   
     
(1
)
   
     
(11
)
Profit / (Loss) from continuing operations
 
$
26
   
$
457
   
$
(32
)
 
$
   
$
451
 
                                         
Segment assets4          
 
$
893
   
$
92
   
$
239
5 
 
$
   
$
1,224
 
Investments in associated companies          
   
     
139
     
92
     
     
231
 
Segment liabilities          
   
700
     
     
39
6 
   
     
739
 


(1)
Subsidiary of Kenon that owns Kenon’s equity holding in Qoros. In January 2018, our ownership in Qoros was reduced from 50% to 24% in connection with the investment in Qoros by the Majority Shareholder in Qoros. In April 2020, we sold half of our remaining interest in Qoros (i.e. 12%) to the Majority Shareholder in Qoros and, as a result, Kenon currently has a 12% interest in Qoros.
 
(2)
Includes the results of Primus, the results of ZIM, as an associated company; as well as Kenon’s and IC Green’s holding company and general and administrative expenses.
 
(3)
“Adjustments” includes inter segment financing income and expense.
 
(4)
Excludes investments in associates.
 
(5)
Includes Kenon’s, IC Green’s and IC Power holding company assets.
 
(6)
Includes Kenon’s, IC Green’s and IC Power holding company liabilities
 
   
Year Ended December 31, 20171
 
   
OPC
   
Quantum2
   
Other3
   
Adjustments4
   
Consolidated Results
 
   
(in millions of USD, unless otherwise indicated)
 
Revenue          
 
$
365
   
$
   
$
1
   
$
   
$
366
 
Depreciation and amortization
   
(30
)
   
     
(1
)
   
     
(31
)
Impairment of assets and investments
   
     
     
29
     
     
29
 
Financing income          
   
1
     
     
13
     
(11
)
   
3
 
Financing expenses          
   
(34
)
   
(6
)
   
(41
)
   
11
     
(70
)
Share in (losses)/income of associated companies
   
     
(121
)
   
10
     
     
(111
)
Profit / (Loss) before taxes          
 
$
23
   
$
(127
)
 
$
(32
)
 
$
   
$
(136
)
Income taxes          
   
(9
)
   
     
(64
)
   
     
(73
)
Profit / (Loss) from continuing operations
 
$
14
   
$
(127
)
 
$
(96
)
 
$
   
$
(209
)
                                         
Segment assets5          
 
$
940
   
$
16
   
$
1,448
6 
 
$
   
$
2,404
 
Investments in associated companies
   
     
2
     
120
     
     
122
 
Segment liabilities          
   
743
     
75
     
657
7 
   
     
1,475
 


(1)
Results for this period reflect the results of the Inkia Business as discontinued operations. For further information, see Note 29 to our financial statements included in this annual report.
 
(2)
Subsidiary of Kenon that owns Kenon’s equity holding in Qoros. In January 2018, our ownership in Qoros was reduced from 50% to 24% in connection with the investment in Qoros by the Majority Shareholder in Qoros. In April 2020, we sold half of our remaining interest in Qoros (i.e. 12%) to the Majority Shareholder in Qoros and, as a result, Kenon currently has a 12% interest in Qoros.
 
(3)
Includes the results of Primus and HelioFocus (which was liquidated in July 2017); the results of ZIM, as an associated company; as well as Kenon’s and IC Green’s holding company and general and administrative expenses.
 
(4)
“Adjustments” includes inter-segment financing income and expenses.
 
(5)
Excludes investments in associates.
 
(6)
Includes Kenon’s, IC Green’s and IC Power holding company assets.
 
(7)
Includes Kenon’s, IC Green’s and IC Power holding company liabilities.
 
4

 
OPC
 
The following tables set forth other financial and key operating data for OPC for the periods presented:
 
   
2019
   
2018
   
2017
 
   
($ millions, except as otherwise indicated)
 
Net income for the period          
   
34
     
26
     
14
 
EBITDA1          
   
105
     
91
     
86
 
Net Debt2          
   
400
     
401
     
395
 
Net energy generated (GWh)          
   
3,811
     
3,383
     
3,655
 
Energy sales (GWh)          
   
4,030
     
3,965
     
3,988
 


(1)
OPC defines “EBITDA” for each period as net income for the period before depreciation and amortization, financing expenses, net and income tax expense.

EBITDA is not recognized under IFRS or any other generally accepted accounting principles as a measure of financial performance and should not be considered as a substitute for net income or loss, cash flow from operations or other measures of operating performance or liquidity determined in accordance with IFRS. EBITDA is not intended to represent funds available for dividends or other discretionary uses because those funds may be required for debt service, capital expenditures, working capital and other commitments and contingencies. EBITDA presents limitations that impair its use as a measure of OPC’s profitability since it does not take into consideration certain costs and expenses that result from its business that could have a significant effect on OPC’s net income, such as finance expenses, taxes and depreciation.

The following table sets forth a reconciliation of OPC’s net income to its EBITDA for the periods presented. Other companies may calculate EBITDA differently, and therefore this presentation of EBITDA may not be comparable to other similarly titled measures used by other companies:
 
   
Year Ended December 31,
 
   
2019
   
2018
   
2017
 
   
(in millions of USD)
 
Net income for the period          
 
$
34
   
$
26
   
$
14
 
Depreciation and amortization          
   
31
     
30
     
30
 
Finance expenses, net          
   
26
     
25
     
33
 
Income tax expense          
   
14
     
10
     
9
 
EBITDA          
 
$
105
   
$
91
   
$
86
 

(2)
Net debt is calculated as total debt, minus cash (which includes short term deposits and restricted cash and long-term deposits and restricted cash). Net debt is not a measure recognized under IFRS. The tables below sets forth a reconciliation of OPC’s total debt to net debt.
 
   
Year Ended December 31, 2019
 
   
OPC-Rotem
   
OPC-Hadera
   
Energy & Others
   
Total OPC
 
   
(in millions of USD)
 
Total debt(i)          
   
346
     
194
     
82
     
622
 
Cash(ii)          
   
55
     
3
     
94
     
152
 
Net Debt          
 
$
291
   
$
191
   
$
(12
)
 
$
470
 


(i)
Total debt comprises loans from banks and third parties and debentures, and includes long-term and short-term debt.
 

(ii)
Includes cash and cash equivalents and short-term deposits of $111 million; and includes debt service reserves (out of the restricted cash of $41 million).
 
   
Year Ended December 31, 2018
 
   
OPC-Rotem
   
OPC-Hadera
   
Energy & Others
   
Total OPC
 
   
(in millions of USD)
 
Total debt(i)          
   
336
     
172
     
79
     
587
 
Cash(ii)          
   
72
     
14
     
100
     
186
 
Net Debt          
 
$
264
   
$
158
   
$
(21
)
 
$
401
 


(i)
Total debt comprises loans from banks and third parties and debentures, and includes long-term and short-term debt.
 
5


(ii)
Includes cash and cash equivalents and short-term deposits of $115 million; and includes debt service reserves (out of the restricted cash) of $26 million.
 
   
Year Ended December 31, 2017
 
   
OPC-Rotem
   
OPC-Hadera
   
Energy & Others
   
Total OPC
 
   
(in millions of USD)
 
Total debt(i)          
   
383
     
144
     
91
     
618
 
Cash(ii)          
   
86
     
31
     
106
     
223
 
Net Debt          
 
$
297
   
$
113
   
$
(15
)
 
$
395
 


(i)
Total debt comprises loans from banks and third parties and debentures, and includes long-term and short-term debt.
 

(ii)
Includes short-term deposits and restricted cash of $0 million; and includes long-term deposits and restricted cash of $76 million including $22 million in cash that was deposited into an escrow account in connection with the Tamar gas dispute. For further information, see “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations —Legal Proceedings.”
 
Set forth below is a summary of certain OPC key historical financial and other operational information, for the periods set forth below.
 
   
Year Ended December 31,
 
   
2019
   
2018
   
2017
 
   
($ millions, except as otherwise indicated)
 
Revenue          
   
373
     
363
     
365
 
Cost of Sales          
   
(256
)
   
(258
)
   
(266
)
Operating income          
   
86
     
75
     
69
 
Operating margins          
   
23
%
   
21
%
   
19
%
Financing expenses, net          
   
26
     
25
     
33
 
Net income for the period          
   
34
     
26
     
14
 
                         
Net Energy sales (GWh)          
   
4,030
     
3,965
     
3,988
 
 
B.
Capitalization and Indebtedness
 
Not applicable.
 
C.
Reasons for the Offer and Use of Proceeds
 
Not applicable.
 
D.
Risk Factors
 
Our business, financial condition, results of operations and liquidity can suffer materially as a result of any of the risks described below. While we have described all of the risks we consider material, these risks are not the only ones we face. We are also subject to the same risks that affect many other companies, such as technological obsolescence, labor relations, geopolitical events, climate change and risks related to the conducting of international operations. Additional risks not known to us or that we currently consider immaterial may also adversely impact our businesses. Our businesses routinely encounter and address risks, some of which may cause our future results to be different—sometimes materially different—than we presently anticipate.
 
Risks Related to Our Strategy and Operations
 
Some of our businesses have significant capital requirements.

The business plans of our businesses contemplate additional debt or equity financing which is expected to be raised from third parties. However, our businesses may be unable to raise the necessary capital from third party financing sources.
 
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In the event that one or more of our businesses requires capital, either in accordance with their business plans or in response to new developments or to meet operating expenses, and such businesses are unable to raise such financing, Kenon may provide such financing by (i) issuing equity in the form of shares or convertible instruments (through a pre-emptive offering or otherwise), (ii) using funds received from the operations or sales of Kenon’s other businesses, (iii) selling part, or all, of its interest in any of its businesses, (iv) raising debt financing at the Kenon level or (v) providing guarantees or collateral in support of the debt of its businesses. To the extent that Kenon raises debt financing, any debt financing that Kenon incurs may not be on favorable terms, may impose restrictive covenants that limit how Kenon manages its investments in its businesses, and may also limit dividends or other distributions by Kenon. In addition, any equity financing, whether in the form of a sale of shares or convertible instruments, would dilute existing holders of our ordinary shares and any such equity financing could be at prices that are lower than the current trading prices.
 
Kenon may also seek to raise financing at the Kenon level to meet its obligations. In the event that funds from its businesses or external financing are not available to meet such obligations on reasonable terms or at all, Kenon may need to sell assets to meet such obligations, and its ability to sell assets may be limited, particularly in light the various pledges over the shares and assets of some of Kenon’s businesses. Any sales of assets may not be at attractive prices, particularly if such sales must be made quickly to meet Kenon’s obligations.
 
