The Haifa District Labor Court today published its ruling allowing Israel Electric Corporation (IEC) (TASE: ELEC.B22) workers to strike this Friday, after being convinced that the negotiations between the state and the workers' representatives had reached a dead end. The Court emphasized that the strike was aimed against "The state's refusal to negotiate with the workers' representatives on the effect of its measures aimed at introducing private producers into the electricity sector on the work conditions and job security of the company's workers." The extent and format of the strike will be determined in the Court's hearing on Friday morning.
IEC CEO Eli Glickman warned yesterday that the company's credit rating would be downgraded if the reform efforts fail. In the Labor Court hearing, Glickman said, "As soon as there are no reform discussions, the rating agencies will immediately lower the rating."
On July 3, Maalot S&P raised IEC's credit rating for domestic debt from AA- to AA, citing "improvement in overall liquidity and better financial ratios." Maalot stressed that the upgrade was unrelated to implementation of reform in IEC, noting, "Early implementation of reform is likely to raise the company's credit rating even further," but did not address the possibility of failure in the negotiations for reform.
The IEC board held a turbulent discussion last Thursday on the state's take-it-or-leave-it offer, and the assumption that the company should prepare for the possibility of prolonged activity without any reform. The proposal was rejected out of hand by Histadrut (General Federation of Labor in Israel) chairman Avi Nissenkorn, but the company has not yet officially responded to the proposal.
Simultaneously with the reform crisis, sources inform "Globes" that the IEC board recently changed its financial ratios targets. For example, the financial leverage target has been raised from 60% to 81%, and the debt-to-EBITDA ratio target has been raised from 1-4 to 1-6.5.
In response to a question from "Globes", IEC said "The company board regards with great trepidation the halt in negotiations for reform in the electricity sector and unilateral measures by the state, because of the severe consequences for the electricity sector and IEC that will be caused by the absence of any consensual reform in the electricity sector. The IEC calls on the Ministers of Finance and National Infrastructure, Energy, and Water Resources and the Government Companies Authority director general to renew and complete the negotiations."
The board also instructed management to use one or more external consultants with expertise in infrastructure and energy, as needed, to analyze the risks of failure to implement reform for IEC and the electricity sector, and its effect on the company's work plan and strategy.
Published by Globes [online], Israel business news - www.globes-online.com - on September 16, 2014
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