Israel Electric Corp. Investor Presentation Business update as of 03 / 31 / 2018 June 2018
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Israel Electric Corp.
Investor
Presentation
Business update as of 03/31/2018
June 2018
Disclaimer
Investor Relations 2
The Company is a public company, with all it entails, and this information provided to you, all or part of it, may constitute “Inside Information” in
accordance with Israel’s Securities Law, 1968, and making use of this information (including, but not only, by way of carrying out a transaction in a
security of IEC, and/or delivering this information, or an opinion regarding a security of IEC, to any third party who may use this information for
purposes of such transaction) may constitute a criminal offence pursuant to that Law.
Please treat this information as CONFIDENTIAL and do not disclose, publish or deliver all or any part of this information, directly or indirectly, to any
third party, except for your employees, officers and any person acting for you or on your behalf, strictly on a “need to know” basis, and only after you
have notified the person receiving any of this information that the information is confidential and that making use of this information may constitute a
criminal offence as specified above
This Presentation does not constitute or form part of and should not be construed as an offer to sell or issue, or the solicitation of an offer to buy or
acquire, securities of the Company. This Presentation is solely for informational purposes. The information contained in this presentation regarding
the Company's operations is concise and presented for convenience purposes only. To get a complete picture of the Company's operations, please
refer to the reports of the Company to the Israeli Securities authority and the Tel-Aviv Stock Exchange.
This presentation includes forward-looking information, as per its definition in the Securities Law, 1968, including forecasts and other information
whose realization is uncertain and depends on factors that are not under the control of the Company. These factors are based, among other things,
on data that is in the possession of the Company as of this date, internal estimates and expectations of the Company regarding trends in the
Company's fields of activity and regarding the implementation of the company's plans. The Company's forecast and expectations included in this
presentation may not be realized, in whole or in part, or may be realized in a different manner than expected, inter alia due to factors that some of
them are not under the control of the Company, including changes in the market conditions and the Company's business environment, regulatory
changes, or the realization of any of the risk factors of the Company.
The information contained in this presentation is provided as of the date of this presentation. The Company is not under any obligation to
update the information in this presentation or to update the forward-looking statements contained in it.
Executive Summary
3
Gas turbine (internal combustion) / Combined-cycle
(internal combustion and steam)
Steam (dual purpose)
400 kV lines
161 kV lines
Israel Electric Corp. at a Glance
IEC Power Grid Established in 1923, 95 years of operation, the Israel Electric Corporation Limited (“IEC”) is the sole
vertically integrated electric utility company in Israel and generates, transmits, distributes and
supplies the majority of the electricity used in Israel
IEC is 99.846% owned by the State of Israel
IEC had total assets of NIS 87.5 billion and 11,893 employees as of March 31, 2018
As of December 31, 2017, IEC serves 2.8 million residential, commercial, agricultural and industrial
customers throughout the State of Israel including East Jerusalem and the Palestinian Authority
Total electricity sales of 11,905 GWh for the period ended March 31, 2018
13.6 GWInstalled capacity
17Power stations
Generation (1)
5,569 kmHigh and ultra-high voltage
transmission grid
211(2)
Switching stations &sub-stations
Transmission (1)
63,179 kmMedium and low
voltage lines
2.8 mnCustomers
Distribution (1)
3M-2018 Key Financials Credit Ratings as of March 31, 2018
Revenues
NIS 5.5 billion
EBITDA
NIS 1.7 billion
Profit fromcurrent operations
NIS 0.5 billion
IEC GlobalBaa2 / BBB
(Moody’s / S&P)(Stable / Stable)
IEC Local (3)
Aa2.il / ilAA+(Midroog / Maalot S&P)
(Stable / Stable)
State of IsraelA1 / A+ / A+
(Moody’s / S&P / Fitch)(Stable / Positive / Stable)
Source: IEC Financial Statements for 2017A and 3M-20181) As of December 31, 2017.2) 51 substations are privately owned.3) A State of Israel guarantee for the existing securities of IEC are negligible compared to the company’s overall Financial debt.
