The Israel Electric Corporation could find itself being forced to pay off NIS 20.6 billion immediately, should its financial situation worsen. This figure is expected to grow by another NIS 1.5 billion within the next few weeks, once the company goes through with a government-backed bond offer that received Knesset approval last week.
The Finance Ministry reached a compromise with the company that would have given it state guarantees in exchange for efficiency measures. In response, rating company S&P Maalot removed the company from its downgrade watch list and left its credit rating at its current -ilAA. Concerns that the company could have its credit rating downgraded and be forced to immediately pay off debts were cited in the past as the treasury's motivation to grant the electricity utility its most recent round of guarantees.
As of the end of July, the company had pulled only NIS 100 million from the trustee account used to fund employee retirement benefits such as free electricity and holiday gifts. Regulators have argued that this account was opened illegally.
In April, as part of a compromise that allowed it to raise electricity rates, the company promised to pull NIS 600 million out of the account in order to buy fuel. The account currently contains NIS 2 billion. As part of the state's promise to offer another NIS 2 billion in guarantees, the treasury told the electricity utility that it had to pull another NIS 1.4 billion out of the account, although it did not specify when.
In total, the company lost NIS 205 million in the second quarter. Financing expenses of NIS 830 million offset operating profit of NIS 567 million. Revenues were up 23.3% for the first half of the year compared to the first half of 2011, totaling NIS 12.7 billion. Some 57% of the increase is due to higher electricity rates, which are up an average of 24% so far this year, while the remainder of the increase is due to an increase in power consumption, which is up 10.1% compared to the parallel period in 2011.
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