20-F 1 zk2227539.htm 20-F Kenon Holdings Ltd. - 1611005 - 2022
Includes current portion of long-term liabilities. Relates to deferred expenses, net for OPC’s connection fees to the gas transmission network and the electricity grid. Additions in respect of assets under construction are presented net of agreed compensation from the construction contractor. Refer to Note 17.A.f for further details. 0001611005falseFYRepresents an amount less than 10% of the revenues. Composed of property, plant and equipment and intangible assets. 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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, 2021
 
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)
_______________
 

Singapore
(Jurisdiction of incorporation or organization)
(Company Registration No. 201406588W)
4911
(Primary Standard Industrial
Classification Code Number)
1 Temasek Avenue #37-02B
Millenia Tower
Singapore 039192
+65 6351 1780

Not Applicable
(I.R.S. Employer
Identification No.)
 
(Address of 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
 
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
 
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:
 
53,879,117 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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
 
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

A.      Directors and Senior Management
1

B.      Advisers
1

C.      Auditors
1
1
1

A.      Reserved
1

B.      Capitalization and Indebtedness
1

C.      Reasons for the Offer and Use of Proceeds
1

D.      Risk Factors
1
54

A.      History and Development of the Company
54

B.      Business Overview
55

C.      Organizational Structure
124

D.      Property, Plants and Equipment
125
125
125

A.      Operating Results
133

B.      Liquidity and Capital Resources
139

C.      Research and Development, Patents and Licenses, Etc.
149

D.      Trend Information
149

E.      Critical Accounting Policies and Significant Estimates
150
151

A.      Directors and Senior Management
151

B.      Compensation
153

C.      Board Practices
153

D.      Employees
156

E.     Share Ownership
156
157

A.     Major Shareholders
157

B.      Related Party Transactions
158

C.      Interests of Experts and Counsel
158
158

A.      Consolidated Statements and Other Financial Information
158

B.      Significant Changes
158
159

A.      Offer and Listing Details
159

B.      Plan of Distribution
159

C.      Markets
159

D.      Selling Shareholders
159

E.      Dilution
159

F.      Expenses of the Issue
159
159

A.      Share Capital
159

B.      Constitution
159

C.      Material Contracts
172

D.      Exchange Controls
172

E.      Taxation
172

F.       Dividends and Paying Agents
179

G.      Statement by Experts
179

H.      Documents on Display
179

I.        Subsidiary Information
180
180
180

A.      Debt Securities
180

B.      Warrants and Rights
180

C.      Other Securities
181

D.      American Depositary Shares
181
i

181
181
181
182
182
182
182
183
183
183
183
183
183
183
184

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 company, collectively, as the context may require, including:
 

OPC Energy Ltd. (“OPC”), an owner, developer and operator of power generation facilities in the Israeli and United States power markets, in which Kenon has an approximately 58.8% 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 an approximately 20.7% interest; and
 

“CPV” means the CPV Group (i.e. CPV Power Holdings LP (a limited partnership established under Delaware law), Competitive Power Ventures Inc. (a company incorporated under Delaware law) and CPV Renewable Energy Company Inc.), a business engaged in the development, construction and management of power plants running conventional energy (powered by natural gas) and renewable energy in the United States, which was acquired from Global Infrastructure Management, LLC in January 2021 by CPV Group LP, an entity in which OPC indirectly holds a 70% interest.
 
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 60% of the outstanding shares of Kenon;
 

“Chery” means Chery Automobile Co. Ltd., a supplier to and shareholder of Qoros;
 

“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;
 

“IC Power” means IC Power Ltd., formerly IC Power Pte. Ltd, a Singaporean company and a wholly-owned subsidiary of Kenon;
 

“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. Kallpa was owned by Inkia until December 2017; and
 

“Majority Shareholder” means the China-based investor related to Shenzhen Baoneng Investment Group Co., Ltd. (“Baoneng Group”) that holds 63% of Qoros;
 
Additionally, this annual report uses the following conventions for OPC and ZIM:
 
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;
 

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



“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;
 

“Energy Center” means OPC Hadera’s boilers and a steam turbine. The Energy Center currently serves as back-up for the OPC-Hadera power plant’s supply for steam and its turbine is not currently operating and is not expected to operate with generation of more than approximately 16MW;
 

“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);
 

“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;
 

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

“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;
 

“OPC-Hadera” is 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 company, collectively, as the context may require;
 

“PPA” means power purchase agreement;
 

“Primus” refers to Primus Green Energy, Inc. In 2020, Primus changed its name to ICG Energy, Inc and was transferred to OPC in 2021;
 

“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;
 

“Sorek” means OPC Sorek 2 Ltd.;
 
iv



“spin-off” shall refer to (i) IC’s January 7, 2015 contribution to Kenon of its interests in IC Power, Qoros, ZIM and other 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;
 

“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; 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;
 
ZIM
 

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

“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; and
 

“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.
 
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 5 Operating and Financial Review and Prospects 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, 2021, 2020 and 2019 and the consolidated statements of financial position as of December 31, 2021 and 2020. We present our consolidated financial statements in U.S. Dollars.
 
All references in this annual report to (i) “U.S. Dollars,” “$” or “USD” are to the legal currency of the United States of America (“United States” or “U.S.”); (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.

This annual report contains translations of certain RMB and NIS amounts into USD at certain foreign exchange rates solely for the convenience of the reader. All convenience translations from RMB or NIS to USD with respect to amounts relating to transactions that occurred during 2021 are based on the certified foreign exchange rates published by the Federal Reserve Board of Governors and foreign exchange rates published by the Bank of Israel, respectively, on December 31, 2021, which was 6.45 RMB per USD and 3.23 NIS per USD, respectively. All other convenience translations from RMB or NIS to USD with respect to amounts relating to transactions that occurred before 2021 are based on the same publications for applicable periods. The convenience translations contained in this annual report should not be construed as representations that the RMB or NIS amounts referred to herein actually represent the USD amounts in the convenience translations presented or that they could have been or could be converted into USD at the exchange rate used in the convenience translations or at any particular rate.
 
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.
 
The financial information presented herein with respect to Qoros has not been audited and is based on Qoros’ management accounts.
 
v

 
NON-IFRS FINANCIAL INFORMATION
 
In this annual report, we disclose non-IFRS financial measures, namely EBITDA and Adjusted EBITDA for OPC and ZIM, each as defined under “Item 5 Operating and Financial Review and Prospects”. 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 Adjusted EBITDA provide transparent and useful information to investors and financial analysts in their review of these businesses’ 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 company 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 company 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.
 
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;
 
vi



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

the potential spin-off, 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 and expected status and treatment under relevant regulations;
 

statements relating to litigation and/or regulatory proceedings;
 

critical accounting estimates and the expected effect of new accounting standards on Kenon;
 

the assumptions used in impairment analysis conducted by Kenon and its businesses;
 

the expected effects of COVID-19, including the effect of any current or future force majeure notices, on our businesses;
 

with respect to OPC:
 

the expected cost and timing of commencement and completion of development and construction of CPV’s construction and development projects and the Tzomet project, as well as the anticipated installed capacities and expected performance (e.g., efficiency) of such projects, including the license and approvals for the development of and financing for projects;
 

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

potential expansions (including new projects or existing projects);
 

its gas supply agreements;
 

its strategy;
 

its dividend policy;
 

expected trends in energy consumption;
 

regulatory trends;
 

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

projections for growth and expected trends in the electricity market in Israel and the US; and
 

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

with respect to Qoros:
 

statements relating to the agreement to sell Kenon’s remaining interest in Qoros to the Majority Shareholder;
 

statements with respect to Qoros’ loan agreements and discussions with its creditors;
 

statements with respect to pledges and guarantees of Qoros’ debt;
 
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with respect to ZIM:
 

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;
 

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

statements with respect to ZIM’s dividends and dividend policy; and
 

trends related to market conditions and the global container shipping industry, including with respect to fluctuations in container supply, industry consolidation, demand, bunker prices and charter/freights rates, including as a result of the COVID-19 pandemic.
 
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.
 
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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.
Reserved
 
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
 
We may make further investments.
 
Our business may require or seek to raise debt or equity financing. In the event that one or more of our businesses requires capital, irrespective of whether such business are able to raise such financing, Kenon may provide financing by (i) utilizing cash on hand, (ii) issuing equity in the form of shares or convertible instruments (through a pre-emptive offering or otherwise), (iii) using funds received from the operations or sales of Kenon’s other businesses, (iv) selling part, or all, of its interest in any of its businesses or using the proceeds from sales of or distributions from its businesses, (v) raising debt financing at the Kenon level or (vi) providing guarantees or pledging 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. Investments by Kenon reduce amounts potentially available for distribution to shareholders.
 
 
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Kenon may also seek to raise financing at the Kenon level to meet its obligations or make investments or acquisitions in its existing or new businesses. In the event that funds from its businesses or external financing are not available to meet such obligations or make investments it seeks to make 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 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.
 
In addition, our directors have broad discretion on the use of the capital resources for investments in our businesses or other investments or other purposes and we may make investments or acquisitions in our existing or new businesses. Kenon has provided loans and guarantees and made equity investments to support its businesses, such as investments in OPC (including equity investments in 2021 and 2020), 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 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. Kenon may seek to access the capital or lending markets to obtain financing in the future, including to support its businesses. The ability of Kenon or its 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.
 
The availability of such financing and the terms thereof will be impacted by many factors, including: (i) our financial performance, (ii) credit ratings or absence of a credit rating, (iii) the liquidity of the overall capital markets, (iv) the state of the global economy and (v) geopolitical events such as the Russian military actions across Ukraine. There can be no assurance that Kenon or its businesses will be able to access the capital markets on acceptable terms or at all. If Kenon or its businesses 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 volatility 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, and in February 2021, ZIM completed an IPO on the New York Stock Exchange, or NYSE. The ability of one or more of our businesses to complete a public offering, distribution or listing is heavily dependent upon the public equity markets.
 
As our holdings in OPC and ZIM securities of our business are publicly traded (and to the extent any of our other holdings in companies are listed in the future), 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.
 
We may enter into lockup agreements with respect to our shares in listed companies in connection with offerings by those companies, and in some cases, we may be required to enter into a lockup agreement. In addition, we are subject to securities laws restrictions on resales, including in the United States the requirement to register resales with the SEC or to make sales under a relevant exemption.
 
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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.
 
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 flows 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 each respective 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.
 
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 company, some of whom rely on the prompt receipt of financial statements from each of their subsidiaries and associated company. 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, 2021 (the following figures are unaudited):
 

OPC had $1,215 million of outstanding indebtedness,
 

ZIM had outstanding indebtedness (mostly lease liabilities) of approximately $3.3 billion, and
 

Qoros had external loans and borrowings of RMB 2,734 million (approximately $429 million) and loans and other advances from parties related to the Majority Shareholder of RMB 5,978 million (approximately $938 million).
 
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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 that are leveraged 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.
 
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:
 

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;
 

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

limits on the ability to sell assets; and
 

other non-financial covenants and limitations and various reporting obligations.
 
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, they 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.
 
We face risks in relation to the agreement to sell all of Kenon’s remaining interest in Qoros.
 
In 2018, the Majority Shareholder acquired 51% of Qoros from Kenon and Chery. The investment was made pursuant to an investment agreement among the Majority Shareholder, 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. As a result, Kenon holds a 12% interest in Qoros, the Majority Shareholder holds 63% and Chery holds 25%.
 
4

 
In April 2021, Kenon’s subsidiary Quantum entered into an agreement with the Majority Shareholder to sell its remaining 12% interest in Qoros for RMB 1.56 billion (approximately $245 million). The agreement provided that a deposit of 5% was due July 30, 2021 and that the purchase price would be payable in installments through March 31, 2023. Neither the deposit nor the initial payment, due September 30, 2021, were paid, and we have not had any confirmation from the Majority Shareholder or the Baoneng Group as to when payments will be made or if payments will be made at all. In the fourth quarter of 2021, Quantum initiated arbitral proceedings against the Majority Shareholder and Baoneng Group with China International Economic and Trade Arbitration Commission (“CIETAC”). The proceedings are ongoing.
 
As a result of the payment delay, Quantum currently has the right to exercise the put option it has over its remaining shares. If Quantum exercises its put option, the Majority Shareholder will be required to assume the full pledge. The guarantee provide by Baoneng Group provides for a number of obligations, including the obligation for Baoneng Group to reimburse Kenon in the event Quantum’s shares are foreclosed. Currently, Baoneng Group is required to deposit an amount sufficient in escrow to ensure sufficient collateral to avoid the banks foreclosing the Qoros shares pledged by Quantum. Baoneng Group has failed to do so after Kenon made a demand in the fourth quarter of 2021, and in November 2021, Kenon filed a claim against Baoneng Group at the Shenzhen Intermediate People’s Court relating to the breaches of the guarantee agreement by the Majority Shareholder. The court proceedings are ongoing. This litigation is not related to Kenon’s back-to-back guarantees to Chery. Kenon has obtained an order freezing certain assets of Baoneng Group in connection with the litigation pursuant to a court order. There is no assurance that Kenon will recover sufficient amount of assets to cover the losses resulting from the breach of contract by Baoneng Group, however, and such failure to recover may affect Kenon’s ability to realize any value in respect of Kenon’s remaining shares in Qoros. The manufacturing production at Qoros has been shut down since July 2021. Since April 2020, Kenon no longer accounts for Qoros pursuant to the equity method of accounting and in 2021, Kenon wrote down the value of Qoros to zero.
 
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. In addition, OPC is subject to exchange rate fluctuations in its operations in Israel, and a portion of its PPAs and its supply arrangements are determined by reference to the NIS:USD exchange rate. Furthermore, OPC is indirectly influenced by changes in the U.S. Dollar to NIS exchange rate (i) partly in view of its investment in CPV which operates in the U.S., (ii) the expected investment in CPV’s existing project backlog and (iii) as the IEC electricity tariff is partially linked to increases in fuel prices (mainly coal and gas) that are denominated in U.S. Dollars. In general, decline in the exchange rate of the U.S. Dollar exchange rate is expected to have an adverse effect on OPC in the long term or on the OPC’s dollar investments. From time to time, and in accordance with its business considerations, OPC uses currency forwards. However, there is no certainty as to the reduction of the exposure to exchange rates under such currency forwards, and OPC incurs costs in respect of those forwards.
 
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.

5

 
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;
 

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 in which our businesses operate. 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 and geopolitical events could result in a deterioration 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 COVID-19 outbreak, which 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 businesses. The COVID-19 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 COVID-19 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 COVID-19 and the actions to contain it or treat its impact.
 
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Furthermore, the Russian military actions across Ukraine has led to and is expected to continue to lead to disruption, instability and volatility in global markets and industries. Our business could be negatively impacted by such conflict. The U.S. government and other governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business.
 
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 COVID-19 outbreak, a continuation or worsening of the Russian military actions across Ukraine and measures taken in response to that action, 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;
 

geopolitical events such as military actions;
 

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, our businesses 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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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 “Item 3.D Risk Factors—Risks Related to OPC—OPC depends on infrastructure, securing space on the grid and infrastructure providers, and 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 Russian military actions across Ukraine which commenced in February 2022 and measures taken in response to that action, the COVID-19 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.
 
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, 2021, OPC employed 118 employees in Israel and ZIM employed 5,931 employees. Our businesses have experienced and could experience strikes, industrial unrest, work stoppages or labor disruptions as a result of the COVID-19 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.
 
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. For example, on September 28, 2020, a competitor of ZIM confirmed a ransomware attack that disabled its booking system, and on October 1, 2020, the public website of the International Maritime Organization (“IMO”) and intranet services were subject to a cyberattack. In December 2020, an Israeli insurance company fell victim to a highly publicized ransomware attack, resulting in the filing of civil actions against the company and significant damage to that company’s reputation. Other Israeli businesses are facing cyber-attack campaigns, and it is believed the attackers may be from hostile countries. These attacks are increasing and becoming more sophisticated, and may be perpetrated by computer hackers, cyber terrorists or other perpetrators of corporate espionage.
 
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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. For example, the COVID-19 pandemic and the resulting reduced staff in in offices and increased reliance on remote access for employees have increased and may continue to increase the likelihood of cyber security attacks. 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, sanctions, 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.
 
We may be subject to further governmental regulation as a result of our regulatory status, which could subject us to restrictions that could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
 
The U.S. Investment Company Act of 1940 (the “Investment Company Act”) regulates “investment companies,” which includes, in relevant part, issuers 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 (as defined in the Investment Company Act) 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. Pursuant to a rule adopted under the Investment Company Act, notwithstanding the 40% test described above, an issuer is excluded from the definition of investment company if no more than 45% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of the issuer’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than (i) U.S. government securities, (ii) securities issued employees’ securities companies, (iii) securities issued by majority-owned subsidiaries of the issuer that are not investment companies and not relying on certain exclusions from the definition of investment company and (iv) securities issued by companies that are not investment companies and are controlled primarily by the issuer through which the issuer engages in a business other than that of investing, reinvesting, owning, holding or trading in securities. We do not believe that we are subject to regulation under the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through majority owned and primarily controlled subsidiaries. We intend to continue to conduct our operations so that we will not be deemed to be an investment company under the Investment Company Act. However, 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, including as a result of a company in which we have an ownership interest ceasing to be majority owned or primarily controlled, including as a result of dispositions of interests in majority owned and primarily controlled subsidiaries, we could, among other things, be required to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company, which could have an adverse effect on us and the market price of our securities. If we were to be deemed an “inadvertent” investment company, we may seek to rely on Rule 3a-2 under the Investment Company Act, which provides that an issuer will not be treated as an investment company subject to the provisions of the Investment Company Act provided the issuer has the requisite intent to be engaged in a non-investment business, evidenced by the issuer’s business activities and an appropriate resolution of the issuer’s board of directors, during a one year cure period.
 
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The Investment Company Act contains substantive legal requirements that regulate the manner in which an “investment company” is permitted to conduct its business activities. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. In any case, 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 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.
 
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 and the Russian military actions across Ukraine has resulted in a number of sanctions being implemented. 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.
 
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Risks Related to OPC’s Israel operations
 
OPC’s profitability depends on the EA’s electricity rates.
 
Since the price of electricity for OPC’s customers is directly affected by the electricity generation component tariff, and this is the basis of linking the price of natural gas pursuant to gas purchase agreements, OPC is exposed to changes in the electricity generation component. Declines in the electricity rates and changes in the structure of electricity rates published by the EA, including the rate of the electricity generation component, may have a substantial adverse effect on OPC’s profits.
 
To the extent that 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. On February 1, 2022, the EA published the electricity tariffs for 2022 set at the weighted average of NIS 0.2869 per KWh which was an increase of the EA’s generation component tariff by approximately 13.6% from 2021. On February 27, 2022, following the government’s economic plan to reduce the cost of living, the EA issued a hearing on the update of the electricity tariff for 2022. In the hearing, it is proposed to update the production component in order to reflect the reduction in the excise duty rate following the draft excise tax on fuel issued by the Israeli Ministry of Finance. The effective date of the new tariff, subject to a final decision at the hearing, is at the beginning of the month following the entry into effect of the new excise order. The proposed generation component (subject to a final decision) is expected to be 27.64 agorot, which is an increase of approximately 9.4% from 2021, instead of an increase of approximately 13.6% approved on February 1, 2022, as mentioned above.
 
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, 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-Hadera, the effect on profit margins also depends on the USD/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. For OPC-Rotem, gas price was equal to the minimum price during 2021 and until January 2021, and later in 2022, OPC-Rotem’s gas price is expected to be higher than the minimum price. As a result, OPC-Rotem’s exposure to changes in the NIS/USD exchange rate may decrease compared to 2021. The price of gas paid by OPC-Hadera throughout 2021 and until February 2022 was the minimum price. According to the annual update of the production component for 2022, the price of gas for OPC-Hadera is expected to be above the minimum price from March 2022 to the end of 2022.
 
OPC is subject to changes in the electricity market and technological changes.
 
Most of the OPC’s electricity and energy generation and supply activities are carried out using conventional technologies. As a result of the acquisition of CPV, OPC now has generation activity in which renewable energy is used to generate electricity, mainly in projects under development and construction. OPC is working to expand its renewable energy activities in Israel and the United States. Failure to adopt new production technologies, as well a failure to manage and lead internal organizational innovation processes or to adjust the private transactions to the developments in the supply chain, may lead to OPC missing out on business opportunities and impair the prospect of positioning itself as a leader in the industry, or to a decrease in its market share. The introduction of renewable energies may lead to decreased generation using conventional energy, including through OPC’s production facilities, including to reduce the production operations at the OPC-Rotem power plant.
 
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OPC’s operations in Israel are significantly influenced by regulations.
 
OPC is subject to significant government regulation in Israel. 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 in Israel and results or on its terms of engagement with third parties, such as its customers and suppliers, such as the Tamar Group. Furthermore, these processes might lead to delays in obtaining permits and licenses, the imposition of monetary sanctions, the filing of criminal indictments or the instigation of administrative proceedings against OPC and its management, and damage to OPC’s reputation. 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 based on the Israeli government’s goals and development of incentives and renewable energies in Israel and worldwide. 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. Such regulatory arrangements may apply pursuant to competition laws or to promote competition.
 
Furthermore, OPC is subject to environmental laws and regulations in Israel, 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 (which will be assigned by IEC to the System Operator). 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 addressed. As of March 27, 2022, there is no assurance regarding the receipt of the license and the terms of such a license if granted. If OPC-Rotem does not receive a supply license, this may adversely affect OPC. In February 2020, the EA issued standards regarding deviations from consumption plans submitted by private electricity suppliers, which became 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 had stated that this regulation will apply to OPC-Rotem after supplementary arrangements have been determined for OPC-Rotem, which have yet to be determined. OPC-Rotem is currently in discussions with the EA and OPC has submitted its position to the EA that preserving OPC’s rights under the OPC-Rotem tender required granting a supply license at the same time as applying the described decision to OPC-Rotem. 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. In February 2022, the EA passed a resolution entitled “Amendment of the Criteria for Applying the Market Model to Existing Independent Production and Renewable Energies,” which amends the existing regulation for producers in the transmission network across all types of technologies and applies to them the criteria that regulate the operation of the energy market in Israel. The EA notes in this resolution that, although the main objective of the decision is to introduce uniformity into the market rules applicable to all generation units in the market, it was decided at this stage to exclude from its scope the IEC generation units as well as OPC-Rotem, which is subject to unique regulation requiring adjustments in several aspects. The EA also notes that it is currently reviewing all changes that need to be made in the regulation applicable to OPC-Rotem such that it will be able to harmonize it with other independent generating units. 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 “Item 3.D Risk Factors—Risks Related to OPC’s Israel operationsOPC faces risks in connection with the expansion of its business.
 
Failure by OPC to identify a new or revised legislation, inadequate interpretation of the provisions of the law, failure to apply controls and monitor the implementation of and compliance with the provisions of the applicable law and regulations, including the terms of licenses, failure to obtain licenses or non-renewal of licenses or stricter licensing terms, the imposition of stricter regulations to independent power producers or failure to comply with such regulations may lead to OPC’s incurring expenses or being required to make significant investments and have a material adverse effect its operating results. Furthermore, adoption and implementation of the objectives of the ESG (environmental, social and corporate governance goals) by various organizations, voluntarily or pursuant to new regulatory provisions, could expose OPC to additional requirements or, in the event of failure to comply with the foregoing goals, to restrictions on obtaining investments and credit, and impair the positioning of its status in its areas of operations.
 
