Israel and the Palestinian Authority (PA) have signed an agreement regarding the arrangement of the PA's debt of over NIS 2 billion to Israel Electric Corporation (IEC) (TASE: ELEC.B22. The memorandum of understandings was signed yesterday by Minister of Finance Moshe Kahlon, Coordinator of Government Activities in the Territories General Yoav Mordechai, Ministry of Finance Director-General Shai Babad and the Palestinian Authority's Civilian Affairs Minister Hussien Ash-Sheikh. The Ministry of Finance says that the agreement will guarantee the payment of the debt to IEC and regulation of the Palestinian power and energy sector.
The PA has been buying power from the IEC for most Palestinian cities and villages, but is yet to repay the debt accumulated so far, despite the IEC's threat to cut power supply. Over the years, the debt has grown to NIS 2 billion. Moreover, the Palestinian Authority has not taken responsibility for some of the residents of the West Bank, forcing them to buy power via brokers and intermediaries.
The outline, formed after long months of negotiations, includes two principles which solve the Palestinian debt problem and regulate the Palestinian Authority energy market, including a permanent mechanism for the supply of power to Palestinian Authority territories. According to these principles, the PA will assume responsibility over the commercial and operational aspects of its own energy sector. For that end, an entity which will be the exclusive power buyer from IEC will be established, and will be fully responsible for paying for the Palestinian population's power consumption.
The PA will repay the debt in one NIS 570 million payment to IEC, with the rest of the sum rescheduled into 48 installments. Some debt components accumulated over the years, such as excess interests and rates, had been deducted from the overall debt.
The agreement states that two professional Israeli-Palestinian work teams will be established and tasked with forming a commercial agreement between the parties and deciding on the manner in which responsibility for the Palestinian energy sector will be transferred.
The Ministry of Finance says that the agreement will enable the formation of stable and fair commercial relations between the IEC and the PA, which will guarantee full payment for the Palestinians' future consumption, as well as the development of future energy projects. The realization of the outline is a vital step in ensuring a continuous, sufficient power supply to PA residents and in the PA's economic development, development which will benefit all of its population.
Moreover, Israel will transfer tax funds it has so far withheld from the PA, totaling NIS 1.14 billion.
The minister of finance said, "The arrangements we have reached provide IEC and the people of Israel with certainty that the Palestinian Authority's past debts have been paid and that future payment has been ensured. The agreement ensures a continuous power supply, as well as the economic development of the Palestinian Authority. A stable PA economy is an economic, political and security interest for Israel.
"Any person who believes that a breakthrough between the parties can be reached without direct negotiations with no preconditions undermines the interests of his own people. If we do not stand up to solve our historic problems with the Palestinians we will leave our children with a crisis that will much harder to resolve," Kahlon said.
Ministry of Finance Director-General Shai Babad added, "This is the first step on a long path and devotion and determination will be required for both parties to fully fulfill the memorandum of understandings we are signing today, for the benefit of both the Israeli and the Palestinian side."
Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2016
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