Denotes USD figures USD/NIS exchange rate of 3.51 as of March 29, 2018.
Investor Relations
$1.6 $0.5 $0.1
4
Israel - a Modern Economy
Source: The Israeli Central Bureau of Statistics, Bank of Israel.1) Credit rating refers to long-term foreign currency debt only. A State of Israel guarantee for the existing securities of IEC are negligible compared to the company’s overall Financial debt 2) The Israeli Ministry of Finance and Bank of Israel.
Denotes USD figures USD/NIS exchange rate of 3.51 as of March 29, 2018.
Israel Public Debt to GDP(2)
Israel Rating History(1)
Inflation Environment
0
1
2
3
2005 2007 2009 2011 2013 2015 2017
Moody's S&P Fitch
Nov 2016
Fitch upgrade
Israel to A+
Nov 2007
S&P upgrade
Israel to A
Apr 2008
Moody’s upgrade
Israel to A1
Sep 2011
S&P upgrade
Israel to A+
Feb 2008
Fitch upgrade
Israel to A
Baa1 / BBB+
A3 / A-
A2 / A
A1 / A+
Aa3 / AA-
68.567.2
66.164.0
62.461.1
50
55
60
65
70
75
80
2012 2013 2014 2015 2016 2017
(% of GDP)
Area 22,072 km2
Population (March 2018) 8.8 million
GDP (2017) NIS 1.24 trillion
GDP per Capita (2017) NIS 140,705
Avg. GDP Growth (2011-2017) 3.3%
Unemployment (March 2018) 3.6%
Foreign Currency LT Debt Ratings
(Moody’s / S&P / Fitch) (1)A1 / A+ / A+
1.6% 1.8%
-0.2%-1.0%
-0.2%
0.4%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2012 2013 2014 2015 2016 2017
(YoY Inflation %)
1%-3%
Government
Inflation Target
1.7%
Average inflation in
the last decade
Investor Relations
Key Figures
5
$353 bn
$40,087
Essential
Service Provider
Owned by the
State of Israel
Robust Growth in
Electricity Demand
Fully Regulated
Across all Segments
Efficiency and
Reliability
Financial
Robustness
Natural Gas
Fuel
Independence
IEC is an essential service provider of
electricity in Israel and the sole vertically
integrated provider in the electricity chain
99.846% owned by
the State of Israel
(A1/A+/A+)
Strong electricity demand
growth in the Israeli market
Tariff is based on costs and
return on equity
Set by the Electricity Authority
Continuous improvement of
efficiency & reliability
IEC has over 95 years of experience in
developing and managing the electricity
sector in Israel
Rated investment grade by both S&P
(BBB) and Moody’s (Baa2)
IEC total liquidity(1) of NIS 6.3 bn as of
January 2, 2018
Natural gas from Tamar and
other significant natural gas
discoveries in Israel have paved
the way towards potential fuel
independence
Key Investment Highlights
Investor Relations
1) Source: IEC Financial Statements for 2017A.IEC defines “Liquidity” as cash and equivalents, short term investments and available credit facilities.
6
Key Strategic Targets
Investor Relations 7
Israel's
Electricity Supplier
•Continuing to guarantee reliability of the
electricity supply and maintaining
adequate electricity reserves
Operational Overview
8
Source:
1) IEC Financial Statements for 2015A-2017A and for 3M-2018, IEC Statistical Report for 2007A.2) The Israeli Central Bureau of Statistics.
Denotes USD figures at USD/NIS exchange rate of 3.90, 3.85, 3.47, 3.63 and 3.51 for the end of period of 2015A, 2016A, 2017A, 3M-2017 and 3M-2018, respectively.