Kenon has provided loans and guarantees to support our businesses, such as Qoros, and may provide additional loans to or make other investments in or provide guarantees in support of its businesses. Kenon’s liquidity requirements will increase to the extent it makes further loans or other investments in or grants additional guarantees to support its businesses. Third party financing sources for Kenon’s businesses may require Kenon to guarantee an individual business’ indebtedness and/or provide collateral, including collateral via a cross-collateralization of assets across businesses (i.e., pledging shares or assets of one of our businesses to secure debt of another of our businesses). To the extent Kenon guarantees an individual business’ indebtedness, it may divert funds received from one business to another business. We may also sell some or all of our interests in any of our businesses to provide funding for another business. Additionally, if we cross-collateralize certain assets in order to provide additional collateral to a lender, we may lose an asset associated with one business in the event that a separate business is unable to meet its debt obligations. Furthermore, if Kenon provides any of its businesses with additional capital, provides any third parties with indemnification rights or a guarantee, and/or provides additional collateral, including via cross-collateralization, this could reduce our liquidity. For further information on the capital resources and requirements of each of our businesses, see “Item 5.B Liquidity and Capital Resources.
 
Disruptions in the financial markets could adversely affect Kenon or its businesses, which may not be able to obtain additional financing on acceptable terms or at all.
 
Kenon’s businesses may seek to access capital markets for various purposes, which may include raising funding for the repayment of indebtedness, acquisitions, capital expenditures and for general corporate purposes. The ability of Kenon’s businesses to access capital markets, and the cost of such capital, could be negatively impacted by disruptions in those markets. Disruptions in the capital or credit markets could make it more difficult or expensive for our businesses to access the capital or lending markets if the need arises and may make financing terms for borrowers less attractive or available. Furthermore, a decline in the value of any of our businesses, which are or may be used as collateral in financing agreements, could also impact their ability to access financing.
 
Kenon may seek to access the capital or lending markets to obtain financing in the future, including to support its businesses. The availability of such financing and the terms thereof will be impacted by many factors, including: (i) our financial performance, (ii) our credit ratings or absence of a credit rating, (iii) the liquidity of the overall capital markets, and (iv) the state of the economy. There can be no assurance that Kenon will be able to access the capital markets on acceptable terms or at all. If Kenon deems it necessary to access financing and is unable to do so on acceptable terms or at all, this could have a material adverse effect on our financial condition or liquidity.
 
We are subject to fluctuations in the capital markets.
 
Our strategy may include sales or distributions of our interests in our businesses. For example, in August 2017, OPC completed an initial public offering, or IPO, in Israel, and a listing on the TASE. Our ability to complete an initial public offering, distribution or listing of one or more of our businesses is heavily dependent upon the public equity markets.
 
To the extent that the securities of our business are publicly traded, we are exposed to risks of downward movement in market prices. In addition, large holdings of securities can often be disposed only over a substantial length of time. Accordingly, under certain conditions, we may be forced to either sell our equity interest in a particular business at lower prices than expected to realize or defer such a sale, potentially for a long period of time.
 
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We have pledged a portion of our shares in OPC to secure obligations to the buyer of the Inkia Business under the indemnification obligations in the share purchase agreement for the sale. To the extent that we are required to make payments under the indemnity obligation in the share purchase agreement, we may be required to sell shares in OPC and we would be subject to market conditions at the time of such sale (and the TASE regulations in relation to such sale) which could mean that we are forced to sell our shares for a lower price than we would otherwise be able to do so, particularly if we need to sell a significant amount of shares. If we do not make required payments in the event we are required to make payments under the share purchase agreement, then, in certain circumstances, the pledge can be enforced to satisfy the indemnity obligations, which would result in a loss of some or all of the pledged OPC shares.
 
We are a holding company and are dependent upon cash flows from our businesses to meet our existing and future obligations.
 
We are a holding company of various operating companies, and as a result, do not conduct independent operations or possess significant assets other than investments in and advances to our businesses. As a result, we depend on funds from our businesses or external financing to meet our operating expenses and obligations, including our operating expenses, our guarantee of the indemnification obligations under the share purchase agreement for the sale of the Inkia Business and our guarantee obligations in respect of Qoros debt.
 
In addition, as Kenon’s businesses are legally distinct from it and will generally be required to service their debt obligations before making distributions to Kenon, Kenon’s ability to access such cash flow from its businesses may be limited in some circumstances and it may not have the ability to cause its subsidiaries and associated companies to make distributions to Kenon, even if they are able to do so. Additionally, the terms of existing and future joint venture, financing, or cooperative operational agreements and/or the laws and jurisdictions under which each of Kenon’s businesses are organized may also limit the timing and amount of any dividends, other distributions, loans or loan repayments to Kenon.
 
Additionally, as dividends are generally taxed and governed by the relevant authority in the jurisdiction in which the company is incorporated, there may be numerous and significant tax or other legal restrictions on the ability of Kenon’s businesses to remit funds to us, or to remit such funds without incurring significant tax liabilities or incurring a ratings downgrade.
 
We do not have the right to manage, and in some cases do not control, some of our businesses, and therefore we may not be able to realize some or all of the benefits that we expect to realize from our businesses.
 
As we own minority interests in Qoros and ZIM, we are subject to the operating and financial risks of these businesses, the risk that these businesses may make business, operational, financial, legal or regulatory decisions that we do not agree with, and the risk that we may have objectives that differ from those of the applicable business itself or its other shareholders. Our ability to control the development and operation of these investments may be limited, and we may not be able to realize some or all of the benefits that we expect to realize from these investments. For example, we may not be able to cause these businesses to make distributions to us in the amount or at the time that we may need or want such distributions.
 
The Majority Shareholder in Qoros holds 63% of Qoros, following the acquisitions of 51% of Qoros from Kenon and Chery in 2018 and 12% of Qoros from Kenon in April 2020. As a result, Kenon and Chery now have 12% and 25% stakes in Qoros, respectively. Kenon can appoint two of nine Qoros directors (as opposed to half of the Qoros directors prior to the acquisitions). Although we still actively participate in the management of Qoros through our 12% interest and board representatives, our right to control Qoros decreased with the Majority Shareholder in Qoros’ investments. In addition, we may be further diluted if the Majority Shareholder in Qoros increases their investment and our right to control may further decrease accordingly. For further information, see “Item 4.B Business Overview—Our Businesses—Qoros —Qoros’ Investment Agreement” and “Item 4.B Business Overview—Our Businesses—Qoros—Kenon’s Sale of Half of its Remaining Interest in Qoros to the Majority Shareholder in Qoros.”
 
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In addition, we rely on the internal controls and financial reporting controls of our businesses and the failure of our businesses to maintain effective controls or to comply with applicable standards could make it difficult to comply with applicable reporting and audit standards. For example, the preparation of our consolidated financial statements requires the prompt receipt of financial statements that comply with applicable accounting standards and legal requirements from each of our subsidiaries and associated companies, some of whom rely on the prompt receipt of financial statements from each of their subsidiaries and associated companies. Additionally, in certain circumstances, we may be required to file with our annual report on Form 20-F, or a registration statement filed with the SEC, financial information of associated companies which has been audited in conformity with SEC rules and regulations and relevant audit standards. We may not, however, be able to procure such financial statements, or such audited financial statements, as applicable, from our subsidiaries and associated companies and this could render us unable to comply with applicable SEC reporting standards.
 
Our businesses are leveraged.
 
Some of our businesses are significantly leveraged and may incur additional debt financing in the future. As of December 31, 2019, OPC had $622 million of outstanding indebtedness, Qoros had outstanding indebtedness of RMB4 billion (approximately $577 million), and ZIM had outstanding indebtedness of approximately $1.6 billion.
 
Highly leveraged assets are inherently more sensitive to declines in earnings, increases in expenses and interest rates, and adverse market conditions. A leveraged company’s income and net assets also tend to increase or decrease at a greater rate than would otherwise be the case if money had not been borrowed. Consequently, the risk of loss associated with a leveraged company is generally greater than for companies with comparatively less debt. Additionally, some of our businesses’ assets have been pledged to secure indebtedness, and as a result, the amount of collateral that is available for future secured debt or credit support and a business’ flexibility in dealing with its secured assets may be limited. Our businesses use a substantial portion of their consolidated cash flows from operations to make debt service payments, thereby reducing its ability to use their cash flows to fund operations, capital expenditures, or future business opportunities. Additionally, ZIM remains highly leveraged and continues to face risks associated with those of a highly leveraged company.
 
Our businesses will generally have to service their debt obligations before making distributions to us or to any other shareholder. In addition, many of the financing agreements relating to the debt facilities of our operating companies contain covenants and limitations, including the following:
 

leverage ratio;
 

minimum equity;
 

debt service coverage ratio;
 

limits on the incurrence of liens or the pledging of certain assets;
 

limits on the incurrence of subsidiary debt;
 

limits on the ability to enter into transactions with affiliates, including us;
 

minimum liquidity and fixed charge cover ratios;
 

limits on the ability to pay dividends to shareholders, including us;
 

limits on our ability to sell assets; and
 

other non-financial covenants and limitations and various reporting obligations.
 
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If any of our businesses are unable to repay or refinance their indebtedness as it becomes due, or if they are unable to comply with their covenants, we may decide to sell assets or to take other actions, including (i) reducing financing in the future for investments, acquisitions or general corporate purposes or (ii) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on their indebtedness. As a result, the ability of our businesses to withstand competitive pressures and to react to changes in the various industries in which we operate could be impaired. A breach of any of our businesses’ debt instruments and/or covenants could result in a default under the relevant debt instrument(s), which could lead to an event of default. Upon the occurrence of such an event of default, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and, in the case of credit facility lenders, terminate all commitments to extend further credit. If the lenders accelerate the repayment of the relevant borrowings, the relevant business may not have sufficient assets to repay any outstanding indebtedness, which could result in a complete loss of that business for us. Furthermore, the acceleration of any obligation under certain debt instrument may permit the holders of other material debt to accelerate their obligations pursuant to “cross default” provisions, which could have a material adverse effect on our business, financial condition and liquidity.
 
As a result, our businesses’ leverage could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
In addition, we have back-to-back guarantee obligations to Chery of approximately $23 million and have pledged substantially all of our interest in Qoros to support certain Qoros debt, as well as Chery’s guarantees of Qoros debt.
 
We face risks in relation to the Majority Shareholder in Qoros’ investment in Qoros
 
In 2018, the Majority Shareholder in Qoros acquired 51% of Qoros from Kenon and Chery. The investment was made pursuant to an investment agreement among the Majority Shareholder in Qoros, Quantum, Wuhu Chery Automobile Investment Co., Ltd. (a subsidiary of Chery), or Wuhu Chery, and Qoros. In April 2020, Kenon sold half of its remaining interest in Qoros (i.e. 12%) to the Majority Shareholder in Qoros. As a result, Kenon holds a 12% interest in Qoros, the Majority Shareholder in Qoros holds 63% and Chery holds 25%.
 
