Israel Electric Seeking to Delay Reform for 10th Time

Utility wants licenses renewed without undertaking the mandated changes. The current licenses expire in January 2013.

Avi Bar-Eli
Avi Bar-Eli
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Avi Bar-Eli
Avi Bar-Eli

For the 10th time in 16 years, the Israel Electric Corporation is seeking an delay on implementing a corporate restructuring that was mandated by the government back in 1996.

The utility has asked the Finance Ministry and the Energy and Water Resources Ministry to renew its licenses for the production, transmission and distribution of electricity in Israel until 2014 - without undertaking the mandated changes. The current licenses expire in January 2013.

Under the 1996 Electricity Sector Law, the licenses weren't to be extended beyond 2006 unless the company undertook restructuring. But all attempts in the interim to implement the necessary reforms have been foiled, and year by year the government has ordered the licenses extended, with the approval of the Knesset's Economic Affairs Committee.

Committee chairman MK Carmel Shama-Hacohen (Likud ) refused last year to serve as a rubber stamp and agreed to extend the licenses for just four months.

When the company responded by announcing it would lay off 2,000 employees, consolidate districts and streamline its budget, the government set out its own plan to circumvent the committee - forcing Shama-Hacohen's hand to extendthe licenses to 2013 after all.

Israel Electric's debts have now reached NIS 72.5 billion. In addition, the utility is reeling from the impact of a giant accounting error that left a NIS 1.4 billion hole in its cash flow forecasts. The error was discovered two months ago, but the utility's budget doesn't include any streamlining measures.

Meanwhile, the Electric Corp.'s cash flow shortfall has grown to NIS 1.64 billion, following the discovery of another error in calculating 2012 cash flow.

Israel Electric Corporation's control center in Haifa. Credit: Tomer Neuberg

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