Sky Solar Holdings, Ltd. today announced its financial results for the third quarter of 2016 ended September 30, 2016.
- Q3 2016 total revenue of $23.4 million, up 93.4% over Q3 2015
- Q3 2016 electricity revenue of $17.9 million, up 58.8% over Q3 2015
- Q3 2016 Adjusted EBITDA of $21.4 million, compared to $3.8 million in Q3 2015, up 466.7% year-over-year; Q3 2016 annualized Adjusted EBITDA return on equity ratio of 56.2%1
- 152.1MW of solar parks assets in operation as of September 30, 2016.
- As of September 30, 2016, 90.7MW under construction, 172.2MW of shovel-ready projects, and 1.0 GW of solar parks in pipeline.
Business Updates (to date):
- Established partnership with a new strategic investor and closed on two transactions in Canada with this partner
- Closed on IDB financing to continue construction of remaining 62.5MW project in Uruguay
- Closed on refinancing term-loan for recently acquired 23MW portfolio in the US
- Recent sale of 23MW solar park in Greece for a total price of Euro39.7 million
Mr. Weili Su, Founder, Chairman and Chief executive officer of Sky Solar, commented, "We are pleased with our quarterly results and remain focused on establishing new strategic partnerships, efficient utilization of capital and delivering growth in our key target markets. We are also pleased to report recent project financing with the Inter-American Development bank, sold preferred equity of our projects in Canada to new strategic investor, and closed on a refinancing of our operating portfolio in the US. We believe we are uniquely positioned and have a very bright future in the renewable energy industry and appreciate the support of our shareholders."
Mr. Sanjay Shrestha, Chief Investment Officer of Sky Solar, and President of Sky Capital America commented, "As Mr. Su highlighted, we are pleased with our continued success to reduce overall cost of capital, strategically utilizing capital and investing in core growth markets. As a result of our efforts to monetize certain solar parks to unlock shareholder value, given our recent sale of equity in our Canadian assets the sale of Greek assets, and refinancing of our existing portfolio, we believe we have sufficient liquidity to execute on our near term growth objectives. "
Third Quarter 2016 Financial Results
Revenue was $23.4 million, up 93.4% from $12.1 million in the same period of 2015.
Electricity sales were $17.9 million in the third quarter of 2016, up 58.8% from $11.3 million in the same period of 2015. The year-over-year growth in electricity sales was primarily due to the increase in the Company's operational IPP assets globally. Electricity sales in the third quarter of 2016 was up 14.7% from $15.6 million in the second quarter of 2016, due to seasonally higher solar irradiation across most of the Company's major geographic markets.
Systems and other sales were $5.4 million in the third quarter of 2016, up 599.2% from $775 thousand in the same period of 2015. The year-over-year increase in systems and other sales was primary due to the sales of solar parks in Canada. Systems and other sales in the third quarter of 2016 were up 299.3% from $1.4 million in the second quarter of 2016, primarily due to the same reason.
The following table shows the Company's sequential and year-over-year change in revenue for each category, geographic region and period indicated.
Cost of sales and services were $10.1 million, compared to $3.6 million in the same period in 2015. The increase was mainly a result of the increase of system sales in Canada during the third quarter of 2016.
Gross profit was $13.2 million, up 56.3% from $8.5 million in the same period in 2015. Gross margin decreased to 56.6% from 70.0% in the same period in 2015 because of the higher percentage of revenue contribution from system sales and others, which had lower margin compared to electricity sales.
Selling, general and administrative ("SG&A") expenses were $8.7 million, up 37.4% from $6.3 million in the same period in 2015 due to the increased professional service fee.
A gain on disposal of interest in subsidiaries was $9.8 million for the sale of preferred share interest in a manner that constituted the sale of a majority of the economic interests of 6MW solar parks in Canada to a new strategic investor.
Operating profit was $15.2 million in the third quarter of 2016, up 951.7% compared to $1.4 million in the same period in 2015 due to the increase of operating IPP assets and sale of preferred share interest in 6MW solar parks in Canada.
Finance costs were $2.4 million, compared to $1.1 million in the same period of 2015. The increase in finance costs was primarily due to the increased average balance of bank loans in the third quarter in 2016.
