Israel Electric Corporation (IEC) (TASE: ELEC.B22) CEO Eli Glickman has ordered a deep cut in the company's 2012 development plans, including on projects considered critical for the electricity market.
The cuts are liable to affect private power producers and renewable energy ventures, especially in the south, which IEC was supposed to link to the national grid. The cuts will likely astonish the government, which approved a 4.5% electricity rate hike only last week.
Expert sources believe that the planned cut will result in an absurdity, as completed power stations will not be operational because they will not be hooked up to the national grid, even as the country faces a power shortage. "IEC's management opted to confront the government," a top energy official told "Globes". "If the government does not respond, it will end in extensive blackouts that will cause rioting."
The planned cut in the development budget is part of wider cutbacks that Glickman is planning in IEC's 2012 budget. The cutback has angered IEC division managers; at one embarrassing meeting, VP Customers Asher Dahan was evicted after yelling at Glickman.
Earlier this year, IEC's board of directors approved a NIS 4.5 billion investment in power stations and the national grid, and banned management from raising capital to finance additional investments. The board approved investing just NIS 700 million to develop the grid, half the amount that expert sources estimate is needed.
The projects most vulnerable to the budget cuts are the solar energy ventures planned for the Negev. These projects, including Ashelim, and power plants at Zeelim and Timna, will generate 1,000-2,000 megawatts of electricity.
IEC's only power lines in the region are obsolete, and cannot handle the electricity that these projects will produce. Other vulnerable projects include larger power stations and the pumped storage power stations planned at Gilboa and Kochav Hayarden in the lower Galilee.
IEC recently notified scores of pensioned senior managers that it was revoking the extra pay grades they were awarded at their retirement. These benefits added tens of thousands of shekels to the pensions of managers who retired between 1996 and 2006. In 1996, the government banned the practice of granting managers higher pay grades upon their retirement, but IEC evaded the order for a decade by granting a so-called "retirement grade". When the trick was discovered in 2006, the managers were not required to repay the illegal benefit.
Published by Globes [online], Israel business news - www.globes-online.com - on October 27, 2011
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