Historical Performance
Comparison of Key Metrics
12/31/2007 12/31/2017%
Change
Population (mn) (2) 7.2 8.8 22.2%
Number of Customers
(mn)2.4 2.8 16.7%
Electricity Sales (GWh) 49,323 52,111 5.7%
National Peak Demand
(MW)10,070 12,741 26.5%
IEC Installed Capacity
(MW)11,323 13,617 20.3%
23.0 22.723.4
5.8 5.5
0
5
10
15
20
25
30
2015 2016 2017 3M-2017 3M-2018
NISbn
$6.7$5.9 $1.6
IEC Revenues
IEC continues to provide most of Israel’s energy requirements
as the sole vertically integrated electric utility in Israel
Investor Relations
$5.9
9
$1.6
Israel Generation Capacity and Demand
Israel Generation Capacity and Demand
Source: IEC’s Annual Financial Statements (2014A-2017A).1) Installed Generation Capacity of Independent Power Producers (“IPPs”).
13,617 13,617 13,617 13,617
1,956
2,980 3,060 3,199
596
754 911 1,021
16,169
17,351 17,588
17,837
11,335
12,905 12,624 12,741
8,000
10,000
12,000
14,000
16,000
18,000
2014 2015 2016 2017
(MW)
IEC's Installed Generating Capacity Gas Fired IPPs Renewable Energy IPPs National Peak Demand
Investor Relations 10
(1) (1)
Demand for Electricity
National Electricity Peak Demand & Total Electricity Produced in the Entire Sector
Trends
Source: IEC’s Annual Financial Statements (1990-2017). IEC’s Statistical data.
Investor Relations
The demand for electricity in
Israel is growing at a fast and
steady pace
Demand is driven by both
population growth and the
increase in electricity
consumption per household
IEC’s demand forecast,
which is used for long term
planning of the generation
segment, anticipates an
average annual increase of
2.8% in peak demand in the
years 2018 to 2050
11
Seasonality in Electricity Demand - Average Consumption of Households
0
200
400
600
800
1,000
Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017
(KWh)
Base Heating Cooling
54 54 53
58 6064
62 6165
67 68
40
45
50
55
60
65
70
75
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
(TWh)(MW)
Total Electricity Produced in the Sector National Electricity Peak Demand
Multiplied by 3.4 in 27 years
The IEC Electricity Chain
Source: IEC Financial Statements for 2017A.
Notes
1) 51 substations are privately owned.
Investor Relations 12
Generation DistributionTransmission
2.8Million
Customers
35,527 kmLow Voltage
Lines
27,652 kmMedium Voltage
Lines
200Substations(1)
5,569 kmUltra-High & High
Voltage lines
11Switching Stations
63Generation
Units
17Power
Stations
The IEC Generation Segment
IEC Generation Facilities(1)
Fuel Mix by Electricity Generated
Source: IEC’s Financial Statements for 2017A and for 3M-2018.1) As of December 31, 2017.2) Units 1-4 will be transferred to preservation by June 1, 2022.
Electricity Generation Sites(1)
January 1 - March 31, 2018
Coal45.2%
Diesel oil & Fuel oil
1.3%
Natural gas & LNG
53.5%
January 1 - December 31, 2017
Investor Relations
No. of
units
Installed
Capacity (MW)
Steam (dual purpose) (coal and fuel oil) 10 4,840
Steam (dual-purpose) (natural gas and fuel / diesel oil) 8 1,622
Gas turbine (internal combustion) (industrial gas) 15 1,570
Gas turbine (internal combustion) (jet engine) 16 504
Combined cycle (internal combustion and steam) 14 5,081
Total 63 13,617
13
17Power stations
sites
13,617Megawatts of generation
Orot Rabin(2)
7 units / 2,605 MW
Rutenberg
6 units / 2,290 MW
Eshkol
7 units / 1,693 MW
Haifa
6 units / 1,110 MW
Gezer
6 units / 1,336 MW
Hagit
4 units / 1,394 MW
- Mainly pow ered by coal
- Mainly pow ered by gas
Gas turbine (internal
combustion) /
Combined-cy cle
(internal combustion
and steam)
Steam (dual purpose)
Coal43.9%
Diesel oil & Fuel oil
0.2%
Natural gas & LNG
55.9%
The IEC Transmission and Distribution Segments(1)
Total Electricity Consumption by Customer Type(1)
Transformation
System
11Switching stations
Power Lines
149Substations
Transmission
51Private substations
760 km400 kV lines
4,719 km161 kV line (includes
underground lines)
91km115 kV lines
63,179 kmMedium and low
voltage lines
50,053Distribution
Transformers
2.8mnCustomers
Distribution
Source: IEC’s Financial Statements for 2017A.
