Israel Electric Corp. seeks NIS 3 billion in treasury aid
The utility is facing record demand for electricity in burning summer heat, as usual; Demand was up 14% in June and 11% in July, compared with a year ago.
Israel Electric Corporation is asking the state for NIS 3 billion in aid to help cover the cost of importing the higher-cost fuel that is keeping power stations running this summer, after losing access to low-cost Egyptian natural gas.
In a letter to Finance Minister Yuval Steinitz, the IEC board of directors said the utility needs financial help to weather August and September. But, it added, the company may actually need help throughout the year.
The Finance Ministry told the Reuters news agency it had received a request from the state-owned IEC for help in resolving its cash-flow crunch during the next two months, but that it had not yet decided on the type or amount of aid it would provide.
As usual, the utility has to cope with record demand for electricity in the burning summer heat; demand was up 14% in June and 11% in July compared with the same months a year ago.
At the same time it has had to cope with a shortage of natural gas - a relatively cheap fuel - because since February 2011, its Egyptian gas supply has been disrupted time and again by sabotage attacks on the pipeline that delivers the gas. Egypt formally halted the supply this April.
Israel had been relying on natural gas to provide much of the power to its generators, but has been forced to use alterative fuels such as diesel and fuel oil, that are five times as expensive as natural gas. They are also dirtier, causing more environmental damage.
On peak-usage days, the IEC said the cost of generating and distributing power comes to NIS 100 million.
In April, the IEC received approval for an average rate rise of 8%, to help cover the cost of the higher fuel prices. But the Public Utilities Authority-Electricity estimated that to really make up the difference, rates would have had to been hiked by 31%. It limited the increase due to strong public opposition. The treasury undertook to make up the difference.
Until the gas disruption, Egypt had supplied 40% of the IEC's gas needs, with the rest coming from the Mari-B gas field off Israel's Mediterranean coast. But that well is rapidly depleting and the large Tamar prospect is only scheduled to come online in mid-2013.
The IEC, Israel's electricity monopoly, has already incurred more than NIS 60 billion shekels of debt. A month ago, it raised NIS 2.9 billion in a bond offering, backed by the Israeli government, aimed at meeting higher fuel costs and avoiding power outages.
Reuters contributed to this report.