PROSPECTUS SUMMARY

This summary highlights information presented in greater detail elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding whether to invest in our ordinary shares, you should carefully read this entire prospectus, especially the risks of investing in our ordinary shares discussed under the heading “Risk Factors.”

Overview

We are a leading owner, developer and operator of power facilities located in key power generation markets in Latin America, the Caribbean and Israel, utilizing a range of fuels, including natural gas, hydroelectric, HFO, diesel and wind. Currently, our principal focus is on Latin American markets, which typically have higher rates of growth of gross domestic product, or GDP, and lower overall and per capita energy consumption, as compared with more developed markets. We believe that economic growth in Latin American markets will drive increases in overall and per capita energy consumption and therefore require significant additional investments in power generation assets in those markets.

As of June 30, 2015, our installed capacity and our proportionate capacity were 2,642 MW and 2,149 MW, respectively. We expect to increase our installed capacity by 1,202 MW, or 45%, to 3,844 MW (3,074 MW on a proportionate basis) by the middle of 2016, upon the completion of the following assets in advanced stages of construction:

 

•

Cerro del Aguila S.A.’s, or CDA’s, 510 MW hydroelectric project located in Peru, which we expect to be completed by the middle of 2016;

 

•

Samay I S.A.’s, or Samay I’s, 600 MW cold-reserve thermoelectric project located in Peru, which we expect to be completed by the middle of 2016; and

 

•

Kanan Overseas, I. Inc.’s, or Kanan’s, 92 MW thermal generation project in Panama, which we expect to be completed by the end of 2015.

ICP’s activities started in 2007 when Inkia Energy Limited, or Inkia, a subsidiary of Israel Corporation Ltd., or IC, an Israeli conglomerate, acquired Globeleq Americas Limited’s, or Globeleq’s, power generation assets in Latin America, which represented 549 MW of installed capacity. In 2010, IC formed ICP and contributed to it both Inkia and O.P.C. Rotem Ltd., or OPC. In January 2015, IC transferred ICP to Kenon (NYSE: KEN; TASE: KEN), our sole shareholder, in connection with IC’s spin-off of Kenon. Prior to the completion of this offering, Kenon will effect a Reorganization pursuant to which it will transfer all of its equity interests in its wholly-owned subsidiary ICP to us, as more fully described in “ Corporate Formation and Reorganization .”

Between 2007 and June 30, 2015, we invested approximately $2.5 billion in the acquisition, development and expansion of our power generation assets. Of this amount, 87% represented investments in greenfield development (including investments made in those assets in advanced stages of construction) and 13% represented acquisitions. We have financed our greenfield development using a combination of cash on hand, debt financing and investments by minority shareholders at the asset level, and have financed our acquisitions using cash on hand. Of the 2,093 MW we have added to our installed capacity since Inkia’s formation, 63% derived from greenfield development projects, consisting of our construction of the Kallpa combined cycle plant, which comprises Peru’s largest power generation facility, and the construction of OPC’s plant, which became Israel’s first independent power producer, or IPP. In the same period, we have acquired businesses with an aggregate installed capacity of 783 MW, in five countries in Latin America and the

 

Caribbean. By the middle of 2016, we will have derived 76% of our installed capacity growth since 2007 from our greenfield development efforts (based upon our current portfolio and assuming the completion of our assets in advanced stages of construction).

By successfully pursuing growth opportunities, primarily through contracted greenfield development projects in existing markets and acquisitions of anchor investments in new markets, we have expanded our regional presence, diversified our portfolio through the addition of various facilities which use a range of fuels, and significantly increased our cash flows. In 2014, our Adjusted EBITDA was $395 million, as compared to $41 million in 2008, representing a CAGR of 46% during this period. Adjusted EBITDA is a non-IFRS measure. For a reconciliation of our net income to our Adjusted EBITDA, see “ Summary Consolidated Financial and Other Information — Key Financial and Other Operating Information .”

We typically enter into long-term U.S. dollar-linked power purchase agreements, or PPAs, to sell capacity and/or energy to customers that we believe have strong credit profiles, such as large local distribution companies or non-regulated customers that are subsidiaries of large multinational corporations. As of June 30, 2015, the weighted average remaining life of our PPAs was 10 years (including the remaining life of the PPAs for our assets in advanced stages of construction). In the six months ended June 30, 2015 and the year ended December 31, 2014, 88% and 92%, respectively, of our aggregate energy sales (in GWh) were made pursuant to PPAs. We believe this practice limits our exposure to fluctuations in energy spot market rates and helps us to generate strong and predictable margins and cash flows. We seek to enter into PPAs at prices that are equal to, or higher than, the prevailing spot market rates in the countries in which we operate. Additionally, the majority of our PPAs are indexed to the underlying fuel cost of the related long-term supply agreements. Such indexing generally limits our exposure to fuel price fluctuations, helping us to maintain our margins in such instances. We believe that the stable and predictable margins and cash flows which generally result from such PPAs helps us to successfully secure significant project and bank/bond financing, with no or limited recourse, from a diverse international lender base during construction of our greenfield projects, which helps us to successfully develop our project pipeline.