Notes
1) As of December 31, 2017.
Residential36%
Industrial20%
Public, commercial,
East-Jerusalem & Palestinaian Authority
39%
Water pumping
3%
Agriculture2%
(kWh)
Investor Relations
Diversified Customer Base
14
The Sector Reform
15
Source: IEC’s Annual Financial Statements (2012-2017), IEC ‘s Financial Statements for 3M-2018.
Investor Relations
Gov’ team led by Deputy Finance Minister Yitzhak Cohen
Appointment of a Steering Team
for the execution of a reform in the
electricity sector and IEC
Steering Team
publishes draft
recommendations
March2014
oYogev letter a summary of the final
offer to restructure
oOther correspondence
onegotiations reached
an impasse
2012
The Ministers Decision to start a process to formulate the
government’s position and to renew negotiations for
implementation of the reform in the electricity sector
The main points of the proposed state outline (discussions to examine the nature of the structural change): In the generation segment, all power stations operating on gas will be sold in two steps and the coal
power stations will be held by IEC through a subsidiary. The system management
segment will remain in IEC. The transmission and distribution segments
will remain a natural monopoly of IEC. The supply segment will be opened to gradual
competition. Steps will be taken to improve financial stability and there will be
changes to the labor relations in IEC
Appointment of dedicated teams to promote structural change
On May 10, 2018, following discussions and further negotiations between the relevant government entities,
IEC, the IEC employees’ representatives and the Histadrut, the parties reached agreements regarding the outline of principles of the structural change for a period of 8 years, which was subsequently approved
by the IEC's Board of Directors. The implementation of the structural changes requires, among other things, legal amendments and approvals of the government entities and regulatory bodies, and the granting of
licenses under the Electricity Sector Law.
On June 3, 2018, the Israeli Government approved a resolution on the subject of "Reform in the Electricity
Sector and Structural Change in the IEC”
May-June
2018
Dec.2016
Nov.2015
Sep.2014
July2013
2016
Since July 2017, consultations have resumed and discussions have been held between the relevant government entities, IEC, the employees’ representatives in the
IEC and the Histadrut regarding a proposed outline for structural change
that IEC will implement and the implications of the outline of the workers' rights. On December 27, 2017, an outline of principles was formulated regarding the structural change that served as the
basis for further discussions and negotiations between the relevant parties.
Dec.2017
The main points of the outline of the principles for structural change are presented in the appendices
IEC’s Human Capital
Streamlining of IEC’s Workforce
Source: IEC’s Financial Statements for 2014A – 2017A and for 3M-2018
12,754
12,371
11,908 11,902 11,893
11,000
11,500
12,000
12,500
13,000
2014 2015 2016 2017 3M-2018
IEC’s employees’
Investor Relations 16
Efficiency measures will continue in the future,
regardless of any structural change in the Israeli electricity sector
Israeli Electricity Sector
17
The Israeli Electricity Sector
Investor Relations
Nearly 100% of the Switching
Stations and the Ultra-High & High
Voltage lines are owned & operated
by IEC
As of 12/31/2017,
76% of total generating
capacity
Expected to reach
67.7% by the end of
2019
Generation, Transmission and Distribution
IEC’s Main Regulators IEC’s Fuel Suppliers
The Electricity Authority (EA)
Antitrust Authority
Government Companies Authority (GCA)
Ministry of Energy
Ministry of Finance
Ministry of Interior
Ministry of Environmental Protection (MoEP)
The Concentration Committee
TASE
Natural Gas - Currently solely from the Tamar Reservoir and more
reservoirs in Israeli waters have been discovered
Liquid Natural Gas - Imported from international suppliers
Coal - Imported from international suppliers
IPPs
Source : IEC’s Financial Statements for 2017A.