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OPC faces risks relating to PPAs, the System Operator and the IEC.
 
Consumption of gas quantities lower than the minimum quantities set in the gas agreements
 
In accordance with the OPC-Rotem gas agreements, OPC-Rotem is required to consume minimum quantities of gas as defined by the parties to the agreement (a take or pay undertaking). Cause for failure to withdraw the minimum quantities of gas (“Low Gas Consumption”) may include, among other things, an operative malfunction as a result of which it would be impossible to generate electricity, or a material decrease in OPC-Rotem and OPC-Hadera’s generation needs, including due to lower generation quantities prescribed by the System Operator. In 2021, there was an increase in the volume of generation reductions in OPC-Rotem at the instruction of the System Operator. Except in certain cases of force majeure events, Low Gas Consumption exposes OPC-Rotem to payment of penalties as set out in the Tamar Agreement; such an exposure is not covered by the OPC’s insurance policy.
 
Similar to OPC-Rotem, OPC-Hadera is required to consume minimum quantities of gas as defined by the parties to the gas supply agreements. As of December 31, 2021, OPC-Hadera consumed gas quantities that exceeded the said minimum quantities; however, in the event of a malfunction or a decrease in its electricity generation needs, OPC-Hadera may consume less than the minimum gas quantities. Low Gas Consumption exposes OPC-Hadera to payment of penalties as set out in the natural gas supply agreements; such an exposure is not covered by OPC’s insurance policy. Following the commercial operation date of the Karish reservoir, the total take or pay obligation to Energean and Tamar by OPC-Rotem and OPC-Hadera is expected to be higher than current obligation and therefore, the above risk may increase.
 
Disputes between OPC-Rotem, IEC and the System Operator
 
In addition, in connection with OPC-Rotem PPA, the IEC and System Operator and OPC-Rotem have certain open issues, including contentions regarding past netting in respect of the energy purchase cost for OPC-Rotem customers in a case of a load reduction of the power plant by the System Operator, and collection differences due to non transfer of meter data in 2013 through 2015, in amounts that are immaterial to OPC. In addition, the IEC stated its position with respect to additional matters in the arrangement between the parties relating to the acquisition price of surplus energy and the acquisition cost of energy by OPC-Rotem during performance of tests. OPC-Rotem’s position regarding the matters raised by IEC is different, and the parties are currently negotiating with the aim of reaching agreements. However, there is still no agreement on the open issues and therefore, it is uncertain whether the parties will reach an agreement. The foregoing may not cover all open issues among the System Operator, IEC and OPC-Rotem.
 
Furthermore, the System Operator and IEC also dispute application of the EA decision with respect to deviations from OPC-Rotem’s consumption plans. In 2021, the System Operator notified OPC-Rotem of sale of energy to end-consumers in excess of the generation capacity of Rotem’s power plant which deviates from the provisions of the PPA agreement between it and IEC. OPC-Rotem was informed that the System Operator disputes OPC-Rotem’s position as to the applicability of Transmission and Backup Appendix (“Appendix O”). According to Appendix O, among other things, the IEC must supply transmission and backup services to OPC-Rotem and its consumers in connection with private transactions between OPC-Rotem and its customers – and thereby sets the tariffs to be paid by OPC-Rotem to the IEC for these services. In addition, Appendix O regulates the sale of surplus energy to the IEC and the purchase of electricity from the grid by the OPC-Rotem power plant and sets forth the relevant rates OPC-Rotem’s position on the PPA with IEC is different, and to the best of OPC-Rotem’s understanding, the matter is expected to be affected by complementary arrangements that are to be set by the Israeli Electricity Authority further to the Israeli Electricity Authority resolution. If such disputes are not settled between the parties, this may have an adverse effect on OPC.
 
Unavailability of the power plants in accordance with the PPAs
 
Unavailability of the power plants as required in accordance with the terms of the PPAs with the IEC exposes OPC to penalties, among other things. Subject to the construction of the Tzomet power plant, a situation where the power plant is unavailable and cannot meet its undertakings may have an adverse effect on the Company’s activity, including its ability to benefit from the arrangements set for electricity producers under Regulation 914.
 
Restrictions on purchase of electricity from IEC
 
Should OPC-Rotem become subject to restrictions with respect to electricity it is entitled to purchase from the IEC, and taking into account OPC-Rotem’s supply license (should such a license be granted), it may be restricted as to the scope of electricity sales to private customers, and this may adversely affect OPC’s operating results.
 
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Engagement in new PPAs and renewal of existing PPAs
 
Most of the energy sold by OPC in Israel is sold to private customers under PPAs for defined periods. When the PPAs signed by OPC expires for any reason whatsoever, OPC will need to sign such agreements with other customers or renew the existing ones. There is no certainty that OPC will be successful in entering into new PPAs for adequate periods or renew the existing PPAs upon their expiry due to various reasons, nor is there certainty that OPC will enter into PPAs at terms identical to those of the expired agreements, due to, among other things, changes in market conditions. If OPC fails to engage in PPAs at the terms and conditions that are favorable for OPC, its operating results may be adversely affected.
 
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. 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 (currently remaining sites are two), 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 16,000 MW (including capacity of IEC). OPC 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, based on OPC’s assessment.
 
OPC may not be able to enter into new markets, complete the merger process of or integrate acquired operations.
 
Expanding OPC’s activity into other markets and geographic regions involves risk factors, which are specific to those markets, including local regulations and the economic and political situation in those markets. Furthermore, operating in other markets depends on various factors, including knowledge of the market, identifying transactions that will suit OPC, conducting due diligence studies, recruiting suitable employees and securing any required financing. Failure of one or more of the foregoing factors may adversely affect the success of projects in such markets and OPC’s operations and results. Furthermore, completion of the integration of significant new operations into the existing operations may involve failure of certain processes, including control and information flow processes, assimilation of management processes, assimilation of the format for financial reporting, completion of the successful absorption of the new operations and relevant human resources, as well as OPC’s understanding of the market in which the acquired activity operates and the integration of its business strategy and development plans.
 
 
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For example, OPC faces risks in connection with the expansion of its business into the United States with the CPV acquisition and OPC may examine possibilities for further expanding its electricity generation activities by means of construction of power plants and/or acquisition of power plants (including in renewable energy) in and outside of its existing geographies. The regulatory environment or other limitations or restrictions in such jurisdictions may restrict OPC’s ability to expand its business in such other jurisdictions. Failure of one or more of the foregoing factors may adversely affect the realization of the potential of the acquired activity.
 
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, 2021, OPC had $1,215 million of total outstanding consolidated 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.
 
A breach of 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.
 
If OPC or its businesses, including CPV, are unable to obtain necessary financing for development of projects or refinancing as required this could have a material adverse effect on OPC’s business, financial condition and results of operation.
 
As a group that is engaged in initiation, development and acquisition of power generation projects, including CPV, Hadera and Tzomet’s development projects, OPC will need to raise money in the upcoming years in connection with execution of its business plans. OPC’s and its subsidiaries and associated companies financing agreements, including OPC’s debentures, restrict the amount of debt they are permitted to incur and provision of collateral. In addition, raising capital involves risks relating to the level of leverage and financing costs. High leverage exposes OPC and its subsidiaries and associated companies to inherent risks and could have an adverse impact on their results and businesses and on their ability to distribute dividends and/or to comply with the terms of the financing agreements, and could also involve provision of collateral or guarantees by OPC. Therefore, OPC may also be required to raise capital from investors, both at the OPC level and/or at the level of its subsidiaries or associated companies. Raising capital could result in OPC shareholder dilution or sale of OPC shares at a discount, as well as additional costs. There is no assurance that the amounts required will be raised under favorable terms or at all. An inability to raise the required financing and/or a failure to maintain an optimal debt/equity structure could harm the OPC’s ability to execute its business plans, and have an adverse effect on its business, financial condition and results of operations.
 
For example, the construction of the Tzomet power plant depends, among other things, on the availability of the financing extended to Tzomet for the construction of the project, making it subject to conditions and restrictions by virtue of the Tzomet loan, including in connection with withdrawals. So long as a draft emission permit is not obtained, Tzomet may only withdraw up to 50% of the total amount of the long-term and stand-by credit facilities. Failure to comply with the aforesaid conditions and restrictions may, among other things, have an adverse effect on the financing extended, increase the equity required for the project and consequently increase costs, delay or prevent the completion of the project, and have a material adverse effect on OPC.
 
OPC is subject to compliance with financial covenants and undertakings as part of OPC’s financing agreements including equity subscription agreements.
 
The deeds of trust for the OPC’s debentures and the financing agreements of OPC companies include undertakings to comply with certain financial covenants and various other undertakings to debentures holders and/or the financing entities. Furthermore, interest rates may increase in certain circumstances, such as downgrading of rating or failure to comply with financial covenants; in addition, distributions may be subject to compliance with certain financial covenants (including the repayment of shareholder loans). In addition, the financing agreements impose certain restrictions in connection with change of control in OPC, expiry of licenses, termination or change of material agreements, and more. Failure to comply with those covenants or the occurrence of any of the events set out in the agreements may restrict distributions by OPC companies, increase finance expenses, to speed the transfer of funds to financing entities, to raise the collateral or equity, and trigger - under certain circumstances - a demand by the lenders for immediate repayment and realization of collateral.
 
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OPC is dependent on subsidiaries’ dividends.
 
As part of its activity, OPC holds project companies. As of December 31, 2021 and except onsite generation and virtual supply, OPC itself does not hold an independent power generation activity or significant assets other than its investments in companies it owns. Therefore, OPC is dependent on cash flows from the companies its owns (in the form of dividends or repayment of shareholder loans) in order to meet its various liabilities. OPC’s ability to receive such cash flows may be limited due to various factors, including operating results and restrictions placed on distributions under agreements with the financing entities of the project companies owned by OPC. A decrease in cash inflows from OPC-Rotem, OPC-Hadera, CPV and other future projects, or restrictions on OPC’s ability to receive those cash flows may have an adverse effect on OPC’s operating results and its ability to meet its liabilities.
 
Risks associated with projects which are not wholly-owned by OPC
 
OPC does not hold and/or will not hold all the rights to all of its projects (including the OPC-Rotem power plant, OPC Power and projects of CPV), including future projects. A less than 100% stake in projects may restrict OPC’s flexibility when conducting its activities, and in terms of its agreements with other holders of rights, it can also restrict OPC’s ability to exercise its rights under exclusive ownership.
 
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 floods, extreme climate conditions, earthquakes or fires, may harm OPC’s facilities in Israel and the U.S. and impair its operations and continuous, high-quality and reliable supply of electricity thereby adversely impacting OPC’s results and activities. Furthermore, such delays or other disruptions could cause a delay in the construction and commercial operation date (“COD”) of projects such as the Tzomet project. 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, renovation work may require the investment of significant resources and time, which would likely lead to full or partial shutdown of the damaged electricity generation facilities. 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. 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 which is conducted approximately every 18 months is subject to various factors, including, among others, the scope of operation of the power plant or revision of the scheduled works with the maintenance contractor or the COVID-19 crisis. The power plant’s activities during maintenance will be suspended, which may adversely affect OPC’s operating results. While these shutdowns and delay in the timing of the planned maintenance work did not have a significant impact on the generation activities of the OPC-Rotem power plant and its results, and such delays or shutdowns in the future could have a material impact on OPC. The next regular maintenance work that was scheduled to take place in October 2021 is expected to take place in April 2022.
 
Furthermore, OPC-Hadera reached COD on July 1, 2020. Certain components of the gas and steam turbines were subject to replacement, repair or improvement during December 2020 and early 2021, and in November and December 2021, maintenance work was performed in the steam turbines. The power plant operated at partial capacity during performance of such work for 74 maintenance days in 2021. Additional maintenance work is scheduled to be performed on steam turbine in May and June 2022 in OPC-Hadera with an estimated period of 50 days during which the power plant is expected to operate on a partial basis. These retrofitting and renovation activities and their timing is subject to movement restrictions due to the COVID-19 crisis affecting arrival of equipment and foreign work teams. In addition, prolonged operations or shutdowns may impact OPC-Hadera’s compliance with availability requirements under the terms of the permanent license which may have an adverse effect on OPC-Hadera’s operating results.
 
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Disruptions and technical malfunctions in critical equipment of OPC’s generation facilities, and inability to maintain inventory levels and quality as well as a sufficient level of spare parts, may damage OPC’s operating activities and its ability to maintain power generation continuity and cause, among other things, delays in the generation of electricity, difficulties with fulfilling contractual obligations, loss of income and excess expenses, which will adversely affect the OPC’s profits, if not covered under its insurance policies. In order to mitigate this risk, OPC has long-term service agreements with the manufacturers of the critical equipment and preventive and scheduled maintenance works are carried out. However, there is no certainty as to OPC’s ability to prevent damages and shutdowns as a result of such disruptions and malfunctions.
 
The political and security situation in Israel as well as instability in global markets may affect OPC.
 
A deterioration in 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 cause damage to the facilities used by OPC (including damage to the power station facilities owned by OPC), the construction of the OPC’s current development projects and future projects, IT systems, facilities for transmission of natural gas to the power stations and the electricity grid. In addition, such acts may cause damage to OPC’s material suppliers, thereby affecting continuous high-quality supply electricity. Likewise, a deterioration in the political and security situation in Israel may have a negative effect on OPC’s ability to build new projects, to raise funding for new projects and to develop new projects in areas which are exposed to security risks. In addition, such deterioration may have an adverse effect on the consumption patterns and scope of OPC’s customers in Israel and/or their financial position. Negative developments in the political and security situation in Israel and various security events may trigger the imposition of 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 drafted as reservists and their absence may affect OPC’s operations. Although certain damages in connection with acts of terrorism and war may be recovered under the Property Tax Law and Compensation Fund and certain covenants and insurance policies taken out with liability limits were agreed with the insurers, there is no certainty that in such cases, OPC will be compensated for some or all of the damages it may have suffered.
 
Instability in global markets, including political or other instability due to various factors, as well as economic instability, including concerns about a recession or a slowdown in growth, might affect, among other things, the availability and prices of the OPC’s raw materials, gas and electricity tariffs, the cost and availability of the OPC’s workforce in the power plants, the availability and financial stability of its suppliers, and the financial strength of the OPC’s customers. Such instability may also cause disruption in the construction and maintenance of the production facilities and power plants as well as the activity of OPC as a whole. Furthermore, instability in global markets may have an adverse effect on OPC’s projects under development in Israel and the U.S., including OPC’s ability to secure the financing required for the projects, and the ongoing establishment of project in progress or in development.
 
As a result of the Russian military actions across Ukraine which began in February 2022, the global geopolitical environment has become particularly unstable significantly affecting the macroeconomic environment, changes in energy prices, economic uncertainty, supply chain, commodity prices and availability, etc. In view of the early stage of this event, OPC is unable to assess the extent of its impact on its operations. However, OPC has already been exposed to increase in commodity, energy and transportation prices and the challenge in availability of various raw materials.
 
OPC’s operations and financial condition may be adversely affected by the outbreak of the COVID-19.
 
The COVID-19 pandemic and measures take to address it have had an impact on business globally including Israel and our operations. The COVID-19 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. For example, in light of the restrictions on entry into Israel due to the pandemic, OPC-Hadera power plant did not operate at full capacity for 74 days in 2021 partially due to the impact of the COVID-19 pandemic. Additional work on steam turbine is scheduled to be performed in May and June 2022 and OPC-Hadera expects that such retrofitting and renovation activities and their timing may be subject to movement restrictions due to the COVID-19 crisis affecting arrival of equipment and foreign work teams. Further proliferation and outbreaks of the COVID-19, including outbreaks of new variations could cause additional quarantines, reduction in business activity and consumption in the Israeli market, labor shortages and other operational disruptions, and adversely impact OPC’s activities and results as well as its ability to complete projects under construction in time or at all and/or its ability to executed future projects.
 
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Having been designated as “essential enterprises”, OPC continued the operation of its active power plants, OPC-Rotem and OPC-Hadera, as well as the construction of the Tzomet power plant and Sorek, throughout the pandemic, while taking precautionary measures to prevent further spread of the virus at OPC sites. The construction work on Tzomet and Sorek and the refurbishment work at the OPC-Hadera power plant have been affected by the pandemic, to the extent there were delays in equipment delivery and/or travel arrangements for foreign workers due to various restrictions placed by the government.
 
The full impact of this outbreak on OPC will depend on future developments, including continued or further severity of the outbreak of the COVID-19, impact on main suppliers (such as suppliers of natural gas and construction and maintenance contractors) or main customers, the extent the virus spreads to other regions, including Israel, and the actions to contain it or treat its impact which are outside of OPC’s control.
 
As of December 31, 2021, the COVID-19 pandemic had not had a significant impact on OPC’s results and its overall activities. However, there have been impacts on timetables and costs of the OPC’s various projects under construction in and outside of Israel as a result of interruptions in the supply chain of components and equipment required for the project that impacted the timetables and raw-material costs and delays in processes due to imposed restrictions in movement, including employees, consultants, professional personnel and staff members of regulatory agencies being in quarantines.
 
In 2020-2021, Energean notified OPC-Rotem and OPC-Hadera of the delay in the supply of gas from the Karish reservoir, contending that COVID-19 related force majeure events have delayed the commercial operation of the Karish reservoir. According to their report, Energean believes that the “first gas” from the Karish reservoir is now expected in the third quarter of 2022. The commercial operation date of the Karish reservoir may be delayed beyond the expected date of the third quarter of 2022, and there is no certainty that OPC-Rotem and OPC-Hadera may be able to recover damage from Energean to cover damages (direct or indirect) incurred as a result of the delay. During 2021, OPC-Rotem and OPC-Hadera were paid NIS 9 million (approximately $3 million) and NIS 7 million (approximately $2 million), respectively, in respect of the delay in the supply of gas from the Karish reservoir. OPC-Rotem and OPC-Hadera informed Energean that they reject Energean’s force majeure contention and that they were retaining their rights in accordance with their agreements with Energean. There is no guarantee, however, that any alternative gas supply will be available by the stated timeframes or at all, which could have a material adverse effect on OPC’s business, financial condition and results of operations.
 
In light of the uncertainty regarding the duration of the COVID-19 pandemic, the intensity thereof (particularly if additional variants of the virus will develop) and its impacts on the markets and factors relating OPC’s activities (such as, employees, significant customers, significant suppliers, lenders, etc.), as well as the uncertainty regarding the measures that will be taken by governments, as at December 31, 2021, OPC is not able to estimate with any certainty the full impact of the COVID-19 pandemic on OPC. Spread of the virus and infections at the OPC’s power plants and other sites, continuation of the COVID-19 pandemic and its restriction for an extended period, impact of the COVID-19 pandemic on main suppliers (such as suppliers of natural gas, construction and maintenance contractors) or OPC’s main customers, may adversely affect OPC’s activities and performance, as well as its ability to complete construction projects on time or at all and/or on its ability to execute future projects. COVID-19 related effects characterized by disruptions in the global supply chain of various commodities and raw materials due to overloads, and the increase in the price of goods and shipping that cause delays in the supply of equipment and increase in the budgets of projects under construction and development have realized in Israel and around the world.
 
Changes in the CPI in Israel or the U.S. Dollar to NIS exchange rate could adversely affect OPC.
 
Changes in the CPI could impact OPC’s financing expenses and results of operations. Generally, an increase in the CPI increases OPC’s liabilities and costs. From time to time, and in accordance with its business considerations, OPC may use CPI transactions in connection with CPI-linked loans of the subsidiaries. Nonetheless, the above does not provide full protection from such exposures, and OPC may incur costs due to such CPI transactions. Furthermore, OPC is exposed to changes in interest rates, and an increase in interest rates increases OPC’s liability and costs.
 
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 (which PPAs will be assigned to the System Operator), 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.
 
OPC owns a majority of the voting equity in OPC-Rotem (80%), and has entered into shareholders’ agreements with Veridis Power Plants Ltd. (“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.
 
In February 2022, OPC reached a non-binding understanding on a potential transaction with Veridis, pursuant to which, OPC would establish a new subsidiary to hold all of OPC’s business activities in the energy and electricity generation and supply sectors in Israel. Veridis would receive 20% of the shares of the new subsidiary in exchange for contributing its 20% interest in OPC-Rotem and cash in an amount equal to NIS 425 million (approximately $132 million) to the new subsidiary. Following completion of the potential transaction, OPC would hold 80%, and Veridis would hold the remaining 20%, of the new subsidiary, and the new subsidiary would hold 100% of OPC-Rotem and OPC’s other business activities in the energy and electricity generation and supply sectors in Israel. The potential transaction is subject, inter alia, to entering into a binding agreement between the parties and other arrangements and conditions, which remain uncertain.
 
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. During the power plants’ construction stage, most of the employees, experts and advisors employed by OPC (whether as employees or as external service providers) are experts in their respective fields and are headhunted by OPC from different countries. Any unavailability of qualified personnel could negatively impact OPC’s activity and results of operations. There are risks of potential difficulties in finding experts that possess specific knowhow and qualifications, shortage of manpower, high employment costs and failures in HR management (employees and managers retention and development, knowledge conservation and other issues), all of which could lead to a loss of essential knowledge, failure to meet OPC’s objectives, failure by OPC to adapt its workers’ placement needs and provide infrastructures that are in line with OPC’s growth rate.
 
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Furthermore, the travel restrictions placed during the COVID-19 pandemic or in the event of deterioration or escalation in the political and/or security situation, may lead to shortage of expert employees, and this, in turn, may lead to delays in the construction of the power plants and have an adverse effect on OPC’s activity and results of operations. In order to mitigate these risks, where there is a shortage of professionally-trained employees, OPC will be required to find alternative employees, make changes to the required training or find other solutions by using external service providers; however, there is no certainty that such alternative measures will fully meet OPC’s workforce requirements.
 
In addition, most of OPC-Rotem’s and the OPC Hadera’s operations employees are employed through a collective agreement. Collective agreements may reduce managerial flexibility and impose additional costs on OPC. Furthermore, a difficulty with the renewal of the collective agreements or labor disputes might have an adverse effect on the OPC’s activity and operating results. For further information on these collective agreements, see “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations—Employees.”
 
An 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.
 
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. OPC-Rotem, OPC-Hadera, Tzomet and other production facilities (including on-site facilities) take guidance from the Israeli Ministry of Energy’s Security and Cyber Division with regard to cyber protection in their power plants. Although such guidance include procedures comprising directives for systems strengthening, work procedures, directives on integration of defense systems which include using network monitoring and control systems, strengthening hardware and operating systems, backups, written policies and procedures, access restrictions, employee training, and other measures, there is no certainty that such measures will prevent cyber attacks or damage to OPC’s IT systems. 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 17 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.
 
