Pensions costs push IEC to heavy losses

A NIS 1.5 billion pension provision and higher fuel costs saw IEC lose NIS 1.47 billion in the first quarter.

Israel Electric Corporation (IEC) (TASE: ELEC.B22) posted a net loss of NIS 1.47 billion for the first quarter of 2012, compared with a net profit of NIS 147 million for the corresponding quarter of 2011. The utility reported an extraordinary NIS 1.5 billion expenses for pension liabilities, due to the new labor contract, which links pensions to the Consumer Price Index (CPI).

Revenue rose 25% to NIS 6.52 billion for the first quarter from NIS 5.21 billion for the corresponding quarter. Higher electricity tariffs boosted revenue by NIS 800 million, and higher electricity sales added another NIS 509 million. Operating loss was NIS 1.46 billion for the first quarter compared with an operating profit of NIS 647 million for the corresponding quarter.

IEC's expenditure on fuel more than doubled to NIS 5.1 billion for the first quarter from NIS 2.22 billion for the corresponding quarter. The higher costs are due to the halt in natural gas deliveries from Egypt and lower deliveries from the Israeli Yam Tethys field, forcing the utility to buy more expensive diesel.

Cash flow from operations was minus NIS 1 billion for the first quarter.

First quarter electricity sales rose 25% to 13.84 billion kilowatt/hours from 12.6 billion kilowatt/hours in the corresponding quarter. Peak demand reached 11,09 megawatts in January, of which IEC supplied 10.62 megawatts, and private power producers supplied 466 megawatts. Peak demand in the corresponding quarter was 9,275 megawatts in February 2011, of which IEC supplied 9,395 megawatts.

Last week, IEC announced that the government will back a NIS 3 billion debt offering by the utility, scheduled for July, due to its deteriorating financial situation.

Published by Globes [online], Israel business news - - on May 30, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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