Our portfolio is comprised of power facilities located in key power generation markets in Latin America, the Caribbean and Israel, using a range of fuels. The following charts present the relative percentages of our installed capacity by fuel type and country, as adjusted to reflect the completion of our assets in advanced stages of construction (the CDA, Samay I and Kanan projects), and assuming no other changes in capacity.

 

Expected Installed Capacity by Energy Source (Middle of 2016) 1		Expected Installed Capacity by Country (Middle of 2016)
3,844 MW

 

1.	Our dual-fueled plants, OPC, Samay I, and Colmito, are categorized as natural gas, diesel and natural gas, respectively.

 

The following charts set forth the relative percentage of our installed capacity by segment as of June 30, 2015, and our expected installed capacity by segment, as adjusted to assume the completion of our assets in advanced stages of construction (the CDA, Samay I and Kanan assets), and excluding additional capacity which may become available through other acquisitions or projects that we may complete by mid-2016 or other potential changes to our capacity:

 

Actual Installed Capacity by Segment (as of June 30, 2015)		Expected Installed Capacity by Segment (Middle of 2016)

Our largest market, Peru, is one of the fastest growing economies in Latin America, with average GDP growth of approximately 5.8% per year from 2009 through 2014, according to the International Monetary Fund, a mature regulatory framework and a well-run power system. As of and for the year ended December 31, 2014, our operating company in Peru had an installed capacity of 1,063 MW, representing 12.2% of Peru’s installed capacity, and generated 14.2% of the gross energy generated (in GWh) in Peru. As of and for the six months ended June 30, 2015, our operating company in Peru represented 45% of our Adjusted EBITDA, 51% of our net income, and 40% of our installed capacity. Our assets in advanced stages of construction in Peru are expected to provide an additional 1,110 MW in installed capacity to address the expected increase in Peruvian energy demand, which is expected to result, in part, from the substantial investments made in connection with Peru’s energy-intensive mining industry and expected growth in its manufacturing industry.

We also operate OPC, the first IPP in Israel, which, following decades of state control, recently opened its electricity market to private power producers. As a result, the electricity market in Israel is still in the early stages of development. Furthermore, Israel’s energy consumption levels have increased in recent years and are expected to continue to increase in the near term. As of and for the year ended December 31, 2014, OPC had an installed capacity of 440 MW, representing approximately 3% of Israel’s installed capacity and 22% of the installed capacity of IPPs, and generated 6.9% of the gross energy generated (in GWh) in Israel. As of and for the six months ended June 30, 2015, OPC represented 25% of our Adjusted EBITDA, 30% of our net income, and 17% of our installed capacity. We believe that OPC’s plant provides us with a strategic advantage as an early entrant in the Israeli electricity market. Additionally, given Israel’s growing economy and the advanced age of its existing state-owned power generation facilities, we believe that OPC provides us with the know-how required for, visibility of, and opportunity to participate in, additional power projects in Israel, which may become increasingly available to private sector participants such as ourselves.

 

Our Portfolio of Generation Assets

The following table sets forth summary operational information regarding each of our operating companies as of June 30, 2015 by segment :

 

Segment		Country		Entity		Ownership Percentage (Rounded)				Fuel		Installed Capacity (MW) 1				Proportionate Capacity 2				Type of Asset		Weighted Average Remaining Life of PPAs Based on Firm Capacity (Years)				LTM Energy Sales Under PPAs (GWh) 3
Peru		Peru		Kallpa			75	%		Natural Gas			1,063				797			Greenfield 4			7				6,154
Israel		Israel		OPC			80	%		Natural Gas and Diesel			440				352			Greenfield			8	5			3,976
Central America		Nicaragua		Corinto			65	%		HFO			71				46			Acquired			4				442
		Nicaragua		Tipitapa Power			65	%		HFO			51				33			Acquired			4				322
		Nicaragua		Amayo I			61	%		Wind			40				24			Acquired			9				179
		Nicaragua		Amayo II			61	%		Wind			23				14			Acquired			10				88
		Guatemala		Puerto Quetzal			100	%		HFO			179				179			Acquired			—				782
		El Salvador		Nejapa			100	%		HFO			140				140			Original Inkia Asset			2				712
Other		Bolivia		COBEE			100	%		Hydroelectric, Natural Gas			228				228			Original Inkia Asset			2				269
		Chile		Central Cardones			87	%		Diesel			153				133			Acquired			—				—
		Chile		Colmito			100	%		Natural Gas and Diesel			58				58			Acquired			3				251
		Dominican Republic		CEPP			97	%		HFO			67				65			Original Inkia Asset			—				90
		Jamaica		JPPC			100	%		HFO			60				60			Original Inkia Asset			3				412
		Colombia		Surpetroil			60	%		Natural Gas			15				9			Acquired			1				49
		Panama		Pedregal 6			21	% 7		HFO			54				11			Original Inkia Asset			2				258
		Total Operating Capacity											2,642				2,149

 

1.	Reflects 100% of the capacity of each of our assets, regardless of our ownership interest in the entity that owns each such asset.

2.	Reflects the proportionate capacity of each of our assets, as determined by our ownership interest in the entity that owns each such asset.

