Sources inform ''Globes'' that the Yogev Committee on Israel Electric Corporation (IEC) (TASE: ELEC.B22) reform will soon begin official talks with the utility's employees, and that the committee is considering a massive sell-off of the utility's real estate to finance the reform, instead of postponing the pending electricity rate cut, as IEC is demanding.
IEC owns 13,500 dunam (4,375 acres), including hundreds of dunam of prime real estate in high demand areas in metropolitan Tel Aviv. In 2012, "Globes" revealed that IEC's real estate was valued at NIS 7 billion, but that assessment is historical and does not reflect current fair value assessments.
There has been no agreement between the Yogev Committee and the IEC on the strengthening of IEC's capital structure, introducing management flexibility, and payment to secure employees' consent to the reform. One of the main outstanding issues is the source for financing the reform's estimated NIS 6 billion cost, part of which will be recouped through the mass retirement of 2,000 employees. IEC is demanding that the balance of the reform's cost be financed by reducing the rate cuts planned from 2015. Electricity rates are set to be cut by 20% as gas flow from the Tamar field increases. The rate has been delayed by three years as part of the rescheduling of IEC's debts created when gas deliveries from Egypt were stopped. IEC VP Engineering Yakov Hain told an engineers conference, "If we don’t get 5% of the tariff, we're wasting our time."
Minister of Finance Yair Lapid and Minister National Infrastructures Silvan Shalom established the Yogev Committee in August to recommend to the government a proposal for restructuring Israel's electricity economy. The committee is due to submit its recommendations by the end of the year. The committee is not bound to resume talks with IEC's employees at the point at which they were broken off early this year. Deputy Attorney General Avi Licht ordered the talks halted to avoid the reaching of material agreements on the eve of elections and which might burden the next government. The government and IEC's employees reached agreements on four aspects of IEC's reform, including the restructuring of the utility; spinning off current and future power stations to a separate company, which IEC might own in whole or in part.
Published by Globes [online], Israel business news - www.globes-online.com - on November 3, 2013
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