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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. The decision as to the type and scope of the insurance is made taking into account, among other things, the cost of the insurance, its nature and scope, regulatory and contractual requirements, and the ability to find adequate coverage in the insurance market. However, the existing insurance policies maintained by OPC and its subsidiaries and associated companies 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 may not be able to renew or take out insurance policies to cover a certain risk (and it may take out new policies whose terms are less favorable than those of its existing policies). The damages that are not partially or fully covered by OPC’s and subsidiaries’ insurance policies may have an adverse effect on OPC, and there is no certainty OPC or its subsidiaries will receive full compensation from the policies in its possession in the event of damage. In addition, the Company’s failure to renew insurance policies may constitute a breach of OPC companies’ licenses. OPC and its subsidiaries may be adversely affected if they incur losses that are not fully covered by their insurance policies.
 
OPC is subject to health and safety risks.
 
OPC operations involve various safety risks including use chemical substances by power plants, some of which are toxic and/or flammable. Safety incidents may cause injuries and even loss of life among employees and subcontractors’ employees; such incidents may cause reputational damage, and give rise to lawsuits in respect of bodily injury or other damages. OPC operates in accordance with safety procedures which include reporting of safety incidents and the steps to be taken should such incidents occur, including bodily injury. Although OPC has safety internal procedures in place, it may not be sufficient to prevent damage from occurring as a result of such incidents. In addition, third-party insurance and employers’ liability insurance maintained by OPC may not guarantee full coverage in respect of the damage caused by such incidents.
 
Furthermore, OPC companies’ activity is subject to environmental and business licensing laws and regulations that are subject to regulate update and change. Legislative changes and stricter environmental standards might affect the activity of the OPC’s facilities and the costs involved therein. Furthermore, deficiencies and/or non-compliance with the provisions of environmental laws and the terms of permits and licenses granted to OPC thereunder might expose OPC and its management to criminal and administrative sanctions, including the imposition of penalties and sanctions, issuance of closure orders to facilities, and exposure to expenses relating to cleaning and remediation of environmental damages, which might have an adverse effect on the activity and operating results of OPC companies.
 
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, including increases in equipment and material prices, transport costs,
 

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,
 

COVID-related delays,
 
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applicable regulations, and
 

obtaining any 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. See “Item 4.B Business Overview—Our Businesses—OPC—OPC’s Description of Operations—Potential Expansions and Projects in Various Stages of Development.
 
Any such construction risks may, among other things, adversely impact the OPC’s operating results and operations due to an increase in construction expenses compared to the projected budget, impair the contractor’s ability to complete the project and/or pay compensation to OPC in respect of its inability to complete the project, or cause delays in the project, loss of profits due to the delays in the completion of the project and its commercial operation, compensation to customers, non-compliance with commitments towards third parties in relation to the execution schedule and/or cancellation of the projects and loss of investments in OPC. Although there is limitation on amounts with respect to agreed compensation for under-performance of the power plants, and for the delay, there is no certainty that OPC will be able to recover full compensation for direct and indirect damages it sustains.
 
Such construction risks and failure to comply with performance requirements and meet deadlines may have adverse effect on OPC’s businesses and activity, including its liabilities to financing entities, authorities and customers and collateral OPC has taken out in their favor.
 
OPC faces risks in the construction of its projects.
 
Projects under construction involve specific risks in addition to general or industry-specific risks, which applies specifically to Tzomet, which is under construction. The construction of a power plant involves a range of construction risks, such as risks associated with the construction contractor and its financial strength, the supply of key equipment and its proper state including increases in equipment and material prices, transport costs and supply schedules thereof, the proper state of the facilities and their systems, execution of the work at the required quality and on time, receipt of the services required for the construction of the power plant and its connection to the grid, the applicable regulation and obtaining the permits required both for execution of the work and operation of the power plant, including the environmental permits, such as emission permits and compliance with their terms. Such construction risks may affect the construction costs and project budget, the schedules for construction completion and potential delays. Such risks are also relevant for similar projects in other geographic regions, including the region in which CPV operates. The materialization of any such construction risks may adversely impact OPC’s operating results and operations due to an increase in construction expenses compared to the projected budget, impair the contractor’s ability to complete the project or pay compensation to OPC in respect of its inability to complete the project, or cause delays in the project, loss of profits due to the delays in the completion of the project and its commercial operation, compensation to customers, non-compliance with commitments towards third parties in relation to the execution schedule or cancellation of the projects and loss of investments in OPC. It should be noted that the agreed compensation for under-performance of the power plants and for the delay is restricted in amount. Therefore, there is no certainty that OPC will be able to receive full compensation for direct and indirect damages it sustains. Such construction risks and failure to comply with performance requirements may have adverse effect on OPC’s businesses and activity, including its liabilities to financing entities, authorities and customers and collateral OPC has taken out in its favor.
 
OPC faces competition in Israel 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.
 
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 plants (currently there are two remaining plants, including Hagit East (the sale of which is expected to be completed in 2022)) through a tender process. While such a policy reduces the IEC’s market share in the generation and supply segment, it may lead to an increase in the number of electricity producers, and intensify competition in the Israeli electricity generation and supply market, which may have an adverse effect on OPC’s position. OPC did not participate in the tender for the sale of the Hagit generation site.
 
OPC participated in the tenders of the Alon Tabor plant and Ramat Hovav plants – the first two plants that have been sold out of the five plants to be sold by the IEC – but was not the winning bidder. There is no certainty that OPC will participate in future IEC tenders or that it will be successful. OPC may consider participation in the sale of generation sites which have not yet been sold, subject to various factors, including, among others, market conditions and regulatory conditions (including regarding the matter of aggregate concentration and sectorial concentration, and principles regarding the maximum scope of the rights of the holder out of the total planned installed capacity), as well as the OPC’s situation and business plans, and the characteristics of the generation site and the sale process. Accordingly, there is no certainty that OPC will participate in any or all of the sale proceedings.
 
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Furthermore, the IEC, through a subsidiary, will be allowed 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—OPC—OPC’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 or renew the existing PPAs when 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 (which was assigned by IEC to the System Operator and later endorsed to Noga – Israel Independent System Operator Ltd., a system management company (“Noga”)). The term of the IEC PPA is for 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): (i) provide the entire net available capacity of its power station to IEC or (ii) carve out energy and capacity for direct sales to private consumers. OPC-Rotem has 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. Under the IEC Reform, in October 2020, Tzomet received notice that its agreement with the IEC has been reassigned to the System Operator, as of the transition date of the system management unit from the IEC to the System Operator.
 
Furthermore, entry into PPAs that are not long-term, are at less competitive prices and/or with high “take or pay” commitments could have a material adverse effect on OPC’s business, financial condition and results of operation.
 
In order to mitigate the above risks, OPC is working to maximize its competitive advantages and its experience in developing and leading power plants; however, there is no certainty that this will prevent or reduce the impact of the competition risk on OPC and its operating results.
 
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 two customers represented approximately 34% of its revenues in 2021; therefore, OPC’s revenues from the generation of electricity are highly sensitive to the consumption by significant customers. Therefore, should there be a decrease in 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.
 
The Bazan Group, a related party of OPC, is considered a major OPC customer representing approximately 14.5% of OPC’s revenues in 2021. Loss of a significant customer could have a material adverse effect on OPC’s business and results of operations. Furthermore, OPC is also exposed to collection risks in connection with significant customers. In November 2017, a shareholder of Bazan Group filed a derivative claim in the district court in Tel Aviv against Bazan Group, OPC-Rotem and IC, alleging that Bazan Group’s 2011 transaction with OPC-Rotem for the purchase of electricity did not receive certain shareholder approval. The parties are negotiating a potential settlement.
 
 Furthermore, OPC-Hadera is dependent on Infinya’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—Our Businesses—OPC—OPC’s Description of Operations—Regulatory Framework for Cogeneration IPPs.
 
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Furthermore, OPC companies are exposed to the financial strength of the System Operator. In addition, failure to analyze the electricity consumption profile of OPC’s customers, including its material customers, and its improvement over the production capacity of OPC’s production facilities and power plants may impair the maximization of OPC’s profitability.
 
OPC may suffer from temporary or continued interruption to regular supply of fuels and fuel prices.
 
OPC’s power generation activity depends on regular supply of fuels (natural gas or diesel fuel). Fuel shortages and disruptions of the supply or transmission of natural gas may disrupt the electricity generation activity and consequently adversely affect the OPC’s operating results. Continued interruption to the supply of natural gas, requires OPC to generate electricity by using an alternative fuel (in Israel, the main alternative fuel is diesel fuel). Covenant 125, which regulates compensation in the event of shortages of natural gas in Israel, does not always apply to OPC-Rotem due to the EA’s interpretation of the covenant’s applicability to OPC-Rotem, which could lead to a gas shortage if there are no arrangements with other distributors, thus materially affecting OPC-Rotem’s profitability.
 
In case of shortage of gas, and insofar as Infinya instructs OPC-Hadera to continue operating, arrangements were provided for operating the power plant using an alternative fuel and the netting in respect thereof.
 
Furthermore, there is no certainty that OPC will be able to negotiate substantially the same natural gas prices with a gas supplier in the event additional natural gas required for projects as compared to natural gas price arrangements under existing agreements of the OPC’s companies. For example, in 2021, there was an increase in natural gas prices. The cost of natural gas affects the OPC’s margins (unlike CPV’s natural gas purchases are based on market prices, and therefore the results of CPV are affected by the market price of natural gas).
 
There is no certainty that OPC will be able to reduce the effects of fuel supply and fuel price changes disruptions on its operations which may be beyond OPC’s control.
 
OPC depends on infrastructure, securing space on the grid and infrastructure providers, and supplier concentration may expose OPC to significant financial credit or performance risk.
 
The power plants owned by OPC (including future projects) in Israel use the IEC’s electricity grid to sell electricity to their customers; therefore, they are dependent on the IEC (which in its capacity as a “supplier of an essential service”, has duties in connection with adequate management of the transmission and distribution network) and the System Operator, and may also be affected by strikes and industrial action in the IEC. Unavailability, damage or disruption to the grid infrastructures supplied by the IEC would damage OPC’s facilities and impair its ability to transmit the electricity generated in the power plant to the electricity grid and sell electricity to its customers, as well as consumers’ ability to consume electricity in accordance with the planned demand; this may have a material adverse effect on OPC’s businesses.
 
In the natural gas supply and transmission market, the Company is dependent on the Tamar Group, which supplies natural gas to OPC, and on Israel National Gas Lines Ltd. (“INGL”), which deals with the transmission of the gas; OPC’s profits will be adversely affected by delays in the commencement of commercial operation date of the Karish reservoir.
 
Failure in the gas transmission network or failure in the electrical grid may interrupt the supply of electricity from the power plants to consumers or to the IEC, and there is no certainty that OPC will be compensated for some or all the damages it may sustain in the event of a failure in those systems. Furthermore, the power plants owned by OPC use water in the process of their operation, such that a continued water supply malfunction might stop the operation of the power plants; therefore, OPC is dependent on Mekorot (the national water company).
 
OPC-Rotem and OPC-Hadera each has single maintenance agreement which is subject to the risks identified above. Tzomet entered into a long-term maintenance agreement with PW Power Systems LLC, or PW, and also has entered into an EPC agreement with PW for construction of the Tzomet project, which are subject to the risks identified above. OPC is currently in the process of entering into an equipment supply agreement, a construction agreement and a maintenance agreement for Sorek, which will be subject to approval by the Seawater Desalination Authority, which is subject to the risks identified above.
 
The power plants and projects under development depend on the ability to secure the outflow of electricity from the site and keeping space on the grid. The power plants and projects under development are exposed to the system management, regulation of generation sources by the System Operator and prioritization of other generation plants over those of OPC.
 
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In addition, the power plants and generation facilities built or operated by OPC are fully reliant on long-term maintenance agreements with suppliers of essential equipment in connection with maintenance and servicing of the power plant and facilities, including the maintenance of generators and gas and steam turbines. In the event of failure to comply with performance targets, or if the key suppliers’ undertakings under the maintenance agreements are breached, their liability in respect of compensation shall be limited in amount, as is generally accepted in agreements of this type. Therefore, any disruptions and technical malfunctions in the continued operation of the power plants, or any equipment failure might lead to delays in the construction of projects, disruption to electricity generation, shutdowns, loss of income and a decrease in OPC’s profits. This also applies to the construction of other projects that will mature and reach commercial activation regarding maintenance during the operation period. Furthermore, projects under construction and development depend on construction contractors in all matters pertaining to the completion of the project, its performances and OPC’s ability to fulfill its undertakings as of the relevant commercial activation dates in accordance with agreements or the regulation applicable to the project. A delay or failure by the construction contractor to meet its undertakings or any other difficulties it faces in the construction of the project, might have an adverse effect (potentially even a material effect) on OPC. Furthermore, OPC is dependent upon infrastructure suppliers such as INGL and IEC as mentioned above.
 
OPC is subject to regulations in connection with ties with hostile entities and anti-corruption legislation.
 
In their capacity as members of a group that has activities in Israel and the U.S., OPC companies are subject to Israeli and U.S. regulations regarding business ties with hostile entities or countries (such as Iran), and to anti-corruption, bribery and money laundering regulations, whose breach might trigger the imposition of various sanctions in Israel and in other countries. OPC implements measures to ensure it is compliant with such regulations. However, considering the extensive scope of the OPC’s activity (including the controlling shareholder group of which OPC is a member), OPC may be exposed to sanctions under regulations despite taking precautionary measures.
 
Risks Related to OPC’s U.S. Operations
 
With the acquisition of CPV in January 2021, OPC is subject to risks relating to the regulations applicable to CPV’s business in the United States. Many of the risks relating to OPC’s Israel operations also apply to CPV. Additional risks relating to CPV are indicated below.
 
CPV is subject to market risks, including price fluctuations and any hedging may not be effective.
 
CPV’s activities are subject to market risks, including general inflation and price fluctuations, primarily with respect to the prices of electricity, natural gas, emission allowances and certificates for renewable energy (“RECs”), as well as fluctuations in the index prices associated with the hedging agreements that have been entered into by certain CPV projects. CPV’s projects generally enter into commodity prices hedge agreements to reduce exposure to price fluctuations and/or to assure minimum cash flows as an inherent part of the activities. However, such hedge agreements may not ultimately protect against price fluctuations, including fluctuations due to hedging less than the total amount of electricity being sold, the delivery point or prices in the hedge agreement being different than the delivery points in CPV’s project operations, and/or the hedge agreements not being renewed on favorable terms or at all.
 
OPC faces risks in connection with the integration of CPV business.
 
The acquisition of CPV by OPC in January 2021 involves, among other things, the integration of two companies that have previously operated independently. OPC is in the process of integration and establishing operating procedures and corporate governance guidelines in order to revise OPC’s structure and management after completion of the transaction. These processes and procedures are expected to continue in the near term. The success of the CPV acquisition will depend on, among other things, the successful integration of CPV into the OPC group, implementation of control and information flow procedures, assimilation and absorption of management and personnel, as well as implementation of a successful business strategy and development plans for OPC.
 
The potential difficulties of combining the operations of the companies include, among others:
 

difficulties in the integration of operations and systems;
 

conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the OPC and CPV;
 
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difficulties in managing the expanded operations of a larger and more complex company; and
 

coordinating across a new jurisdiction for OPC.
 
Many of these factors will be outside of OPC’s control and any one of them could result in increased costs. The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could harm OPC’s business, financial condition and results of operations.
 
In addition, the CPV acquisition may result in material unanticipated problems, expenses, and liabilities.
 
CPV’s operations are significantly influenced by energy market risks and federal and local regulations.
 
CPV is subject to significant federal and local regulations relating to the U.S. electricity market and natural gas market, including environmental regulations. Such regulations may change and could also be affected by changes in political and governmental policies at the federal and state levels. In addition, CPV’s results and development projects in the renewable energy sector are affected by governmental policies (federal and state) relating to the promotion and granting of incentives to renewable energy. Furthermore, CPV is subject to environmental laws and regulations, including those that seek to regulate air pollution, disposal of hazardous wastewater and garbage, preservation of vegetation and endangered species and historical sites. CPV’s projects and operations also require certain licenses and permits under environmental and other regulations, which require compliance with their terms, including the renewal of the licenses and/or permits. A failure or deviation from the standards or regulations and/or non-compliance with the terms of the issued licenses and/or permits, could have a material adverse effect on CPV’s business, results of operation and financial condition and/or prevent advancement of its development projects. If stricter regulatory requirements are imposed on CPV or if CPV does not comply with such requirements, laws and regulations, this could have an adverse effect on CPV’s results and activity. Furthermore, stricter regulatory requirements could require material expenditures or investments by CPV.
 
In addition, CPV is subject to policies and decisions made by Regional Transmission Organizations (“RTO”) or Independent System Operator (“ISO”) of the markets in which it operates or expects to operate. Changes in such policies or decisions could have an adverse effect on CPV’s results and activity.
 
Severe weather conditions could have a material adverse effect on CPV’s operations and financial results.
 
Severe weather conditions, natural disasters and other natural phenomena (such as hurricanes and tornadoes) could adversely affect CPV’s activities and its financial condition and results of operation. Such severe weather conditions could affect suppliers and pipelines that supply natural gas to gas-fired facilities. Furthermore, severe weather conditions could cause damage to CPV’s facilities, increased repair costs and result in loss of revenue if CPV fails to supply electricity to the markets in which it operates. To the extent that these losses are not covered by CPV’s insurance or are not recovered by CPV through the price of electricity, they could have a material adverse effect on CPV’s business, financial condition, results of operation and cash flows.
 
CPV’s facilities are subject to disruptions, including breakdowns and other disruptions as a result of natural disasters, terrorist attacks, and infrastructure failure.
 
CPV’s facilities are subject to breakdowns, such as mechanical breakdowns, breakdowns in the electricity and natural gas transmission systems, breakdown of electricity and gas transmission connections, difficulties with fuel supply, and accidents or disruptions of the activities of the facilities or the infrastructure on which they operate. Any such disruption could have material adverse effect on CPV’s business, financial condition and results of operation.
 
CPV’s facilities and operations could be adversely affected by natural disasters, terrorist attacks, infrastructure failure (such as failure of gas pipeline systems, RTO or ISO systems) and other extreme events. Such events could also adversely impact CPV’s suppliers and customers, thereby adversely impacting CPV. In addition, such events may affect the ability of CPV’s personnel to operate or maintain CPV’s facilities or perform additional tasks necessary for their proper operation. Natural disasters and terrorist attacks may also disrupt capital market activity and, consequently, CPV’s ability to raise capital.
 
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Third-party disruptions could have a material adverse effect on CPV’s business.
 
CPV’s business relies on third parties, such as construction contractors for construction projects, maintenance providers, suppliers of natural gas and capacity of natural-gas transmission grids. For example, global events such as the ongoing COVID-19 has resulted in delays in the supply of raw materials, equipment and ancillary services, which contributed to increased costs. Any disruption in the operations of such third parties could have a material adverse effect on CPV’s business, financial condition and results of operation.
 
An inability to obtain required financing or inability to comply with terms of any financing agreements may have a material adverse effect on CPV’s business, financial condition and results of operation.
 
CPV’s results and its development projects could be adversely impacted if it is unable to obtain financing on attractive terms or at all, to comply with the conditions of CPV’s existing financing agreements and the ability to refinance existing debt and credit on favorable terms or at all. The financing agreements that have been entered into at a project level include restrictions, covenants and obligations that could limit distribution or require making of repayments in certain events. If we are unable to obtain financing or refinancing on favorable terms or at all may adversely affect CPV’s ability to execute its development projects or adversely affect the results of CPV’s active project. In addition, difficulty in complying with the terms of financing agreements may require the provision of collateral and additional guarantees, and in some circumstances even the provision of immediate repayment of the credit facilities, which could have a material adverse effect on CPV’s business, financial condition and results of operation.
 
An inability to extend or renew certain agreements could have an adverse impact on CPV’s business, financial condition and results of operation.
 
Most of CPV’s material agreements (including hedging agreements, financing agreements, gas supply agreements, gas transmission agreements and project management agreements) have short to medium terms, as is customary in the market in which CPV operates. Difficulties in the ability to renew or extend agreements that are close to expiration on favorable terms or at all and/or entering into new undertakings on inferior commercial terms may have a material adverse effect on CPV’s business, financial condition and results of operation.
 
CPV faces risks in connection with the construction and development of its projects’ power plants.
 
CPV is involved in the development, construction and management of power plants. Therefore, its activities are subject to construction risks that are part of the construction of a power plant, including obtaining the required financing, receipt of permits, connection of the facility to transmission and distribution networks, compliance with timetables and dependency on technical teams and equipment. Any failure or delay with respect to such items could result in delays in project completion, increase in costs and adversely affect the results CPV’s results of operation.
 
CPV is subject to environmental risks associated with the construction and operation of power plants, including renewable energy power plants (including wind and solar), and compliance with environmental regulations.
 
The environmental impacts of CPV’s operations include the emission of air pollutants, including greenhouse gases; the discharge of wastewaters; the storage and use of petroleum products and hazardous materials; the generation and disposal of hazardous waste; and, depending on location, potential impacts to threatened and endangered species and waters of the United States. CPV is subject to federal, state and local statutes and regulations governing all of the foregoing. Compliance with environmental laws and regulations can result in significant capital, operating and other costs, including requirements to install air pollution or wastewater controls or obligations to mitigate environmental impacts resulting from the construction of power projects. In addition, CPV is required to obtain licenses and permits to develop, construct and operate its facilities, which permits will frequently include specific emission limits and pollution control requirements. CPV’s operating permits are typically subject to periodic renewal. A failure to obtain and maintain necessary permits would prevent CPV from developing and/or operating its projects. A failure or deviation from the environmental standards or regulations and/or non-compliance with the terms and conditions of the issued permits could result in material administrative, civil or, in extreme cases, criminal penalties that could have a material adverse impact on CPV’s operating results and/or prevent advancement of projects in the development stage.
 
 
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Certain environmental laws, such as CERCLA, impose strict, joint and several liability for costs to cleanup and restore sites where hazardous substances have been disposed or released. CPV may be generally liable for all liabilities associated with any environmental contamination at its power plant locations. These liabilities may include costs to clean up any soil or groundwater contamination that may be present, regardless of whether contamination was caused by the activities of predecessor or third parties.
 
Environmental laws and regulations are frequently changed or amended and such developments often result in the imposition of more stringent requirements. Revisions to wastewater discharge limits, air pollution control regulations or tightening of national ambient air quality standard could require CPV to make additional material investments in order to maintain compliance with such standards.
 
The likely expansion of greenhouse gas regulation poses a particular risk to CPV’s conventional natural gas-fired power plants, although it also encourages the growth of renewable energy projects. The United States is a signatory to and in 2021 rejoined the Paris Agreement. The parties to the Paris Agreement have committed to attempting to limit global warming below 2 ̊Celsius and to pursue efforts to limit global warming to 1.5 ̊Celsius. The Biden Administration has submitted as the United States’ national commitment the goal of achieving an economy-wide reduction in greenhouse gas emissions of 50-52% from 2005 emission levels by 2030. Certain states, including states in which CPV operates, are also enacting legislation to address climate change, and such legislation may impact the operation of CPV’s conventional natural gas-fired power plants. The most significant existing state climate change legislation affecting CPV’s fossil-fuel fired generation is New York’s Climate Leadership and Community Protection Act, which requires the development of regulations to achieve a 40% reduction in greenhouse gas emissions in New York by 2030, net zero greenhouse gas emissions by 2050, and 100% zero-emission electric generation by 2040 Such regulations, if and when enacted, may require CPV to capture and sequester carbon dioxide (CO2) emissions; purchase carbon offsets, or reduce or shut down CPV’s operations.
 