3.	Reflects energy sales under PPAs for the 12 months ended June 30, 2015.

4.	Kallpa’s plants were developed as greenfield projects in four different stages between 2005 and 2012, resulting in 870 MW of installed capacity. In addition, Kallpa acquired Las Flores’ power plant in 2014, adding 193 MW to Kallpa’s capacity.

5.

Reflects the weighted average remaining life of OPC’s PPAs with end users based on OPC’s firm capacity. The IEC PPA (as defined below), which extends for an 18-year term and covers OPC’s entire firm capacity, provides OPC with the option to allocate and sell the generated electricity of the power station directly to end users. OPC has exercised this option and sells all of its energy and capacity directly to 23 end users, as of June 30, 2015 (22 end users as of December 31, 2014). For further information on the IEC PPA, see “Business—Regulatory, Environmental and Compliance Matters—Regulation of the Israeli Electricity Sector.”

6.	Although Pedregal is located in Central America, it is a minority investment. Therefore, from an income statement perspective, it is not part of the Central America segment and Pedregal is only reflected in our share in income of associated companies.

7.	Although we have a non-controlling interest in Pedregal, we are party to a management services agreement, which designates us as the administrator responsible for the day-to-day management of Pedregal.

 

The following table sets forth summary operational information regarding each of our assets in advanced stages of construction:

 

Country

Entity

Ownership Percentage (Rounded)

Fuel

Installed Capacity (MW) 1

Proportionate Capacity 2

Expected COD

Percentage Developed (As of September 30, 2015)

Expected Cost

Amount Invested (As of  June 30, 2015)

Peru

CDA

75%

Hydroelectric

510

383

Middle of 2016

85%—Overall completion 96%—Dam construction 100%—Tunnel drilling

$954 million

$780 million

Peru

Samay I

75%

Diesel and Natural Gas

600

3

450

Middle of 2016

91%

$380 million

$267 million

Panama

Kanan

100%

HFO

92

92

End of 2015

85%

$73 million

4

$61 million

4

Total Capacity In Advanced Stages of Construction

1,202

925

$1,407 million

$1,108 million

 

1.	Reflects 100% of the expected capacity of each asset regardless of our ownership interest in the entity that owns the asset.

2.	Reflects the proportionate capacity of each of our assets, as determined by our ownership interest in the entity that owns each such asset.

3.	When fueled by natural gas, the Samay I plant will have an installed capacity of approximately 720 MW.

4.	Includes $40 million of intercompany expenses relating to Puerto Quetzal’s and CEPP’s sale of the barges to Kanan.

Since 2008, we have increased our installed capacity at a CAGR of 24%, and we expect our installed capacity to grow at a CAGR of 21% over the next two years as a result of the anticipated completion of assets which are currently in advanced stages of construction.

The following chart presents the growth of our installed capacity by year from 2008 through 2014, and the expected growth of our installed capacity resulting from the completion of our assets in advanced stages of construction and assuming no other changes to our capacity during this period. By the middle of 2016, we will have derived 76% of our installed capacity growth since 2007 from our greenfield development efforts (based upon our current portfolio and assuming the completion of our assets in advanced stages of construction).

Installed Capacity (MW)

 

 

 

1.	Figures for 2008 and 2009 reflect Inkia’s capacity.

2.	Expected Kanan capacity.

3.	Expected Kanan, CDA and Samay I capacity.

 

The following table sets forth certain consolidated financial and operational data as of the dates and for the periods set forth below:

 

		Six Months Ended June 30,								Year Ended December 31,
		2015				2014				2014				2013				2012
		($ millions, except as otherwise indicated)
Sales from continuing operations		$	655			$	661			$	1,372			$	873			$	576
Net income from continuing operations			39				72				140				53				37
Net income			43				79				268				81				66
Adjusted EBITDA 1			175				168				395				247				154
Installed capacity at end of period (in MW) 2			2,642				2,463				2,642				2,070				1,572
Proportionate capacity at end of period (in MW) 3			2,149				1,929				2,108				1,608				1,198

 

1.	Adjusted EBITDA is a non-IFRS measure. For a reconciliation of our net income to our Adjusted EBITDA, see “ Summary Consolidated Financial and Other Information .”

2.	Reflects 100% of the capacity of each of our assets, regardless of our ownership interest in the entity that owns each such asset.

3.	Reflects the proportionate capacity of each of our assets, as determined by our ownership interest in the entity that owns each such asset.

Potential Projects

We are constantly monitoring and considering development and acquisition opportunities and are currently assessing 30 projects in Israel and various Latin American countries, such as Chile, Colombia, Guatemala, Mexico, Peru, Panama, the Dominican Republic, and Nicaragua. These potential projects range in size from small-scale power facilities ( e.g. , less than 40 MW) to large-scale power facilities ( e.g. , approximately 550 MW) and utilize different fuels and technologies, including natural gas, hydroelectric, wind, and stranded gas. In some instances, we have acquired land, secured necessary licenses or rights, including temporary concessions and water rights, commissioned studies, made bids, or initiated similar actions, in connection with our assessment of the viability of the relevant project. We are also considering acquiring companies and assets in power generation and related businesses ( e.g. , transmission and distribution companies or assets).

