Last Thursday, as part of a report to the Tel Aviv Stock Exchange (TASE) aimed at obtaining approval for a bond issue for US financial institutions, Israel Electric Corporation (IEC) (TASE: ELEC.B22) reported that the cost of the reform on the company would be NIS 7-8 billion, double the NIS 3.5-5 billion cost previously official estimate.
A source close to IEC management told "Globes" today that the figure in last week's report was "the closest to reality, although it is not yet final, because the discussions about the final reform format have not yet been concluded. All the other numbers that have circulated until now were speculation." On the other hand, a senior government source asserted that there is still no precise estimate for the cost of the reform. This source noted that the previously announced NIS 3.5-5 billion figure referred only to costs pertaining to IEC employees, and did not include additional costs incurred in structural change, such as setting up a new system management unit. The source added that NIS 2 billion of this amount consisted of payments to employees being laid off under the agreement, and NIS 3 billion was earmarked for employees staying with the company.
The government source said that the company's NIS 7-8 billion estimate was an "extremely pessimistic scenario" that included only expenses, and did not take IEC's revenue and streamlining into account. At the same time,, the same source stated, "The company has an interest in inflating its costs, so that more expenses will be recognized for it… IEC is applying the principle of prudence before its overseas issue."
However, when "Globes" asked what the state's estimate for the costs to IEC of the reform company was, the source had difficulty answering. The source said that some costs were hard to estimate because they had to be calculated for each of the company's assets, and because discussion of the reform had not been completed.
The IEC reform negotiations taking place in teams including the IEC workers' committee and the Histadrut (General Federation of Labor in Israel) were halted, and have not taken place for over a week. In a meeting yesterday presided over by Ministry of Finance director general Shai Babad, it was decided to postpone the date for completing the negotiations and signing the reform agreement from the original February 15 date to the end of February.
Work on the document outlining the benefit for the economy resulting from implementation of the reform, which the state undertook to prepare for the prime minister, has also yet to be completed. It was decided at the same time that National Economic Council chairperson Prof. Avi Simhon would prepare an estimate of the costs of the reform agreement.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 6, 2018
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