The most significant environmental risks associated with the operation of renewable energy projects are the potential for impacts to threatened and endangered species, migratory birds and bald and golden eagles. Takings associated with such species could result in significant civil and criminal penalties. However, the risk of such liability is mitigated if projects are sited in suitable locations and the project developer has acted appropriately in evaluating potential impacts and has consulted with and followed the recommendations of federal and state agencies responsible for wildlife protection when developing a project.
 
CPV’s operations and financial condition may be adversely affected by the outbreak of the COVID-19.
 
The COVID-19 pandemic has impacted economic activity and conditions worldwide, and the global recovery and transition from COVID-19 could have a material impact on supply, business and commodity market fundamentals on a national and global scale. CPV has acted to address specific aspects of the COVID-19 pandemic and continues to examine the impacts of the pandemic on its workforce, liquidity, reliability, cybersecurity, customers, suppliers, along with other macroeconomic conditions. COVID-19 or another pandemic could have material and adverse effects on CPV’s results of operations, financial condition and cash flows due to, among other factors, a protracted slowdown of broad sectors of the economy, changes in demand or supply for commodities, significant changes in legislation or regulatory policy to address the pandemic, reduced demand for electricity (particularly from commercial and industrial customers), negative impacts on the health of CPV’s workforce and the workforce of its service providers, and the inability of CPV’s contractors, suppliers, and other business partners to fulfill their contractual obligations. The COVID-19 crisis may have an effect on construction or development projects due to the necessity in transportation of equipment and teams, and may affect schedules for completion of such projects. To the extent COVID-19 adversely affects CPV’s business and financial results, it may also have the effect of hastening, heightening, or increasing the negative impacts of, many of the other risks described in this risk factors section with respect to CPV.
 
Risks Related to Our Interest in Qoros
 
Qoros is significantly leveraged and its loans are in default.
 
Qoros has three major credit facilities, being its RMB 3 billion, RMB 700 million and RMB 1.2 billion loan facilities. As of December 31, 2021, there was RMB 465 million, zero and RMB 660 million outstanding under these facilities, respectively. In 2021, Qoros did not make payments totaling approximately RMB 455 million ($70 million) which were due in respect of its RMB 3 billion, RMB 700 million and RMB 1.2 billion loan facilities, and as a result, the lenders under these facilities accelerated these loans. These loans remain in default and accelerated. Qoros had been in discussions with lenders on rescheduling loan repayments on its long-term loans, but no agreement has been reached.
 
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Qoros also has loans and other advances outstanding from parties related to the Majority Shareholder of RMB 5,968 billion (approximately $938 million). These numbers are unaudited.
 
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 not generated positive cash flows from its operations.
 
Kenon understands that Qoros continues to engage in discussions with the lenders and other relevant stakeholders relating to its other outstanding bank loans and resumption of operations, including manufacturing production which has been shut down since July 2021.
 
Kenon had outstanding “back-to-back” guarantee obligations of approximately $16 million to Chery in respect of guarantees that Chery has given in respect of 50% of the RMB 3 billion and 100% of the RMB 700 million loan facilities. In the fourth quarter of 2021, Chery paid the full amount of its guarantee obligations relating to these two loans. Chery had issued to Kenon demand notices to pay these guaranteed amounts. Kenon has paid the amount demanded by Chery, and does not have any remaining guarantee obligations with respect to Qoros debt.
 
Substantially all of Quantum’s interests in Qoros are pledged to secure Qoros’ RMB 1.2 billion loan facility. Although the Majority Shareholder was required to assume its pro rata share of pledge obligations in lieu of Quantum’s, it has not yet provided such pledges, and Quantum’s pledge has not been released. Baoneng Group has provided Kenon with a guarantee for a certain percentage, and up to all, of Quantum’s pledge obligations.
 
We have a minority interest in Qoros.
 
Kenon owns 12% of Qoros. The Majority Shareholder holds 63% of Qoros and Chery holds 25%.
 
Prior to the Majority Shareholder’s investments, Kenon had a 50% interest in Qoros, and the right to appoint three of the six directors on the Qoros board, among various other management rights. Following the 2018 and 2020 sales of Qoros shares to the Majority Shareholder, Kenon’s interest in Qoros has been diluted, and it is now entitled to only appoint two of the nine Qoros directors. 
 
Accordingly, while Kenon maintains an active role as one of the three joint venture partners in Qoros, it holds a minority interest in Qoros. Qoros’ other joint venture partners may have goals, strategies, priorities, or resources that conflict with our goals, strategies, priorities or resources, which may adversely impact our ability to effectively own Qoros, undermine the commitment to Qoros’ long-term growth, or adversely impact Qoros’ business. In addition, the Joint Venture Agreement contains provisions relating to the transfer and pledge of Qoros’ shares, the appointment of executive officers and directors, and the approval of certain matters which may prevent us from causing Qoros to take actions that we deem desirable. For further information on the terms of our Joint Venture Agreement, see “Item 4.B Business Overview—Our Businesses—Qoros—Qoros’ Joint Venture Agreement.
 
Qoros has entered into certain arrangements and agreements with its shareholders.
 
Qoros has entered into transactions with its shareholders and their related parties.
 
Qoros has taken loans and other advances from parties related to the Majority Shareholder with outstanding balances as at December 31, 2021 of RMB 5,968 billion (approximately $938 million).
 
Qoros sources a portion of its engines and spare parts from Chery and has entered into various commercial agreements with respect to the provision of such supplies from Chery. Qoros has also entered into a platform sharing agreements with Chery, pursuant to which Qoros provides Chery with the right to use Qoros’ platform in exchange for a fee.
 
Qoros has total amounts payable to Chery in respect of these supply agreements in the amount of RMB 1,188 million (approximately $187 million) as of December 31, 2021.
 
Qoros also owes Chery an amount equal to the bank loans paid by Chery under its guarantee of Qoros’ loans, equal to RMB 1.2 billion (approximately $188 million).
 
 
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Qoros may enter into additional commercial arrangements and agreements with shareholders or their affiliates in the future. Kenon’s ability to control the terms of such transactions may be limited. Such transactions could create potential conflicts of interest, which could impact the terms of such transactions.
 
Risks Related to Our Interest in ZIM
 
ZIM predominantly operates in the container segment of the shipping industry, and the container shipping industry is dynamic and volatile.
 
ZIM’s principal operations are in the container shipping market and ZIM is significantly dependent on conditions in this market, which are for the most part beyond its control. For example, ZIM’s results in any given period are substantially impacted by supply and demand in the container shipping market, which impacts freight rates, bunker prices, and the prices ZIM pays under the charters for its vessels. Unlike some of its competitors, ZIM does not own any ports or similar ancillary assets (except for minority ownership rights in a company operating a terminal in Tarragona, Spain). Due to ZIM’s lack of diversification, an adverse development in the container shipping industry would have a significant impact on ZIM’s financial condition and results of operations.
 
The container shipping industry is dynamic and volatile and has been marked in recent years by instability as a result of global economic crises and the many conditions and factors that affect supply and demand in the shipping industry, which include:
 

global and regional economic and geopolitical trends, armed conflicts, terrorist activities, embargoes, strikes and trade wars;
 

the global supply of and demand for commodities and industrial products globally and in certain key markets, such as China;
 

developments in international trade, including the imposition of tariffs, the modification of trade agreements between states and other trade protectionism (for example, in the U.S.-China trade);
 

currency exchange rates;
 

prices of energy resources;
 

environmental and other regulatory developments;
 

changes in seaborne and other transportation patterns;
 

changes in the shipping industry, including mergers and acquisitions, bankruptcies, restructurings and alliances;
 

changes in the infrastructure and capabilities of ports and terminals;
 

weather conditions;
 

outbreaks of diseases, including the COVID-19 pandemic; and
 

development of digital platforms to manage operations and customer relations, including billing and services.
 
As a result of some of these factors, including cyclical fluctuations in demand and supply, container shipping companies have experienced volatility in freight rates. For example, the comprehensive Shanghai (Export) Containerized Freight Index (SCFI) increased from 818 points on April 23, 2020, with the global outbreak of COVID-19, to 5,047 as of December 31, 2021. Since the middle of 2020, the industry has witnessed a sharp and unprecedented increase in freight rates, reflecting the sudden demand surge triggered by the COVID-19 pandemic and the unprecedented supply chain disruptions. Furthermore, rates within the charter market, through which ZIM sources most of its capacity, may continue to fluctuate significantly based upon changes in supply and demand for shipping services. The current severe shortage of vessels available for hire has resulted in increased charter rates and longer charter periods dictated by owners. See “Item 3.D Risk FactorsRisks Related to Our Interest in ZIMZIM charters-in most of its fleet, which makes it more sensitive to fluctuations in the charter market, and as a result of its dependency on the vessel charter market, the costs associated with chartering vessels are unpredictable.
 
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As global trends continue to change, it remains difficult to predict their impact on the container shipping industry and on ZIM’s business. If ZIM is unable to adequately predict and respond to market changes, they could have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity.
 
The global COVID-19 pandemic has created significant business disruptions and affected ZIM’s business and is likely to continue to create significant business disruptions and affect its business in the future.
 
In March 2020, the World Health Organization declared the outbreak of novel COVID-19 a global pandemic. During the past two years the COVID-19 pandemic has spread globally and caused high mortality and morbidity rates world-wide, with some geographic regions affected more than others. The COVID-19 pandemic has significantly impacted the global economy, disrupted global supply chains, created significant volatility and disruption in financial markets and increased unemployment levels in some of its phases, all of which may become heightened concerns upon additional waves of infection or future developments. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. In particular, the State of Israel where ZIM’s head office is located has been highly affected by COVID-19, with a high and steady increase in percentage per capita of reported cases of infected patients, especially with the recent Omicron variant. Since March 2020, and in response to new pandemic waves of COVID-19, the Government of Israel imposed from time to time certain measures such as restrictions on travel, mandatory quarantines, partial home confinement and other movement restrictions, reducing staffing of nonessential businesses, restricting public transportation and other public activities. Although ZIM is considered an essential business and therefore enjoys certain exemptions from the restrictions under Israeli regulations, ZIM has voluntary reduced its maximum permitted percentage of staffing in its offices in order to mitigate the COVID-19 risks and has therefore relied more on remote connectivity. Similarly, ZIM’s sea crews and staff located in offices worldwide have been adversely affected as a result of the COVID-19 pandemic and may continue to be adversely affected by the pandemic in the future. In addition, since December 2020, the US Food and Drug Administration FDA issued three Emergency Use Authorizations (EUAs) for COVID-19 vaccines applications, launching COVID-19 vaccination campaigns in many countries worldwide. While certain countries such as the State of Israel, the US and the UK are in advanced stages of the COVID-19 vaccination campaigns, other countries have been unable to vaccinate their population at the same pace. In addition, as new variants of the virus emerge, there is no certainty that the vaccines will continue to be effective for all existing and future variants of the virus. ZIM continues to monitor its operations and government regulations, guidelines and recommendations.
 
The COVID-19 pandemic has resulted in reduced industrial activity in various countries around the world, with temporary closures of factories and other facilities such as port terminals, which led to a temporary decrease in supply of goods and congestion in warehouses and terminals. For example, in January 2020, the government of China imposed a lockdown during the Chinese New Year holiday which prevented many workers from returning to the manufacturing facilities, resulting in prolonged reduction of manufacturing and export. Government-mandated shutdowns in various countries have also temporarily decreased consumption of goods, negatively affecting trade volumes and the shipping industry globally during the first half of 2020. Moreover, because of COVID-19, ZIM faces risks to its personnel and operations. Such risks include delays in the loading and discharging of cargo on or from ZIM’s vessels due to severe congestion at ports and inland supply chains, difficulties in carrying out crew changes, off-hire time due to quarantine regulations, delays and expenses in finding substitute crew members if any of ZIM’s vessels’ crew members become infected, delays in drydocking if insufficient shipyard personnel are working due to quarantines or travel restrictions, difficulties in procuring new containers due to temporary factory shutdowns and increased risk of cyber-security threats due to ZIM’s employees working remotely. Fear of the virus and the efforts to prevent its spread continue to exert increasing pressure on the supply-demand balance, which could also put financial pressure on ZIM’s customers and increase the credit risk that ZIM faces in respect of some of them. Such events have affected ZIM’s operations and may have a material adverse effect on its business, financial condition and results of operations. In addition, these and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risk factors disclosed herein.
 
 
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A decrease in the level of China’s export of goods could have a material adverse effect on ZIM’s business.
 
According to the world shipping council (WSC), the Asia trade regions represent approximately 70% of the total TEUs of international container trade, and the Intra-Asia trade alone accounts for at least one quarter of the global market. Although ZIM also operates in many countries in Asia, Southeast Asia and the Far East (such as Vietnam, South Korea and Thailand), a significant portion of ZIM’s business originates from China and therefore depends on the level of imports and exports to and from China. Trade tensions between the US and China have intensified in recent years, and trade restrictions have reduced bilateral trade between the US and China and led to shifts in trade structure and reductions in container trade. For more information on the risks related to US/China trade restrictions, see “Item 3.D Risk FactorsRisks Related to Our Interest in ZIMZIM’s business may be adversely affected by trade protectionism in the markets that ZIM serves, particularly in China.” Furthermore, as China exports considerably more goods than it imports, any reduction in or hindrance to China-based exports, whether due to decreased demand from the rest of the world, an economic slowdown in China, seasonal decrease in manufacturing levels due to the Chinese New Year holiday or other factors, could have a material adverse effect on ZIM’s business. For instance, in recent years, the Chinese government has implemented economic policies aimed at increasing domestic consumption of Chinese-made goods and national security measures for Hong Kong which may have the effect of reducing the supply of goods available for export and may, in turn, result in decreased demand for cargo shipping. In recent years, China has experienced an increasing level of economic autonomy and a gradual shift toward a “market economy” and enterprise reform. However, many of the reforms implemented, particularly some price limit reforms, are unprecedented or experimental and may be subject to revision, change or abolition. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government. Changes in laws and regulations, including with regard to tax matters, and their implementation by local authorities could affect ZIM’s vessels calling on Chinese ports and could have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
Imbalance between supply of global container ship capacity and demand may limit ZIM’s ability to operate its vessels profitably.
 
According to Alphaliner, as of December 31, 2021, global container ship capacity was approximately 25 million 20-foot equivalent units, or TEUs, spread across approximately 5,515 vessels. Furthermore, global container ship capacity has increased by 4.5% in 2021, while demand for shipping services is projected to increase by 6.7%, therefore the increase in ship capacity is expected to be less than the increase in demand for container shipping for a second consecutive year. During the first half of 2020, the COVID-19 pandemic outbreak has caused a decrease in demand for goods, causing carriers to adopt mitigating measures such as blank sailings and redelivery of chartered vessels. However, during the second half of 2020 and in 2021 carriers resumed temporarily halted service lines, performed additional sailings, and reduced the number of idle vessels to a minimum because of a significant increase in demand and a market shift to consumption of goods over services. The increased demand for container shipping and inventory restocking during 2021 persisted for a longer period than initially anticipated, leading to reduced port productivity, disrupted sailing schedule, shortage of trucks, railways and warehousing capacity. Supply chain disruptions became a factor influencing demand and supply, while concerns regarding vaccine rates, turnaround in the pandemic, renewed waves and new variants of the virus continue to pose risk for future worldwide demand. In an attempt to meet the sharp demand increase during 2021, ZIM has expanded its operated vessel fleet from 87 vessels as of January 1, 2021 to 118 vessels as of December 31, 2021 (including three purchased secondhand vessels already delivered out of a total of eight vessels purchased), as well as entered into strategic long-term charter transactions. For example, we have entered into strategic agreements with Seaspan for the long-term charter of ten 15,000 TEU liquified natural gas (LNG) vessels and fifteen 7,000 TEU LNG vessels. See “Item 4.B Business Overview—Our Businesses—ZIM’s vessel fleet—Strategic Chartering Agreements.
 
Responses to changes in market conditions may be slower as a result of the time required to build new vessels and adapt to market needs and due to the severe shortage of vessels in the charter market. As shipping companies purchase vessels years in advance of their actual use to address expected demand, vessels may be delivered during times of decreased demand (or oversupply if other carriers act in kind) or unavailable during times of increased demand, leading to a supply/demand mismatch. The container shipping industry may face oversupply in the coming years and numerous other factors beyond ZIM’s control may also contribute to increased capacity, including deliveries of refurbished or converted vessels, port and canal congestion, decreased scrapping levels of older vessels, any increase in the practice of slow steaming, a reduction in the number of void voyages and a decrease in the number of vessels that are out of service (e.g., vessels that are laid-up, drydocked, or are otherwise not available for hire). In the event of overcapacity, there is no guarantee that measures of blank sailings and redelivery of chartered vessels will prove successful, partially or at all, in mitigating the gap between excess supply and demand. Excess capacity generally depresses freight rates and can lead to lower utilization of vessels, which may adversely affect ZIM’s revenues and costs of operations, profitability and asset values. Overcapacity can cause the industry to experience downward pressure on freight rates and such prolonged pressure could have a material adverse effect on ZIM’s financial condition, results of operations and liquidity.
 
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Access to ports could be limited or unavailable, including due to congestion in terminals and inland supply chains, and ZIM may incur additional costs as a result thereof.
 
Global development of new terminals continues to be outpaced by the increase in demand. In addition, the increasing vessel size of containership newbuilding has forced adjustments to be made to existing container terminals. As such, existing terminals are coping with high berth utilization and space limitations of stacking yards, which are at near-full capacity. This results in longer cargo operations times for the vessels and port congestions, which could increase operational costs and have a material adverse effect on affected shipping lines. Decisions about container terminal expansion and port access are made by national or local governments and are outside of ZIM’s control. Such decisions are based on local policies and concerns and the interests of the container shipping industry may not be considered.
 
ZIM’s access to ports may also be limited or unavailable due to other reasons. As industry capacity and demand for container shipping continue to grow, ZIM may have difficulty in securing sufficient berthing windows to expand its operations in accordance with its growth strategy, due to the limited availability of terminal facilities.
 
ZIM’s status as an Israeli company has limited, and may continue to limit, its ability to call on certain ports. Furthermore, major ports may close for long periods of time due to maintenance, natural disasters, strikes, pandemics, including COVID-19, or other reasons beyond ZIM’s control. For example, in August 2021, a key terminal in Ningbo-Zhoushan port, one of China’s busiest ports, was temporarily shut down after it was reported that a worker was found to be infected with COVID-19. Moreover, the COVID-19 pandemic has caused disruptions to global trade and severe congestion at ports and inland supply chains. Ports and terminals may implement certain measures and work procedures intended to relieve congestion which may also limit ZIM’s access to terminals and apply additional costs to it or to its customers. For example, in October 2021, the port of Los Angeles and the port of Long Beach, California, together with the Biden-Harris Supply Chain Disruptions Task Force, US Department of Transportation, introduced a new dwell fee to be applied against containers that remained in the terminal longer than a specified permitted amount of days. While this dwell fee was announced to be originally collected commencing on November 1, 2021, its implementation date was delayed several times as congestion conditions improved. ZIM has taken measures to relieve congestion at these ports and avoid dwell fee charges. Similar measures may be imposed in other ports and terminals in other geographical areas. ZIM cannot ensure that its efforts to secure sufficient port access will be successful. Any of these factors may have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
Changing trading patterns, trade flows and sharpening trade imbalances may adversely affect ZIM’s business, financial condition and results of operations.
 
ZIM’s TEUs carried can vary depending on the balance of trade flows between different world regions. For each service ZIM operates, it measures the utilization of a vessel on the “strong,” or dominant, leg, as well as on the “weak,” or counter-dominant, leg by dividing the actual number of TEUs carried on a vessel by the vessel’s effective capacity. Utilization per voyage is generally higher when transporting cargo from net export regions to net import regions (the dominant leg). Considerable expenses may result when empty containers must be transported on the counter-dominant leg. ZIM seeks to manage the container repositioning costs that arise from the imbalance between the volume of cargo carried in each direction by utilizing its global network to increase cargo on the counter-dominant leg and by triangulating its land transportation activities and services. If ZIM is unable to successfully match demand for container capacity with available capacity in nearby locations, it may incur significant balancing costs to reposition its containers in other areas where there is demand for capacity. It is not guaranteed that ZIM will always be successful in minimizing the costs resulting from the counter-dominant leg trade, which could have a material adverse effect on ZIM’s business, financial condition and results of operations. Furthermore, sharpening imbalances in world trade patterns — rising trade deficits of net import regions in relation to net export regions — may exacerbate imbalances between the dominant and counter-dominant legs of ZIM’s services. This could have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
ZIM’s ability to participate in operational partnerships in the shipping industry is limited, which may adversely affect its business, and following the amendment of its strategic collaboration with the 2M Alliance, ZIM or the 2M Alliance can unilaterally terminate the agreement after an initial period of 18 months subject to provision of notice.
 
The container shipping industry has experienced a reduction in the number of major carriers, as well as a continuation and increase of the trends of strategic alliances and partnerships among container carriers, which can result in more efficient and better coverage for shipping companies participating in such arrangements. For example, in 2016 CSCL was acquired by COSCO, APL-NOL was acquired by CMA CGM, United Arab Shipping Company merged with Hapag-Lloyd and Hanjin Shipping exited the market as a result of a bankruptcy, during 2017, Hamburg Sud was acquired by Maersk, three large Japanese carriers, K-Line, MOL and NYK merged into ONE and OOCL was acquired by COSCO, and in April 2020, Hyundai Merchant Marine (HMM) consummated the termination of its strategic cooperation with 2M and joined THE Alliance. Although there were no major transactions during 2021, past consolidation in the industry has affected the existing strategic alliances between shipping companies. For example, the Ocean Three alliance, which consisted of CMA CGM Shipping, United Arab Shipping Company and China Shipping Container Lines, was terminated in 2019 and replaced by the Ocean Alliance, consisting of COSCO Shipping Group (including China Shipping and OOCL), CMA CGM Shipping Group (including APL) and Evergreen Marine.
 
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ZIM is not party to any strategic alliances and therefore has not been able to achieve the benefits associated with being a member of such an alliance. If, in the future, ZIM would like to enter into a strategic alliance but is unable to do so, it may be unable to achieve the cost and other synergies that can result from such alliances. However, ZIM is party to operational partnerships with other carriers in some of the other trade zones in which it operates, and may seek to enter into additional operational partnerships or similar arrangements with other shipping companies or local operators, partners or agents. For example, in September 2018, ZIM entered into a strategic operational cooperation agreement with the 2M Alliance in the Asia-USEC trade zone. In March and August 2019, ZIM expanded its strategic partnership with the 2M Alliance by entering into additional cooperation agreements, to cover the Asia-East Mediterranean, Asia-American Pacific Northwest and Asia-US Gulf trade zones. In addition, at the end of 2020, ZIM further upsized a joint service by utilizing larger vessels on the Asia-U.S. Gulf Coast service and in June 2021, ZIM launched a new joint service line connecting from Yantian and Vietnam to U.S. South Atlantic ports via Panama Canal with the 2M Alliance. In January and February 2022, ZIM announced its principal agreement with the 2M to extend the existing collaboration agreements on the Asia- USEC and Asia-USGC, as well as the intention to launch an independent pendulum service on the Asia-Mediterranean and Pacific Northwest trades, replacing its cooperation with the 2M Alliance on those trades, effective as of April, 2022. Under ZIM’s new collaboration agreement with the 2M, ZIM or the 2M Alliance may not terminate the agreement during the first 18 months of the agreement term (by providing a six-month prior written notice following a 12-month period from the effective date of the agreement), which is a shorter period compared to the original agreement terms. For additional information on ZIM’s strategic operational cooperation with the 2M Alliance, see “Item 4.B Business Overview—Our Businesses—ZIM’s operational partnerships.” A termination of ZIM’s existing operational agreements, including with the 2M Alliance, or any future cooperation agreement it may enter into, could adversely affect its business, financial condition and results of operations.
 