In addition to the Latin American opportunities that we are currently considering, we also monitor opportunities in other markets. For example, in August 2015, we acquired 100% of the shares of Advanced Integrated Energy Ltd., or AIE, for NIS 60 million (approximately $16 million). AIE holds a provisional license for the construction of a 120 MW cogeneration power station in Israel and will seek regulatory approval for licenses in respect of an additional 25 MW. Based upon our initial assessment, we expect that the total cost of completing the construction of the AIE plant (including the consideration for the acquisition of AIE) will be approximately $200 million. The AIE plant is expected to reach its COD in the second half of 2018.

 

Set forth below is a map summarizing certain of the markets and projects that we have identified for potential expansion. Development projects imply a high degree of uncertainty, and there is no guarantee that we will proceed with these projects. Ultimately, notwithstanding the number of opportunities that we may consider over the long- and short-terms, we will only pursue those projects that we believe will generate attractive, risk-adjusted returns over the long-term and which we believe we have the management capacity to build and operate. Numerous conditions will need to be met before we can develop or acquire any of the projects listed below. The summary below sets forth projects developed and owned by us, as well as projects owned by third parties, that we may be able to acquire by direct negotiations or through tender processes. This summary is not exhaustive, is only provided to show projects which we are evaluating, and should not serve as an indication of any expectation regarding any final outcome.

 

Competitive Strengths

Strong track record in disciplined project development and obtaining financing —We leverage our core competencies—project identification, evaluation, development, construction and operation—to develop power generation facilities using various technologies in attractive markets that typically have relatively high GDP growth rates and relatively low levels of per capita energy consumption. For example, in 2012, we completed our third expansion of Kallpa Generación S.A.’s, or Kallpa’s, gas-powered plant, which is the largest power generation facility in Peru in terms of capacity, by converting it into a combined cycle facility and thereby adding 292 additional MW to the facility’s capacity. This expansion was completed on time and below budget. Additionally, in 2013, OPC became the first IPP in Israel when we completed the construction of its 440 MW combined cycle power plant.

 

Our projects have been developed with a disciplined capital structure, which reflects our commitment to develop projects in accordance with three key fundamental principles. First, we endeavor to construct projects by entering into turnkey engineering, procurement and construction, or EPC, agreements that define the total project cost and transfer most of the risks of construction delays and cost overruns to our EPC contractors. We currently have assets in advanced stages of construction with an expected aggregate installed capacity of 1,202 MW, 1,110 MW of which is being constructed pursuant to EPC contracts. Second, we seek to secure a revenue stream prior to the construction of our plants by sourcing and entering into long-term PPAs, which provide our development projects with verifiable projected margins and cash flows, before construction has commenced. Finally, we leverage our EPC contracts and PPAs to secure long-term project financing agreements which are generally stand-alone, secured, project-specific, and with no or limited recourse. Over the course of our history, we have secured different types of financings ( e.g. , leases, local and international bonds, syndicated loans, etc.) during times of changing financial markets and in connection with our construction of various projects using a range of fuels.

Long-term PPAs and supply agreements that limit exposure to market fluctuations —Our operating subsidiaries typically enter into long-term PPAs, which generally limits their exposure to fluctuations in energy spot market rates, generates stable and predictable margins, and helps to create stability and predictability in our cash flows. In the six months ended June 30, 2015 and the year ended December 31, 2014, we made 88% and 92%, respectively, of our aggregate energy sales (in GWh) pursuant to long-term PPAs. As of June 30, 2015, the weighted average remaining life of our PPAs was 10 years (including the remaining life of the PPAs for our assets in advanced stages of construction) and we have historically sought, and will continue to seek, to renew our long-term PPAs as they expire.

As of June 30, 2015, the majority of our PPAs were indexed to the price of the corresponding power plant’s operating fuel prices in U.S. Dollars. Additionally, as of June 30, 2015, many of our PPAs provided for payment in, or were linked to, the U.S. Dollar, thereby limiting our exposure to fuel price and exchange rate fluctuations. Additionally, the counterparties to our long-term PPAs are typically large local distribution companies or non-regulated customers, including subsidiaries of large multi-national corporations, which we believe have strong credit profiles, mitigating the risk of customer default. Some of our major customers within Peru and Israel include Southern Peru Copper Corporation, Sociedad Minera Cerro Verde S.A.A., a subsidiary of Freeport-McMoRan, Compañía Minera Antapaccay S.A., a subsidiary of Glencore Xstrata, and Oil Refineries Limited, as well as governments and quasi-governmental entities.

As our power facilities utilize and are dependent upon natural gas, hydroelectric, HFO, diesel, wind, or a combination of these energy sources, we generally seek to enter into long-term supply and transportation agreements to acquire the necessary fuel for our facilities. For example, Kallpa and OPC, which own and operate our largest plants, are party to long-term supply agreements, including natural gas supply agreements and transportation services agreements, that are material to their operations.

