Israel Electric Corp. Reports Q1 Net Loss of $99.4 Million
Revenues grew by 4.8% in first quarter thanks to price hike, but mild winter caused a drop in demand.
The state-owned Israel Electric Corporation started the year in similar loss-making fashion to previous years, ending the first quarter of 2014 with a net loss of 347 million shekels ($99.4 million). That compares to a 253 million shekel loss for the same quarter last year.
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This year’s loss came despite IEC’s switch to cheaper natural gas to generate power, which curbed its fuel expenses by more than 48% compared to the same quarter last year. On the other hand, the utility’s bottom line was weighed down by major financing expenses and provision for unpaid electricity that IEC provided to the Palestinian market, as well as by its operating expenses.
The electric utility’s revenues grew by 4.8% compared to the first quarter of 2013, to 6.7 billion shekels, even though it actually sold 6.6% less electricity. The drop in demand was the result of the relatively mild winter this year and due to new competition from private electricity companies, which, as of March, had a 7.5% share of the power market. Revenues increased despite the drop in demand due to higher rates.
On the downside, IEC had to set aside an additional 150 million shekels for doubtful debt it is owed from the Palestinian Authority and by the Jerusalem District Electric Company, which supplies about 30% of Palestinian electricity consumption, primarily in East Jerusalem and the West Bank towns of Bethlehem, Ramallah and Jericho. The total unpaid Palestinian electricity debt is estimated at 1.6 billion shekels.
IEC had a first quarter operating profit of 511 million shekels, but that was more than wiped out by 981 million shekels in financing costs for the quarter.