The government and the Histadrut (General Federation of Labor in Israel) will seek to reach a historic agreement to reform Israel Electric Corporation (IEC) (TASE: ELEC.B22) within four months, under a deal reached by Minister of Finance Yair Lapid, Histadrut chairman Ofer Eini, and Minister Energy and Water Resources Silvan Shalom. In talks over the past few days, they decided that the negotiations on IEC reform will officially resume within three weeks, and continue for 3-4 months, until a final agreement is struck.
Earlier this week, Shalom held a series of meetings with top Ministry of Energy officials, the Public Utilities Authority (Electricity), and IEC's board of directors to reach an agreement. At the meetings, Shalom said that he would examine all the proposals on the agenda, and that he did not consider himself bound by understandings reached by the previous government, which failed to reach an agreement to reform IEC.
For example, the model which states that independent power producers will increase their market share to 40% and that IEC's share will fall to 60% is not the only formula that Shalom and his staff are considering.
In the previous Netanyahu government, Deputy Ministry of Finance Yitzhak Cohen, a Shas MK, led the talks on IEC reform. Deputy Attorney General Avi Licht ordered the talks halted before the elections, on the grounds that the outgoing government should not make such an important decision on the electricity economy. At the time, IEC workers committee chairman Miko Tzarfati told the Knesset Finance Committee that the talks had reached an advanced stage and that an agreement was just days away. In reality, there were still wide gaps between the parties, especially over strengthening IEC financial soundness.
The IEC reform is in four parts: restructuring; streamlining; employee compensation; and strengthening the financial soundness of the utility, which owes more than NIS 70 billion.
IEC's workers have agreed to the restructuring and the sale of control in current and future power stations to private parties. Talks on aspects of outsourcing the grid management system are stuck. The streamlining involves early retirement by up to 2,000 employees over the age of 55. The talks on employee compensation are over the size of financial benefits: IEC CEO is offering NIS 6 billion, while the employees are demanding NIS 10 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013