Attractive footprint in high growth markets —Currently, our principal focus is on Latin American markets, which typically have higher rates of growth of GDP and lower overall and per capita energy consumption, as compared with more developed markets. We expect continued growth in these key markets, providing us with the opportunity to generate attractive, risk-adjusted returns through additional investments in power generation assets in those countries.

We are a leader in our largest market, Peru, one of the fastest growing economies in Latin America, with an average GDP growth of approximately 5.8% per year from 2009 through 2014, according to the International Monetary Fund, a mature regulatory framework, and a well-run power system. As of and for the year ended December 31, 2014, our operating company in Peru had an installed capacity of 1,063 MW, representing 12.2% of Peru’s installed capacity, and generated 14.2% of the gross energy generated (in GWh) in Peru. Our operating company in Peru represented 45% of our Adjusted EBITDA, 51% of our net income, and 40% of our installed

 

capacity as of and for the six months ended June 30, 2015. Additionally, our assets in advanced stages of construction in Peru are expected to provide an additional 1,110 MW in installed capacity to address the expected increase in Peruvian energy demand, which is expected to result, in part, from the substantial investments made in connection with Peru’s energy-intensive mining industry and expected growth in its manufacturing industry.

We also operate OPC, the first IPP in Israel, which, following decades of state control, recently opened its electricity market to private power producers. As a result, the electricity market in Israel is still in the early stages of development. Furthermore, Israel’s energy consumption levels have increased in recent years and are expected to continue to increase in the near-term. As of and for the year ended December 31, 2014, OPC had an installed capacity of 440 MW, representing approximately 3% of Israel’s installed capacity and 22% of the installed capacity of IPPs, and generated 6.9% of the gross energy generated (in GWh) in Israel. As of and for the six months ended June 30, 2015, OPC represented 25% of our Adjusted EBITDA, 30% of our net income, and 17% of our installed capacity. We believe that OPC’s plant provides us with a strategic advantage as an early entrant in the Israeli electricity market. Additionally, given Israel’s growing economy and the advanced age of its existing state-owned power generation facilities, we believe OPC provides us with the know-how required for, visibility of, and opportunity to participate in, additional power projects in Israel, which may become increasingly available to private sector participants such as ourselves.

In addition to our attractive position in Peru and Israel, we have also developed an attractive footprint in several markets in Latin America, including Chile and Colombia. We believe that our current platform, coupled with our agile and disciplined decision-making process, enables us to take advantage of opportunities as they arise.

Established and disciplined track record in making acquisitions— We have acquired numerous generation assets since 2007, resulting in the expansion of our operations by 783 MW (641 MW on a proportionate basis) in five countries in Latin America and the Caribbean. We believe our recognition as a regional generator and developer with a relatively strong balance sheet, and our ability to act quickly with respect to acquisitions, has complemented our development capabilities by allowing us to strategically source and execute acquisitions. Furthermore, we have the ability to manage projects that are too small for large companies, as well as projects that are too large for small companies. Our acquisition of Central Cardones in 2011, for example, provided us with an initial footprint in Chile, a dynamic and important power market, and facilitated our acquisition of Colmito in October 2013. Similarly, our acquisition of certain Nicaraguan assets in 2014, representing 185 MW of installed capacity (117 MW on a proportionate basis) provided us with an entry into the Nicaraguan market and diversified our portfolio with operational wind generation assets. Additionally, in August 2015, we acquired 100% of the shares of AIE, which holds a provisional license for the construction of a 120 MW cogeneration power station, and will seek regulatory approval for licenses in respect of an additional 25 MW, in Israel, a new and growing private electricity generation market.

Driving operational excellence through partnerships with leading OEMs and reliance on efficient technologies —We seek to optimize our power generation capacity by using leading technologies ( e.g. , turbines manufactured by Siemens, General Electric, Mitsubishi and Andritz) and entering into long-term service agreements with leading, multi-national original equipment manufacturers, or OEMs. Our technologies and long-term partnerships enable our power generation assets to perform more efficiently and at relatively high levels of reliability. Additionally, our experienced staff is committed to increasing our operating performance and ensuring the disciplined maintenance of our power generation assets. We believe that our generation plants’ weighted average availability rate of 94% for both the six months ended June 30, 2015 and the year ended December 31, 2014 was the result of our optimization efforts and commitment to improving our operating efficiency and performance.

Additionally, our acquisition or construction of power generation assets that use efficient technologies ( e.g ., the conversion of Kallpa’s facility into a combined cycle operation in 2012) places our generation assets competitively in the dispatch merit order in certain of the countries in which we operate. For example, Kallpa’s

 

facility, a base load plant and combined cycle gas turbine, is among the first power plants to be dispatched, due to its efficiency and competitiveness in the dispatch stack. Similarly, CDA’s plant, as a hydroelectric power plant, will also be among the first power plants to be dispatched in Peru once it reaches its COD in 2016. Having a portfolio which includes efficient power plants with lower production costs allows us to potentially earn higher margins than companies that utilize certain other competing technologies in their plants and are therefore less competitive in the dispatch merit order.