Under the investment agreement, Kenon has put rights with respect to its interest in Qoros, see “Item 4.B Business Overview—Our Businesses—Qoros —Qoros’ Investment Agreement—Kenon’s Put Option.” If the Majority Shareholder in Qoros (and the other company within the Baoneng Group which has effectively guaranteed the Majority Shareholder in Qoros’ obligations under the put right by also serving as a grantor of the put) is unable to purchase Kenon’s equity interest in Qoros upon exercise of the put option, or if any exercise of the put option does not result in a purchase of Kenon’s shares in accordance with the terms thereof for any other reason, this could have a material adverse effect on Kenon.

As part of the investment agreement, the Majority Shareholder in Qoros assumed its pro rata share (based on the 51% equity ownership it originally acquired in 2018) of the guarantees and pledges provided by Quantum and Wuhu Chery in respect of Qoros debt, which is subject to further adjustment following any future changes in the equity ownership in Qoros (including as a result of the 2020 sale described above or the exercise of the put option under the investment agreement). The Majority Shareholder in Qoros has agreed to assume its pro rata share of the pledge obligations with respect to the RMB1.2 billion loan facility after which Kenon will also be proportionately released from its pledge obligations thereunder, subject to the Qoros bank lender consent. Therefore, as a result of these sales, the Majority Shareholder in Qoros is required to pledge additional shares or to provide other support acceptable to the lender banks. To date, Kenon has not been proportionately released by the bank lenders from these pledge obligations. To the extent that Kenon’s pledge is not released as required due to failure to obtain bank consents or otherwise, this could adversely impact Kenon and its ability to exercise its put rights with respect to its remaining interest in Qoros.
 
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In connection with its January 2018 investment in Qoros, the Majority Shareholder in Qoros agreed to introduce a minimum number of vehicle purchase orders to Qoros each year between 2018 and 2020 following the entry into further agreements with respect to these purchases. This minimum number of purchases orders was not met in 2018 or 2019 and there is no assurance that it will be met in 2020.
 
Our success will be dependent upon the efforts of our directors and executive officers.
 
Our success will be dependent upon the decision-making of our directors and executive officers as well as the directors and executive officers of our businesses. The loss of any or all of our directors and executive officers could delay the implementation of our strategies or divert our directors and executive officers’ attention from our operations which could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
Foreign exchange rate fluctuations and controls could have a material adverse effect on our earnings and the strength of our balance sheet.
 
Through our businesses, we have facilities and generate costs and revenues in a number of geographic regions across the globe. As a result, a significant portion of our revenue and certain of our businesses’ operating expenses, assets and liabilities, are denominated in currencies other than the U.S. Dollar. The predominance of certain currencies varies from business to business, with many of our businesses generating revenues or incurring indebtedness in more than one currency. For example, most of ZIM’s revenues and a significant portion of its expenses are denominated in the U.S. Dollar. However, a material portion of ZIM’s expenses are denominated in local currencies.
 
We have outstanding back-to-back guarantees to Chery of approximately $23 million, plus certain interest and fees, in respect of certain of Qoros’ indebtedness. In addition, from time to time, we have held, and may hold, a portion of our available cash in RMB, which may expose us to RMB exchange rate fluctuations.
 
Furthermore, our businesses may pay distributions or make payments to us in currencies other than the U.S. Dollar, which we must convert to U.S. Dollars prior to making dividends or other distributions to our shareholders if we decide to make any distributions in the future. Foreign exchange controls in countries in which our businesses operate may further limit our ability to repatriate funds from unconsolidated foreign affiliates or otherwise convert local currencies into U.S. Dollars.
 
Consequently, as with any international business, our liquidity, earnings, expenses, asset book value, and/or amount of equity may be materially affected by short-term or long-term exchange rate movements or controls. Such movements may give rise to one or more of the following risks, any of which could have a material adverse effect on our business, financial condition, results of operations or liquidity:
 

Transaction Risk—exists where sales or purchases are denominated in overseas currencies and the exchange rate changes after our entry into a purchase or sale commitment but prior to the completion of the underlying transaction itself;
 
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Translation Risk—exists where the currency in which the results of a business are reported differs from the underlying currency in which the business’ operations are transacted;
 

Economic Risk—exists where the manufacturing cost base of a business is denominated in a currency different from the currency of the market into which the business’ products are sold; and
 

Reinvestment Risk—exists where our ability to reinvest earnings from operations in one country to fund the capital needs of operations in other countries becomes limited.
 
If our businesses do not manage their interest rate risks effectively, our cash flows and operating results may suffer.
 
Certain of our businesses’ indebtedness bears interest at variable, floating rates. In particular, some of this indebtedness is in the form of Consumer Price Index (or CPI)-linked, NIS-denominated bonds. We, or our businesses, may incur further indebtedness in the future that also bears interest at a variable rate or at a rate that is linked to fluctuations in a currency in the form of other than the U.S. Dollar. Although our businesses attempt to manage their interest rate risk, there can be no assurance that they will hedge such exposure effectively or at all in the future. Accordingly, increases in interest rates or changes in the CPI that are greater than changes anticipated based upon historical trends could have a material adverse effect on our or any of our businesses’ business, financial condition, results of operations or liquidity.
 
Risks Related to the Industries in Which Our Businesses Operate
 
Conditions in the global economy, and in the industries in which our businesses operate in particular, could have a material adverse effect on us.
 
The business and operating results of each of our businesses are affected by worldwide economic conditions, particularly conditions in the energy generation, passenger vehicle, and shipping industries our businesses operate in. The operating results and profitability of our businesses may be adversely affected by slower global economic growth, credit market crises, lower levels of consumer and business confidence, downward pressure on prices, high unemployment levels, reduced levels of capital expenditures, fluctuating commodity prices (particularly prices for electricity, natural gas, bunker, gasoline, and crude oil), bankruptcies, government deficit reduction and austerity measures, heightened volatility, uncertainties with respect to the stability of the emerging markets, increased tariffs and other forms of trade protectionism and other challenges affecting the global economy. Volatility in global financial markets and in prices for oil and other commodities could result in a worsening of global economic conditions. As a result of global economic conditions, some of the customers of our businesses have experienced, and may experience, deterioration of their businesses, cash flow shortages, and/or difficulty in obtaining financing. As a result, existing or potential customers may delay or cancel plans to purchase the products and/or services of our businesses, or may not be able to fulfill their obligations to us in a timely fashion. Furthermore, the vendors, suppliers and/or partners of each of our businesses may experience similar conditions, which may impact their ability to fulfill their obligations.
 
In addition, the business and operating results of each of our businesses have been and may continue to be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of a novel strain of coronavirus, first identified in Wuhan, Hubei Province, China in December 2019. The coronavirus outbreak has and could continue to adversely affect the economies and financial markets of many countries, which has had and could continue to have an adverse effect on our business. See also, “—Risks Related to OPC—OPC’s operations and financial condition may be adversely affected by the outbreak of the coronavirus,” “—Risks Related to Our Interest in Qoros—The impact of the coronavirus on Qoros’ operations and the operations of its suppliers may harm its business” and “—Risks Related to Our Other Businesses—Risks Related to Our Interest in ZIM—The coronavirus outbreak has had a significant impact on global markets and the global economy which is expected to impact the container industry and ZIM.” The coronavirus outbreak has led to quarantines, cancellation of events and travel, business and school shutdowns and restrictions, supply chain interruptions, increased unemployment and overall economic and financial market instability. Further spread of the coronavirus could cause additional quarantines, reduction in business activity, labor shortages and other operational disruptions. The full impact of this outbreak will depend on future developments, including continued or further severity of the outbreak of the coronavirus and the actions to contain the coronavirus or treat its impact.
 
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Additionally, economic downturns may alter the priorities of governments to subsidize and/or incentivize participation in any of the markets in which our businesses operate. Slower growth or deterioration in the global economy (as a result of recent volatility in global markets, the coronavirus outbreak, trade protectionism and commodity prices, or otherwise) could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
Our businesses’ operations expose us to risks associated with conditions in those markets where they operate.
 
Through our businesses, we operate and service customers in geographic regions around the world which exposes us to risks, including:
 

heightened economic volatility;
 

difficulty in enforcing agreements, collecting receivables and protecting assets;
 

the possibility of encountering unfavorable circumstances from host country laws or regulations;
 

fluctuations in revenues, operating margins and/or other financial measures due to currency exchange rate fluctuations and restrictions on currency and earnings repatriation;
 

unfavorable changes in regulated electricity tariffs;
 

trade protection measures, import or export restrictions, licensing requirements and local fire and security codes and standards;
 

increased costs and risks of developing, staffing and simultaneously managing a number of operations across a number of countries as a result of language and cultural differences;
 

issues related to occupational safety, work hazard, and adherence to local labor laws and regulations;
 

adverse tax developments;
 

changes in the general political, social and/or economic conditions in the countries where we operate; and
 

the presence of corruption in certain countries.
 
If any of our businesses are impacted by any of the aforementioned factors, such an impact could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
We require qualified personnel to manage and operate our various businesses.
 
As a result of our decentralized structure, we require qualified and competent management to independently direct the day-to-day business activities of each of our businesses, execute their respective business plans, and service their respective customers, suppliers and other stakeholders, in each case across numerous geographic locations. We must be able to retain employees and professionals with the skills necessary to understand the continuously developing needs of our customers and to maximize the value of each of our businesses. This includes developing talent and leadership capabilities in the emerging markets in which certain of our businesses operate, where the depth of skilled employees may be limited. Changes in demographics, training requirements and/or the unavailability of qualified personnel could negatively impact the ability of each of our businesses to meet these demands. If any of our businesses fail to train and retain qualified personnel, or if they experience excessive turnover, we may experience declining sales, production/manufacturing delays or other inefficiencies, increased recruiting, training or relocation costs and other difficulties, any of which could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
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Significant raw material shortages, supplier capacity constraints, production disruptions, supplier quality and sourcing issues or price increases could increase our operating costs and adversely impact the competitive positions of the products and/or services of our businesses.
 
The reliance of certain of our businesses on certain third-party suppliers, contract manufacturers and service providers, or commodity markets to secure raw materials (e.g., natural gas for OPC and bunker and containers for ZIM), parts, components and sub-systems used in their products or services exposes us to volatility in the prices and availability of these materials, parts, components, systems and services. Some of these suppliers or their sub-suppliers are limited- or sole-source suppliers. For more information on the risks relating to supplier concentration in relation to OPC, see “—Risks Related to OPC— Supplier concentration may expose OPC to significant financial credit or performance risk.
 