These strategic cooperation agreements and other arrangements could also reduce ZIM’s flexibility in decision making in the covered trade zones, and ZIM is subject to the risk that the expected benefits of the agreements may not materialize. Furthermore, in other trade zones in which other alliances operate, ZIM is still unable to benefit from the economies of scale that many of its competitors are able to achieve through participation in strategic arrangements (i.e., strategic alliances or operational agreements). ZIM’s status as an Israeli company has limited, and may continue to limit, its ability to call on certain ports and has therefore limited, and may continue to limit, its ability to enter into alliances or operational partnerships with certain shipping companies. In addition, ZIM’s existing collaboration with the 2M Alliance may limit its ability to enter into alliances or other certain operational agreements. If ZIM is not successful in expanding or entering into additional operational partnerships which are beneficial to ZIM, this could adversely affect its business.
 
The container shipping industry is highly competitive and competition may intensify even further, which could negatively affect ZIM’s market position and financial performance.
 
ZIM competes with a large number of global, regional and niche container shipping companies, including, for example, Maersk, MSC, COSCO Shipping, CMA CGM S.A., Hapag-Lloyd AG, ONE and Yang Ming Marine Transport Corporation to provide transport services to customers worldwide. In each of its key trades, ZIM competes primarily with global container shipping companies. The cargo shipping industry is highly competitive, with the top three carriers in terms of global capacity – A.P. Moller-Maersk Group, Mediterranean Shipping Company and COSCO – accounting for approximately 46.3% of global capacity, and the remaining carriers together contributing less than 53.7% of global capacity as of December 31, 2021, according to Alphaliner. Certain of ZIM’s large competitors may be better positioned and have greater financial resources than ZIM and may therefore be able to offer more attractive schedules, services and rates. Some of these competitors operate larger fleets with larger vessels and with higher vessel ownership levels than ZIM and may be able to gain market share by supplying their services at aggressively low freight rates for a sustained period of time. In addition, there has been an increase in merger and acquisition activities within the container shipping industry in recent years, which has further concentrated global capacity with certain of ZIM’s competitors. See “Item 3.D Risk FactorsRisks Related to Our Interest in ZIMZIM’s ability to participate in operational partnerships in the shipping industry is limited, which may adversely affect its business, and following the amendment of its strategic collaboration with the 2M Alliance, ZIM or the 2M Alliance can unilaterally terminate the agreement after an initial period of 18 months subject to provision of notice.” If one or more of its competitors expands its market share through an acquisition or secures a better position in an attractive niche market in which it operates or intends to enter, ZIM could lose market share as a result of increased competition, which in turn could have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
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Global economic downturns and geopolitical challenges throughout the world could have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
ZIM’s business and operating results have been, and will continue to be, affected by worldwide and regional economic and geopolitical challenges, including global economic downturns. In particular, the Russian military actions across Ukraine has caused a sharp decline in the financial markets and a sharp increase in bunker prices. Furthermore, freight movement and supply chains in Ukraine and neighboring countries have been, and may continue to be, significantly disrupted. Economic sanctions levied on Russia and its leaders may cause further global economic downturns. A further deterioration of the current conflict or other geopolitical instabilities may cause global markets to plummet, affect global trade, increase bunker prices and may have a material adverse effect on ZIM’s business a financial condition, results of operations and liquidity.
 
Currently, global demand for container shipping is highly volatile across regions and remains subject to downside risks stemming mainly from factors such as government-mandated shutdowns and other restrictions due to the COVID-19 pandemic, severe hits to the GDP growth of both advanced and developing countries, fiscal fragility in advanced economies, high sovereign debt levels, highly accommodative macroeconomic policies and persistent difficulties accessing credit. During 2020, the outbreak of the COVID-19 pandemic resulted in an immediate and sharp decline in economic activity worldwide. From the second half of 2020, market conditions improved with higher demand mainly by heavy consumers’ purchase orders and e-commerce sales. The increase in demand combined with congestions and bottlenecks in the terminals, led to a temporary significant containers shortage which also resulted in surge in the freight rates, climbing up to record-breaking levels. Economic recoveries from the COVID-19 pandemic are still uncertain, vary from each country and are influenced by government economic support measures as well as the pace of vaccine campaigns. According to a report by the International Monetary Fund (IMF), the global economy entered 2022 in a weaker position than previously expected, with reimposition of mobility restrictions due to the Omicron variant of the COVID-19 pandemic, rising energy prices and higher inflation rates, especially in the U.S. Such factors contributed to a projected global growth decrease of 4.4% during 2022, compared to 5.9% during 2021.
 
The deterioration in the global economy has caused, and may continue to cause, volatility or a decrease in worldwide demand for certain goods shipped in containerized form. In particular, if growth in the regions in which ZIM conducts significant operations, including the United States, Asia and the Black Sea, Europe and Mediterranean regions, slows for a prolonged period and/or there is additional significant deterioration in the global economy, such conditions could have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity. If these or other global conditions continue to deteriorate during 2022, global growth may take another downturn and demand in the shipping industry may decrease. Geopolitical challenges such as rising inflation in the U.S. as well as in other dominant countries, enhanced and other political crises and military conflicts and further escalation between the U.S. and Russia, trade wars, weather and natural disasters, embargoes and canal closures could also have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
In addition, as a result of weak economic conditions, some of ZIM’s customers and suppliers have experienced deterioration of their businesses, cash flow shortages and/or difficulty in obtaining financing. As a result, ZIM’s existing or potential customers and suppliers may delay or cancel plans to purchase ZIM’s services or may be unable to fulfill their obligations to ZIM in a timely fashion.
 
 ZIM’s business may be adversely affected by trade protectionism in the markets that ZIM serves, particularly in China.
 
ZIM’s operations are exposed to the risk of increased trade protectionism. Governments may use trade barriers in an effort to protect their domestic industries against foreign imports, thereby further depressing demand for container shipping services. In recent years, increased trade protectionism in the markets that ZIM accesses and serves, particularly in China, where a significant portion of its business originates, has caused, and may continue to cause, increases in the cost of goods exported and the risks associated with exporting goods as well as a decrease in the quantity of goods shipped. In November 2020, China and additional 15 countries in the Asia-Pacific region entered into the largest free trade pact, the RCEP (Regional Comprehensive Economic Partnership), which is expected to strengthen China’s position on trade protectionism related matters. China’s import and export of goods may continue to be affected by trade protectionism, specifically the ongoing U.S.-China trade dispute, which has been characterized by escalating trade barriers between the U.S. and China as well as trade relations among other countries. These risks may have a direct impact on demand in the container shipping industry. In January 2020, China and the U.S. reached an agreement aimed at easing the trade war. However, there is no assurance that further escalation will be avoided.
 
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The U.S. administration has advocated greater restrictions on trade generally and significant increases on tariffs on certain goods imported into the United States, particularly from China and has taken steps toward restricting trade in certain goods. China and other countries have retaliated in response to new trade policies, treaties and tariffs implemented by the United States. China has imposed significant tariffs on U.S. imports since 2018. Such trade escalations have had, and may continue to have, an adverse effect on manufacturing levels, trade levels and specifically, may cause an increase in the cost of goods exported from Asia Pacific and the risks associated with exporting goods from the region. Such increases may also affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs. Further, increased tensions may adversely affect oil demand, which would have an adverse effect on shipping rates. They could also result in an increased number of vessels sailing from China with less than their full capacity being met. These restrictions may encourage local production over foreign trade which may, in turn, affect the demand for maritime shipping. In addition, there is uncertainty regarding further trade agreements such as with the EU, trade barriers or restrictions on trade in the United States. Any increased trade barriers or restrictions on trade may affect the global demand for ZIM’s services and could have a material adverse effect on its business, financial condition and results of operations.
 
ZIM may be unable to retain existing customers or may be unable to attract new customers.
 
ZIM’s continued success requires it to maintain its current customers and develop new relationships. ZIM cannot guarantee that its customers will continue to use its services in the future or at the current level. ZIM may be unable to maintain or expand its relationships with existing customers or to obtain new customers on a profitable basis due to competitive dynamics. In addition, as some of ZIM’s customer contracts are longer-term in nature (up to one year), if market freight rates increase, ZIM may not be able to adjust the contractually agreed rates to capitalize on such increased freight rates until the existing contracts expire. Upon the expiration of its existing contracts, ZIM cannot assure that its customers will renew the contracts on favorable terms, or if at all, or that it will be able to attract new customers. Any adverse effect would be exacerbated if ZIM loses one or more of its significant customers. In 2021, ZIM’s 10 largest customers represented approximately 17% of its freight revenues and its 50 largest customers represented approximately 32% of its freight revenues. Although ZIM believes it currently has a diversified customer base, it may become dependent upon a few key customers in the future, especially in particular trades, such that ZIM would generate a significant portion of its revenue from a relatively small number of customers. Any inability to retain or replace its existing customers may have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
Technological developments which affect global trade flows and supply chains are challenging some of ZIM’s largest customers and may therefore affect its business and results of operations.
 
By reducing the cost of labor through automation and digitization and empowering consumers to demand goods whenever and wherever they choose, technology is changing the business models and production of goods in many industries, including those of some of ZIM’s largest customers. Consequently, supply chains are being pulled closer to the end-customer and are required to be more responsive to changing demand patterns. As a result, fewer intermediate and raw inputs are traded, which could lead to a decrease in shipping activity. If automation and digitization become more commercially viable and/or production becomes more regional or local, total containerized trade volumes would decrease, which would adversely affect demand for ZIM’s services. Supply chain disruptions caused by COVID-19, rising tariff barriers and environmental concerns also accelerate these trends.
 
ZIM relies on third-party contractors and suppliers, as well as its partners and agents, to provide various products and services and unsatisfactory or faulty performance of its contractors, suppliers, partners or agents could have a material adverse effect on its business.
 
ZIM engages third-party contractors, partners and agents to provide services in connection with its business. An important example is its chartering-in of vessels from ship owners, whereby the ship owner is obligated to provide the vessel’s crew, insurance and maintenance along with the vessel. Another example is ZIM’s carrier partners whom it relies on for vessels and service to deliver cargo to its customers, as well as third-party agencies who serve as its local agents in specific locations. Disruptions caused by third-party contractors, partners and agents could materially and adversely affect ZIM’s operations and reputation.
 
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Additionally, a work stoppage at any one of its suppliers, including land transportation suppliers, could materially and adversely affect its operations if an alternative source of supply were not readily available. Also, ZIM outsources part of its back-office functions to a third-party contractor. The back-office support center may shut down due to various reasons beyond ZIM’s control, which could have an adverse effect on its business. There can be no assurance that the products delivered and services rendered by third-party contractors and suppliers will be satisfactory and match the required quality levels. Furthermore, major contractors or suppliers may experience financial or other difficulties, such as natural disasters, terror attacks, failure of information technology systems or labor stoppages, which could affect their ability to perform their contractual obligations to ZIM, either on time or at all. Any delay or failure of contractors or suppliers to perform their contractual obligations could have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity.
 
A shortage of qualified sea and shoreside personnel could have an adverse effect on its business and financial condition.
 
ZIM’s success depends, in large part, upon its ability to attract and retain highly skilled and qualified personnel, particularly seamen and coast workers who deal directly with activities related to vessel operation and sailing. In crewing its vessels, ZIM requires professional and technically skilled employees with specialized training who can perform physically demanding work on board its vessels. As the worldwide container ship fleet continues to grow, the demand for skilled personnel has been increasing, which has led to a shortfall of such personnel. An inability to attract and retain qualified personnel as needed could materially impair ZIM’s ability to operate, or increase its costs of operations, which could adversely affect its business, financial condition, results of operations and liquidity. Furthermore, due to the COVID-19 pandemic, the shipping industry as a whole is experiencing difficulties in carrying out crew changes, which could impede ZIM’s ability to employ qualified personnel.
 
Risks Related to Operating ZIM’s Vessel Fleet
 
ZIM charters-in most of its fleet, which makes it more sensitive to fluctuations in the charter market, and as a result of its dependency on the vessel charter market, the costs associated with chartering vessels are unpredictable.
 
ZIM charters-in most of its fleet. As of December 31, 2021, of the 118 vessels through which it provides transport services globally, 114 are chartered (including 106 vessels accounted as right-of-use assets under the accounting guidance of IFRS 16 and 4 vessels accounted under sale and leaseback refinancing agreements), which represents a percentage of chartered vessels that is significantly higher than the industry average of 50% (according to Alphaliner). Any rise in charter hire rates could adversely affect ZIM’s results of operations.
 
While there have been fluctuations in the demand in the container shipping market, charter demand is currently very high for all vessel sizes, leading to an imbalance in supply and demand and a shortage of vessels available for hire, increased charter rates and longer charter periods dictated by owners. In order to meet the growing cargo demand during the second half of 2020 and throughout 2021, ZIM has increased its chartered operated fleet from 86 as of January 1, 2021, to 114 as of December 31, 2021, including the charter of 8 additional car carrier vessels. In addition, during 2021 ZIM has entered into strategic long-term charter agreements. See “Item 4.B Business Overview—Our Businesses—ZIM’s vessel fleet—Strategic Chartering Agreements.
 
In order to mitigate the steep increase in charter hire rates, during the second half of 2021 ZIM has completed the purchase transaction of eight secondhand vessels, ranging from 1,100 to 4,250 TEUs each, in several separate transactions, and it may purchase additional secondhanded vessels if it evaluates such a purchase is more suited to its needs than other available alternatives. It is also a party to a number of other long-term charter agreements and may enter into additional long-term agreements based on its assessment of current and future market conditions and trends. As of December 31, 2021, 80.7% of ZIM’s chartered-in vessels (or 81.6% in terms of TEU capacity) were chartered under leases for terms exceeding one year, and it may be unable to take full advantage of short-term reductions in charter hire rates with respect to such longer-term charters. Furthermore, on March 30, 2022, ZIM announced a new chartering agreement with MPC Container Ships ASA for the 7-year charter of a total of six 5,500 TEU wide beam newbuild vessels for total charter hire consideration of approximately $600 million. The vessels are expected to be delivered between May 2023 and February 2024. In the future, ZIM may substitute a short-term charter of one year or less with a long-term charter exceeding one year, which could cause its costs to increase quickly compared to competitors with longer-term charters or owned vessels. To the extent ZIM replaces vessels that are chartered-in under short-term leases with vessels that are chartered-in under long- term leases it owns, the principal amount of its long-term contractual obligations would increase. There can be no assurance that the terms of any such long- term leases will be favorable to ZIM in the long run.

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ZIM may face difficulties in chartering or owning enough vessels, including large vessels, to support its growth strategy due to the possible shortage of vessel supply in the market.
 
Charter rates for container and car carrier vessels are volatile and are currently very high for all vessel sizes, with shortage of supply of vessels for hire. If ZIM is unable in the future to charter vessels of the type and size needed to serve its customers efficiently on terms that are favorable to it, if at all, this may have a material adverse effect on its business, financial condition, results of operations and liquidity.
 
Furthermore, container shipping companies have been incorporating, and are expected to continue to incorporate, larger, more economical vessels into their operating fleets. Particularly, in February 2021, ZIM and Seaspan Corporation entered into strategic agreements for the long-term charter of ten 15,000 TEU liquified natural gas (LNG dual-fuel) container vessels to serve ZIM’s Asia-US East Coast Trade and other global-niche trades, with the vessels expected to be delivered between February 2023 and January 2024. The cost per TEU transported on large vessels is less than the cost per TEU for smaller vessels as, among other factors, larger vessels provide increased capacity and fuel efficiency per carried TEU. As a result, carriers are encouraged to deploy large vessels, particularly within the more competitive trades. According to Alphaliner, vessels in excess of 12,500 TEUs represented approximately 73% of the current global orderbook based on TEU capacity as of December 31, 2021, and approximately 36% of the global fleet based on TEU capacity will consist of vessels in excess of 12,500 TEUs by December 31, 2023. Furthermore, a significant introduction of large vessels, including very large vessels in excess of 18,000 TEUs, into any trade, will enable the transfer of existing, large vessels to other shipping lines on which smaller vessels typically operate. Such transfer, which is referred to as “fleet cascading,” may in turn generate similar effects in the smaller trades in which ZIM operates. Other than its strategic agreements with Seaspan Corporation for the long-term charter of ten 15,000 TEU LNG dual-fuel container vessels, ZIM does not currently have additional agreements in place to procure or charter-in large container vessels (in excess of 12,500 TEU), and the continued deployment of larger vessels by its competitors will adversely impact ZIM’s competitiveness if it is not able to charter-in, acquire or obtain financing for such vessels on attractive terms or at all. This risk is further exacerbated as a result of its inability to participate in certain alliances and thereby access lager vessels for deployment. Even if ZIM is able to acquire or charter-in larger vessels, it cannot assure you ZIM will be able to achieve utilization of its vessels necessary to operate such vessels profitably.
 
Rising bunker prices and the low-sulfur fuel mandate under the IMO 2020 Regulations may have an adverse effect on ZIM’s results of operations.
 
Fuel expenses, in particular bunker expenses, represent a significant portion of ZIM’s operating expenses, accounting for 18.9%, 12.8%, and 13.8% of its operating expenses and cost of services for the years ended December 31, 2021, 2020, and 2019, respectively. Bunker price moves in close interdependence with crude oil prices, which have historically exhibited significant volatility. Crude oil prices are influenced by a host of economic and geopolitical factors that are beyond ZIM’s control, particularly economic developments in emerging markets such as China and India, the US-China trade war, concerns related to the global recession and financial turmoil, policies of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producing countries and production cuts, sanctions on Iran by the US, consumption levels of other transportation industries such as the aviation, rail and car industries, and ongoing political tensions and acts of terror in key production countries such as Libya, Nigeria and Venezuela. Crude oil prices have decreased significantly from annual level of $64 per barrel in 2019 to an average price of $42 per barrel in 2020, due in part to decreased demand as a result of the COVID-19 pandemic and the changing dynamics among OPEC+ members. However, during 2021, crude oil prices have increased to an annual average of $71 per barrel. The Russian military actions across Ukraine led to a sharp increase in bunker prices, and bunker prices may increase even further if this conflict continues.
 
The IMO 2020 Regulations which entered into effect on January 1, 2020 require all ships to burn fuel with a maximum sulfur content of 0.5%, which is a significant reduction from the previous threshold of 3.5%. In addition, certain countries around the world require ships to burn fuel with a maximum sulfur content of 0.1% upon entry to territorial waters. The IMO 2020 Regulation led to increased demand for low sulfur fuel and higher prices for such bunker compared to the price ZIM would have paid had the IMO 2020 Regulations not been adopted. Most of the vessels chartered by ZIM do not have scrubbers, which means ZIM is required to purchase low sulfur fuel for its vessels. ZIM’s vessels began operating on 0.5% low sulfur fuel during the fourth quarter of 2019, and as a result, ZIM implemented a New Bunker Factor, or NBF, surcharge, in December 2019, intended to offset the additional costs associated with compliance with the IMO 2020 Regulations. However, there is no assurance that this surcharge will enable ZIM to mitigate the possible increased costs in full or at all. As a result of the IMO 2020 Regulations and any future regulations with which ZIM must comply, it may incur substantial additional operating costs.
 
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A rise in bunker prices could have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity. Historically and in line with industry practice, ZIM has imposed from time to time surcharges such as the NBF over the base freight rate it charges to customers in part to minimize its exposure to certain market-related risks, including bunker price adjustments. However, there can be no assurance that ZIM will be successful in passing on future price increases to customers in a timely manner, either for the full amount or at all.
 
ZIM’s bunker consumption is affected by various factors, including the number of vessels being deployed, vessel capacity, pro forma speed, vessel efficiency, the weight of the cargo being transported, port efficiency and sea conditions. ZIM has implemented various optimization strategies designed to reduce bunker consumption, including operating vessels in “super slow steaming” mode, trim optimization, hull and propeller polishing and sailing rout optimization. Additionally, ZIM may sometimes manages part of its exposure to bunker price fluctuations by entering into hedging arrangements with reputable counterparties. ZIM’s optimization strategies and hedging activities may not be successful in mitigating higher bunker costs, and any price protection provided by hedging may be limited due to market conditions, such as choice of hedging instruments, and the fact that only a portion of ZIM’s exposure is hedged. There can be no assurance that ZIM’s hedging arrangements, if taken, will be cost-effective, will provide sufficient protection, if any, against rises in bunker prices or that ZIM’s counterparties will be able to perform under its hedging arrangements.
 
There are numerous risks related to the operation of any sailing vessel and ZIM’s inability to successfully respond to such risks could have a material adverse effect on it.
 
There are numerous risks related to the operation of any sailing vessel, including dangers associated with potential marine disasters, mechanical failures, collisions, lost or damaged cargo, poor weather conditions (including severe weather events resulting from climate change), the content of the load, exceptional load (including dangerous and hazardous cargo or cargo the transport of which could affect ZIM’s reputation), meeting deadlines, risks of documentation, maintenance and the quality of fuels and piracy. For example, ZIM incurred expenses of $11.5 million in respect of claims and demands for lost and damaged cargo for the year ended December 31, 2021. Such claims are typically insured and deductibles, both individually and in the aggregate, are typically immaterial. In addition, in the past, ZIM’s vessels have been involved in collisions resulting in loss of life and property as well as weather related events which damaged its cargo. For example, in October 2021, ZIM Kingston, one of its chartered vessels, experienced a collapse and loss of containers due to bad weather which also resulted in a fire erupting onboard while approaching the port of Vancouver. Both vessel and cargo suffered damages, however no personal injuries were involved.
 
 The occurrence of any of the aforementioned risks could have a material adverse effect on ZIM’s business, financial condition, results of operations or liquidity and it may not be adequately insured against any of these risks. For more information about ZIM’s insurance coverage, see “Item 3.D Risk Factors—Risks Related to Our Interest in ZIM—ZIM’s insurance may be insufficient to cover losses that may occur to its property or result from its operations.” For example, acts of piracy have historically affected oceangoing vessels trading in several regions around the world. Although both the frequency and success of attacks have diminished recently, potential acts of piracy continue to be a risk to the international container shipping industry that requires vigilance. Additionally, ZIM’s vessels may be subject to attempts by smugglers to hide drugs and other contraband onboard. If its vessels are found with contraband, whether with or without the knowledge of any of its crew, ZIM may face governmental or other regulatory claims or penalties as well as suffer damage to its reputation, which could have an adverse effect on its business, results of operations and financial condition.
 
As vessel owners, ZIM may incur additional costs and liabilities for the operation of its vessel fleet.
 
