As previously reported in “Globes,” an accounting exercise led IEC to record a total profit of NIS 1.3 billion in 2014, due to the implementation of the “deep market” policy. The “profit” fails to conceal the company’s worse-that-ever situation - revenue has dropped (and is expected to drop further still, so long as its big customers leave in favor of buying electricity from private providers), and the company’s financing expenses have increased. The main expense that decreased is the cost of fuel, due to the transition to electricity production from natural gas.
IEC’s revenue fell 8.7% in 2014 to NIS 25.2 billion in 2014 from NIS 27.6 billion in 2013. The decrease in revenue may be attributed to the many big customers who switched to private electricity providers. According to IEC, as of the writing of the report, 180 major customers had left the company, and the company estimates that customers will continue to leave this year as well.
While the company’s revenue is declining, its financing expenses increased 27% to NIS 2.8 million in 2014 from NIS 2.2 million in 2013.
The main expense that decreased relative to 2013 was fuel, which fell to NIS 3 billion NIS 7.9 billion in 2014 from NIS 10.9 billion in 2013 due to the transition to natural gas from the Tamar reservoir.
Despite rising expenses and shrinking revenue, and the fact that the company ended the third quarter of 2014 with a net loss of NIS 1.85 billion, IEC actually closed 2014 with a net profit of NIS 1.3 billion due to the transition to the “deep market” policy.
The company notes in its report that in light of the transition to this policy, the company recognized a reduction of NIS 5.2 billion, which was recorded as other profit totaling NIS 2.9 billion, and fixed assets of $1.2 billion.
IEC chairman Yiftah Ron-Tal said: “We have witnessed, in the last two years, the significant effects of the introduction of natural gas on the company’s cost of production. The savings in production costs were expressed in the reduction of electricity rates for our customers. IEC can put the fuel crisis of 2012 behind it, and enter an era of competition as an equal competitor, in a complex regulatory environment, in which private producers have already become profitable players in the market. The expected reform will represent another significant step in IECs becoming a competitive, efficient, and profitable company, with national responsibility for the high-level of service to which our customers have become accustomed.”
Published by Globes [online], Israel business news - www.globes-online.com - on March 25, 2015
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