Israel Electric Investing in PR Ahead of Anticipated Restructuring Talks

The struggling electricity monopoly is thought to be looking for an image boost before a new government is formed and the public debate about the company's future resumes.

Israel Electric Corporation is investing in an advertising campaign to improve its public image ahead of an anticipated 10-percent rate hike in April.

The company froze advertising in 2012 because of financial problems but is allocating NIS 10 million to bolster its reputation in 2013. It recently issued a tender for creative advertising services. At the same time, the company continues to face a cash-flow problem and has had to issue government-guaranteed bonds to stay afloat.

Its image-bolstering efforts are thought to be in preparation for a renewed public debate about the company's restructuring and its cost to consumers and the economy, expected to take place after a new government is formed.

Eli Glickman, Israel Electric Corporation's chief executive, declined to renew a contract with the McCann Erickson advertising agency in 2012 due to acute budgetary issues related to a natural gas shortage the company had been grappling with since the previous year. Reverting to more expensive fuels inflated the company's budget to NIS 29.5 billion in 2012, almost twice as much as it had spent in 2010 when gas was plentiful.

Gas from the Tamar field is expected to start flowing in April, easing the company's cash-flow situation. But the high costs the company absorbed last year will still make the 10-percent rate hike necessary – twice the planned increase.

Meanwhile talks on restructuring the company, and Israel's entire power industry, are expected to continue between management, the workers' council and the Finance Ministry. The company wants to increase electricity rates for consumers to help cover its deficit and the bonuses it will pay to the workers who stay on.

In response to request for comment, the Israel Electric Corporation said, "The company serves more than 2.5 million households in Israel and particularly, due to its being a monopoly, needs to maintain ongoing discourse with its customers."

Moti Milrod