Although it charters most of its fleet, ZIM currently owns and operates 6 vessels, 5 of which were purchased in the past year in several separate transactions, and it may purchase additional vessels, depending on market terms and conditions. As a vessel owner, ZIM may incur additional costs due to maintenance and regulatory requirements, most of them described in this Item 3.D and elsewhere of this Annual Report. In addition, as a vessel owner, ZIM may be exposed to higher risks due to its responsibility to the crew and operational condition of the vessel. ZIM intends to mitigate these vessel owner liability risks by acquiring adequate insurance policy, however its insurance policy may not cover all or even part of its costs. See also below “Item 3.D Risk Factors—Risks Related to Our Interest in ZIM—ZIM’s insurance may be insufficient to cover losses that may occur to its property or result from its operations.
 
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ZIM’s insurance may be insufficient to cover losses that may occur to its property or result from its operations.
 
The operation of any vessel includes risks such as mechanical failure, collision, fire, contact with floating objects, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine disaster, including oil spills and other environmental mishaps. There are also liabilities arising from owning and operating vessels in international trade. ZIM procures insurance for its fleet in relation to risks commonly insured against by operators and vessel owners, which ZIM believes is adequate. ZIM’s current insurance includes (i) hull and machinery insurance covering damage to ZIM’s and third-party vessels’ hulls and machinery from, among other things and collisions, (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities and (iii) protection and indemnity insurance, entered with reputable protection and indemnity, or P&I, clubs covering, among other things, third-party and crew liabilities such as expenses resulting from the injury or death of crew members, passengers and other third parties, lost or damaged cargo, third-party claims in excess of a vessel’s insured value arising from collisions with other vessels, damage to other third-party property including fixed and floating objects, in excess of a vessel’s insured value and pollution arising from oil or other substances. While all of its insurers and P&I clubs are highly reputable, ZIM can give no assurance that it is adequately insured against all risks or that its insurers will pay a particular claim. Even if its insurance coverage is adequate to cover its losses, ZIM may not be able to obtain a timely replacement vessel or other equipment in the event of a loss. Under the terms of ZIM’s credit facilities, insurance proceeds are pledged in favor of the lender who financed the respective vessel. In addition, there are restrictions on the use of insurance proceeds ZIM may receive from claims under its insurance policies. ZIM may also be subject to supplementary calls, or premiums, in amounts based not only on its own claim records but also the claim records of all other members of the P&I clubs through which ZIM receives indemnity insurance coverage. There is no cap on ZIM’s liability exposure for such calls or premiums payable to its P&I clubs, even though unexpected additional premiums are usually at reasonable levels as they are distributed among a large number of ship owners. ZIM’s insurance policies also contain deductibles, limitations and exclusions which, although ZIM believes are standard in the shipping industry, may nevertheless increase its costs. While ZIM does not operate any tanker vessels, a catastrophic oil spill or a marine disaster could, under extreme circumstances, exceed its insurance coverage, which might have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
Any uninsured or underinsured loss could harm ZIM’s business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required certification. Further, ZIM does not carry loss of hire insurance. Loss of hire insurance covers the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking due to damage to the vessel from accidents. Any loss of a vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have an adverse effect on ZIM’s business, financial condition and results of operations.
 
Maritime claimants could arrest ZIM’s vessels, which could have a material adverse effect on its business, financial condition and results of operations.
 
Crew members, suppliers of goods and services to a vessel, shippers or receivers of cargo, vessel owners and lenders and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages, including, in some jurisdictions, for debts incurred by previous owners. In many jurisdictions, a maritime lienholder may enforce its lien by vessel arrest proceedings. Unless such claims are settled, vessels may be subject to foreclosure under the relevant jurisdiction’s maritime court regulations. In some jurisdictions, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in ZIM’s fleet for claims relating to another of its vessels. The arrest or attachment of one or more vessels could interrupt business or require ZIM to pay or deposit large sums to have the arrest lifted, which could have a material adverse effect on its business, financial condition and results of operations.
 
Governments, including that of Israel, could requisition ZIM’s vessels during a period of war or emergency, resulting in loss of earnings.
 
A government of the jurisdiction where one or more of ZIM’s vessels are registered, as well as a government of the jurisdiction where the beneficial owner of the vessel is registered, could requisition for title or seize ZIM’s vessels. Requisition for title occurs when a government takes control of a vessel and becomes its owner. A government could also requisition ZIM’s vessels for hire. Requisition for hire occurs when a government takes control of a ship and effectively becomes the charterer at dictated charter rates. Requisitions generally occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. ZIM would expect to be entitled to compensation in the event of a requisition of one or more of its vessels; however, the amount and timing of payment, if any, would be uncertain and beyond ZIM’s control. For example, ZIM’s chartered-in and owned vessels, including those that do not sail under the Israeli flag, may be subject to control by Israeli authorities in order to protect the security of, or bring essential supplies and services to, the State of Israel. Government requisition of one or more of ZIM’s vessels could have a material adverse effect on its business, financial condition and results of operations.
 
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Risks Related to Regulation
 
The shipping industry is subject to extensive government regulation and standards, international treaties and trade prohibitions and sanctions.
 
The shipping industry is subject to extensive regulation that changes from time to time and that applies in the jurisdictions in which shipping companies are incorporated, the jurisdictions in which vessels are registered (flag states), the jurisdictions governing the ports at which vessels call, as well as regulations by virtue of international treaties and membership in international associations. As a global container shipping company, ZIM is subject to a wide variety of international, national and local laws, regulations and agreements. As a result, ZIM is subject to extensive government regulation and standards, customs inspections and security checks, international treaties and trade prohibitions and sanctions, including laws and regulations in each of the jurisdictions in which it operates, including those of the State of Israel, the United States, the International Safety Management Code, or the ISM Code, and the European Union.
 
Any violation of such laws, regulations, treaties and/or prohibitions could have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity and may also result in the revocation or non-renewal of ZIM’s “time-limited” licenses. Furthermore, the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers certain laws and regulations that impose restrictions upon U.S. companies and persons and, in some contexts, foreign entities and persons, with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of such sanctions laws and regulations. Similar sanctions are imposed by the European Union and the United Nations. Under economic and trading sanction laws, governments may seek to impose modifications to business practices, and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. For additional information, see “Item 4.B Business Overview—Our Businesses—ZIM’s Regulatory Matters.
 
ZIM is subject to competition and antitrust regulations in the countries where it operates, and has been subject to antitrust investigations by competition authorities. Moreover, the recent sharp increase in freight rates and related charges has resulted in increased scrutiny by regulators around the world and ZIM may face antitrust investigations.
 
ZIM is subject to competition and antitrust regulations in each of the countries where it operates. In most of the jurisdictions in which ZIM operates, operational partnerships among shipping companies are generally exempt from the application of antitrust laws, subject to the fulfillment of certain exemption requirements. However, it is difficult to predict whether existing exemptions or their renewal will be affected in the future. ZIM is a party to numerous operational partnerships and views these agreements as competitive advantages in response to the market concentration in the industry as a result of mergers and global alliances. An amendment to or a revocation of any of the exemptions for operational partnerships that it relies on could negatively affect its business and results of operations. For example, Commission Regulation (EC) No 906/2009, or the Block Exemption Regulation, exempts certain cooperation agreements in the liner shipping sector (such as operational cooperation agreements), from the prohibition on anti-competitive agreements contained at Article 101 of the Treaty on the Functioning of the European Union, or TFEU. This Block Exemption Regulation is due to expire in May 2024. If the Block Exemption Regulation is not extended or its terms are amended, this could have an adverse effect on the shipping industry and limit ZIM’s ability to enter into cooperation arrangements with other shipping companies, which could adversely affect its business, financial condition and results of operations.
 
In recent years, a number of liner shipping companies, including ZIM, have been the subject of antitrust investigations in the U.S., the EU and other jurisdictions into possible anti-competitive behavior. Furthermore, the recent spike in freight rates and related charges has resulted in increased scrutiny by governments and regulators around the world, including U.S. President Biden’s administration and the U.S. Federal Maritime Commission (FMC) in the U.S., and the ministry of transportation in China. Although ZIM has taken measures to fully comply with antitrust regulatory requirements and has adopted a comprehensive antitrust compliance plan, which includes, among other things, mandatory periodic employee trainings, ZIM may face investigations from time to time, and, if it is found to be in violation of the applicable regulation, could be subject to criminal, civil and monetary sanctions, as well as related legal proceedings.
 
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ZIM is also subject from time to time to civil litigation relating, directly or indirectly, to alleged anti-competitive practices and may be subject to additional investigations by other competition authorities. These types of claims, actions or investigations could continue to require significant management time and attention and could result in significant expenses as well as unfavorable outcomes which could have a material adverse effect on ZIM’s business, reputation, financial condition, results of operations and liquidity. For further information, see “Item 4.B Business Overview—Our Businesses—ZIM’s Legal Proceedings” and Note 27 to ZIM’s audited consolidated financial statements included herein.
 
ZIM 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 a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both the 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. ZIM’s anti-bribery and anti-corruption plan mandate compliance with these anti-bribery laws, establishes anti-bribery and anti-corruption policies and procedures, imposes mandatory training on its employees and enhances reporting and investigation procedures. ZIM operates in many parts of the world that are recognized as having governmental and commercial corruption. ZIM cannot assure you that its internal control policies and procedures will protect it from reckless or criminal acts committed by its employees or third-party intermediaries. In the event that ZIM believes or has reason to believe that its employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, ZIM may be required to 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 or other restrictions which could disrupt ZIM’s business and have a material adverse effect on its business, financial condition, results of operations or liquidity. 
 
Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and disrupt ZIM’s business.
 
International container shipments are subject to security and customs inspection and related procedures in countries of origin, destination, and certain transshipment points. These inspection procedures can result in cargo seizures, delays in the loading, offloading, transshipment, or delivery of containers, and the levying of customs duties, fines or other penalties against ZIM as well as damage its reputation. Changes to existing inspection and security procedures could impose additional financial and legal obligations on ZIM or its customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on ZIM’s business, financial condition and results of operations.
 
The operation of its vessels is also affected by the requirements set forth in the International Ship and Port Facility Security Code, or the ISPS Code. The ISPS Code requires vessels to develop and maintain a ship security plan that provides security measures to address potential threats to the security of ships or port facilities. Although each of ZIM’s vessels is ISPS Code-certified, any failure to comply with the ISPS Code or maintain such certifications may subject ZIM to increased liability and may result in denial of access to, or detention in, certain ports. Furthermore, compliance with the ISPS Code requires ZIM to incur certain costs. Although such costs have not been material to date, if new or more stringent regulations relating to the ISPS Code are adopted by the International Maritime Organization (the IMO) and the flag states, these requirements could require significant additional capital expenditures by ZIM or otherwise increase the costs of its operations.
 
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ZIM is subject to environmental regulations and failure to comply with these regulations could have a material adverse effect on its business. In addition, Environmental, Social and Governance (ESG) regulation and reporting is expected to intensify in the future, which could increase ZIM’s operational costs.
 
ZIM’s operations are subject to international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which its vessels operate or are registered relating to the protection of the environment. Such requirements are subject to ongoing developments and amendments and relate to, among other things, the storage, handling, emission, transportation and discharge of hazardous and non-hazardous substances, such as sulfur oxides, nitrogen oxides and the use of low- sulfur fuel or shore power voltage, and the remediation of contamination and liability for damages to natural resources. ZIM is subject to the International Convention for the Prevention of Pollution from Ships (including designation of Emission Control Areas thereunder), the International Convention for the Control and Management of Ships Ballast Water & Sediments, the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea of 1996, the Oil Pollution Act of 1990, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the U.S. Clean Water Act (“CWA”), and National Invasive Species Act (“NISA”), among others. Compliance with such laws, regulations and standards, where applicable, may require the installation of costly equipment, make ship modifications or operational changes and may affect the useful lives or the resale value of ZIM’s vessels.
 
ZIM may also incur additional compliance costs relating to existing or future ESG requirements, which have recently intensified and are expected to intensify in the future, and which could have a material adverse effect on its business, results of operations and financial conditions. Such costs include, among other things: reduction of greenhouse gas emissions and use of “cleaner” fuels, imposition of vessel speed limits; changes with respect to cargo capacity or the types of cargo that could be carried; management of ballast and bilge waters; maintenance and inspection; elimination of tin-based paint; and development and implementation of emergency procedures. For example, the IMO 2020 Regulations have required ZIM’s vessels to comply with its low sulfur fuel requirement since January 1, 2020. ZIM complies with this requirement by using fuel with low sulfur content, which is more expensive than standard marine fuel, or ZIM may upgrade its vessels to provide cleaner exhaust emissions. Environmental or other incidents may result in additional regulatory initiatives, statutes or changes to existing laws that could affect ZIM’s operations, require it to incur additional compliance expenses, lead to decreased availability of or more costly insurance coverage, and result in ZIM’s denial of access to, or detention in, certain jurisdictional waters or ports.
 
If ZIM fails to comply with any environmental requirements applicable to it, it could be exposed to, among other things, significant environmental liability damages, administrative and civil penalties, criminal charges or sanctions, and could result in the and termination or suspension of, and substantial harm to, its operations and reputation. Additionally, environmental laws often impose strict, joint and several liabilities for remediation of spills and releases of oil and hazardous substances, which could subject ZIM to liability without regard to whether it was negligent or at fault. Under local, national and foreign laws, as well as international treaties and conventions, ZIM could incur material liabilities, including remediation costs and natural resource damages, as well as third-party damages, personal injury and property damage claims in the event there is a release of petroleum or other hazardous substances from its vessels, or otherwise, in connection with its operations. ZIM is required to satisfy insurance and financial responsibility requirements for potential petroleum (including marine fuel) spills and other pollution incidents. Although ZIM has arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on ZIM’s business, results of operations and financial condition. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of ZIM’s vessels and events of this nature could have a material adverse effect on ZIM’s business, reputation, financial condition and results of operations. For further information on the environmental regulations ZIM is subject to and ESG (sustainability), see “Item 4.B Business Overview—Our Businesses—ZIM’s Regulatory Matters—Environmental and other regulations in the shipping industry.
 
Regulations relating to ballast water discharge may adversely affect ZIM’s results of operation and financial condition.
 
The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of the international oil pollution prevention, or IOPP, renewal survey, existing vessels constructed before September 8, 2017, must comply with the updated D-2 standard on or after September 8, 2019, but no later than September 9, 2024. For most vessels, compliance with the D-2 standard will involve installing on- board systems to treat ballast water and eliminate unwanted organisms. Vessels constructed on or after September 8, 2017, are required to comply with the D-2 standards. ZIM is subject to costs of compliance, as the increased costs of compliance are passed on to the charter, which may be substantial and may adversely affect its results of operation and financial condition.
 
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Furthermore, U.S. regulations with respect to ballast water discharge are currently changing. Although the 2013 Vessel General Permit (VGP) program and The National Invasive Species Act (NISA) are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act (VIDA), which was signed into law on December 4, 2018, requires that the EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP, by December 2020. EPA published a notice of proposed rulemaking – Vessel Incidental Discharge National Standards of Performance for public comment on October 26, 2020. The comment period closed on November 25, 2020. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the installation of new equipment, which may cause ZIM to incur substantial costs.
 
Climate change and greenhouse gas restrictions may adversely affect its operating results.
 
Many governmental bodies have adopted, or are considering the adoption of, international treaties, national, state and local laws, regulations and frameworks to reduce greenhouse gas emissions due to the concern about climate change. These measures in various jurisdictions include the adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. In November 2016, the Paris Agreement, which resulted in commitments by 197 countries to reduce their greenhouse gas emissions with firm target reduction goals, came into force and could result in additional regulation on the shipping. The Glasgow Climate Change Conference held between October and November 2021 with the participation of nearly 200 countries’ leaders reiterated an international commitment to bringing down emissions and finalized guidelines for the full implementation of the Paris Agreement. In addition, several non-governmental organizations and institutional investors have undertaken campaigns with respect to climate change, with goals to minimize or eliminate greenhouse gas emissions through a transition to a low- or zero-net carbon economy.
 
Compliance with laws, regulations and obligations relating to climate change, including as a result of such international negotiations, as well as the efforts by non-governmental organizations and investors, could increase ZIM’s costs related to operating and maintaining its vessels and require it to install new emission controls, acquire allowances or pay taxes related to its greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.
 
Compliance with safety and other requirements imposed by classification societies may be very costly and may adversely affect its business.
 
The hull and machinery of every commercial vessel must be classed by a classification society. The classification society certifies that the vessel has been built, maintained and repaired, when necessary, in accordance with the applicable rules and regulations of the classification society. Moreover, every vessel must comply with all applicable international conventions and the regulations of the vessel’s flag state as verified by a classification society as well as the regulations of the beneficial owner’s country of registration. Finally, each vessel must successfully undergo periodic surveys, including annual, intermediate and special surveys, which may result in recommendations or requirements to undertake certain repairs or upgrades. Currently, all of ZIM’s vessels have the required certifications. However, maintaining class certification could incur significant costs. If any of ZIM’s owned and certain of its chartered-in vessels does not maintain its class certification, it might lose its insurance coverage and be unable to trade, and ZIM will be in breach of relevant covenants under its financing arrangements, in relation to both failing to maintain the class certification as well as having effective insurance. Failure to maintain the class certification of one or more of its vessels could have, under extreme circumstances, a material adverse effect on ZIM’s financial condition, results of operations and liquidity.
 
Changes in tax laws, tax treaties as well as judgments and estimates used in the determination of tax-related asset (liability) and income (expense) amounts, could materially adversely affect its business, financial condition and results of operations.
 
ZIM operates in various jurisdictions and may be subject to the tax regimes and related obligations in the jurisdictions in which it operates or does business. Changes in tax laws, bilateral double tax treaties, regulations and interpretations could adversely affect its financial results. The tax rules of the various jurisdictions in which ZIM operates or conduct business often are complex, involve bilateral double tax treaties and are subject to varying interpretations. Specifically, on July 1, 2021, the Organization for Economic Co-operation and Development (OECD) introduced Pillar Two model rules which are expected to be approved during 2022 and take effect in 2023. The Pillar Two rules were introduced to ensure that large multinational enterprises (MNEs) pay a minimum level of tax on the income arising in each jurisdiction where they operate. The current minimum effective tax rate that was determined under Pillar Two is 15%. While Pillar Two model rules are not intended to be applied to international shipping income, other sources of ZIM’s income may be affected as a result of Pillar Two entering into effect. ZIM is currently monitoring the developments of Pillar Two legislation process and are evaluating its potential impact on ZIM’s financial results.

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Tax authorities may challenge tax positions that ZIM takes or historically has taken, may assess taxes where it has not made tax filings, or may audit the tax filings it has made and assess additional taxes. Such assessments, either individually or in the aggregate, could be substantial and could involve the imposition of penalties and interest. For such assessments, from time to time, ZIM uses external advisors. In addition, governments could impose new taxes on ZIM or increase the rates at which it is taxed in the future. The payment of substantial additional taxes, penalties or interest resulting from tax assessments, or the imposition of any new taxes, could materially and adversely impact its results, financial condition and liquidity. Additionally, ZIM’s provision for income taxes and reporting of tax-related assets and liabilities require significant judgments and the use of estimates. Amounts of tax-related assets and liabilities involve judgments and estimates of the timing and probability of recognition of income, deductions and tax credits. Actual income taxes could vary significantly from estimated amounts due to the future impacts of, among other things, changes in tax laws, regulations and interpretations, ZIM’s financial condition and results of operations, as well as the resolution of any audit issues raised by taxing authorities.
 
Risks Related to ZIM’s Financial Position and Results
 
If ZIM is unable to generate sufficient cash flows from its operations, liquidity will suffer and it may be unable to satisfy its obligations and operational needs.
 
ZIM’s ability to generate cash flow from operations to cover operational costs and to make payments in respect of its obligations, financial liabilities (mainly lease liabilities) and operational needs will depend on its future performance, which will be affected by a range of economic, competitive and business factors. ZIM cannot control many of these factors, including general economic conditions and the health of the shipping industry. If it is unable to generate sufficient cash flow from operations to satisfy its obligations, liabilities and operational needs, ZIM may need to borrow funds or undertake alternative financing plans, or reducing or delaying capital investments and other costs. It may be difficult to incur additional debt on commercially reasonable terms due to, among other things, ZIM’s financial position and results of operations and market conditions. ZIM’s inability to generate sufficient cash flows from operations or obtain additional funds or alternative financing on acceptable terms could have a material adverse effect on its business.
 
Volatile market conditions could negatively affect its business, financial position, or results of operations and could thereby result in impairment charges.
 
As of the end of each reporting period, ZIM examines whether there have been any events or changes in circumstances, such as a decline in freight rates or other general economic or market conditions, which may indicate an impairment. When there are indications of an impairment, an examination is made as to whether the carrying amount of the operating assets or cash generating units, or CGUs, exceeds the recoverable amount, and, if necessary, an impairment loss is recognized in its financial statements.
 
For each of the years ended December 31, 2021, 2020 and 2019, ZIM concluded there were no indications for potential impairment, or that the recoverable amount of its CGU was higher than the carrying amount of its CGU and, as a result, did not recognize an impairment loss in its financial statements. However, ZIM cannot assure you that it will not recognize impairment losses in future years. If an impairment loss is recognized, its results of operations will be negatively affected. Should freight rates decline significantly or ZIM or the shipping industry experiences adverse conditions, this may have a material adverse effect on it business, results of operations and financial condition, which may result in ZIM recording an impairment charge. 
 
Foreign exchange rate fluctuations and controls could have a material adverse effect on its earnings and the strength of its balance sheet.
 
Since ZIM generates revenues in a number of geographic regions across the globe, it is exposed to operations and transactions in other currencies. A material portion of expenses are denominated in local currencies other than the U.S. dollar. Most revenues and a significant portion of expenses are denominated in the U.S. dollar, creating a partial natural hedge. To the extent other currencies increase in value relative to the U.S. dollar, ZIM’s margins may be adversely affected. Foreign exchange rates may also impact trade between countries as fluctuations in currencies may impact the value of goods as between two trading countries. Where possible, ZIM endeavors to match its foreign currency revenues and costs to achieve a natural hedge against foreign exchange and transaction risks, although there can be no assurance that these measures will be effective in the management of these risks. Consequently, short-term or long-term exchange rate movements or controls may have a material adverse effect on ZIM’s business, financial condition, results of operations and liquidity. In addition, foreign exchange controls in countries in which it operates may limit ZIM’s ability to repatriate funds from foreign affiliates or otherwise convert local currencies into U.S. dollars.
 
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ZIM’s operating results may be subject to seasonal fluctuations.
 
The markets in which ZIM operates have historically exhibited seasonal variations in demand and, as a result, freight rates have also historically exhibited seasonal variations. This seasonality can have an adverse effect on its business and results of operations. As global trends that affect the shipping industry have changed rapidly in recent years, it remains difficult to predict these trends and the extent to which seasonality will be a factor affecting ZIM’s results of operations in the future. See “Item 4.B Business Overview—Our Businesses—ZIM’s Seasonality.
 
Risks Related to ZIM’s Operations in Israel
 
ZIM is incorporated and based in Israel and, therefore, its results may be adversely affected by political, economic and military instability in Israel.
 