A disruption in deliveries from these and other third-party suppliers, contract manufacturers or service providers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities, including as a result of the coronavirus outbreak or catastrophic events, could have an adverse effect on the ability of our businesses to meet their commitments to customers or could increase their operating costs. Our businesses could encounter supply problems and may be unable to replace a supplier that is not able to meet their demand in either the short- or the long-term; these risks are exacerbated in the case of raw materials or component parts that are sourced from a single-source supplier. Furthermore, quality and sourcing issues experienced by third-party providers can also adversely affect the quality and effectiveness of our businesses’ products and/or services and result in liability and reputational harm that could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
Some of our businesses must keep pace with technological changes and develop new products and services to remain competitive.
 
The markets in which some of our businesses operate experience rapid and significant changes as a result of the introduction of both innovative technologies and services. To meet customer needs in these areas, these businesses must continuously design new, and update existing, products and services, as well as invest in, and develop new technologies. Introducing new products and technologies requires a significant commitment to research and development that, in return, requires the expenditure of considerable financial resources that may not always result in success.
 
Our sales and profitability may suffer if our businesses invest in technologies that do not operate, or may not be integrated, as expected or that are not accepted into the marketplace as anticipated, or if their services, products or systems are not introduced to the market in a timely manner, in particular, compared to its competitors, or become obsolete. Furthermore, in some of these markets, the need to develop and introduce new products rapidly in order to capture available opportunities may lead to quality problems. Our operating results depend on our ability, and the ability of these businesses, to anticipate and adapt to changes in markets and to reduce the costs of producing high-quality, new and existing products and services. If we, or any of these businesses, are unsuccessful in our efforts, such a failure could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
Our businesses may be adversely affected by work stoppages, union negotiations, labor disputes and other matters associated with our labor force.
 
As of December 31, 2019, OPC employed 96 employees, Qoros employed approximately 2,700 employees and ZIM employed approximately 3,500 employees. Our businesses have experienced and could experience strikes, industrial unrest, work stoppages or labor disruptions as a result of the coronavirus outbreak. Any disruptions in the operations of any of our businesses as a result of labor stoppages, strikes or other disruptions could materially and adversely affect our or the relevant businesses’ reputation and could adversely affect operations. Additionally, a work stoppage or other disruption at any one of the suppliers of any of our businesses could materially and adversely affect our operations if an alternative source of supply were not readily available.
 
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A disruption in our and each of our business’ information technology systems, including incidents related to cyber security, could adversely affect our business operations
 
Our business operations, and the operations of our businesses, rely upon the accuracy, availability and security of information technology systems for data processing, storage and reporting. As a result, we, and our businesses, maintain information security policies and procedures for managing such information technology systems. However, such security measures may be ineffective and our information technology systems, or those of our businesses, may be subject to cyber-attacks. A number of companies around the world have been the subject of cyber security attacks in recent years, including in Israel where we have a large part of our businesses. These attacks are increasing and becoming more sophisticated, and may be perpetrated by computer hackers, cyber terrorists or other perpetrators of corporate espionage.
 
Cyber security attacks could include malicious software (malware), attempts to gain unauthorized access to data, social media hacks and leaks, ransomware attacks and other electronic security breaches of our and our business’ information technology systems as well as the information technology systems of our customers and other service providers that could lead to disruptions in critical systems, unauthorized release, misappropriation, corruption or loss of data or confidential information. In addition, any system failure, accident or security breach could result in business disruption, unauthorized access to, or disclosure of, customer or personnel information, corruption of our data or of our systems, reputational damage or litigation. We or our operating companies may also be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches in the future, including, for example, rebuilding internal systems, implementing additional threat protection measures, providing modifications to our services, defending against litigation, responding to regulatory inquiries or actions, paying damages, providing customers with incentives to maintain the business relationship, or taking other remedial steps with respect to third parties. These cyber security threats are constantly evolving. We, therefore, remain potentially vulnerable to additional known or yet unknown threats, as in some instances, we, our businesses and our customers may be unaware of an incident or its magnitude and effects. Should we or any of our operating businesses experience a cyber-attack, this could have a material adverse effect on our, or any of our operating companies’, business, financial condition or results of operations.
 
Risks Related to Legal, Regulatory and Compliance Matters
 
We, and each of our businesses, are subject to legal proceedings and legal compliance risks.
 
We are subject to a variety of legal proceedings and legal compliance risks in every part of the world in which our businesses operate. We, our businesses, and the industries in which we operate, are periodically reviewed or investigated by regulators and other governmental authorities, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Changes in laws or regulations could require us, or any of our businesses, to change manners of operation or to utilize resources to maintain compliance with such regulations, which could increase costs or otherwise disrupt operations. Protectionist trade policies and changes in the political and regulatory environment in the markets in which we operate, such as foreign exchange import and export controls, tariffs and other trade barriers and price or exchange controls, could affect our businesses in several national markets, impact our profitability and make the repatriation of profits difficult, and may expose us or any of our businesses to penalties, sanctions and reputational damage. In addition, the uncertainty of the legal environment in some regions could limit our ability to enforce our rights.
 
The global and diverse nature of our operations means that legal and compliance risks will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time. No assurances can be made that we will be found to be operating in compliance with, or be able to detect violations of, any existing or future laws or regulations. In addition, as we hold minority interests in ZIM and Qoros, we do not control them and therefore cannot ensure that they will comply with all applicable laws and regulations. A failure to comply with or properly anticipate applicable laws or regulations could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
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We may be subject to further government regulation, which may adversely affect our strategy.
 
The U.S. Investment Company Act of 1940 regulates “investment companies,” which includes entities that are, or that hold themselves out as being, primarily engaged in the business of investing, reinvesting and trading in securities or that are engaged, or propose to engage, in the business of investing, reinvesting, owning, holding or trading in securities and own, or propose to acquire, investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (or 45% of the issuer’s net income or assets, excluding interest in primarily controlled companies). We do not believe that we are subject to regulation under the U.S. Investment Company Act of 1940. We are organized as a holding company that conducts its businesses primarily through majority owned and primarily controlled subsidiaries. Maintaining such status may impose limits on our operations and on the assets that we and our subsidiaries may acquire or dispose of. If, at any time, we meet the definition of investment company, we could, among other things, be required either (a) to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company or (b) to register as an investment company under the U.S. Investment Company Act of 1940, either of which could have an adverse effect on us and the market price of our securities. The U.S. Investment Company Act of 1940 generally only allows U.S. entities to register. If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business in the United States or offering and selling securities in the United States or to U.S. persons, unable to comply with our reporting obligations in the United States as a foreign private issuer, subject to the delisting of the Kenon shares from the New York Stock Exchange, or the NYSE, and subject to criminal and civil actions that could be brought against us, any of which would have a material adverse effect on the liquidity and value of the Kenon shares and on our business, financial condition, results of operations or liquidity.
 
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws outside of the United States.
 
The U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Recent years have seen substantial anti-bribery law enforcement activity, with aggressive investigations and enforcement proceedings by both the U.S. Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with the FCPA and other applicable anti-bribery laws. We operate, through our businesses, in some parts of the world that are recognized as having governmental and commercial corruption. Additionally, because many of our customers and end users are involved in construction and energy production, they are often subject to increased scrutiny by regulators. Our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees, the employees of any of our businesses, or third-party intermediaries. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, we would investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Violations of these laws may result in criminal or civil sanctions, inability to do business with existing or future business partners (either as a result of express prohibitions or to avoid the appearance of impropriety), injunctions against future conduct, profit disgorgements, disqualifications from directly or indirectly engaging in certain types of businesses, the loss of business permits, reputational harm or other restrictions which could disrupt our business and have a material adverse effect on our business, financial condition, results of operations or liquidity. We face risks with respect to compliance with the FCPA and similar anti-bribery laws through our acquisition of new companies and the due diligence we perform in connection with an acquisition may not be sufficient to enable us fully to assess an acquired company’s historic compliance with applicable regulations. Furthermore, our post-acquisition integration efforts may not be adequate to ensure our system of internal controls and procedures are fully adopted and adhered to by acquired entities, resulting in increased risks of non-compliance with applicable anti-bribery laws.
 
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We could be adversely affected by international sanctions and trade restrictions.
 
We have geographically diverse businesses, which may expose our business and financial affairs to political and economic risks, including operations in areas subject to international restrictions and sanctions. Legislation and rules governing sanctions and trade restrictions are complex and constantly evolving. Moreover, changes in these laws and regulations can be unpredictable and happen swiftly. Part of our global operations necessitate the importation and exportation of goods and technology across international borders on a regular basis. From time to time, we, or our businesses, obtain or receive information alleging improper activity in connection with such imports or exports. Our policies mandate strict compliance with applicable sanctions laws and trade restrictions. Nonetheless, our policies and procedures may not always protect us from actions that would violate U.S. and/or foreign laws. Such improper actions could subject us to civil or criminal penalties, including material monetary fines, denial of import or export privileges, or other adverse actions. The occurrence of any of the aforementioned factors could have a material adverse effect on our business, financial condition, results of operations or liquidity.
 
Risks Related to OPC
 
OPC faces risks in connection with the expansion of its business.
 
OPC is in the process of the construction and development of power generation facilities and is contemplating further such development. Existing regulation, such as antitrust laws, regulation by virtue of the Israeli Concentration Law, or regulation by virtue of the Israeli Electricity Sector Law 5756-1996, or Electricity Sector Law, with respect to holdings in generation licenses, may restrict the expansion of OPC’s activity in Israel.
 
According to the Israeli Concentration Law, when allocating and determining the terms of certain rights, including the right to an electricity generation license under certain circumstances, the regulator must consider the promotion of competition in the relevant industry sector and the Israeli economy generally. If the right is on the list of rights that may have a material impact on competition, the regulator must consult with the Israel Antitrust Commissioner regarding sector concentration. Kenon, OPC, and OPC’s subsidiaries are considered concentration entities under the Israel Corporation Group for purposes of sector-specific and economy-wide concentration. The list of concentration entities also includes Mr. Idan Ofer, who is the beneficiary of entities that indirectly hold a majority of the shares in Kenon, and includes a list of other entities which may be affiliated with Mr. Idan Ofer, including ZIM, in which Kenon holds a 32% interest. With respect to economy-wide concentration, this may affect OPC’s or its subsidiaries’ ability to receive a generation license if it involves the construction and operation of power plants exceeding 175 MW. For example, in August 2017, the Israel Antitrust Authority and the Chairman of the Committee for the Reduction of Concentration, or the Concentration Committee, recommended to the Electricity Authority, or EA not to grant a conditional license for the Tzomet project. The conditional license was eventually approved after OPC and the Idan Ofer group had complied with certain conditions agreed with the Concentration Committee, including the completion of the sale of the Idan Ofer group’s shares in Reshet Media Ltd. in April 2019. Therefore, OPC’s expansion activities and future projects have been and could in the future be limited by the Israeli Concentration Law.
 
