Sky Solar Holdings, Ltd. 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
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 6.5MW 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.
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.
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.
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.