Market Overview

Sky Solar Holdings, Ltd. Reports Fourth Quarter and Full Year 2016 Unaudited Financial Results

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HONG KONG, May 15, 2017 (GLOBE NEWSWIRE) -- Sky Solar Holdings, Ltd. (NASDAQ:SKYS) ("Sky Solar" or "the Company"), a global developer, owner and operator of solar parks, today announced its financial results for the fourth quarter of 2016 and fiscal year ended December 31, 2016.

Fourth Quarter 2016 Highlights

  • Q4 2016 total revenue of $13.8 million, up 13.4% over Q4 2015
  • Q4 2016 electricity revenue of $10.1 million, up 28.2% over Q4 2015
  • Q4 2016 Adjusted EBITDA of negative $3.1 million, compared to positive $0.5 million in Q4 2015
  • 159.6 MW of IPP assets in operation as of December 31, 2016, compared to 152.1 MW as of September 30, 2016
  • As of December 31, 2016, 84.5 MW under construction, 172.2 MW of shovel-ready projects, and 1.0 GW of solar parks in pipeline

Business Updates

During 2016 the Company accelerated its expansion into the Western Hemisphere.

  • In the United States, Sky Solar acquired a 22MW operating portfolio, and closed on 25 MW of permit acquisitions.

  • Construction progressed on the 63.6MW project in Uruguay.  The Company closed on $82 million of project financing with the International Development Bank to fund the remaining work.  The IDB financing was secured in part with equity from a strategic partner.

  • In Chile the Company strategically expanded its presence in distributed generation.

  • The Company demonstrated its ability to efficiently recycle capital via the monetization of Canadian assets, selling an equity stake in the Canadian operating portfolio to a new strategic financial partner.

  • The Company expects to meaningfully expand its collaboration with this strategic partner on a global basis.

  • Continued working diligently to unlock value in Japan.

  • Entered into a strategic partnership with Capstone to provide financing solutions that expand Sky Solar's role beyond PV to generate higher equity returns.

Subsequent to the end of the year, the Company also achieved the following:

  • Closed on the sale of 23MW of Greek assets for a total consideration of $41.9 million.

  • Refinanced the US operating portfolio with East West Bank.

Mr. Weili Su, Founder, Chairman and Chief executive officer of Sky Solar, commented, "We executed on the strategy we outlined in Q1 of 2016, and our full year 2016 results reflect robust revenue growth.  We have approximately 1GW of solar parks in our project pipeline.  We continue to believe the cash flow expected to be generated from the solar parks over time will provide a solid foundation for future business development.  Additionally, we continue to see the efforts we put in in key market development yield results with compelling cash-on-cash return, and expect these efforts to result in stable earnings in the longer term."

Mr. Sanjay Shrestha, Chief Investment Officer of Sky Solar, and President of Sky Capital America commented, "We are excited about our continued expansion in the Americas region and our outlook.  We expect significant growth in the United States, Uruguay and Chile and continue to build out our existing pipeline in Japan.  We believe we are well positioned to deliver on our growth objective by leveraging the attractive cost of capital from our new strategic partner."

Fourth Quarter 2016 Financial Results

Revenue was $13.8 million, up 13.4% from $12.2 million in the same period of 2015.

Electricity sales were $10.1 million in the fourth quarter of 2016, up 28.2% from $7.9 million in the same period of 2015. The year-over-year increase in electricity sales was primarily due to the growth in the Company's operational IPP assets.  Electricity sales in the fourth quarter of 2016 were down 43.6% from $17.9 million in the third quarter of 2016, due to disposal of solar parks in Canada and seasonally lower solar irradiation across most of the Company's major geographic markets.

Systems and other sales were $3.7 million in the fourth quarter of 2016, down 13.9% from $4.3 million in the same period of 2015.  The year-over-year decrease in systems and other sales was due to the Company's continued shift in business model toward IPP electricity sales.  Systems and other sales in the fourth quarter of 2016 were down 31.5% from $5.4 million in the third quarter of 2016.  The sequential decrease in systems and other sales was due to a significant system sale in Canada of 6.5 MW in the third quarter of 2016.

The following table shows the Company's sequential and year-over-year change in revenue for each category, geographic region and period indicated.

  Q4 2016 Sequential
Change
Q3 2016 Year-Over-Year
Change
Q4 2015
  (US$ in thousands, except percentages)
Asia 8,627 -22.5 % 11,128 66.3 % 5,186
Electricity Sales 5,863 -42.9 % 10,263 18.0 % 4,969
System Sales and Other 2,764 219.5 % 865 1,173.7 % 217
Europe 1,993 -52.9 % 4,232 -17.6 % 2,419
Electricity Sales 1,697 -54.9 % 3,763 -14.4 % 1,983
System Sales and Other 296 -36.9 % 469 -32.1 % 436
South America 1,132 851.3 % 119 182.3 % 401
Electricity Sales 836 655.6 % 111 108.4 % 401
System Sales and Other 296 3,520.4 % 8  
North America 2,082 -73.6 % 7,882 -50.4 % 4,196
Electricity Sales 1,728 -54.6 % 3,805 218.7 % 542
System Sales and Other 354 -91.3 % 4,077 -90.3 % 3,654
Electricity Sales 10,124 -43.6 % 17,942 28.2 % 7,895
System Sales and Other 3,710 -31.5 % 5,419 -13.9 % 4,307

Cost of sales and services was $9.0 million, compared to $7.6 million in the same period in 2015.  The increase was mainly a result of the increase in capacity of operating assets during 2016.

