Kenon Holdings said its subsidiary OPC Energy has agreed to sell its distributed energy business for approximately NIS 272 million ($90 million), adding a new divestment to the power producer’s portfolio strategy. The transaction remains subject to conditions precedent, including approval from the Israel Competition Authority, and is expected to close only after those conditions are satisfied.
Under the agreement announced September 28, OPC’s subsidiary will sell the company that holds its distributed energy business to a wholly owned subsidiary of Aluma Infrastructure Fund (2020) Ltd. The business develops, constructs and operates energy generation facilities at customers’ premises in Israel. Its portfolio includes approximately 52.2 megawatts of natural-gas-fired generation facilities that are either operational or under construction and approaching operational status.
The aggregate consideration is approximately NIS 272 million, equivalent to about $90 million based on the exchange-rate conversion included in Kenon’s filing. The consideration remains subject to interest and certain other adjustments specified in the agreement, so the stated amount is not necessarily the final cash consideration at completion.
The transaction also includes obligations that extend beyond the transfer of the business. OPC’s subsidiary is required to complete, at its own expense, generation facilities whose construction has not yet been completed. The agreement also contains arrangements concerning the long-term supply of natural gas and electricity, as well as customary indemnification, liability and other contractual provisions.
Completion is conditional on several requirements that must be satisfied within 180 days of the agreement’s signing. Kenon specifically identified approval by the Israel Competition Authority as one of the conditions precedent, meaning the announced sale does not yet represent a completed disposal.
The agreement involves OPC Energy, which is Kenon’s primary operating business and in which Kenon holds approximately 46% of the equity, including shares subject to a collar arrangement. OPC operates power-generation and energy businesses in Israel and the United States, with activities spanning conventional generation, renewable energy and other energy services.
The sale comes shortly after OPC reported stronger second-quarter financial results. For the three months ended June 30, OPC reported revenue of $379 million, up from $196 million a year earlier, while net profit increased to $15 million from $1 million. Its adjusted EBITDA including its proportionate share of associated companies rose to $131 million from $90 million.
OPC has also been expanding in other parts of its portfolio. In June, the company reached financial closing for the Hadera expansion project after entering financing and engineering, procurement and construction agreements and receiving tariff approval from the Israeli Electricity Authority. In August, OPC issued NIS 600 million of Series E bonds, according to Kenon’s second-quarter update.
The distributed energy transaction would transfer a business focused on generation facilities located at customer sites to Aluma, an Israeli infrastructure investment fund. Aluma’s investment activities include infrastructure assets across areas such as communications, energy services and environmental services.
Kenon said the transaction and related statements are subject to risks and uncertainties, including the possibility that the sale may not be completed on the anticipated terms or timeline, or at all. The company’s September 28 Form 6-K and accompanying exhibit constitute the primary disclosure of the agreement.