ZIM is incorporated and its headquarters are located in Israel and the majority of its key employees, officers and directors are residents of Israel. Additionally, the terms of the Special State Share require ZIM to maintain its headquarters and to be incorporated in Israel, and to have its chairman, chief executive officer and a majority of its board members be Israeli. As an Israeli company, ZIM has relatively high exposure, compared to many of its competitors, to acts of terror, hostile activities including cyber-attacks, security limitations imposed upon Israeli organizations overseas, possible isolation by various organizations and institutions for political reasons and other limitations (such as restrictions against entering certain ports). Political, economic and military conditions in Israel may directly affect ZIM’s business and existing relationships with certain foreign corporations, as well as affect the willingness of potential partners to enter into business arrangements with ZIM. Numerous countries, corporations and organizations limit their business activities in Israel and their business ties with Israeli-based companies. ZIM’s status as an Israeli company may limit its ability to call on certain ports and therefore could limit its ability to enter into alliances or operational partnerships with certain shipping companies, which has historically adversely affected its operations and its ability to compete effectively within certain trades. In addition, ZIM’s status as an Israeli company may limit its ability to enter into alliances that include certain carriers who are not willing to cooperate with Israeli companies.
 
Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disrupting economic activities. Recent political uprisings, social unrest and violence in the Middle East and North Africa, including Israel’s neighbors Egypt and Syria, are affecting the political stability of those countries. This instability has raised concerns regarding security in the region and the potential for armed conflict. In addition, Israel faces threats from more distant neighbors, in particular, Iran. Iran is also believed to have a strong influence among parties hostile to Israel in areas that neighbor Israel, such as the Syrian government, Hamas in the Gaza Strip and Hezbollah in Lebanon. Armed conflicts or hostilities in Israel or neighboring countries could cause disruptions in ZIM’s operations, including significant employee absences, failure of its information technology systems and cyber-attacks, which may lead to the shutdown of its headquarters in Israel. For instance, during the 2006 Lebanon War, a military conflict took place in Lebanon. As a result of rocket fire in the city of Haifa, ZIM closed its headquarters for several days. Although ZIM maintains an emergency plan, such events can have material effects on its operational activities. Any future deterioration in the security or geopolitical conditions in Israel or the Middle East could adversely impact ZIM’s business relationships and thereby have a material adverse effect on its business, financial condition, results of operations or liquidity. If ZIM’s facilities, including its headquarters, become temporarily or permanently disabled by an act of terrorism or war, it may be necessary for ZIM to develop alternative infrastructure and it may not be able to avoid service interruptions. Additionally, ZIM’s owned and chartered-in vessels, including those vessels that do not sail under the Israeli flag, may be subject to control by the authorities of the State of Israel in order to protect the security of, or bring essential supplies and services to, the State of Israel. Israeli legislation also allows the State of Israel to use ZIM’s vessels in times of emergency. Any of the aforementioned factors may negatively affect ZIM and its results of operations.
 
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ZIM’s commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. The Israeli government currently provides compensation only for physical property damage caused by terrorist attacks or acts of war, based on the difference between the asset value before the attack and immediately after the attack or on any cost of repairing the damage, whichever is lower. Any losses or damages incurred by ZIM could have a material adverse effect on its business. Any armed conflict involving Israel could adversely affect ZIM’s business and results and operations.
 
Further, ZIM’s operations could be disrupted by the obligations of personnel to perform military service.
 
As of December 31, 2021, ZIM had 770 employees based in Israel, certain of whom may be called upon to perform several weeks of annual military reserve duty until they reach the age qualifying them for an exemption (generally 40 for men who are not officers or do not have specified military professions) and, in certain emergency circumstances, may be called to immediate and unlimited active duty. ZIM’s operations could be disrupted by the absence of a significant number of employees related to military service, which could materially adversely affect its business and operations.
 
General Risk Factors for ZIM
 
ZIM faces cyber-security risks.
 
ZIM’s business operations rely upon secure information technology systems for data processing, storage and reporting. As a result, it maintains information security policies and procedures for managing its information technology systems. Despite security and controls design, implementation and updates, ZIM’s information technology systems may be subject to cyber-attacks, including, network, system, application and data breaches. A number of companies around the world, including in ZIM’s industry, have been the subject of cyber-security attacks in recent years. For example, one of ZIM’s peers experienced a major cyber-attack on its IT systems in 2017, which impacted such company’s operations in its transport and logistics businesses and resulted in significant financial loss. In addition, in August 2020, a cruise operator was a victim to ransomware attack. On September 28, 2020, another competitor confirmed a ransomware attack that disabled its booking system, and on October 1, 2020, the IMO’s public website and intranet services were subject to a cyberattack. In December 2020, an Israeli insurance company fell victim to a highly publicized ransomware attack, resulting in the filing of civil actions against the company and significant damage to that company’s reputation. Other Israeli companies are facing cyber-attack campaigns, and it is believed the attackers may be from hostile countries. Cyber-attacks are becoming increasingly common and more sophisticated, and may be perpetrated by computer hackers, cyber-terrorists or others engaged in 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 ZIM’s information technology systems 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, and breach of protected data belonging to third parties. In addition, due to the COVID-19 pandemic, ZIM has reduced staffing in its offices and increased reliance on remote access of its employees. ZIM has taken measures to enable it to face cyber-security threats, including backup and recovery and backup measures, as well as cyber security awareness trainings and an annual company-wide cyber preparedness drill. However, there is no assurance that these measures will be successful in coping with cyber-security threats, as these develop rapidly, and ZIM may be affected by and become unable to respond to such developments. A cyber-security breach, whether as a result of malicious, political, competitive or other motives, may result in operational disruptions, information misappropriation or breach of privacy laws, including the European Union’s General Data Protection Regulation and other similar regulations, which could result in reputational damage and have a material adverse effect on ZIM’s business, financial condition and results of operation. 
 
ZIM faces risks relating to its information technology and communication system.
 
ZIM’s information technology and communication system supports all of its businesses processes throughout the supply chain, including the customer service and marketing teams, business intelligence analysts, logistics team and financial reporting functions. ZIM’s primary data center is in Europe with a back-up data center in Israel. While it has a disaster recovery plan pursuant to which it is able to immediately activate the back-up data center in the event of a failure at the primary data center, if its primary data center ceases to be available without sufficient advance notice, ZIM would likely experience delays in its operating activities.
 
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Additionally, its information systems and infrastructure could be physically damaged by events such as fires, terrorist attacks and unauthorized access to servers and infrastructure, as well as the unauthorized entrance into its information systems. Furthermore, ZIM communicates with its customers through an ecommerce platform. Its ecommerce platform was developed and is run by third-party service providers over which ZIM has no management control. A potential failure of internal computer systems or a failure of third-party ecommerce platform providers to satisfy their contractual service level commitments to ZIM may have a material adverse effect on its business, financial condition and results of operation. Efforts to modernize and digitize ZIM’s operations and communications with customers further increase ZIM’s dependency on information technology systems, which exacerbates the risks it could face if these systems malfunction. 
 
ZIM is subject to data privacy laws, including the European Union’s General Data Protection Regulation, and any failure to comply could result in proceedings or actions against it and subject ZIM to significant fines, penalties, judgments and negative publicity.
 
ZIM is subject to numerous data privacy laws, including Israeli privacy laws and the European Union’s General Data Protection Regulation (2016/679), or the GDPR, which relates to the collection, use, retention, security, processing and transfer of personally identifiable information about ZIM’s customers and employees in the countries where it operates. ZIM has also been certified as compliant with ISO27001 in Israel (information security management standard) and ISO27701 (extension to the information security management standard).
 
The EU data protection regime expands the scope of the EU data protection law to all companies processing data of EEA individuals, imposes a stringent data protection compliance regime, including administrative fines of up to the greater of 4% of worldwide turnover or €20 million (as well as the right to compensation for financial or non-financial damages claimed by any individuals), and includes new data subject rights such as the “portability” of personal data. Although ZIM is generally a business that serves other businesses (B2B), it still processes and obtains certain personal information relating to individuals, and any failure to comply with the GDPR or other data privacy laws where applicable could result in proceedings or actions against it, which could subject ZIM to significant fines, penalties, judgments and negative publicity.
 
Labor shortages or disruptions could have an adverse effect on its business and reputation.
 
ZIM employs, directly and indirectly, 5,931 employees around the globe (including contract workers). ZIM, its subsidiaries, and the independent agencies with which it has agreements could experience strikes, industrial unrest or work stoppages. Several ZIM employees are members of unions. In recent years, it has experienced labor interruptions as a result of disagreements between management and unionized employees and has entered into collective bargaining agreements addressing certain of these concerns. If such disagreements arise and are not resolved in a timely and cost-effective manner, such labor conflicts could have a material adverse effect on its business and reputation. Disputes with unionized employees may result in work stoppage, strikes and time-consuming litigation. ZIM’s collective bargaining agreements include termination procedures which affect its managerial flexibility with re-organization procedures and termination procedures. In addition, its collective bargaining agreements affect financial liabilities towards employees, including pension liabilities or other compensation terms.
 
ZIM incurs increased costs as a result of operating as a public company, and its management team, which has limited experience in managing and operating a company that is publicly traded in the U.S., will be required to devote substantial time to new compliance initiatives.
 
As a public company whose ordinary shares are listed in the United States, ZIM incurs accounting, legal and other expenses that it did not incur as a private company, including costs associated with reporting requirements under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also incurs costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes- Oxley Act, as well as rules implemented by the SEC and the NYSE, and provisions of Israeli corporate laws applicable to public companies. ZIM expects that these rules and regulations will increase its legal and financial compliance costs, introduce new costs such as investor relations and stock exchange listing fees, and will make some activities more time-consuming and costly. In addition, ZIM expects that its senior management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. The current management team has limited experience managing and operating a company that is publicly traded in the US. Failure to comply or adequately comply with any laws, rules or regulations applicable to the business may result in fines or regulatory actions, which may adversely affect ZIM’s business, results of operation or financial condition and could result in delays in achieving or maintaining an active and liquid trading market for its ordinary shares. 
 
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Changes in the laws and regulations affecting public companies could result in increased costs as ZIM responds to such changes. These laws and regulations could make it more difficult or more costly for ZIM to obtain certain types of insurance, including director and officer liability insurance, and it may be forced to accept reduced policy limits and coverage and/or incur substantially higher costs to obtain the same or similar coverage, including increased deductibles. The impact of these requirements could also make it more difficult for ZIM to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers. ZIM cannot predict or estimate the amount or timing of additional costs it may incur in order to comply with such requirements. Any of these effects could adversely affect its business, financial condition and results of operations.
 
The State of Israel holds a Special State Share in ZIM, which imposes certain restrictions on ZIM’s operations and gives Israel veto power over transfers of certain assets and shares above certain thresholds, and may have an anti- takeover effect.
 
The State of Israel holds a Special State Share in ZIM, which imposes certain limitations on its operating and managing activities and could negatively affect its business and results of operations. These limitations include, among other things, transferability restrictions on ZIM’s share capital, restrictions on its ability to enter into certain merger transactions or undergo certain reorganizations and restrictions on the composition of its board of directors and the nationality of its chief executive officer, among others.
 
Because the Special State Share restricts the ability of a shareholder to gain control of ZIM, the existence of the Special State Share may have an anti-takeover effect and therefore depress the price of its ordinary shares or otherwise negatively affect its business and results of operations. In addition, the terms of the Special State Share dictate that ZIM maintain a minimum fleet of 11 wholly-owned seaworthy vessels.
 
Currently, as a result of waivers received from the State of Israel, ZIM owns fewer vessels than the minimum fleet requirement. However, if it acquires and owns additional vessels in the future, these vessels would be subject to the minimum fleet requirements and conditions of the Special State Share. Further, if ZIM should want to dispose of such vessels, it would need to obtain consent from the State of Israel. For further information on the Special State Share, see “Item 4.B Business Overview—Our Businesses—ZIM’s Special State Share.
 
ZIM’s dividend policy is subject to change at the discretion of its board of directors and there is no assurance that its board of directors will declare dividends in accordance with this policy.
 
ZIM’s board of directors has adopted a dividend policy, which was amended in November 2021, to distribute a dividend to shareholders on a quarterly basis at a rate of approximately 20% of the net income derived during such fiscal quarter with respect to the first three fiscal quarters of the year, while the cumulative annual dividend amount to be distributed by ZIM (including the interim dividends paid during the first three fiscal quarters of the year) will total 30-50% of the annual net income (including with respect to 2021). During 2021, ZIM paid a special cash dividend of approximately $237 million, or $2.00 per ordinary share and a cash dividend of approximately $299 million, or $2.50 per ordinary share. On March 9, 2022, ZIM’s board of directors declared a cash dividend of approximately $2.04 billion, or $17.00 per ordinary share, resulting in a cumulative annual dividend amount of approximately 50% of 2021 net income, to be paid on April 4, 2022, to holders of the ordinary shares on March 23, 2022.
 
Any dividends must be declared by ZIM’s board of directors, which will take into account various factors including profits, ZIM’s investment plan, its financial position and additional factors the board deems appropriate. While ZIM has stated that it intends to distribute 30- 50% of its annual net income, the actual payout ratio could be anywhere from 0% to 50% of net income, and may fluctuate depending on cash flow needs and such other factors. There can be no assurance that dividends will be declared in accordance with the Board’s policy or at all, and the board of directors may decide, in its absolute discretion, at any time and for any reason, not to pay dividends, to reduce the amount of dividends paid, to pay dividends on an ad-hoc basis or to take other actions, which could include share buybacks, instead of or in addition to the declaration of dividends. Accordingly, ZIM expects that the amount of any cash dividends distributed will vary between distributions as a result of such factors. ZIM has not adopted a separate written dividend policy to reflect its Board’s policy.
 
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ZIM’s ability to pay dividends is limited by Israeli law, which permits the distribution of dividends only out of distributable profits and only if there is no reasonable concern that such distribution will prevent it from meeting existing and future obligations when they become due.
 
Risks Related to Our Ordinary Shares
 
Our ordinary shares are traded on more than one stock exchange and this may result in price variations between the markets.
 
Our ordinary shares are listed on each of the NYSE and the TASE. Trading of our ordinary shares therefore takes place in different currencies (U.S. Dollars on the NYSE and New Israeli Shekels on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ as a result of these, or other, factors. Any decrease in the price of our ordinary shares on either of these markets could also cause a decrease in the trading prices of our ordinary shares on the other market.
 
A significant portion of our outstanding ordinary shares may be sold into the public market, which could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.
 
A significant portion of our shares are held by Ansonia, which holds approximately 60% of our shares. If Ansonia sells, or indicates an intention to sell, substantial amounts of our ordinary shares in the public market, the trading price of our ordinary shares could decline. The perception that any such sales may occur, including the entry by Ansonia into programmed selling plans, could have a material adverse effect on the trading price of our ordinary shares and/or could impair the ability of any of our businesses to raise capital.
 
Control by principal shareholders could adversely affect our other shareholders.
 
Ansonia beneficially owns approximately 60% of our outstanding ordinary shares and voting power. Ansonia therefore has a continuing ability to control, or exert a significant influence over, our board of directors, and will continue to have significant influence over our affairs for the foreseeable future, including with respect to the election of directors, the consummation of significant corporate transactions, such as an amendment of our constitution, a merger or other sale of our company or our assets, and all matters requiring shareholder approval. In certain circumstances, Ansonia’s interests as a principal shareholder may conflict with the interests of our other shareholders and Ansonia’s ability to exercise control, or exert significant influence, over us may have the effect of causing, delaying, or preventing changes or transactions that our other shareholders may or may not deem to be in their best interests.
 
We may not have sufficient distributable profits to pay dividends or make other distributions.
 
Under Singapore law and our constitution, dividends, whether in cash or in specie, must be paid out of our profits available for distribution. The availability of distributable profits is assessed on the basis of Kenon’s standalone unconsolidated accounts (which are based upon the Singapore Financial Reporting Standards, or the SFRS). We may incur losses and we may not have sufficient distributable income that can be distributed to our shareholders as a dividend or other distribution in the foreseeable future. Therefore, we may be unable to pay dividends to our shareholders unless and until we have generated sufficient distributable reserves. Accordingly, it may not be legally permissible for us to pay dividends to our shareholders. As a result, if we do not declare dividends with respect to our ordinary shares, a holder of our ordinary shares will only realize income from an investment in our ordinary shares if there is an increase in the market price of our ordinary shares. Such potential increase is uncertain and unpredictable.
 
Under Singapore law, it is possible to effect either a court-free or court-approved capital reduction exercise to return cash and/or assets to our shareholders. Further, the completion of a court-free capital reduction exercise will depend on whether our directors are comfortable executing a solvency statement attesting to our solvency, as well as whether there are any other creditor objections raised. We have completed capital reduction exercises in connection with the distribution of our Tower shares and the cash distribution in March 2018, but there is no assurance that we will be able to complete further capital reductions in the future.
 
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Any dividend payments or other cash distributions in respect of our ordinary shares would be declared in U.S. Dollars, and any shareholder whose principal currency is not the U.S. Dollar would be subject to exchange rate fluctuations.
 
The ordinary shares are, and any cash dividends or other distributions to be declared in respect of them, if any, will be denominated in U.S. Dollars. For example, in every year between 2018 and 2021, we have made cash contributions to our shareholders. Although a significant percentage of our shareholders hold their shares through the TASE, each of these distributions was denominated in U.S. Dollars. Shareholders whose principal currency is not the U.S. Dollar are exposed to foreign currency exchange rate risk. Any depreciation of the U.S. Dollar in relation to such foreign currency will reduce the value of such shareholders’ ordinary shares and any appreciation of the U.S. Dollar will increase the value in foreign currency terms. In addition, we will not offer our shareholders the option to elect to receive dividends, if any, in any other currency. Consequently, our shareholders may be required to arrange their own foreign currency exchange, either through a brokerage house or otherwise, which could incur additional commissions or expenses.
 
We are a “foreign private issuer” under U.S. securities laws and, as a result, are subject to disclosure obligations that are different from those applicable to U.S. domestic registrants listed on the NYSE.
 
We are incorporated under the laws of Singapore and, as such, will be considered a “foreign private issuer” under U.S. securities laws. Although we will be subject to the reporting requirements of the Exchange Act, the periodic and event-based disclosure required of foreign private issuers under the Exchange Act is different from the disclosure required of U.S. domestic registrants. Therefore, there may be less publicly available information about us than is regularly published by or about other public companies in the United States. We are also exempt from certain other sections of the Exchange Act that U.S. domestic registrants are otherwise subject to, including the requirement to provide our shareholders with information statements or proxy statements that comply with the Exchange Act. In addition, insiders and large shareholders of ours are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act and are not obligated to file the reports required by Section 16 of the Exchange Act.
 
As a foreign private issuer, we have followed certain, and may follow, home country corporate governance practices instead of otherwise applicable SEC and NYSE corporate governance requirements, and this may result in less investor protection than that accorded to investors under rules applicable to domestic U.S. issuers.
 
As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the NYSE’s rules for domestic U.S. issuers, provided that we disclose which requirements we are not following and describe the equivalent home country requirement. For example, foreign private issuers are permitted to follow home country practice with regard to director nomination procedures and the approval of compensation of officers.
 
In addition, we are not required to maintain a board comprised of a majority of independent directors and a fully independent nominating and corporate governance committee. We generally seek to apply the corporate governance rules of the NYSE that are applicable to U.S. domestic registrants that are not “controlled” companies. We may, in the future, decide to rely on other foreign private issuer exemptions provided by the NYSE and follow home country corporate governance practices in lieu of complying with some or all of the NYSE’s requirements.
 
Following our home country governance practices, as opposed to complying with the requirements that are applicable to a U.S. domestic registrant, may provide less protection to you than is accorded to investors under the NYSE’s corporate governance rules. Therefore, any foreign private exemptions we avail ourselves of in the future may reduce the scope of information and protection to which you are otherwise entitled as an investor.
 
It may be difficult to enforce a judgment of U.S. courts for civil liabilities under U.S. federal securities laws against us, our directors or officers in Singapore.
 
We are incorporated under the laws of Singapore and certain of our officers and directors are or will be residents outside of the United States. Moreover, most of our assets are located outside of the United States. Although we are incorporated outside of the United States, we have agreed to accept service of process in the United States through our agent designated for that specific purpose. Additionally, for so long as we are listed in the United States or in Israel, we have undertaken not to claim that we are not subject to any derivative/class action that may be filed against us in the United States or Israel, as may be applicable, solely on the basis that we are a Singapore company. However, since most of the assets owned by us are located outside of the United States, any judgment obtained in the United States against us may not be collectible within the United States.
 
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Furthermore, there is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters, such that a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would not be automatically enforceable in Singapore. Additionally, there is doubt as to whether a Singapore court would impose civil liability on us or our directors and officers who reside in Singapore in a suit brought in the Singapore courts against us or such persons with respect to a violation solely of the federal securities laws of the United States, unless the facts surrounding such a violation would constitute or give rise to a cause of action under Singapore law. We have undertaken not to oppose the enforcement in Singapore of judgments or decisions rendered in Israel or in the United States in a class action or derivative action to which Kenon is a party. Notwithstanding such an undertaking, it may still be difficult for investors to enforce against us, our directors or our officers in Singapore, judgments obtained in the United States which are predicated upon the civil liability provisions of the federal securities laws of the United States.
 
We are incorporated in Singapore and our shareholders may have greater difficulty in protecting their interests than they would as shareholders of a corporation incorporated in the United States.
 
Our corporate affairs are governed by our constitution and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of the members of our board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States. Therefore, our public shareholders may have more difficulty in protecting their interest in connection with actions taken by our management or members of our board of directors than they would as shareholders of a corporation incorporated in the United States. For information on the differences between Singapore and Delaware corporation law, see “Item 10.B Constitution.
 
Singapore corporate law may delay, deter or prevent a takeover of our company by a third-party, but as a result of a waiver from application of the Code, our shareholders may not have the benefit of the application of the Singapore Code on Take-Overs and Mergers, which could adversely affect the value of our ordinary shares.
 
The Singapore Code on Take-overs and Mergers and Sections 138, 139 and 140 of the Securities and Futures Act 2001 contain certain provisions that may delay, deter or prevent a future takeover or change in control of our company for so long as we remain a public company with more than 50 shareholders and net tangible assets of $5 million or more. Any person acquiring an interest, whether by a series of transactions over a period of time or not, either on his own or together with parties acting in concert with such person, in 30% or more of our voting shares, or, if such person holds, either on his own or together with parties acting in concert with such person, between 30% and 50% (both inclusive) of our voting shares, and such person (or parties acting in concert with such person) acquires additional voting shares representing more than 1% of our voting shares in any six-month period, must, except with the consent of the Securities Industry Council of Singapore, extend a mandatory takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers.
 
In October 2014, the Securities Industry Council of Singapore waived the application of the Singapore Code on Take-overs and Mergers to the Company, subject to certain conditions. Pursuant to the waiver, for as long as Kenon is not listed on a securities exchange in Singapore, and except in the case of a tender offer (within the meaning of U.S. securities laws) where the offeror relies on a Tier 1 exemption to avoid full compliance with U.S. tender offer regulations, the Singapore Code on Take-overs and Mergers shall not apply to Kenon.
 