IEC reached 2.8 million customers
(as of December 31, 2017)
TransmissionGeneration Distribution
18
As of 12/31/2017,
24% of total generating
capacity
Expected to reach
32.3% by the end of
2019
149 of 200 Substations are owned &
operated by IEC
(as of December 31, 2017)
The Electricity Tariff
In accordance with the Electricity Sector Law, the electricity tariff is set by the Electricity Authority (EA) and reformulat ed from time to time. The outline of the
formula is as follows:
Actual costs are examined every 2 weeks by the EA
Discrepancies between forecasted costs and actual
cost are reconciled on the earlier of:
A difference of 3.5%, provided that 3 months
have passed since the last update
A difference of 5.5%
The Annual Update
Once a year, discrepancies
between the previous year’s
forecasted costs and the previous
year’s actual costs are reconciled
New formula reduces the average amount paid per consumer
by 2.3%
New formula reduces recognized costs using a worldwide
benchmark study of comparable utilities to set a normative
standard for costs to which the Company will be expected to
adapt gradually through 2022 (subject to further review by the
EA)
New formula recognizes pension costs
Investor Relations
Forecasted recognized costs per segment (e.g. fuel, foreign
currency exposure, depreciation and not
recognizing cross-subsidies)
+ Fair rate of return on equity
per segment -Cost reduction/efficiency co-
efficient (including costs the
EA chooses not to recognize)
(temporarily suspended)
Electricity Tariff
Ongoing Update Annual Update Tariff Reformulation as of January 15, 2018
Tariff Structure
Source: IEC’s Financial Statements, Electricity Authority's decision No. 4 (1226) - Annual Update 2018 electricity tariff
19
The Electricity Tariff - Cont’d
Source:
1) World Bank Commodity Price Data (Pink Sheet), March 2018; Calculated as average price of Australia, Colombia and South Africa coal. Russia is not included in World Bank information,
even though it is a significant source of coal for IEC.
2) The Electricity Authority - Report on State of Electricity Economy Year of 2016.
Tariff vs. Coal Price Development(1)
Investor Relations
0.40
0.45
0.50
0.55
0.60
40
60
80
100
120
($/t)
Coal Average General Tariff Residential Tariff
NIS
20
Structure of the Residential Tariff as Divided into Segments(2)
64%
4%
7%
16%
10%
Production and fuel
Transmission
High Voltage
Low Voltage
Electricity Grid Administrator+ returns to IEC consumers
Financial Overview
21
1.7 1.7 1.8
0.8 0.5 0.7
1.2 1.31.4
3.7 3.53.9
1.00.5
0
1
2
3
4
5
2015 2016 2017 3M-2017 3M-2018
NISbn
Generation Transmission+System Manager Distribution+Supply
$1.0 $0.1
Financial Highlights
Revenues EBITDA(1)
Historical Investments by segments (CapEx) (3) Net Financial Debt/EBITDA(2)
7.2 7.6 7.4
1.9 1.7
0
3
6
9
12
2015 2016 2017 3M-2017 3M-2018
NISbn $1.9 $0.5
23.1 22.7 23.4
5.8 5.5
0
10
20
30
2015 2016 2017 3M-2017 3M-2018
NISbn $1.6$6.0 $6.7 $1.6
Source: IEC’s Financial Statements for 2015A, 2016A, 2017A and 3M-2018.1) IEC defines “EBITDA”as profit (loss) before income taxes, financialexpenses, depreciation and amortization.2) IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions, debentures to
the State of Israel and liabilities to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts and swaptransactions, MTM and long-term depositsand regulatorydeferral account assets with respect to linkage differentials).
3) Starting in the first quarter of 2018, IEC presents in its financial statements two new segments: the system manager segment and the consumer services -supplysegment.Denotes USD figures at USD/NIS exchange rate of 3.84, 3.85, 3.47, 3.63 and 3.51 for the end of period of 2015A, 2016A, 2017A, 3M-2017 and 3M-2018 respectively.