Following the Israeli Government’s electricity sector reform, as part of which the IEC is expected to sell five of its sites, the Israel Competition Authority issued guiding principles for sector concentration consultation in such sale process. According to such principles, which are subject to change and review considering the relevant circumstances, entities will not be permitted to hold more than 20% of the total planned installed capacity on the date of sale of all the sites being sold. The generation capacity of an entity’s related parties with generation licenses will be counted towards such entity’s capacity for purposes of this 20% limitation. These principles may therefore increase competition and impose limitations on OPC’s ability to expand its business. In addition, the EA published proposed regulations in respect of maximum holdings in generation licenses which are not identical to the Competition Authority principles. The Competition Authority has stated that the relevant limit is 20% of 10,500 MW (which is the anticipated capacity in the market held by private players by 2023, excluding capacity of IEC), while, the EA has proposed regulation whereby the relevant limit is 20% of 14,000 MW (including capacity of IEC). We may be subject to more restrictive interpretation. The MW currently attributable to OPC, including Oil Refineries Ltd., or ORL, and Israel Chemicals Ltd. as parties with generation licenses that are related to OPC, is approximately 1,480 MW.
 
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In addition, OPC is examining possibilities for expanding its electricity generation activities by means of construction of power plants and/or acquisition of power plants (including in renewable energy) outside of Israel. The regulatory environment or other limitations or restrictions in such jurisdictions may restrict OPC’s ability to expand its business in such other jurisdictions.
 
Changes in the EA’s electricity rates may reduce OPC’s profitability.

The price of electricity for OPC’s customers is directly affected by the electricity generation tariff, and this is the basis of linking the price of natural gas pursuant to gas purchase agreements. Therefore, changes in the electricity rates published by the EA, including the rate of the electricity generation component, may have a substantial adverse effect on OPC’s profits.

If the generation component tariffs published by the EA change as a result of, among other things, fluctuations in currency exchange rates or IEC fuel costs, OPC’s revenues from sales to private customers and cost of sales will be affected. The EA has published the electricity tariffs for 2020, which included a decrease of the EA’s generation component tariff by approximately 8%.
 
Furthermore, the gas price formula determined in the agreements with the Tamar Group is subject to a minimum U.S. dollar price mechanism. When the price of gas is equal to or lower than the minimum price, as was the case for example in 2016-2018 (excluding one month in 2018) for OPC-Rotem and which is expected to be the case for OPC-Rotem and OPC-Hadera in 2020, reductions in the generation tariff will not lead to a reduction in the cost of natural gas consumed by OPC-Rotem and/or OPC-Hadera, but rather to a reduction in profit margins. For OPC-Rotem, the effect on profit margins depends on the US$/NIS exchange rate fluctuations. Therefore, declines in the EA generation component tariff below the minimum price may not result in a corresponding decline in natural gas expenses, due to the floor price mechanism and may lead to a decline in profit margins because the gas price may not decrease as much as revenues.
 
OPC is leveraged and may be unable to comply with its financial covenants or meet its debt service or other obligations.
 
As of December 31, 2019, OPC had $622 million of outstanding indebtedness. The debt instruments to which OPC and its operating companies are party to require compliance with certain covenants and limitations, including:
 

Minimum liquidity, loan life coverage ratios and debt service coverage ratios covenants; and
 

Other non-financial covenants and limitations such as restrictions on dividend distributions, repayments of shareholder loans, asset sales, pledges investments and incurrence of debt, as well as reporting obligations.
 
Breach of the various covenants could result, among other things, in acceleration of the debt, restrictions in the declaration or payment of dividends or cross-defaults across the debt instruments.
 
Furthermore, OPC may have a limited ability to receive financing from Israeli banks due to Israeli regulatory restrictions on the amount of loans that Israeli banks are permitted to grant to single borrowers or groups of borrowers, which may result in limitations to the amount of loans that they are permitted to grant to OPC.
 
OPC’s facilities may be affected by disruptions, including planned maintenance, technical failures and natural disasters.
 
OPC’s ongoing activities may be affected by technical disruptions and faults to critical equipment. For instance, various natural disasters, such as earthquakes or fires, may harm OPC’s facilities and thereby affecting its operations and supply of electricity. Due to the nature of OPC’s activities, which, for example, include the use and storage of flammable materials and working with high temperatures and pressures, OPC’s facilities are exposed to the risk of fire hazards. Should natural disasters damage OPC’s facilities, restoration may involve the investment of significant resources and time, which would likely lead to full or partial shutdown of the generation facilities that are damaged. Losses that are not fully covered by OPC’s insurance policies may have an adverse effect on OPC.
 
In addition, maintenance work may result in operational shutdowns and impact results. For example, as planned, major overhaul maintenance work was completed between September and November 2018, which halted the OPC-Rotem plant’s operations along with the related energy generation activities, which impacted results for that period. OPC’s long-term service agreement for the maintenance of OPC-Rotem includes timetables for performance of the maintenance work, and in particular the first “major overhaul” maintenance, which is to be performed every six years. Regular maintenance work is completed approximately every 18 months, with the next regular maintenance work scheduled to occur in Q2 2020, which is expected to halt the OPC-Rotem plant’s operations for two to three weeks.
 
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The political and security situation in Israel may affect OPC.
 
A deterioration of the political and security situation in Israel may adversely affect OPC’s activities and harm its assets. Security and political events such as a war or acts of terrorism may harm the facilities serving OPC (including the power station facilities owned by the Company), the construction of the OPC’s current development projects and future projects, computer systems, facilities for transmission of natural gas to the power stations and the electricity transmission grid. In addition, such acts may have an adverse effect on OPC’s material suppliers, thereby limiting OPC’s ability to supply electricity to its customers reliably. Likewise, a deterioration in the political and security situation in Israel may have a negative effect on OPC’s ability to construct new projects, to raise capital for new projects and to initiate new projects in areas exposed to a security risk. Negative developments in the political and security situation in Israel and various security events may cause additional restrictions on OPC, including boycotts by various parties. In addition, in such cases, parties with whom OPC has contracted may claim to terminate their obligations pursuant to the agreements with the OPC due to the occurrence of force majeure events. In addition, some of OPC’s employees may be called for reserve military duty and their absence may have an adverse effect on OPC’s operations.
 
OPC’s operations and financial condition may be adversely affected by the outbreak of the coronavirus.
 
In December 2019, a novel strain of coronavirus was identified in Wuhan, Hubei Province, China, prompting precautionary government-imposed closures of certain travel and businesses. The virus has currently spread across China and to other countries globally, and may continue to spread. In February 2020, Energean (an entity with which OPC has entered into gas supply agreements, that are expected to come into effect in the first half of 2021) issued a “force majeure notice” under its agreements with OPC, notifying OPC that part of its production in China, including personnel and resources, have been affected by the coronavirus outbreak. In March 2020, Energean also notified OPC that Energean’s EPC contractor had issued a force majeure notice to Energean as a result of the coronavirus outbreak. Energean was unable to predict the impact at the time of the notices, including with respect to any delays in the commercial operation of its reservoir, if any. There is, therefore, no guarantee that such alternative gas supply will be available by 2021 or at all, which could have a material adverse effect on OPC’s business, financial condition and results of operations. Furthermore, in March 2020, the EPC contractor of the OPC-Hadera power plant notified OPC that the quarantine instructions and limitations imposed on entry into Israel as a result of the coronavirus are expected to delay completion of the OPC-Hadera power plant acceptance tests, which could result in a delay in the commercial operation of the OPC-Hadera power plant. The maintenance contractor of the OPC-Rotem plant also notified OPC that the limitations as a result of the coronavirus may delay or adversely impact the planned maintenance of the OPC-Rotem power plant, which is planned to take place in April 2020. Both contractors informed OPC that these circumstances constitute a force majeure under their agreements with OPC. The coronavirus outbreak has led to quarantines, cancellation of events and travel, businesses and school shutdowns and restrictions, supply chain interruptions and overall economic and financial market instability. Further spread of the coronavirus could cause additional quarantines, reduction in business activity and consumption in the Israeli market, labor shortages and other operational disruptions. The full impact of this outbreak on OPC will depend on future developments, including continued or further severity of the outbreak of the coronavirus, the extent the virus spreads to other regions, including Israel, and the actions to contain the coronavirus or treat its impact which are outside of OPC’s control.
 
Changes in the Consumer Price Index in Israel or the U.S. Dollar to NIS exchange rate could adversely affect OPC.
 
Inflation in Israel may affect OPC. A significant portion of the liabilities of OPC and its subsidiaries is linked to the CPI, including the interest rates applicable to a substantial part of the OPC-Rotem, OPC-Hadera and Tzomet loans. Therefore, changes to the CPI could impact OPC’s financing expenses and results of operations. In addition, to the extent that the price OPC pays for gas is above the floor price in its gas supply agreements, the price it pays for gas is linked in part to the U.S. Dollar to NIS exchange rate, and accordingly variations in such rate can impact OPC’s results. The IEC’s electricity tariff is also set, in part, in accordance with the IEC’s fuel costs that are denominated in U.S. Dollars and is therefore also affected by variations in the U.S. Dollar to NIS exchange rate.
 
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There are barriers to exit in connection with the disposal or transfer of OPC and its businesses, development projects or other assets.
 
OPC may face exit barriers, including high exit costs or objections from various parties (whose approval OPC requires), in connection with dispositions of its operating companies, development projects or their assets. For example, pursuant to Electricity Sector Law the transfer of control over an entity that holds a generation license in Israel must be approved by the EA. Additionally, there are restrictions on a transfer of control of OPC, OPC-Rotem, OPC-Hadera and Tzomet, pursuant to, among others, OPC-Rotem’s and Tzomet’s PPAs with the Israel Electric Corporation, or IEC, the trust deed relating to OPC’s bonds, and OPC-Rotem’s, OPC-Hadera’s and Tzomet’s credit agreements. Such restrictions may prohibit or make it difficult for OPC to dispose of its interests in its businesses.
 
OPC is also defined as a “significant real corporation.” As a result, OPC is subject to various restrictions, which mainly include restrictions on significant financial entities holding an interest (above a certain percentage) in such companies and restrictions on OPC’s holdings (above a certain percentage) of financial entities.
 
Such restrictions may also limit Kenon’s ability to transfer its interests in OPC.
 
OPC holds 80% of OPC-Rotem and has entered into a shareholders’ agreement with the minority shareholder.
 