Experienced management team with strong local presence —Our management team has extensive experience in the power generation business. Our executive officers have an average of approximately 20 years of experience in the power generation industry, and significant portions of our core management team have been working together in international large power generation companies since 1996. We believe that this overall level of experience contributes to our ability to effectively manage our existing operating companies and to identify, evaluate and integrate high-quality growth opportunities within and outside Latin America. Furthermore, our hands-on management team utilizes a lean decision-making process, which allows us to quickly take advantage of strategic acquisitions and potential developments and opportunities as they materialize. Our managers are compensated, in part, on the basis of our financial performance, which incentivizes them to continue to improve our operating results. Additionally, our local management teams provide in-depth market knowledge and power industry experience. These teams consist primarily of local executives with significant experience in the local energy industry and with local government regulators. We believe that the market-specific experience of our local management provides us with insight into the local regulatory, political and business environment in each of the countries in which we operate.

Strong and dedicated shareholder with experience operating growth-oriented businesses and a long-term commitment to our growth — Our shareholder owns businesses, in whole or in part, ranging from established, cash generating businesses to early stage development companies. The international profile, experience and commitment of our shareholder in operating growth-oriented businesses, lends us credibility in conducting our operations and project development, particularly with respect to large national and international companies, such as our customers, and international financial institutions which are an important source of financing for our assets. Upon completion of this offering, Kenon (NYSE: KEN; TASE: KEN) will remain our controlling shareholder. Kenon was formed in 2014 to serve as the holding company of various dynamic, primarily growth-oriented businesses, including IC Power, which were contributed to Kenon by its former parent, IC, in a spin-off completed in January 2015.

Business Strategy

Continue to successfully develop greenfield assets in attractive markets —One of our core competencies is identifying, evaluating, constructing, and operating greenfield development projects in our target markets. We will continue to seek to develop power generation assets in countries with relatively stable, growing economies, low levels of per capita energy consumption or developing private energy generation markets. We also seek to develop assets that can be expanded through further investment, or as additional fuels become available, which provides us with the ability to further develop an asset and increase its installed capacity in connection with market trends, industry developments, or changing fuel availability.

We place particular focus on our ability to complete the development of our greenfield projects on time and within budget and will continue to use extensive project planning and contracting mechanisms to minimize our development risk. For example, in connection with our development activities, we typically enter into lump-sum, turnkey EPC contracts to minimize our construction risks and mitigate construction cost overruns, while also entering into long-term PPAs to generate stable and predictable margins and cash flows; we believe this combination facilitates our access to construction financing. Engaging in such practices has allowed us to successfully complete several thermal generation projects, including the Kallpa facility, our largest development

 

to date. Additionally, our first hydroelectric development, CDA’s plant, is expected to be fully operational at a cost of $1.9 million per MW, making CDA’s plant among the most efficiently constructed hydroelectric facilities in Latin America in terms of cost per MW.

Optimize portfolio to maximize returns while minimizing risk —We regularly assess our portfolio of operating companies and employ disciplined portfolio management principles to optimize our operations in light of changing industry dynamics in a particular country or region, create financing flexibility and address specific risk management and exposure concerns. Our strategy is to optimize the composition of our portfolio by focusing on profitable developments and acquisitions within key power generation markets typically in Latin America, the Caribbean and Israel.

For example, prior to our 2014 acquisition of the Las Flores facility, a 193 MW thermal power generation plant (representing 145 MW on a proportionate basis), Las Flores had operated intermittently due to the lack of a long-term regular supply of natural gas. The Kallpa facility, which is located near the Las Flores plant, had an excess supply of natural gas. We identified these and other potential synergies and, since our acquisition of the Las Flores facility, have been able to significantly improve the operations and generation activities of Las Flores’ plant, while also maximizing the use of the Kallpa facility’s natural gas supply and transportation capabilities. Our recent acquisition of Puerto Quetzal Power (PQP) Company, or Puerto Quetzal, serves as another example of our portfolio optimization efforts. In addition to providing us with an attractive entry point into the Guatemalan market, one of the barges we acquired from Puerto Quetzal was recently redeployed to Panama to allow Kanan to take advantage of a short-term supply shortfall in the Panamanian power market. Additionally, in 2014, we divested our 21% indirect equity interest in Edegel S.A.A., or Edegel, one of Peru’s largest power generation companies. While the Edegel investment was a strong cash flow generator which helped to fund the initial stages of our growth, we opted to sell this investment in order to redeploy the proceeds from such sale into projects in which we have a majority control and which we believe will have a better risk and return profile for our shareholders over the long term.

