Israel Electric Corporation (IEC) (TASE: ELEC.B22) will have to boost its operating budget 30%, or NIS 1.5 billion, to meet its targets for 2014, says IEC CFO Tamir Poliker. His letter, which has created shockwaves at the utility, follows worrying forecasts by IEC about falling revenue caused by reduced demand, due in part to the entry of independent power producers in the market.
IEC's 2014 budget will Poliker's first at the utility, which he joined a few months ago, after fulfilling senior positions at Azrieli Group Ltd. (TASE: AZRG) and Better Place. His letter to IEC's executives was probably coordinated with IEC CEO Eli Glickman.
IEC's previous forecasts predicted substantial improvement in the utility's profits, thanks to the start of natural gas flow from Tamar, which should have the utility's fuel bill, even as electricity tariffs will stay high through 2015.
IEC's operating budget is currently almost NIS 5 billion, 90% of which is allocated for salaries and arnona (local property tax), which cannot be altered. IEC does not have an impressive record in reducing its operating budget, to put it mildly. For example, it admitted in its financial report for the second quarter of 2013 that a board of directors' decision from December 2011 to retire 400 employees early was not implemented. The early retirement was supposed to be a key element in the government's rescue plan for the utility, which included NIS 9 billion in government guarantees and a 30% electricity rate hike.
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2013
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