Although OPC owns a majority of the voting equity in OPC-Rotem (80%), it has entered into shareholders’ agreements with Veridis, the 20% minority shareholder of OPC-Rotem. The shareholders’ agreement grants Veridis certain minority rights, including veto rights over certain decisions, including (i) changes to OPC-Rotem’s constitutional documents, (ii) the liquidation of OPC-Rotem, (iii) changes to the rights attached to OPC-Rotem’s shares that may prejudice shareholders, (iv) entry into related party transactions, (v) changes in OPC-Rotem’s activities and entry into new projects, (vi) significant acquisitions and dispositions, (vii) changes in OPC-Rotem’s share capital or incurrence of significant debt and (viii) appointment or dismissal of directors on behalf of Veridis or the auditors. The agreements also provide for a right of first refusal and tag-along rights in the event of a sale of OPC-Rotem shares by any of the parties. Therefore, OPC’s ability to develop and operate OPC-Rotem may be limited if OPC is unable to obtain the approval of Veridis for certain corporate actions OPC deems to be in the best interest of OPC-Rotem. In addition, OPC’s ability to dispose of its interest in OPC-Rotem may be limited as a result of the foregoing. OPC’s operation of OPC-Rotem may also subject OPC to litigation proceedings initiated by Veridis.
 
OPC requires qualified personnel to manage and operate its various businesses and projects.
 
OPC requires professional and skilled personnel in order to manage its current activities and the performance of its projects, to service and respond to customers and suppliers. Therefore, OPC must be able to retain employees and professionals with the necessary skills. Furthermore, OPC employs foreign employees. Any unavailability of qualified personnel could negatively impact OPC’s activity and results of operations.
 
In addition, most of OPC-Rotem’s and Hadera Energy Center’s operations employees are employed through a collective agreement. Collective agreements may reduce managerial flexibility and impose additional costs on OPC. For further information on these collective agreements, see “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations—Employees.”
 
The interruption or failure of OPC’s information technology, communication and processing systems or external attacks and invasions of these systems, including incidents relating to cyber security, could have an adverse effect on OPC.
 
OPC uses information technology systems, telecommunications and data processing systems to operate its businesses and relies on the accuracy, availability and security of information technology systems for data processing, storage and reporting. In recent years, cyber security attacks of security systems have increased globally and OPC could be exposed to such attacks, which may harm its business and operations or result in reputational damage. These attacks are becoming more sophisticated, and may be perpetrated by computer hackers, cyber terrorists or other perpetrators of corporate espionage. Given the security risks in Israel and the industry in which OPC operates, it may be particularly susceptible to cyber security attacks.
 
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If a cyber-attack occurs, OPC may not be able to prevent harm on its information systems and any such attack could have a significant effect on OPC’s operations. Cyber security attacks could include malicious software (malware), attempts to gain unauthorized access to data, social media hacks and leaks, ransomware attacks, remote control and shutdown of critical systems, and other electronic security breaches of OPC’s information technology systems and its power plant facilities as well as the information technology systems of its customers and other service providers that could lead to disruptions in critical systems, unauthorized release, misappropriation, corruption or loss of data or confidential information. Furthermore, damage to such systems may result in service delays or interruptions to OPC’s ability to provide electricity to its customers. In addition, any system failure, accident or security breach could result in business disruption, unauthorized access to, or disclosure of, customer or personnel information, corruption of OPC’s data or of its systems, reputational damage or litigation. OPC may also be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches in the future, including, for example, rebuilding internal systems, implementing additional threat protection measures, providing modifications to our services, defending against litigation, responding to regulatory inquiries or actions, paying damages, providing customers with incentives to maintain the business relationship, or taking other remedial steps with respect to third parties. These cyber security threats are constantly evolving. OPC, therefore, remains potentially vulnerable to additional known or yet unknown threats, as in some instances, OPC and its customers may be unaware of an incident or its magnitude and effects. Should OPC experience a cyber-attack, this could have a material adverse effect on its reputation, business, financial condition or results of operations.
 
OPC is exposed to litigation and administrative proceedings.
 
OPC is involved in various litigation proceedings, and may be subject to future litigation proceedings, which could have adverse consequences on its business, see Note 20 to our financial statements included in this annual report.
 
Litigation and/or regulatory proceedings are inherently unpredictable, and excessive verdicts may occur. Adverse outcomes in lawsuits and investigations could result in significant monetary damages, including indemnification payments, or injunctive relief that could adversely affect OPC’s ability to conduct its business and may have a material adverse effect on OPC’s financial condition and results of operations. In addition, such investigations, claims and lawsuits could involve significant expense and diversion of OPC’s management’s attention and resources from other matters, each of which could also have a material adverse effect on its business, financial condition, results of operations or liquidity.
 
OPC’s insurance policies may not fully cover damage, and OPC may not be able to obtain insurance against certain risks.
 
OPC and its subsidiaries maintain insurance policies intended to reduce various risks, including policies related to development projects, as is customary in the industry. However, the existing insurance policies maintained by OPC and its subsidiaries may not cover certain types of damages or may not cover the entire scope of damage caused. In addition, OPC may not be able to obtain insurance on comparable terms in the future. OPC and its subsidiaries may be adversely affected if they incur losses that are not fully covered by their insurance policies.
 
OPC’s operations are significantly influenced by regulations.

OPC is subject to significant government regulation. OPC-Rotem, OPC-Hadera and Tzomet are governed by different regulatory regimes set by the EA and any future projects will also be governed by different regulations, see “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations—Regulatory, Environmental and Compliance Matters.” OPC is therefore exposed to changes in these regulations as well as changes to regulations applicable to sectors that are associated with the company’s activities. Regulatory changes may have an adverse effect on OPC’s activity and results or on its terms of engagement with third parties, such as its customers and suppliers, such as the Tamar Group. In the coming years, OPC expects frequent regulatory changes in the industry, including in relation to the private electricity market in Israel, which is a new and developing market. Regulatory changes may impact the power stations owned by OPC or the power stations that it intends to develop, including the economic feasibility of establishing new power stations.
 
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Furthermore, OPC is subject to environmental laws and regulations, including those that seek to regulate noise pollution and emission of contaminants to treat hazardous materials. If stricter regulatory requirements are imposed on private electricity producers or if OPC does not comply with such requirements, laws and regulations, this could have an adverse effect on OPC’s results and activity. Furthermore, stricter regulatory requirements could require material expenditures or investments by OPC.
 
Additionally, OPC requires certain licenses to produce and sell electricity in Israel, and may need further licenses in the future. For example, in November 2017, OPC-Rotem applied to the EA to obtain a supply license. In February 2018, the EA responded that OPC-Rotem needs a supply license to continue selling electricity to customers and that the license will not change the terms of the PPA between OPC-Rotem and the IEC. The EA also stated that it will consider OPC-Rotem’s supply license once the issue of electricity trade in the Israeli economy has been comprehensively dealt with. OPC-Rotem has not received a supply license to date and there is no assurance regarding the receipt of the license and its terms. If OPC-Rotem does not receive a supply license, it may adversely affect OPC-Rotem’s operations. In February 2020, the EA issued standards regarding deviations from consumption plans submitted by private electricity suppliers, which will become effective on September 1, 2020, see “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations—Regulatory, Environmental and Compliance Matters.” The EA has stated that this regulation will apply to OPC-Rotem after supplementary arrangements have been determined for OPC-Rotem, which have yet to be determined. This regulation could limit OPC-Rotem’s operations if it does not obtain a supply license or if it obtains a license that contains more restrictive terms than expected. OPC is still examining the effects of the decision on OPC-Rotem and OPC-Hadera.
 
Furthermore, the grant of a permanent generation license to Tzomet, upon expiration of the conditional license, is subject to Tzomet’s compliance with the conditions set by law. If Tzomet is unable to obtain the permanent generation license in time or at all this may result in the project not being completed in time or at all and, therefore, have a material adverse effect on OPC’s business, financial condition and results of operations. See also “—OPC faces risks in connection with the expansion of its business.”
 
Construction and development projects may not be completed or, if completed, may not be completed on time or perform as expected.
 
OPC faces risks in connection with its construction and development projects, including future projects, in particular because it owns projects at a development stage. Constructing and developing a power station project entails certain risks, such as:
 

delays in project completion,
 

costs exceeding budget,
 

risks associated with the construction contractor,
 

supply and operation of key equipment,
 

performance of works at the required specifications,
 

receipt of services required from the IEC to establish the station and connect it to the grid (which may be affected by sanctions and IEC strikes),


impact on PPAs from any delays in completing new projects,
 

applicable regulations, and
 

obtaining the required approvals and permits for the development and operation of the station, including obtaining permits required in connection with the environment, including emission permits, and compliance with their terms.
 
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OPC faces these risks in the development of its OPC-Hadera and Tzomet projects.
 
OPC-Hadera
 
OPC-Hadera is party to the OPC-Hadera’s power plant EPC agreement with SerIDOM Servicios Integrados IDOM S.A.U., or IDOM, and a maintenance agreement with General Electric International, Inc. and its affiliates, or GE. Breaches by IDOM or GE, including failure to meet certain fixed schedules and supply the primary equipment on time, or in the required quality, are likely to delay or hinder the establishment of the OPC-Hadera’s power plant, and may also hamper the performance of the OPC-Hadera’s power plant once it is built, and as a result cause material harm to OPC. IDOM has agreed to compensate OPC-Hadera in case of a delay or non-compliance with the terms determined in the agreement in connection with the operation of the power plant. However, the agreed compensation for the underperformance of the OPC-Hadera’s power plant is limited and, as of December 31, 2019, OPC-Hadera has recognized a receivable of NIS 52 million (approximately $15 million) in respect of such compensation.
 
In March 2020, IDOM notified OPC that the quarantine instructions and limitations imposed on entry into Israel as a result of the coronavirus are expected to delay the arrival of a foreign technical team required by IDOM for the completion of the acceptance tests of the OPC-Hadera power plant and that, as a result, completion of the OPC-Hadera power plant acceptance tests is expected to be delayed. At this stage, OPC cannot estimate the duration of the delay, if any, in the commercial operation of the OPC-Hadera power plant.
 
Additionally, the establishment of part of the infrastructure to connect the OPC-Hadera’s power plant and the Hadera Paper mill is Hadera Paper’s responsibility. If Hadera Paper, which we do not control, does not meet its obligations to establish the infrastructure by the agreed date, this may lead to delays and obstructions in the development and operation of the OPC-Hadera’s power plant, thus adversely affecting OPC’s business and results of operations.
 
