IEC in talks with Goldman Sachs over $1 billion in financing - Haaretz

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Last update - 09:11 17/08/2007

IEC in talks with Goldman Sachs over $1 billion in financing

By Avi Bar-Eli, TheMarker

The Israel Electric Corporation (IEC) has started negotiations with investment bank Goldman Sachs over $1 billion in financing. The IEC's board approved the move on Wednesday.

As TheMarker reported last month, Goldman Sachs has offered the company a loan to finance its development budgets for 2007 and 2008.

A delegation of senior bankers arrived in Israel from London six weeks ago and presented the financing plan to the IEC and the Government Companies Authority (GCA). The loan will be for 20 years.

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The board also approved an emergency plan to generate electricity in 2009 and 2010 at its Wednesday evening meeting. According to forecasts, Israel will suffer a shortage of electricity in those years.

The plans include, inter alia, upgrading the IEC's gas turbines spread out around the country and accelerating the construction of an integrated power station in Haifa. All together these solutions should provide another 500 megawatts of generating capacity.

The IEC needs to raise about $1 billion a year for its development projects, but so far in 2007 has raised only NIS 730 million.

The company's difficult financial position worsened after a prospectus for raising NIS 1 billion next month was postponed. Now the firm is examining the possibility of raising a smaller sum in short-term notes.

The board also discussed the option of placing debt with institutional investors overseas.

The chief financial officer (CFO) of the IEC, Avner Yehudai, announced his resignation at the end of the board meeting. He quit as a result of his opposition to the changes demanded by the GCA in the IEC's financial reports. The GCA ordered Yehudai to make two changes in explanatory notes of the reports: one that originally stated that the structural changes in the IEC are conditional on the employees and bondholders' agreement; and another that relates to the electricity rate policy and how it affects the IEC's financial results and its ability to raise funds in the future.

Even though the board unanimously approved a compromise wording to the notes, which will appear in a prospectus for an IEC offering, Yehudai still announced his resignation, saying: "The cabinet's decision on the structural change and policies and the Public Services Authority's policies as to the IEC and electricity rates are leading the company in directions that I am not willing to be a partner to. I am not willing to take responsibility for the results," said Yehudai.

The IEC chairman, Mordechai Friedman, made it clear to Yehudai that he disagreed with his opinion, but still expressed his regrets over the resignation.

Next week the board will meet to discuss approval of the IEC's financial statements, and only afterward will it discuss approval of the prospectus.

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09:11 IEC in talks with Goldman Sachs over $1 billion in financing