Complement our organic development with dynamic and disciplined acquisitions —We seek to invest in countries and/or assets where we can significantly increase our cash flows and optimize our operations. Therefore, in addition to greenfield developments, we also seek to enter into and/or expand our presence in attractive markets by acquiring controlling interests in operating assets to anchor our geographical expansion. For example, we recently acquired power generation assets in Nicaragua, Guatemala and Colombia, which represent our initial entry into these markets, through our acquisitions of (1) IC Power Nicaragua Holding, or ICPNH, which provided us with controlling interests in two HFO and two wind energy Nicaraguan generation companies, (2) Puerto Quetzal, which provided us with three power barges with HFO generators (one of which was recently transferred to our subsidiary Kanan to allow it to take advantage of supply shortfalls in the Panamanian power market), and (3) Surpetroil S.A.S., or Surpetroil, a company that utilizes stranded natural gas reserves in its production of energy. Chile and Colombia represent important parts of our growth strategy. We continue to seek expansion in Chile and Colombia, and we expect that our assets in these countries will provide us with the initial footprint from which to carry out our organic development strategy in these two markets. Additionally, consistent with our strategy of maintaining controlling interests in our power generation assets, in May 2014, we increased our equity ownership in Jamaica Private Power Company Ltd., or JPPC, (which has an aggregate 60 MW of installed capacity in two HFO generation units in Jamaica) from 16% to 100%, and in January 2015, we increased our equity ownership in Nejapa Power Company L.L.C., or Nejapa, (which has 140 MW of installed capacity at an HFO power generation facility in El Salvador) from 71% to 100%. We will continue to seek to leverage our acquisitions of assets in new markets and/or of assets utilizing a broad range of technologies (which may include new fuels, such as solar power) to generate attractive risk-adjusted returns.

 

Continue to enter into long-term PPAs with credit-worthy counterparties —In the six months ended June 30, 2015 and the year ended December 31, 2014, we made 88% and 92%, respectively, of our aggregate energy sales (in GWh) pursuant to PPAs, many of which are denominated in, or linked to, the U.S. Dollar. Our strategy of generating strong and predictable cash flows from long-term PPAs has enabled us to successfully secure financing for our greenfield projects from a diverse international lender base. We seek to enter into long-term capacity PPAs prior to committing to a new project so as to accurately determine expected cash flows and margins of a particular asset, which facilitates its financing. For example, although the CDA plant is yet to reach its COD, CDA has sourced and entered into two long-term PPAs beginning in 2016 and 2018 for a significant portion of its expected capacity, contracting most of the estimated firm energy it expects to generate between 2018 and 2027. The expected cash flows associated with such PPAs contributed to CDA’s attractive credit profile, which supported the financing of CDA’s plant’s development. Similarly, the Peruvian government has guaranteed capacity payments for 600 MW of the expected capacity of Samay I’s plant for a 20-year period at rates above regulated capacity rates, which also provided support for the financing of the plant’s development. In addition to significantly improving our access to financing with no or limited recourse, our strategy of contracting our assets’ energy and capacity significantly reduces our exposure to changes in spot prices.

Risk Factors

Investing in our ordinary shares involves risks. You should carefully consider the risks described in “ Risk Factors ” before making a decision to invest in our ordinary shares. If any of these risks actually occurs, our business, financial condition, results of operations or liquidity could be materially adversely affected. In such case, the trading price of our ordinary shares would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

 

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risks related to our capital commitments and/or intentions with respect to certain of our operating businesses, including the sufficiency of our liquidity and capital resources in the near-term;

 

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risks related to the expansion, construction, development, or acquisition, as applicable, of power companies or assets;

 

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risks related to the expected timing, completion, and terms of certain acquisitions, including the assignment of certain supply and/or transmission agreements;

 

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an inability to source, enter into and/or renew long-term PPAs and EPC agreements and the amounts to be paid under such agreements;

 

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an inability to renew and/or enter into supply, transmission and/or distribution agreements on competitive terms, as such agreements expire;

 

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risks related to expected trends in the countries in which each of our businesses operate, including trends relating to the growth of a particular market, supply and demand imbalances, investments in power generation facilities, and the availability and prices of natural gas and other fuels;

 

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an inability to respond appropriately, or effectively index our sales prices or expenses, to volatility in commodity prices;

 

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an inability to secure raw materials, including fuel, to operate our power generation plants;

 

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risks related to the impact of the decline of crude oil prices on our sales or Adjusted EBITDA;

 

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risks related to expected or potential changes in tariffs, which may impact our revenues or Adjusted EBITDA;

 

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risks related to variations in weather, the occurrence of certain hydrological conditions in respect of our hydropower and thermal plants, as well as hurricanes and other storms and disasters, and low levels of wind for our wind facilities;

 

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risks related to competition from other companies serving our end markets;

 

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risks related to our counterparties, including risks related to our counterparties’ financial credit, performance risks;

 

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increased governmental regulation of our business, industry or the business and industries of our customers and suppliers;

 

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new types of taxes, increases or decreases in taxes, our tax position, or the tax position of our businesses;

 

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economic and political unrest in the countries in which we operate;

 

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the potential expropriation or nationalization of our operating assets by foreign governments, with or without adequate compensation; and

 

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risks related to our ability to distribute dividends to our shareholders.

Company History, Structure and Reorganization

IC Power was incorporated under the laws of Singapore in May 2015 under the name IC Power Pte. Ltd., pursuant to the Companies Act, Chapter 50 of Singapore, or the Singapore Companies Act, to serve as the holding company of ICP and its businesses, which shall be contributed to us by our parent, Kenon, prior to the completion of this offering, through the Reorganization described in further detail in “ Corporate Formation and Reorganization .” Additionally, prior to the completion of this offering, we will be converted into a Singapore public company limited by shares and renamed                                         . Our Singapore company registration number is 201511865D. Until the completion of this offering, we will remain a wholly-owned subsidiary of Kenon, which was formed by IC in 2014 to serve as the holding company of certain interests, including ICP, received by Kenon in connection with IC’s January 2015 spin-off of Kenon to IC’s shareholders.