Gross profit was $4.9 million, up 5.1% from $4.6 million in the same period in 2015.  Gross margin decreased to 35.2% from 37.9% in the same period in 2015 due to a decrease in sales of systems with higher gross margin.

Selling, general and administrative ("SG&A") expenses were $10.4 million, up 39.4% from $7.4 million in the same period in 2015 as a result of our increased professional fees related to financing in core market such as Japan, United States and Uruguay.

Operating loss was $7.1 million, compared to operating loss of $4.9 million in the same period in 2015.

Finance costs were $1.1 million, compared to $1.2 million in the same period of 2015.

Other non-operating expense was $1.7 million, compared to other non-operating expense of $1.4 million in the same period of 2015. The increase was mainly a result of the transaction cost attributable to the issue of the Hudson notes.

Net loss in the fourth quarter of 2016 was $8.7 million, compared to a net loss of $7.4 million in the same period in 2015.

Basic and diluted loss per share was $0.02 compared to $0.02 in the same period in 2015.  Basic and diluted loss per ADS was $0.16 compared to $0.15 in the same period in 2015.

Adjusted EBITDA was negative $3.1 million, compared to positive $0.5 million in the same period in 2015.

Full Year 2016 Financial Results
Revenue was $65.9 million, up 39.8% from $47.2 million in 2015.  The increase reflects the Company's ongoing strategic shift from solar energy system sales to IPP electricity sales during the year.  Revenue from electricity sales increased 51.2% to $53.6 million in 2016 from $35.5 million in 2015, driven by increased capacity of IPP solar parks.  Growth was also driven by the 5.2% increase in revenue from solar energy systems to $12.3 million from $11.7 million in 2015.

The following table shows the Company's change in revenue for each category, geographic region and period indicated.

  2016 Sequential
2015
Growth
  (US$ in thousands)
Asia 37,757 24,728 52.7 %
Electricity Sales 32,318 19,453 66.1 %
System Sales and Other 5,439 5,275 3.1 %
Europe 13,224 13,659 -3.2 %
Electricity Sales 11,469 11,523 -0.5 %
System Sales and Other 1,755 2,136 -17.8 %
South America 2,425 401 504.7 %
Electricity Sales 1,839 401 358.6 %
System Sales and Other 586 - -  
North America 12,519 8,367 49.6 %
Electricity Sales 8,017 4,102 95.4 %
System Sales and Other 4,502 4,265 5.6 %
Electricity Sales 53,643 35,479 51.2 %
System Sales and Other  12,282 11,676 5.2 %

Cost of sales and services was $30.9 million, compared to $18.5 million in 2015.  The increase was primarily due to the increase of system sales in Canada and increased capacity of IPP portfolio during 2016.

Gross profit was $35.0 million, up 22.3% from $28.6 million in 2015.  Gross margin was 53.1%, compared to 60.7% in 2015 primarily due to the higher percentage of revenue contribution from North America and South America, which had lower margin compared to Japan.

Selling and administrative ("SG&A") expenses were $30.6 million, compared to $23.7 million in 2015. The increase in SG&A expenses was due to expansion in key markets such as Japan, the United States and Latin America.

Operating profit was $15.4 million, compared to $8.2 million in 2015.

Net income was $3.3 million, compared to a net loss of $1.6 million in 2015.

Basic and diluted earnings per share were $0.01, compared to basic and diluted loss per share of $0.004 in 2015.  Basic and diluted earnings per ADS were $0.08, compared to basic and diluted loss per ADS of $0.03 in 2015.

Adjusted EBITDA was $32.2 million compared to $15.7 million in 2015.

Pipeline Analysis

As of December 31, 2016, the Company owned and operated 159.6 MW of IPP assets, compared to 152.1 MW as of September 30, 2016.

The Company had 84.5 MW of projects under construction as of December 31, 2016, comprised of a 63.6 MW project in Uruguay and 20.9 MW project in Japan.  This compares to 90.7 MW under construction as of September 30, 2016.

In total, the Company had 1.2 GW of projects in various stages of development as of December 31, 2016, which includes the projects under construction described above as well as 172.2 MW of shovel-ready projects and more than 1.0 GW of projects in earlier-stage pipeline.  The pipeline does not include any incremental opportunities associated with project opportunities in the U.S.

Balance Sheet and Liquidity

As of December 31, 2016, the Company had bank balances and cash of $12.5 million, restricted cash of $29.9 million, trade and other receivables of $30.1 million and IPP solar park assets of $271.3 million. Total borrowing was $159.2 million, including $27.3 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 year, the most directly comparable IFRS measure, for each of the periods indicated:

    As of and for the Year Ended December 31,
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