Accordingly, Kenon’s shareholders will not have the protection or otherwise benefit from the provisions of the Singapore Code on Take-overs and Mergers and the Securities and Futures Act to the extent that this waiver is available.
 
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Our directors have general authority to allot and issue new shares on terms and conditions and with any preferences, rights or restrictions as may be determined by our board of directors in its sole discretion, which may dilute our existing shareholders. We may also issue securities that have rights and privileges that are more favorable than the rights and privileges accorded to our existing shareholders.
 
Under Singapore law, we may only allot and issue new shares with the prior approval of our shareholders in a general meeting. Other than with respect to the issuance of shares pursuant to awards made under our Share Incentive Plan 2014 or Share Option Plan 2014, and subject to the general authority to allot and issue new shares provided by our shareholders annually, the provisions of the Singapore Companies Act and our constitution, our board of directors may allot and issue new shares on terms and conditions and with the rights (including preferential voting rights) and restrictions as they may think fit to impose. Any such offering may be on a pre-emptive or non-pre-emptive basis. Subject to the prior approval of our shareholders for (i) the creation of new classes of shares and the (ii) granting to our directors of the authority to issue new shares with different or similar rights, additional shares may be issued carrying such preferred rights to share in our profits, losses and dividends or other distributions, any rights to receive assets upon our dissolution or liquidation and any redemption, conversion and exchange rights. At the annual general meeting of shareholders held in 2021, or the 2021 AGM, our shareholders granted the board of directors authority (effective until the conclusion of the annual general meeting of shareholders to be held in 2022, or the 2022 AGM, or the expiration of the period by which the 2022 AGM is required by law to be held, whichever is earlier) to allot and issue ordinary shares and/or instruments that might or could require ordinary shares to be allotted and issued as authorized by our shareholders at the 2021 AGM and shareholders will be asked to renew this authority at the 2022 AGM. Ansonia, our significant shareholder, may use its ability to control to approve a grant of such authority to our board of directors, or exert influence over, our board of directors to cause us to issue additional ordinary shares, which would dilute existing holders of our ordinary shares, or to issue securities with rights and privileges that are more favorable than those of our ordinary shareholders. There are no statutory pre-emptive rights for new share issuances conferred upon our shareholders under the Companies Act 1967, or the Singapore Companies Act. Furthermore, any additional issuances of new shares by our directors could adversely impact the market price of our ordinary shares.
 
Risks Related to Taxation
 
It is likely that we will be classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for our current taxable year ending December 31, 2022 and foreseeable future taxable years, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.
 
A non-U.S. corporation, such as our company, will be classified as a PFIC for any taxable year if either (i) 75% or more of its gross income for such year is passive income or (ii) 50% or more of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. For this purpose, we will be treated as owning our proportionate share of the businesses and earnings our proportionate share of the income of any other business in which we own, directly or indirectly, 25% or more (by value) of the stock. For example, in February 2021, ZIM completed its initial public offering, which reduced our equity interest from 32% to approximately 28%. In addition, between September and November 2021, Kenon sold ZIM shares reducing its equity interest in ZIM to approximately 26%. Thus, we should be treated as owning our proportionate share of ZIM’s businesses and earnings for the taxable year ended December 31, 2021.
 
In March 2022, Kenon sold additional ZIM shares further reducing its equity interest in ZIM to approximately 20%. As a result of the additional sale of ZIM shares, we are no longer able to treat our proportionate share of ZIM’s businesses and earnings as directly owned for purposes of determining whether we are a PFIC, for our current taxable year ending December 31, 2022 and foreseeable future taxable years.
 
Because the value of our assets for purposes of the PFIC test will generally be determined in part by reference to the market price of our ordinary shares, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. Moreover, changes in the composition of our income or assets may cause us to become a PFIC. As a result, dispositions of operating companies could increase the risk that we become a PFIC. For instance, the sale of the Inkia Business, the investment in Qoros by the Majority Shareholder in Qoros in 2018 (which reduced our equity interest in Qoros to 24%), the sale of half of our remaining interest in Qoros to the Majority Shareholder in Qoros in April 2020 (which reduced our equity interest in Qoros to 12%) and the sale of all of our remaining interest in Qoros to the Majority Shareholder in Qoros in April 2021 (which will eliminate our equity interest in Qoros) each may increase the value of our assets that produce, or are held for the production of, passive income and/or our passive income.
 
Based upon, among other things, the valuation of our assets and the composition of our income and assets, we do not believe we were a PFIC for U.S. federal income tax purposes for our previous taxable year ended December 31, 2021. However, the reduction in our equity interest in ZIM to below 25% limits our ability to treat our proportionate share of ZIM’s businesses and earnings as directly owned, which could increase the value of our assets that produce, or are held for the production of, passive income and/or our passive income. Based upon, among other things, the valuation of our assets and the composition of our income and assets taking into account such additional sale of ZIM shares, we anticipate that we will be treated as a PFIC for U.S. federal income tax purposes for our current taxable year ending December 31, 2022 and foreseeable future taxable years. However, the application of the PFIC rules is subject to uncertainty in several respects and a separate determination must be made after the close of each taxable year as to whether we were a PFIC for such year.
 
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If we are classified as a PFIC for any taxable year during which a U.S. Holder (as defined below) holds an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. For further information on such U.S. tax implications, see “Item 10.E Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company.
 
Tax regulations and examinations may have a material effect on us and we may be subject to challenges by tax authorities.
 
We operate in a number of countries and are therefore regularly examined by and remain subject to numerous tax regulations. Changes in our global mix of earnings could affect our effective tax rate. Furthermore, changes in tax laws could result in higher tax-related expenses and payments. Legislative changes in any of the countries in which our businesses operate could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. Additionally, the uncertain tax environment in some regions in which our businesses operate could limit our ability to enforce our rights. As a holding company with globally operating businesses, we have established businesses in countries subject to complex tax rules, which may be interpreted in a variety of ways and could affect our effective tax rate. Future interpretations or developments of tax regimes or a higher than anticipated effective tax rate could have a material adverse effect on our tax liability, return on investments and business operations.
 
In addition, we and our businesses operate in, are incorporated in and are tax residents of various jurisdictions. The tax authorities in the various jurisdictions in which we and our businesses operate, or are incorporated, may disagree with and challenge our assessments of our transactions (including any sales or distributions), tax position, deductions, exemptions, where we or our businesses are tax resident, or other matters. If we, or our businesses, are unsuccessful in responding to any such challenge from a tax authority, we, or our businesses, may be unable to proceed with certain transactions, be required to pay additional taxes, interest, fines or penalties, and we, or our businesses, may be subject to taxes for the same business in more than one jurisdiction or may also be subject to higher tax rates, withholding or other taxes. Even if we, or our businesses, are successful, responding to such challenges may be expensive, consume time and other resources, or divert management’s time and focus from our operations or businesses or from the operations of our businesses. Therefore, a challenge as to our, or our businesses’, tax position or status or transactions, even if unsuccessful, may have a material adverse effect on our business, financial condition, results of operations or liquidity or the business, financial condition, results of operations or liquidity of our businesses.
 
Our shareholders may be subject to non-U.S. taxes and return filing requirements as a result of owning our ordinary shares.
 
Based upon our expected method of operation and the ownership of our businesses following the spin-off, we do not expect any shareholder, solely as a result of owning our ordinary shares, to be subject to any additional taxes or additional tax return filing requirements in any jurisdiction in which we, or any of our businesses, conduct activities or own property. However, there can be no assurance that our shareholders, solely as a result of owning our ordinary shares, will not be subject to certain taxes, including non-U.S. taxes, imposed by the various jurisdictions in which we and our businesses do business or own property now or in the future, even if our shareholders do not reside in any of these jurisdictions. Consequently, our shareholders may also be required to file non-U.S. tax returns in some or all of these jurisdictions. Further, our shareholders may also be subject to penalties for failure to comply with these requirements. It is the responsibility of each shareholder to file each of the U.S. federal, state and local, as well as non-U.S., tax returns that may be required of such shareholder.
 
ITEM 4.
Information on the Company
 
A.
History and Development of the Company
 
We were incorporated in March 2014 under the Singapore Companies Act to be the holding company of certain companies that were owned (in whole, or in part) by IC in connection with our spin-off from IC in January 2015. We currently own the following:
 

an approximately 58.8% interest in OPC, an owner, developer and operator of power generation facilities in the Israeli and US power market;
 
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an approximately 20.7% interest in ZIM, a large provider of global container shipping services; and
 

a 12% interest in Qoros, a China-based automotive company.
 
In connection with our spin-off from IC, we also held a 29% interest in Tower, a NASDAQ- and TASE-listed specialty foundry semiconductor manufacturer. In July 2015, we completed a pro-rata distribution in specie of substantially all of our interest in Tower. In 2016, we sold our remaining interest in Tower.
 
In December 2017, our wholly-owned subsidiary Inkia sold its power generation and distribution businesses in Latin America and the Caribbean, or the Inkia Business. In January 2021, an entity which is 70%-owned by OPC acquired CPV.
 
In April 2021, we entered into an agreement to sell our remaining 12% interest in Qoros. However, the Majority Shareholder has failed to make required payments under this agreement. In the fourth quarter of 2021, Quantum initiated arbitral proceedings against the Majority Shareholder and Baoneng Group with CIETAC. The proceedings are ongoing.
 
The legal and commercial name of the Company is Kenon Holdings Ltd. Our principal place of business is located at 1 Temasek Avenue #37-02B, Millenia Tower, Singapore 039192. Our telephone number at our principal place of business is + 65 6351 1780. Our internet address is www.kenon-holdings.com.We have appointed Gornitzky & Co., Advocates and Notaries, as our agent for service of process in connection with certain claims which may be made in Israel.
 
Our ordinary shares are listed on the NYSE and the TASE under the symbol “KEN.”
 
The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
 
B.
Business Overview
 
We are a holding company established in connection with a spin-off of our businesses from IC to promote the growth and development of our primary businesses.
 
Over the past years, our businesses and our holdings have substantially evolved, and we have realized significant value for our shareholders.
 
For example, we have made significant distributions to shareholders since our initial listing in 2015. In July 2015, we distributed substantially all of our interest in Tower. In addition, since 2018, we have distributed total cash of $1.25 billion, including approximately $100 million and $189 million to our shareholders in May 2021 and January 2022, respectively. Furthermore, in March 2022, we have announced an intention to distribute an additional amount of approximately $550 million pursuant to a capital reduction, subject to shareholder approval and approval of the High Court of the Republic of Singapore. Assuming completion of this capital reduction, we will have distributed a total of $1.8 billion in cash in addition to our stake in Tower to our shareholders.
 
We have also made significant investments in our businesses, including investments of $64 million and $101 million in OPC in October 2021 and October 2020, respectively, supporting its growth strategy. In addition, we have substantially exited our holdings in Qoros, and are actively engaged in exiting our remaining stake.
 
Our primary businesses today, OPC and ZIM, have each become public companies which have grown to substantial market capitalizations.
 
As our businesses and our holdings have substantially evolved, we are considering various ways to further maximize value for our shareholders, which may include investments or acquisitions in existing or new businesses.
 
Our Businesses
 
Set forth below is a description of our businesses.
 
OPC
 
OPC, which accounted for 100% of our revenues in the year ended December 31, 2021, is an owner, developer and operator of power generation facilities located in Israel and, since its acquisition of CPV, in the United States. OPC has two main areas of activity: (i) generation and supply of electricity and energy in Israel; and (ii) generation and supply of electricity and energy in the United States. OPC’s facilities and primary development projects are set forth below. During 2021, OPC completed the acquisition of 51% interest in Gnrgy Ltd. (“Gnrgy”), whose business focuses on e-mobility charging stations.
 
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Operations in Israel
 

OPC-Rotem, in which OPC has an 80% equity interest, operates a conventional combined cycle power plant in Mishor Rotem, Israel, with an installed capacity of 466 MW (based on OPC-Rotem’s generation license). The power plant utilizes natural gas, with diesel oil and crude oil as backups.
 

OPC-Hadera, a wholly-owned subsidiary of OPC, operates a power plant using cogeneration technology with an installed capacity of 144 MW in Hadera which reached its COD on July 1, 2020 and owns the Energy Center, which consists of boilers and a steam turbine. The Energy Center currently serves as back-up for the OPC-Hadera power plant’s supply of steam and its turbine is not currently operating and is not expected to operate with generation of more than 16MW.
 

Tzomet, a wholly-owned subsidiary of OPC, is developing a natural gas-fired open-cycle power station in Israel with capacity of approximately 396 MW. Tzomet has a conditional license for the development project, which remains subject to conditions set forth under the conditional license, including construction of the plant, as well as for the receipt of a permanent generation license upon expiration of the conditional license. In September 2018, Tzomet entered into an EPC contract in an amount equivalent to approximately $300 million for the design, engineering, procurement and construction of the Tzomet power plant and provision of certain maintenance services in connection with the power station’s main equipment for a period of 20 years from the plant’s COD. During 2021, the construction of the Tzomet power plant continued. OPC expects that the Tzomet plant will reach its COD in the first quarter of 2023 and that the estimated total cost of completing the Tzomet plant will be approximately NIS 1.5 billion (approximately $0.5 billion) (excluding NIS 200 million, which is the tax assessment on the land). As of December 31, 2021, OPC had invested approximately NIS 1,019 million (approximately $328 million) in the project (not including amounts relating to milestones provided in the Tzomet power plant construction agreement that partially completed).
 

Construction of energy generation facilities on the premises of consumers. OPC has entered into agreements with several consumers (including consumers that were successful in the EA’s tender) for the installation and operation of generation facilities (natural gas) on the premises of consumers for aggregate capacity of approximately 102 MW, as well as arrangements for the sale and supply of energy to consumers. Once completed, OPC will sell electricity from the generation facilities to the consumers for a period of approximately 15-20 years from the COD of the generation facilities. The total amount of OPC’s investment depends on the number of arrangements entered into and is expected to be an average of NIS 4 million for each installed MW. OPC has also entered into construction agreements and agreements for supply of motors for the generation facilities with a total capacity of approximately 581 MW.


Sorek Generation Facility. In May 2020, Sorek (a special-purpose company wholly owned by OPC) signed an agreement with SMS IDE Ltd. (“IDE”) that won a tender of the State of Israel for the construction, operation, maintenance and transfer of a seawater desalination facility on the Sorek B site (“Desalination Facility”), whereby Sorek is to supply equipment, construct, operate, and maintain a natural gas-powered energy generation facility on Sorek B site, with a production capacity of 87 MW (“Sorek B Generation Facility”), and supply the energy required for the Sorek B Desalination Facility for a period of 25 years from the Desalination Facility’s commercial operation date (“Sorek B IPP Agreement”). At the end of the aforesaid period, ownership of the Sorek Generation Facility will be transferred to the State of Israel. In addition, a build, operate, transfer (“BOT”) agreement was signed between IDE and the State of Israel. OPC has committed to construct the plant within 24 months from the approval date of the national infrastructure plan, which approval was received in November 2021. In June 2021, Sorek also signed construction and equipment supply agreements with BHI CO Ltd, a South Korean-owned corporation that will serve as the project’s construction contractor in accordance with an EPC agreement according to the milestones, terms, and dates stipulated in the agreement. OPC estimates that construction of the plant will be completed in the fourth quarter of 2023. Excess capacity beyond that used by the Desalination Facility is expected to be sold to an onsite consumer and the System Operator.


Gnrgy Ltd. As of December 31, 2021, OPC owns 51% interest in Gnrgy, which it acquired in April 2021. Gnrgy was established in Israel in 2008 and operates in the field of charging electric vehicles (e-mobility) and the installation of charging stations for electric vehicles. For further information, see “Item 4.B Business OverviewOur BusinessesOPC’s Description of OperationsAcquisition of Gnrgy Ltd.
 
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Operations in the United States
 
OPC has operated in the United States since January 2021, when an entity in which OPC indirectly holds a 70% interest, acquired CPV from Global Infrastructure Management, LLC. The consideration for the acquisition was $648 million in cash, subject to post-closing adjustments based on closing date cash, working capital and debt. Additional consideration of $95 million was paid in the form of a vendor loan in respect of CPV’s 17.5% equity in the Three Rivers project, which is currently being developed. CPV subsequently reduced its interest in the Three River’s project to 10% and the consideration for the transaction and the amount of the seller’s loan was reduced accordingly.
 
CPV is engaged in the development, construction and management of renewable energy and conventional natural gas-fired power plants in the United States. CPV was founded in 1999 and since the date of its establishment it has initiated and constructed power plants having an aggregate capacity of approximately 15 gigawatts (GW), of which approximately 5 GWh consists of wind energy and another approximately 10 GW consists of conventional, natural gas-fired power plants. CPV holds ownership interests in active power plants it developed and constructed over the past years (both conventional, natural gas-fired and renewable energy) , as well as in a project backlog of renewable energy in advanced development stages and other projects using various technologies: in power plants powered by natural gas (of the open-cycle type from an advanced generation), CPV’s proportionate ownership interest is approximately 1,290 MW out of 4,045 MW (5 power plants), and 152 MW in wind energy. In addition, the share of CPV and its production capacity in projects that are currently under construction is as follows: in a conventional natural gas-fired power plant, the share of CPV is 126 MW out of a total capacity of 1,258 MW under construction and 126 MW in a solar energy project.
 
CPV holds a 10% ownership interest in the Three Rivers project, which consists of the construction of a natural gas, combined cycle power plant with expected capacity of 1,258 MW, expected to participate in tenders for capacity in the PJM market. Its expected COD is the second quarter of 2023 and the expected cost of construction is approximately $1.3 billion for 100% of the project (not just CPV’s ownership interest). CPV also has a number of renewable energy projects in advanced stages of development (including 126 MW solar energy project), and additional projects using various technologies in different stages of development, having an expected total capacity of about 7,150 MW. CPV manages its active plants and the development of its projects. In addition, CPV provides management services to third parties.
 
 
In October 2021, CPV entered into agreements to acquire the rights in two solar projects under development in the PJM market in the United States, one in Kentucky (approximately 98 MW) and one in Illinois (approximately 360 MW).
 
OPC’s Share Issuances from 2019 to 2021
 
In August 2017, OPC completed an initial public offering in Israel, and a listing on the TASE, resulting in net proceeds to OPC of approximately $100 million and Kenon retaining 75.8% stake.
 
In 2019, 2020 and 2021, OPC issued new shares in multiple offerings:
 

In 2019, OPC issued a total of 11,028,240 new ordinary shares (representing approximately 8% of OPC’s issued and outstanding share capital at the time on a fully diluted basis) in two share issuances, for total cash consideration net of issuance expenses of approximately NIS 272 million (approximately $76 million). As a result of these share issuances, Kenon’s interest in OPC decreased from 75.8% to 69.8%.
 

In October 2020, OPC issued 11,713,521 new ordinary shares (representing approximately 7.5% of OPC’s issued and outstanding share capital at the time on a fully diluted basis) for total (gross) consideration of NIS 350 million (approximately $103 million) to two institutional investors in a private placement in connection with the acquisition of CPV.
 

Also in October 2020, OPC issued 23,022,100 new ordinary shares (representing approximately 14.8% of OPC’s issued and outstanding share capital at the time on a fully diluted basis) for a total (gross) consideration of NIS 737 million (approximately $217 million) in a public offering. Kenon was allocated 10,700,200 shares in the public offering for a total purchase price of approximately $101 million.
 

In January 2021, OPC issued 10,300,000 ordinary shares (representing approximately 5.5% of OPC’s issued and outstanding share capital at the time on a fully diluted basis) in a private placement for a total (gross) consideration of NIS 350 million (approximately $107 million).
 
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In September 2021, OPC issued rights to purchase approximately 13 million OPC shares to fund the development and expansion of OPC’s activity in the U.S., with investors purchasing approximately 99.7% of the total shares offered in the rights offering. The gross proceeds from the offering amounted to approximately NIS 329 million (approximately $102 million). Kenon exercised rights for the purchase of approximately 8 million shares for total consideration of approximately NIS 206 million (approximately $64 million), which included its pro rata share and additional rights it purchased during the rights trading period plus the cost to purchase these additional rights.
 
As a result of these share issuances, including Kenon’s participation in the October 2020 public offering and October 2021 rights offering, Kenon’s interest in OPC is now 58.8%.
 
OPC’s Debt Issuances in 2020 and 2021
 

In April 2020, OPC issued debentures (Series B) at a par value of NIS 400 million (approximately $113 million) that are linked to the CPI and bear interest at the annual rate of 2.75%. The debentures are to be repaid in semi‑annual payments (on March 31, and September 30 of every calendar year), commencing from March 31, 2021 and up to September 30, 2028 (the first payment of interest falls on September 30, 2020).
 

In September 2021, OPC issued debentures (Series C) at a par value of NIS 851 million (approximately $266 million), bearing annual interest of 2.5%. The Series C bonds are repayable over 12 semi-annual payments (which repayment amounts vary, and range from 5% up to 16% of the total issued amount) commencing in February 2024 with the final payment in August 2030. OPC used the proceeds from the Series C bonds for the early repayment of project financing debt of OPC-Rotem.
 
Potential Transaction with Veridis
 
OPC owns a majority of the voting equity in OPC-Rotem (80%), and 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. In February 2022, OPC has reached an understanding on a potential transaction with Veridis, pursuant to which, OPC would establish a new subsidiary to hold all of OPC’s business activities in the energy and electricity generation and supply sectors in Israel. Veridis would receive 20% of the shares of the new subsidiary in exchange for contributing its 20% interest in OPC-Rotem and cash in an amount equal to NIS 425 million (approximately $132 million) to the new subsidiary. Following completion of the potential transaction, OPC would hold 80%, and Veridis would hold the remaining 20%, of the new subsidiary, and the new subsidiary would hold 100% of OPC-Rotem and OPC’s other business activities in the energy and electricity generation and supply sectors in Israel.
 
Overview of OPC’s Operations
 
Israel
 
The following table sets forth summary operational information regarding OPC’s main operations in Israel as of March 27, 2022:
 
Israel - Projects under Operation
 
Project / activity
 
Capacity(1)
(MW)
 
Ownership stake
 
Method of presentation
in the financial statements
of the Company
 
Location
 
Type of project / technology
 
Year of commercial operation
Rotem
 
466
 
80%
 
Consolidated
 
Mishor Rotem
 
Natural gas, combined cycle
 
2013
Hadera(2)
 
144
 
100%
 
Consolidated
 
Hadera
 
Natural gas - cogeneration
 
2020
 
Virtual Supply: as of March 27, 2022, supply of 110 MW to customers. OPC signed an intercompany agreement, intended to govern the settling accounts method following from OPC’s construction of generation facilities on OPC-Rotem customers’ premises.
 
                                   
(1)
As stipulated in the relevant generation license
 
(2)
Hadera holds the Energy Center (boilers and turbines located at the premises of Infinya), which serves as back-up for steam generated by the Hadera power plant. From the end of 2020, the turbine at the Energy Center is not operating.
 
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Israel - Projects under Development and Construction
 
Power plants / energy generation facilities
 
Status
 
Capacity
(MW)(1)
 
Rate of holdings(2)
 
Location
 
Technology
 
Date / expected commercial operation date
 
Main customer/ consumer
 
Total expected construction cost (in NIS million)
 
Total investment cost as of December 31, 2021 (in NIS million)