The graphic below illustrates our corporate structure prior to, and immediately after, the completion of the Reorganization and the completion of the offering.

 

Prior to the Completion of the Reorganization and the Offering		After the Completion of the Reorganization and the Offering

Our registered address is 80 Raffles Place #26-01, UOB Plaza, Singapore 048624. Our principal executive office is located at 1 Temasek Avenue #36-01, Millenia Tower, Singapore 039192 and our telephone number at this address is +65 6351 1780.

 

THE OFFERING

 

Issuer

IC Power Pte. Ltd., a newly-formed holding company which will receive the outstanding equity interests of ICP. Prior to the completion of this offering, we will be converted into a Singapore public company limited by shares and renamed                                                                      .

 

Underwriters

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., UBS Securities LLC, HSBC Securities (USA) Inc., Scotia Capital (USA) Inc., and Credicorp Capital Sociedad Agente de Bolsa S.A.

 

Public offering price

We currently expect that the initial public offering price will be between $         and $         per ordinary share.

 

Ordinary shares being offered

ordinary shares.

 

Ordinary shares outstanding before this offering

ordinary shares.

 

Ordinary shares outstanding immediately after this offering

ordinary shares (              ordinary shares if the underwriters exercise in full their option to purchase additional ordinary shares from us).

 

Underwriters’ purchase option

We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an additional              ordinary shares, at the initial public offering price listed on the cover page of this prospectus, less the underwriting discount.

 

Listing

We are in the process of applying for the listing of our ordinary shares on the NYSE under the ticker symbol “ICP.”

 

Use of proceeds

Assuming an initial public offering price of $         per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from the sale of shares of our ordinary shares in this offering will be approximately $         million (or $         million if the underwriters exercise in full their option to purchase additional ordinary shares from us), after deducting estimated underwriting discounts and commissions and offering expenses.

 

We intend to use the net proceeds that we receive in this offering, along with readily available cash:

 

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to develop greenfield projects;

 

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to acquire companies or assets in the electricity sector ( e.g. , generation, transmission or distribution companies or assets);

 

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to prepay in full all obligations under our note payable to Kenon (which will be in an aggregate principal amount of $220 million), which note will be issued to Kenon as part of the consideration for Kenon’s contribution of ICP to us in connection with the Reorganization, will bear interest at a

 

rate of LIBOR +6% per annum from the earlier of June 30, 2016 or 21 days after the completion of this offering, and will mature, unless otherwise prepaid, on December 31, 2016; and

 

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for general corporate purposes.

 

Except as specified above, we are unable to estimate the amount of the net proceeds from this offering that will be used for any of the purposes described above. Accordingly, we will have broad discretion in the way that we use the net proceeds of this offering. For further information on our Use of Proceeds, see “ Use of Proceeds .” For further information on the greenfield development and acquisition opportunities under current assessment and the status of our development efforts, see “ Business—Potential Projects .”

 

Payment and settlement

Our ordinary shares are expected to be delivered against payment on                     , 2015.

 

Voting rights

We will have only one class of issued and outstanding ordinary shares, which have identical rights in all respects (including voting rights) and rank equally with one another. For further information on our ordinary shares, see “ Description of Share Capital .”

 

Dividend policy

From time to time, our board of directors may approve the payment of dividends to our shareholders. The declaration and payment of future dividends, if any, will be at the discretion of our board of directors and will depend upon many factors, including our profits, our financial position, earnings, cash flows, capital requirements, level of indebtedness, the progress relating to our strategy plan, statutory and contractual restrictions applicable to the payment of dividends, the conditions prevailing in the market, our overall financial condition, available distributable reserves, and additional factors our board of directors deems appropriate. For further information on our dividend policy, see “ Dividend Policy ” and for further information on the risks related to our dividend policy and our ability to declare dividends to our shareholders, see “ Risk Factors—Risks Related to Our Ordinary Shares and this Offering—As a newly-incorporated company , we will not have distributable profits to pay dividends .”

 

Lock-up agreements

Subject to certain exceptions, we, our executive officers and directors and Kenon, our controlling shareholder, collectively holding all of our ordinary shares outstanding immediately prior to this offering have entered into lock-up agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus. For further information on these lock-up agreements, see “ Underwriting—No Sales of Similar Securities .”

 

Material tax considerations

For a description of certain U.S. federal income tax considerations of the acquisition, ownership and disposition of our ordinary shares, see “ Taxation—U.S. Federal Income Tax Considerations .”

 

For a summary of Singapore income tax, goods and services tax and stamp duty considerations relevant to the acquisition, ownership and disposition of our ordinary shares, see “ Taxation—Material Singapore Tax Considerations .”

 

Risk factors

See “ Risk Factors ” included elsewhere in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.

We base the number of ordinary shares outstanding following the completion of this offering on the number of ordinary shares outstanding as of the date of this prospectus.