"IEC's chairman should take responsibility and ensure that lessons are learned," said a Ministry of Finance official ahead of the Israel Electric Corporation (IEC) (TASE: ELEC.B22) board of directors meeting which will discuss the utility's cash flow shortfall.
A top government official who knows about the finding of the external audit at IEC said that it "reveals serious flaws in IEC's conduct to the point of a systemic failure."
IEC commissioned the audit by Goren Capital Group Ltd. to find out how IEC missed the NIS 1.5 billion cash flow shortfall. The draft report's findings were presented to IEC's directors at a special board meeting this afternoon. The draft report has no personal conclusions about IEC executives, and the board is not expected to discuss today the ouster of IEC's CEO or other executives. However, a top government source told "Globes", "The report indicates a serious problem in the internal communications between the company's units on critical issues, such as cash flow updates."
A top Ministry of Finance official said today that the government expects IEC chairman Yiftach Ron-Tal, a retired IDF major general with extensive experience in commanding people, to "take command responsibility" and to ensure that the lessons are learned to correct the flaws uncovered in the report. Ahead of the meeting, differences emerged between IEC directors over the severity of the affair.
Veteran IEC director Micha Lazar, CPA, said that the affair has been blown out of proportion. Sources on the board told "Globes" that Ron-Tal agrees with him. However, other directors say that they expect clear answers from IEC managers, partly because of their personal responsibility for overseeing what goes on at the utility.
Ministry of Finance officials believe that IEC will ultimately accept most of what is required, and that the government will agree to increase its guarantees for IEC to raise more than NIS 1 billion debt to buy the fuel it needs to generate electricity. The ministry is demanding that IEC sell assets, empty the trust fund, and postpone reforms until after the Knesset elections in January.
Published by Globes [online], Israel business news - www.globes-online.com - on November 5, 2012
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