Israel Electric Urged by Panel to Sell Sites to Reduce Debt
Israel Electric Corp. should offer a 15 percent stake to the public and sell off power stations to save the indebted state-owned utility, according to a government panel.
The government should sell a 7.5 percent stake of the company in 2015 and the same amount in 2018, the panel said in a report published on the Energy Ministry website today. It recommends the utility find buyers for three production plants to boost competition in the next decade.
The Haifa-based utility is struggling under a debt load of 75 billion shekels ($22 billion) as the government seeks to restructure the country’s electricity market by 2025. It controls more than 90 percent of the country’s electricity production. Israel has been considering the sale of the utility since at least 1997.
“The bad financial position of Israel Electric is a threat to its credit rating and a downgrade will make it difficult for the company to get external financing,” the panel said. “Due to the size of the company this may also have an impact on Israel’s credit rating.”
Moody’s Investors Service rates Israel’s debt A1, while Standard & Poor’s ranks it A+, four levels from the top grade, with stable outlooks.
Reform should include extending Israel Electric’s debt maturities and “significantly” reducing the number of employees, according to the proposals. Salaries make up 20 percent of the company’s costs. Competing suppliers should generate at least 42 percent of the country’s electricity by 2025, the panel said.
The yield on the company’s 2 billion shekels of 6.5 percent bonds due February 2015 rose six basis points, or 0.06 percentage point, to 2.15 percent, the highest since March 13, at the close in Tel Aviv.
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