OPC-Hadera has entered into a financing agreement to finance the construction of OPC-Hadera’s power plant, and funding under this agreement is subject to conditions, see “Item 5.B Liquidity and Capital Resources—OPC’s Liquidity and Capital Resources—OPC’s Material Indebtedness—OPC-Hadera Financing.” In March 2020, the lenders under this agreement granted OPC-Hadera’s request to extend the COD under the agreement to June 2020. If OPC-Hadera is unable to comply with any of the conditions this could impact the financing for the construction of the power plant and result in delays or an inability to complete the project.
 
Pursuant to OPC-Hadera’s conditional license, the license is valid until March 2021 (following extension from the previous March 2020 expiration date). Expiration of the conditional license prior to the receipt of a permanent license would constitute grounds for an event of default under OPC-Hadera’s financing agreement.
 
Furthermore, in the event of significant delays past the agreed COD date, the majority of customers have the right to cancel PPAs, subject to certain conditions.
 
OPC-Hadera is expected to reach COD in Q2 2020. The commercial operation date may be further delayed as a result, among others, of factors that are outside OPC’s control, including the effects of the coronavirus outbreak, technical failures, unexpected delays in the test-running stage of the plant, lack of a permanent generation license and supply license and of the required regulatory approvals.
 
Tzomet
 
 Tzomet is subject to conditions set forth in its conditional license, including construction of the plant, as well as for the receipt of a permanent generation license upon expiration of the conditional license. If Tzomet is unable to meet such conditions this could result in a delay or inability to complete the project.
 
In September 2018, Tzomet entered into an EPC agreement with PW Power Systems LLC, or PW, for construction of the Tzomet project. In March 2020, Tzomet issued a notice to commence to the contractor under the agreement and extended the period for completion of construction by three months. OPC’s management currently does not expect that the extension will result in a delay in the project. For more information on Tzomet’s EPC agreement, see “Item 4.B Business Overview—OPC—OPC’s Description of Operations—Tzomet.” If OPC is unable to meet its commitments or achieve the milestones under the agreement, including in the case that OPC is unable to obtain relevant approvals, this could result in increased costs for or delays in the project, which could have a material adverse effect on our business, financial condition and results of operations.
 
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In December 2019, Tzomet entered into a financing agreement to finance the construction of Tzomet’s power plant, and funding under this agreement is subject to conditions, see “Item 5.B Liquidity and Capital Resources—OPC’s Liquidity and Capital Resources—OPC’s Material Indebtedness—Tzomet Financing.” If Tzomet is unable to comply with any of the conditions this could impact the financing for the construction of the power plant and result in delays or an inability to complete the project.
 
OPC faces competition from other IPPs.
 
In recent years, the Israeli government’s policy has been to open the electricity market to competition and to encourage the entry of private electricity producers. This policy has increased the number of private electricity producers, increasing the level of competition in the private generation market, which may have an adverse effect on OPC’s business. In 2019, 34% of the total electricity generation in Israel was generated by private producers as compared to 31% in 2018 and 28% in 2017.
 
Pursuant to the Electricity Sector Law (Amendment No. 16 and Temporary Order) (2018) that was published in July 2018, the IEC is required to sell five of its power stations through a tender process by 2023, which is expected to reduce the IEC’s market share to below 40%. OPC participated in the first tender, but was not the winning bidder. In 2019, OPC was admitted to the preliminary classification stage for the Ramat Hovav site tender process but there is no certainty that OPC will submit a bid or that it will be successful.
 
Furthermore, the IEC will be required to build and operate two new gas-powered stations, but will not be authorized to construct any new stations or recombine existing stations. This new law is expected to further increase competition from private producers, which may have an adverse effect on OPC’s business. For more information regarding this law, see “Item 4.B Business Overview—Our Businesses—OPCOPC’s Description of Operations—Regulatory, Environmental and Compliance Matters.”
 
Increased competition could make it more difficult for OPC to enter into new long-term PPAs, renew the existing PPAs at the time they expire. OPC-Rotem has a PPA with the IEC, the government-owned electricity generation, transmission and distribution company in Israel, or the IEC PPA. The term of the IEC PPA lasts until 20 years after the power station’s COD. According to the agreement, OPC-Rotem is entitled to operate in one of the following two ways (or a combination of both with certain restrictions set in the agreement): (1) provide the entire net available capacity of its power station to IEC or (2) carve out energy and capacity for direct sales to private consumers, and OPC-Rotem has accordingly allocated the entire capacity of the plant to private consumers since COD. Under the IEC PPA, OPC-Rotem can also elect to revert back to supplying to IEC instead of private customers, subject to twelve months’ advance notice. If OPC is required to rely on the IEC PPA because it is unable to enter into sufficient PPAs as a result of increased competition, it will be faced with lower margins, which may have an adverse effect on its business, financial condition and results of operations. In January 2020, Tzomet entered into a PPA with the IEC, or the Tzomet PPA. Once the Tzomet plant reaches its COD, its entire capacity will be allocated to the System Administrator pursuant to the terms of the Tzomet PPA, and Tzomet will not be permitted to sign agreements with private customers unless the electricity trade rules are updated.
 
OPC is dependent on certain significant customers.
 
OPC has a small number of customers that purchase a significant portion of OPC’s output under PPAs that account for a substantial percentage of the anticipated revenue of its generation companies. OPC’s top five customers represented approximately 81% of its revenues in 2019; therefore, OPC’s revenues from the generation of electricity are highly sensitive to the consumption by significant customers. Therefore, should there be no demand for electricity from OPC’s significant customers or should such customers not fulfill their obligations, including by failing to make payments to OPC, OPC’s revenues could be significantly affected.
 
Intel and the ORL Group, a related party of OPC, are major OPC customers and represented approximately 22% and 21%, respectively, of OPC’s revenues in 2019. Loss of these customers could have a material adverse effect on OPC’s business and results of operations. In January 2018, a shareholder of the ORL Group filed a claim against, among others, OPC, regarding certain gas purchase transactions. If this suit or related considerations impacts OPC’s ability to do business with the ORL Group or other related parties, or if OPC were to otherwise lose these significant customers, this could impact OPC’s business and results of operations.
 
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Furthermore, OPC-Hadera is dependent on Hadera Paper’s consumption of steam. If such consumption ceases, it could have a material effect on OPC’s operations and OPC-Hadera’s classification as a cogeneration electricity producer (which entails certain benefits). For further information on the regulations relating to cogeneration electricity producers, see “Item 4.B Business Overview—OPCOPC’s Description of Operations—Regulatory, Environmental and Compliance Matters—Regulatory Framework for Cogeneration IPPs.”
 
Supplier concentration may expose OPC to significant financial credit or performance risk.
 
The Tamar Group is OPC’s sole supplier of gas. If the Tamar Group is unable to supply OPC with its gas requirements, it could have a material adverse effect on OPC’s profitability. OPC has also entered into an agreement with Energean for the supply of gas in the future. Energean’s natural gas reservoirs have been established and Energean has announced that they’ll commence their gas supply by the first half of 2021. However, in February 2020, Energean issued a “force majeure notice” under its agreements with OPC, notifying OPC that its production facilities in China, including personnel and resources, have been affected by the coronavirus outbreak. In March 2020, Energean also notified OPC that Energean’s EPC contractor had issued a force majeure notice to Energean as a result of the coronavirus outbreak. Energean was unable to predict the impact at the time of the notices, including with respect to any delays in the commercial operation of its reservoir, if any. There is, therefore, no guarantee that such alternative gas supply will be available by 2021 or at all. In December 2019, supply from the Livyatan reservoir operated by a new gas supplier, the Leviathan Group (which includes Delek Drilling Limited Partnership, Noble Energy Mediterranean Ltd. and Ratio Oil Exploration (1992) Limited Partnership) commenced in the Israeli market; however, OPC does not have any agreements with this gas supplier.
 
OPC-Rotem has a single maintenance agreement with Mitsubishi Heavy Industries Ltd., or Mitsubishi, for the maintenance of its power station. If Mitsubishi is unable to perform its obligations under its contract with OPC-Rotem, including warranties, this could result in the technical malfunctioning of the power station. This could lead to delays in the supply of electricity, loss of revenues for OPC and a reduction in its profits. It could also have similar adverse effects on other projects once they are completed.
 
OPC-Hadera has a single maintenance agreement with GE and Tzomet has a single maintenance agreement with PW and are both subject to the same risks identified above.
 
OPC relies on transmission facilities for the transmission of power and gas.
 
OPC’s businesses depend upon transmission facilities owned and operated by the IEC to deliver the wholesale power it sells from its power generation plants. If transmission is disrupted, or if the transmission capacity infrastructure is inadequate, OPC’s ability to sell and deliver wholesale power may be adversely impacted. OPC’s businesses may also be affected by IEC strikes and sanctions.
 
Furthermore, there is currently a single company supplying natural gas to OPC and one company providing it with gas transmission services. OPC has an agreement with the same company to provide OPC with gas transmission services upon commencement of the Energean supply contract. Failure to comply with the requirements of these companies or limitations in the supply or transmission of gas by such companies could affect OPC’s ability to generate electricity using natural gas, which could have a material adverse effect on OPC’s business and results of operations. Finally, OPC’s plants require water for their operation. A continued disruption in the water supply could disrupt the operation of such plants.
 
Risks Related to the Sale of the Inkia Business
 
We have indemnification obligations under the share purchase agreement for the sale of the Inkia Business
 
In December 2017, our wholly-owned subsidiary Inkia sold its Latin America and Caribbean businesses, or the Inkia Business, to an entity controlled by I Squared Capital, an infrastructure private equity firm. For further information on the sale and share purchase agreement see “Item 4.B Business Overview—Discontinued Operations—Inkia Business — Sale of the Inkia Business— Share Purchase Agreement.”
 
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Under the share purchase agreement, our subsidiary Inkia has agreed to indemnify the buyer and its successors, permitted assigns, and affiliates against certain losses arising from a breach of Inkia’s representations and warranties and certain tax matters, subject to certain time and monetary limits depending on the particular indemnity obligation. These indemnification obligations are supported by (a) a three-year pledge of shares of OPC which represent 25% of OPC’s outstanding shares as of the date of the pledge, (b) a deferral of $175 million of the purchase price in the form of a four-year $175 million deferred payment agreement, or the Deferred Payment Agreement, accruing interest at 8% per year and payable in-kind, and (c) a three-year corporate guarantee from Kenon for all of the Inkia’s indemnification obligations. All of the foregoing time periods run from December 31, 2017. To the extent that Inkia is required to make indemnification payments under the share purchase agreement (and such payment obligations are agreed between buyer and seller or determined by a court in a non-appealable judgment), the buyer is entitled to seek recourse to the foregoing support arrangements in the following order: first, by exhausting rights under the OPC share pledge, second, by set off against amounts owing by the buyer under the Deferred Payment Agreement and third, against the Kenon guarantee.
 
