The State will increase Israel Electric Corporation (IEC) (TASE: ELEC.B22) equity and decrease its debt if it takes steps to sell power plants in 2015, said Israeli Government Companies Authority Director General Ori Yogev to the IEC board of directors. Yogev explained that he expects IEC to decide to publish tenders to sell a 1,000 megawatt capacity power station in Ramat Hovav, and land for a 500 megawatt power station in Alon Tavor. Yogev said that if a decision in this spirit is made in the 2015 budget, the government will work to inject some of the company’s NIS 6 billion perpetual debt into equity - as an incentive.
Yogev’s proposal revives an arrangement that was included in the recommendations of the committee he headed to advance reform in IEC and the electricity market, in the chapter on strengthening the company’s capital structure. The Yogev Committee’s recommendations also included the sale of the 912 megawatt Ashdod power plant.
The Yogev Committee recommendations for reform were not agreed upon, after Minister of Finance Yair Lapid demanded a 50% cut in the compensation packages offered to employees in exchange for their agreement to the reform. Because of this, the Histadrut General Federation of Labor in Israel and the IEC workers’ committee rejected the State’s proposal. In his meeting with the IEC board of director at the end of last week Yogev explained that he views it as critical to immediately advance the sections of the reform that do not require Histadrut and workers’ committee approval, in light of the company’s difficult financial situation.
The prices of the power plants in Ramat Hovav and the land in Alon Tavor are unknown as of yet. Any developer who wishes to buy the power station will ask for a rate that covers expenses, and, according to the company’s latest financial report, as of June 2014, the rate did not succeed in achieving this. For example, the revenue from the power plant in Ramat Hovav was NIS 440 million, but, after deducting expenses, the total loss reached NIS 24 million. IEC said: “These are Israel Electric Corporation business matters, and we will not discuss them with the press.”
Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2014
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