UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
12 Marina View, #15-01
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 30, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
As discussed in Notes 3.J and 13.C to the consolidated financial statements, the carrying amount of the cash generating unit (CGU) to which goodwill is allocated is reviewed at each reporting date for impairment. As of December 31, 2022, the Group’s goodwill arising from the acquisition of CPV Group amounted to $105 million (Renewable Energy CGU). The Company estimates the recoverable amount of the Renewable Energy CGU based on discounted expected future cash flows. An impairment loss is recognized if the carrying value of the Renewable Energy CGU exceeds its estimated recoverable amount.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls relating to the impairment assessment of Renewable Energy CGU, including the control related to evaluating the discount rates used in the discounted cashflows. In addition, we involved valuation professionals with specialized skills and knowledge to assist us in evaluating the discount rates by comparing them against an independently developed range of discount rates using inputs from publicly available information.
Kenon Holdings Ltd. and subsidiaries
25,680
25,783
1,793,688
486,598
2,280,286
Cash distribution to owners of the Company
19.F
(552,316
8,502
2,104
10,606
11.A.5
57,585
135,567
193,152
Acquisition of subsidiary with non-controlling interest
36,725
57,626
172,292
229,918
312,652
349,659
-
(24,474
8,227
(5,420
(21,667
(568
(22,235
307,232
290,985
327,424
50,134
1,206
1,504,592
1,598,485
697,433
2,295,918
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Statements of Changes in EquityFor the years ended December 31, 2022, 2021 and 2020
Dividends declared
19.D
(288,811
(10,214
(299,025
Dividend to holders of non-controlling interests in subsidiaries
In addition, in determining the depreciation rates of the tangible, intangible assets and liabilities, the Group estimates the expected life of the asset or liability.
3.
4.
Cash and cash equivalents in banks
The Group held cash and cash equivalents which are of investment grade based on Standard and Poor’s Ratings.
Short-term deposits with bank and others
Short-term restricted cash
The Group held short-term deposits and restricted cash which are of investment grade based on Standard and Poor’s Ratings.
Debt investments - at FVOCI
The Group held debt investments at FVOCI which are of investment grade based on Standard and Poor’s Ratings and have stated interest rates of 0.26% to 5.94% (2021: Nil) with an average maturity of 2 years. These debt investments are expected to be realized within the next 12 months.
Information about the Group’s exposure to credit and market risks, and fair value measurement, is included in Note 29 Financial Instruments.
Note 9 – Investment in Associated Companies (Cont’d)
Year Ended December 31, 2022
Kenon identified indicators of impairment in accordance with IAS 28 as a result of a significant decrease in ZIM’s market capitalization towards the end of 2022. Therefore, the carrying value of Kenon’s investment in ZIM was tested for impairment in accordance with IAS 36.
Note 10 – Long-term investment (Qoros)
OPC Power Plants Ltd. (formerly OPC Israel Energy Ltd.)
Note 11 – Subsidiaries (Cont’d)
Note 15 – Loans and Debentures (Cont’d)
Note 17 – Right-Of-Use Assets, Net and Lease Liabilities
As at December 31, 2022, an arbitration proceeding was conducted between OPC Hadera and the construction contractor, of which a hearing is scheduled for in June 2024.
OPC Rotem and OPC Hadera has an agreement with Tamar Group in connection to the supply of natural gas to the power plants. Both OPC Rotem and OPC Hadera undertook to continue to consume all the gas required for its power plants from Tamar Group (including quantities exceeding the minimum quantities) up to the completion date of the commissioning of the Karish Reservoir, except for a limited consumption of gas during the commissioning period of the Karish Reservoir.
In May 2022, an amendment to the Energean Agreements was signed, which set out, among other things, arrangements pertaining to bringing forward the reduction of the quantities of gas supplied by OPC Rotem and OPC Hadera, of which the scope of reduction was not yet determined as at December 31, 2022.
Note 24 – Income Taxes (Cont’d)
Note 25 – Earnings per Share
The Group’s related parties include Kenon’s beneficial owners and Kenon’s subsidiaries, affiliates and associates companies. Kenon’s immediate holding company is Ansonia Holdings Singapore B.V. A discretionary trust, in which Mr. Idan Ofer is the ultimate beneficiary, indirectly holds 100% of Ansonia Holdings Singapore B.V.
Other investments
344,780
Based on the credit risk profiles of the Group’s counterparties relating to the Group’s cash and cash equivalents, short-term and long-term deposits and restricted cash, trade receivables and other assets, short-term and long-term derivative instruments, the Group has assessed expected credit losses on the financial assets to be immaterial. The maximum exposure to credit risk for trade receivables as at year end, by geographic region was as follows:
$ Thousands
No ECL has been recorded on any trade receivable amounts based on historical credit loss data and the Group’s view of economic conditions over the expected lives of the receivables.
Debt securities
For the year ended December 31,
Impairment loss on debt securities at FVOCI
Note 29 – Financial Instruments (Cont’d)
The Group’s exposure to LIBOR risk for derivative financial instruments used for hedging is as follows:
Note 30 – Subsequent Events
As at the date of approval of the consolidated financial statements, the fair value of ZIM, represented by its share price, had increased which may result in a reversal of impairment in 2023. The financial impact on Kenon from the increase in market capitalization of ZIM has yet to be determined.