Sky Solar Holdings, Ltd. today announced its financial results for the second quarter of 2016 ended June 30, 2016.
- Q2 2016 total revenue of $17.0 million, up 34.6% over Q2 2015
- Q2 2016 electricity revenue of $15.6 million, up 40.2% over Q2 2015
- Q2 2016 Adjusted EBITDA of $8.6 million, compared to $4.5 million in Q2 2015, up 91.5% year-over-year; Q2 2016 annualized Adjusted EBITDA return on equity ratio of 28.4%1
- 133.1MW of IPP assets in operation as of June 30, 2016. Including the recent acquisition of operating assets in the U.S. on July 15, 2016, total IPP assets in operation currently stand at 155MW.
- As of June 30, 2016, 27.9MW under construction, 232.3MW of shovel-ready projects, and 1.0GW of solar parks in pipeline.
Mr. Weili Su, Founder, Chairman and Chief executive officer of Sky Solar, commented, "We have begun operating 22MW solar parks with average remaining PPA of 15 years in the United States since the completion of our acquisition of these assets from Greenleaf-TNX and SunPeak Universal Holdings on July 15, 2016, on top of our existing assets in other key markets. We believe the sustainable cash flow expected to be generated from these solar parks provides a strong foundation for future business development. The efforts we implemented in previous years to develop our business in key markets have resulted in attractive cash-on-cash return, and we expect these efforts to result in stable earnings over the long run. We have a very bright future in the renewable energy industry and appreciate the loyalty 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 pursuing opportunities in the U.S. and continue to remain disciplined with our investment return metrics. In addition to the recent acquisition of operating solar parks in the United States, we aim to enter into definitive agreements to acquire additional PV development pipeline in the U.S. within the third quarter of 2016. This is in addition to the 22.5MW development stage permits in the U.S. that we acquired last month. We also expanded our partnership with Hudson to be a strategic financial partner for opportunities in the U.S. as well as in Latin America and we are in discussion with other potential strategic partners to expand our presence in key target markets. Our strategic objective remains on reducing our cost of capital and focus on owning or developing renewable assets with higher returns on capital. We look forward to reporting on our progress throughout the fiscal year."
Second Quarter 2016 Financial Results
Revenue was $17.0 million, up 34.6% from $12.6 million in the same period of 2015.
Electricity sales were $15.6 million in the second quarter of 2016, up 40.2% from $11.2 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 second quarter of 2016 was up 57.4% from $9.9 million in the first quarter of 2016, due to seasonally higher solar irradiation across most of the Company's major geographic markets.
Systems and other sales were $1.4 million in the second quarter of 2016, down 7.5% from $1.5 million in the same period of 2015. The year-over-year decline in systems and other sales was primary due to the lower sales in Japan. Systems and other sales in the second quarter of 2016 were down 24.4% from $1.8 million in the first 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 $5.4 million, compared to $4.3 million in the same period in 2015. The increase was mainly a result of the increased capacity of IPP solar parks during the second quarter of 2016.
Gross profit was $11.6 million, up 38.8% from $8.4 million in the same period in 2015. Gross margin increased to 68.2% from 66.2% in the same period in 2015 because of the higher percentage of revenue contribution from electricity sales, which had higher margin compared to system sales and others. The increase in percentage of electricity sales primarily came from increase in electricity sales in Japan.
Selling, general and administrative ("SG&A") expenses were $6.8 million, up 21.4% from $5.6 million in the same period in 2015 due to the increased project financing activities in Japan.
Other operating income was $119 thousand, compared to $75 thousand in the same period of 2015. The increase in other operating income was due to land lease income during the second quarter of 2016.
Operating profit was $4.9 million in the second quarter of 2016, compared to $8.8 million in the same period in 2015. Included in the operating profit in the second quarter of 2015 was a $6.0 million reversal of tax provision of previously-recorded VAT and other tax provision.
Finance costs were $1.5 million, compared to $0.8 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 second quarter in 2016.
Other non-operating expenses of $2.2 million mainly represented fair value changes of financial liabilities – FVTPL of US$1.4 million and loss from hedge ineffectiveness on cash flow hedge of $0.7 million – compared to other non-operating expenses of $1.9 million in the same period of 2015. These other non-operating expenses were primarily due to an increase of charges in fair value change as a result of increase in external financing as compared with the same period in 2015.
As a result of the above, the net loss for the second quarter of 2016 was $1.4 million, compared to a net profit of $8.8 million in the same period in 2015.
Basic and diluted loss per share was $0.004 compared to earnings per share of $0.02 in the same period in 2015. Basic and diluted loss per ADS were $0.03 compared to earnings per share of $0.18 in the same period in 2015.
Adjusted EBITDA was $8.6 million, compared to $4.5 million in the same period in 2015.
As of June 30, 2016, the Company owned and operated 133.1MW of IPP assets, which remained at the same level as of the end of March 31, 2016. Including the recent acquisition of operating assets in the U.S. on July 15, 2016, among others, the Company's total operating assets now stand at approximately 155MW.
The Company had 27.9MW of projects under construction as of June 30, 2016, compared to 24.1MW under construction as of March 31, 2016. All of the 27.9MW of projects under construction are located in Japan.
In total, the Company had 1.2GW of projects in various stages of development as of June 30, 2016, which included the projects under construction described above as well as 232.3MW 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 June 30, 2016, the Company had bank balances and cash of $37.0 million, trade receivables of $28.0 million and IPP solar park assets of $323.2 million. Total borrowing was $142.5 million, including $19.2 million of borrowing due within one year.