It will be possible for Israel Electric Corporation (IEC) (TASE: ELEC.B22) to hold an IPO within two years, subject to execution of its streamlining plan, IEC acting chairman Micha Lazar told "Globes" in an exclusive interview. He cautioned that delays in delivery of natural gas from Tamar could cost the Israeli economy billions of shekels in damage.
Lazar also warned that if the Israeli government, which owns IEC, does not finance the construction of new power stations, the effects will be felt very soon. "We've reached the moment of truth. The government has to decide and ensure the development of the electricity economy, otherwise we'll see shortages by 2012." Lazar said.
Lazar accused the government of delaying execution of IEC's Compass streamlining plan. The Ministry of Finance says that the plan must be part of the restructuring of IEC.
Lazar added, "IEC's main problem is that its shareholders don’t finance it, either through a capital injection or by other means. This conduct is unacceptable at companies with such large debt-to-balance sheet ratios."
"Globes": How do you explain the government's ignoring your condition?
Lazar: "It's convenient for them for the entire financing burden to fall on IEC, and that's what has happened. IEC has raised and financed, and reached the situation in which it is in. the shareholders should realize that an infrastructure company in development needs investment from its owners.
"Another thing has happened here. Private power producers have not been established in Israel until now, belying the regulator's intentions. The result is that there is no one to share with us the burden of developing the electricity economy."
Reports claim that there are worries about IEC's financial soundness. Are you worried?
"The company is stable and can meet its obligations, provided that the development burden is lifted from it. We decided to suspend this and approved the raising of capital only for the recycling of debt.
"IEC can raise more, but the board of directors said, 'We won't do it.' Our responsibility as directors is to ensure that the company reduces its debt burden, as at any normal company."
Is this why you're considering an IPO?
"An IPO will inject capital into IEC and enable to reduce its liabilities."
But the World Bank found that salaries at IEC are 25% above the industry average and that you should streamline.
"An IPO can only be held after we begin a streamlining and restructuring process with the consent of the employees. The issue of streamlining is not stymied because of the employees. The plan is lying on the government's table, and it has to decide."
Lazar was elected as acting chairman to replace Motti Friedman, whose term expired in February 2010. No permanent chairman has since been elected, an unprecedented event at the 87-year old utility. Possible candidates for the post include former National Religious Party chairman Effie Eitam, Israel Ports Development & Assets Company Ltd. chairman Yiftach Rontal, who has served as IEC CFO, and IEC director Avraham Natan. Eitam is thought to have the best chance because Prime Minister Benjamin Netanyahu supports him.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010