If the Israel Electric Corporation (IEC) floats shares on the Tel Aviv Stock Exchange (TASE), its employees will receive either options or shares. An agreement to this effect was reached in the past few days in negotiations between the state, the IEC workers committee, and the Histadrut (General Federation of Labor in Israel). The allocations of shares and options are likely to increase the volume of the offering from 15% of the company's share capital to 25%. Contacts between the Histadrut and the state continued today in advance of the negotiation sessions scheduled for tonight.
As reported yesterday in "Globes", the parties were about to announce a historic agreement for reforming the IEC, and had scheduled a press conference for tomorrow. It was then learned, however, that Minister of Finance Yair Lapid was opposing the agreement and demanding a reduction in the total amount to be paid to IEC workers.
Following the pre-offering agreement, the employees and the Histradrut are expected to withdraw their objections to an offering by the company. In its already published interim report, the Yogev Committee for Reforming the IEC and the Electricity Sector recommended an offer of 15% of the IEC's shares on the TASE, and the use of the capital raised to strengthen the company's capital structure, which is burdened by high leverage. Yogev has warned in the past that, without an offering, a power rate hike or the cancellation of the rate cut scheduled in 2015 is unavoidable. Histadrut chairman Avi Nissenkorn formerly expressed strong opposition to an offering, fearing a precedent for other government companies with large debts.
Under the offering outline promoted by the Yogev Committee, investors in IEC shares will be promised that its capital structure will be reinforced, and the proportion of capital in the balance sheet will rise from 15% at present to 35% by 2025. Strengthening IEC's capital structure will also be achieved by selling the company's real estate and the waiving by the state of NIS 6 billion in bonds. The company will undertake not to distribute dividends before achieving the leverage targets set.
Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2014
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