If Inkia is required to make indemnification payments under the share purchase agreement this could require us to sell OPC shares or result in enforcement of the OPC share pledge, set off against amounts owing to us under the Deferred Payment Agreement and enforcement of the Kenon guarantee, which could impact our liquidity and financial position. Furthermore, any enforcement of the OPC share pledge could result in the buyer acquiring a significant interest in OPC or could result in a sale of a significant amount of OPC shares which could adversely affect the market price of OPC’s shares.
 
If Kenon is required to make payments under the guarantee it may need to use funds from its businesses, or sell assets, including OPC shares. Furthermore, any sales of assets may not be at attractive prices, particularly if such sales must be made quickly to meet the sellers’ obligations.
 
We are subject to risk in relations to the Deferred Payment Agreement
 
As part of the consideration for the sale of the Inkia Business, $175 million of the purchase price payable to us was deferred in the form of a four-year $175 million Deferred Payment Agreement, accruing interest at 8% per year and payable in-kind, which agreement expires on December 27, 2021. The obligor under the Deferred Payment Agreement is Nautilus Energy TopCo LLC, or Nautilus Energy, which is one of the parent companies of the buyer of the Inkia Business. The obligations of Nautilus Energy under this agreement are secured by a pledge over its shares by its direct parent company and a pledge over the shares of the direct subsidiary of Nautilus Energy and a pledge over the shares of Nautilus Isthmus Holdings LLC by Nautilus Energy's direct parent company. The obligations of Nautilus Energy are structurally subordinated to all of the debt and other obligations of the buyer of the Inkia Business and the Inkia Business itself. Accordingly, to the extent that the buyer of the Inkia Business or the Inkia Business itself are required to make payments to their creditors, there could be insufficient funds remaining for Nautilus Energy to meet its obligations under the Deferred Payment Agreement. In addition, debt or other agreements may limit amounts which can be distributed or otherwise transferred to Nautilus Energy to make payments on the Deferred Payment Agreement. Finally, Nautilus Energy will depend on cash held or generated by the Inkia Business to be made available to it to meet its obligations under this agreement. ISQ Global Infrastructure Fund II, L.P., an indirect parent of Nautilus Energy, has provided a guarantee of Nautilus Energy’s obligations under the deferred payment agreement. However, this guarantee falls away upon a cross-acceleration of Nautilus Energy’s obligations under the deferred payment agreement. For further information see “Item 4.B Business Overview—Discontinued Operations— Inkia Business—Nautilus Energy TopCo LLC Deferred Payment Agreement.” In December 2019, Nautilus Energy, the Company and Inkia amended the Deferred Payment Agreement in order to permit Nautilus Energy Partners LLC, the direct parent of Nautilus Energy, to enter into a senior secured term loan agreement in an initial aggregate amount not to exceed $200 million. Nautilus Energy Partners LLC also has an option to increase the loan by an aggregate amount not to exceed $238 million which is to be used solely to repay the Deferred Payment Agreement. The new indebtedness was used to repay the indebtedness of the Inkia Business and was secured with a first priority security interest in Nautilus Energy's equity interests in Nautilus Distribution Holdings LLC (“Nautilus Distribution”) and secondary priority interests in Nautilus Energy's equity interests in Nautilus Inkia and Nautilus Energy Partners LLC's equity interests in Nautilus Energy.
 
We are subject to credit risk relating to this loan, as Nautilus Energy may be unable to make principal and interest payments as they become due and there is no guarantee that any collateral securing such loan will be sufficient to protect us in the event of non-payment by Nautilus Energy.
 
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In addition, we face risks under this loan relating to our indemnification obligations under the share purchase agreement for the sale of the Inkia Business, as to the extent that there are indemnification obligations owing to the buyer (and such payment obligations are agreed between buyer and seller or determined by a court in a non-appealable judgment) which are unpaid and after the buyer has exhausted its rights under the OPC share pledge, the buyer can offset amounts owing under this loan against unpaid indemnification obligations.
 
Risks Related to Our Interest in Qoros
 
Qoros depends on funding to further its development and, until it achieves significant sales levels, to meet its operating expenses, financing expenses, and capital expenditures.
 
Qoros has incurred losses since its inception and expects that this will continue until it achieves significantly higher levels of sales. Qoros’ operating expenses, debt service requirements, capital expenditures and other liquidity requirements are significant. Until Qoros experiences a significant increase in sales, it will continue to require additional financing, to meet these expenses and requirements. Qoros may continue to experience low sales and there is no assurance that Qoros will obtain additional financing.
 
Qoros has significant debt obligations and liquidity requirements. Qoros has historically relied, and continues to rely, upon capital contributions, loans, guarantees and pledges from its shareholders, and third-party loans supported by its shareholders, to fund its development and operations. Qoros has long-term and short-term credit facilities with lenders, but amounts available under such facilities are limited. Qoros actively manages its repayment requirements, trade payables, accrued expenses and other operating expenses in connection with the management of its liquidity requirements and resources.
 
Qoros will continue to need additional financing from shareholders or third parties to meet its operating expenses, including accounts payable, and debt service requirements until it increases its sales levels. To the extent that the Majority Shareholder in Qoros provides additional financing to Qoros in the form of equity (or loans that convert to equity), Kenon’s interest in Qoros would be diluted.
 
Qoros’ success is dependent upon an increase in sales volumes.
 
Qoros’ sales decreased to approximately 26,000 vehicles in 2019, as compared to approximately 62,000 in 2018. Qoros needs to significantly increase sales to reach breakeven. In addition, a substantial portion of 2019 sales were made to entities introduced by the Majority Shareholder in Qoros. Qoros’ success will depend upon Qoros increasing its sales volumes, which will depend on, among other things:
 

the volume of vehicles purchased by customers introduced by the Majority Shareholder in Qoros;
 

the development of the Qoros brand;
 

successful development and launch of new vehicle models;
 

expansion and enhanced sales performance of its dealer network;
 

build-up of its aftersales and services infrastructure;
 

managing its procurement, manufacturing and supply processes;
 

establishing effective, and continuing to improve, customer service processes; and
 

securing additional financing to support its operating and capital expenses and further its growth and development.
 
Qoros will need to increase sales to a broad base of customers to establish its brand and create a sustainable customer base. Qoros’ success is also dependent upon the margins it achieves on the cars it sells.
 
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In recent years, Qoros has sold a majority of its vehicles to leasing companies introduced by the Majority Shareholder in Qoros.
 
A significant portion of car sales in 2018 and 2019 were made to leasing companies, which were introduced by the Majority Shareholder in Qoros. If these entities reduce or cease their purchases from Qoros, it could have a material impact on sales which could have a material adverse effect on Qoros’ business, financial condition and results of operations. This concentration of sales also results in potential credit risk and impacts the development of the Qoros brand, which Qoros is seeking to establish across a broad customer base.
 
Qoros is significantly leveraged.
 
As of December 31, 2019, Qoros had total loans and borrowings of RMB4 billion (approximately $577 million). Qoros require additional financing for its continued development and operating expenses and is also seeking to extend repayment deadlines under its credit facilities.
 
Highly leveraged businesses are inherently more sensitive to declines in revenues, increases in expenses and interest rates, and adverse market conditions. This is particularly true for Qoros, as Qoros has yet to generate positive cash flows from its operations. Qoros has limited cash flows and uses a portion of its liquidity to make debt service payments, including interest and amortization payments on its RMB3 billion, RMB1.2 billion and RMB700 million facilities. This debt reduces its ability to use cash flows from operations to fund its operations, capital expenditures, or future business opportunities.
 
Qoros’ RMB3 billion syndicated credit facility, RMB1.2 billion syndicated credit facility, and RMB700 million syndicated credit facility contain affirmative and negative covenants. Those facilities, as well as its other short-term credit facilities, also contain events of default and mandatory prepayments for breaches, including certain changes of control, and for material mergers and divestments, among other provisions. A significant portion of Qoros’ assets secures its RMB3 billion syndicated credit facility and, as a result, the amount of collateral that Qoros has available for future secured debt or credit support and its flexibility in dealing with its secured assets is therefore relatively limited.
 
Qoros has borrowed approximately RMB4.1 billion (approximately $0.6 billion) from an entity related to the Majority Shareholder in Qoros pursuant to shareholder loans which are due in 2021. Qoros repaid RMB0.9 billion (approximately $0.1 billion) of such loans in 2019.
 
Currently, Qoros’ debt-to-asset ratio is higher, and its current ratio is lower, than the allowable ratios set forth in the terms of Qoros’ RMB3 billion syndicated credit facility. In 2016, the lenders under this credit facility waived compliance with the financial covenants under this facility through the first half of 2020. Qoros is planning to seek an extension of the waiver. If the waiver is not extended and Qoros’ debt-to-asset ratio continue to exceed, or its current ratio continue to be less than, the permitted ratios in any period after the waiver period, and Qoros’ syndicated lenders do not revise such covenants, Qoros’ lenders could accelerate the repayment of borrowings due under this credit facility. If Qoros does not maintain a good relationship with its lenders this could impact requests for lender consents, including the consents being sought by Majority Shareholder in Qoros, Chery and Kenon as pledgors of Qoros shares under the RMB1.2 billion facility in connection with the investment by the Majority Shareholder in Qoros.
 
If Qoros is unable meet its debt service obligations or otherwise comply with other covenants in its credit facilities, this would lead to an event of default. Each of Qoros’ significant debt facilities above contains a “cross-default” provision which provides for an event of default if any other debt of Qoros in excess of RMB50 million becomes payable prior to maturity, so a default under such other debt facilities would result in a default under the facilities referenced above and a default that leads to acceleration under either facility above will result in an event of default under the other facility.
 
In the event that any of Qoros’ lenders accelerate the payment of Qoros’ borrowings, Qoros would not have sufficient liquidity to repay such debt. Additionally, as a substantial portion of Qoros’ assets, including its manufacturing facility and significant portion of its intellectual property, secure its syndicated credit facility and other indebtedness, if Qoros were unable to comply with the terms of its debt agreements, this could result in the foreclosure upon and loss of certain of Qoros’ assets.
 
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Kenon has outstanding “back-to-back” guarantee obligations to Chery in respect of guarantees that Chery has given in respect of Qoros’ bank debt and has pledged substantially all of its interests in Qoros to secure Qoros’ bank debt, as well as Chery’s guarantees of Qoros’ debt. Accordingly, if Qoros’ debt facilities become payable due to a default under these facilities or otherwise, Kenon may be required to make payments under its guarantees and could lose the shares in Qoros it has pledged. In addition, Kenon may be required to increase the amount of Qoros shares pledged (or Kenon may provide other credit support).
 
We have a minority interest in Qoros.
 
Kenon owns 12% of Qoros,