Other non-operating income was $500 thousand compared to other non-operating expense of $4.1 million in the same period of 2015. Other non-operating expenses for the third quarter of 2015 were primarily due to the fair value fluctuation of financial liabilities.
As a result of the above, the net profit for the third quarter of 2016 was $14.2 million, compared to a net loss of $5.6 million in the same period in 2015.
Basic earnings per share was $0.03 and diluted earnings per share was $0.04 compared to a loss per share of $0.01 in the same period in 2015. Basic and diluted earnings per ADS were $0.28 compared to a basic loss per ADS of $0.12 and diluted loss per ADS of $0.11 in the same period in 2015.
Adjusted EBITDA was $21.4 million, compared to $3.8 million in the same period in 2015.
As of September 30, 2016, the Company owned and operated 152.1MW of IPP assets, compared to $133.1MW as of June 30, 2016.
The Company had 90.7MW of projects under construction as of September 30, 2016, comprised of a 28.2MW project in Japan and 62.5MW project in Uruguay. This compares to 27.9 MW under construction as of June 30, 2016.
In total, the Company had 1.2GW of projects in various stages of development as of September 30, 2016, which included the projects under construction described above as well as 172.2MW of shovel-ready projects and more than 1.0GW of projects in pipeline. This does not include any incremental opportunities associated with project opportunities in the U.S.
Balance Sheet and Liquidity
As of September 30, 2016, the Company had bank balances and cash of $26.5 million, restricted cash of 55.6 million, trade and other receivables of $43.6 million and IPP solar park assets of $359.8 million. Total borrowing was $162.3 million, including $24.9 million of borrowing due within one year.
Use of Non-IFRS Measures
To provide investors with additional information regarding the Company's financial results, the Company has disclosed Adjusted EBITDA and annualized Adjusted EBITDA return on equity ratio, non-IFRS financial measures, below. The Company presents these non-IFRS financial measures because they are used by the Company's management to evaluate its operating performance. The Company also believes that these non-IFRS financial measures provide useful information to investors and others in understanding and evaluating the Company's consolidated results of operations in the same manner as the Company's management does and in comparing financial results across accounting periods and to those of its peers.
Adjusted EBITDA, as the Company presents it, represents profit or loss for the period before taxes, depreciation and amortization, adjusted to eliminate the impacts of share-based compensation expenses, impairment charges, interest expenses, fair value changes of financial liabilities, loss from hedge ineffectiveness on cash flow hedges and reversal of tax provision.
Annualized Adjusted EBITDA return on equity ratio is Adjusted EBITDA of the applicable quarter multiplied by four, and divided by total equity as of the applicable quarter end.
The use of Adjusted EBITDA and annualized Adjusted EBITDA return on equity ratio has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of the Company's financial results as reported under IFRS. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to the Company; and (e) other companies, including companies in the Company's industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. In addition, the annualized Adjusted EBITDA return on equity ratio does not take into account effects of seasonality from quarter to quarter. Because of these and other limitations, you should consider Adjusted EBITDA and annualized Adjusted EBITDA return on equity alongside the Company's IFRS-based financial performance measures, such as profit (loss) for the period and the Company's other IFRS financial results.
The following table presents a reconciliation of Adjusted EBITDA to profit (loss) for the period, the most directly comparable IFRS measure, for each of the periods indicated:
The following table presents a reconciliation of annualized Adjusted EBITDA return on equity to annualized profit (loss) return on equity for the period, the most directly comparable IFRS measure, for each of the periods indicated. Annualized profit (loss) return on equity is profit (loss) return of the applicable quarter multiplied by four, and divided by total equity as of the applicable quarter end.
The Company believes that Adjusted EBITDA and annualized Adjusted EBITDA return on equity ratio are important measures for evaluating the results of its IPP business.
These measures are not intended to represent or substitute numbers as measured under IFRS. The submission of non-IFRS numbers is voluntary and should be reviewed together with IFRS results.
Unless specifically indicated or the context otherwise requires, megawatt capacity values in this earnings release refer to the attributable capacity of a solar park. We calculate the attributable capacity of a solar park by multiplying the percentage of our equity ownership in the solar park by the total capacity of the solar park.