Idan Ofer's Kenon Holdings (NYSE: KEN; TASE: KEN) is parting from control of loss-making Chinese automotive venture Qoros. Qoros is 50% owned by Kenon unit Quantum and 50% by Chinese auto maker Chery. Kenon reports that it and Chery have agreed with a new Chinese investor on an investment of 6.5 billion yuan ($942 million) in Qoros is exchange for a third of the company.
The investment is subject to a number of preconditions, some of which are beyond the control of the parties to the agreement and may not be fulfilled. They include regulatory permissions and completion of regulatory processes, agreement by financing bodies, and conclusion of further agreements.
Kenon also reported that the investment agreement signed by Qoros, Quantum and Chery with Yibin Municipal Government, that was announced on April 6 this year, will not come into force, and that he municipality's investment platform company Yibin will not make an equity investment in Qoros.
The investment in Qoros is one of Kenon's main problems. The Chinese company has been posting heavy losses, burning tens of millions of dollars a quarter. In the first quarter of this year, Qoros lost $41 million, following accumulated losses of $647 million in the period 2015-2016.
Unlike in 2016, when Qoros reported rapid growth in revenue, in the first quarter of 2017 revenue fell a worrying 21% to $59 million. This was explained by a 24% drop in sales of vehicles to 3,700 units in the first quarter of this year, compared with 4,900 in the corresponding quarter.
During the first quarter, Kenon injected $57 million into Qoros, but Qoros ended the quarter with just $9 million cash. In April, Kenon injected a further $15 million, and it is committed to another $42 million.
Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2017
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