6.0x 5.5x 5.6x 5.6x 5.7x
0.2x0.2x 0.1x 0.2x
6.2x5.7x 5.7x 5.8x 5.7x
0
2
4
6
8
2015 2016 2017 3M-2017 3M-2018
Net Financial Debt/EBITDA not State guaranteed State guaranteed
Investor Relations
$5.9 $2.0 $2.1
$0.9 $1.1
22
$0.5
$0.3
Historical Cash Flow
Source: IEC’s Financial Statements for 2015A-2017A & 3M-2018
1) Investment activities excluding repayment (or deposits) of bank deposits. Total cash from investment activities figures as reported for 2015A, 2016A, 2017A, 3M-2017 & 3M-2018 are NIS
(0.9) bn, NIS (2.8) bn, NIS (2.2) bn, NIS(1.0) bn and NIS (2.7) bn, respectively.
2) IEC defines “liquidity” as cash and cash equivalents, short term investments and available credit facilities.
3) Total liquidity as of January 2, 2018.Denotes USD figures at USD/NIS exchange rate of 3.84, 3.85, 3.47, 3.63 and 3.51 for the end of period of 2015A, 2016A, 2017A, 3M-2017 & 3M-2018 respectively.
7.6
6.55.8
2.2 1.9
(3.1)(2.2)
(2.7)
(1.0) (0.7)
(8.7)
(2.7)(3.7)
(1.6)
1.5
4.3
5.76.3
(12)
(8)
(4)
0
4
8
12
2015 2016 2017 3M-2017 3M-2018
NIS bn
Operating activities Investment activities, net Financing activities Total Liquidity
$1.7
$0.6
($0.8)
($0.3)
($1.1)
($0.4)
$2.0
$(0.8)
$(2.3)
(3)$1.7
$0.5
($0.2)
$0.4
Generating sufficient cash flow from operations enables IEC to decrease debt
Investor Relations
(1)
($0.6)($0.7)
23
(2)
51.8
50.0
46.9
44.6
43.2
42.141.5
32
37
42
47
52
2012 2013 2014 2015 2016 2017 3M-2018
NIS, bn
$11.3
$12.1
$11.6
$12.0
$14.4
$11.8
Net Financial Debt (1) Over Time
Source: IEC’s Financial Statements for 2012A, 2013A, 2015A, 2016A, 2017A & 3M-2018/
1) IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions,
debentures to the State of Israel and liabilities to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts
and swap transactions, MTM and long-term depositsand regulatorydeferral account assets with respect to linkage differentials).
Denotes USD figures at USD/NIS exchange rate of 3.73, 3.47, 3.89, 3.84, 3.85, 3.47 & 3.51 for the end of period of 2012A, 2013A, 2014A, 2015A, 2016A, 2017A & 3M-2018, respectively.
Investor Relations
Prepared According to
Government Companies
Regulations
IFRS
24
$13.9
Fixed95.7%
Floating4.3%
Consolidated Debt Breakdown
Note: The “fifth year and thereafter” blue bar is off the chart.
Source:1) IEC immediate report on the Corporate Liabilities Status March 2018.2) $ listed bonds, IEC Financial data and Bloomberg, as of March 31, 20183) IEC’s Financial Statements for 3M-2018, includes NIS 2.5bn of perpetual bonds as of March 2018, expected to be repaid at a nominal value of NIS 15 million as part of the Assets Arrangements.
Annual Debt Maturities as of March 31, 2018 (Principal in NIS billions)(1)
0.3 0.60.2 0.2 0.8
7.0
2.8
2.3 2.2
24.4
7.3
3.4
2.5 2.4
0
3
6
9
First year Second year Third year Forth year Fifth year and thereafter
(NIS bn)
Loans from local and foreign banks Local bonds, private bonds and non-bank loans
Debt by Currency(3) Type of Instrument(3) Source of Debt(3)
NIS38.0%
Euro2.5%
USD53.8%
Other5.7%
State guaranteed
0.9%
Non-guaranteed
by state 99.1%
25.2
Interest Rate Exposure(3)
Investor Relations
Local public bonds19.4%
Private bonds and non-bank
loans 75.6%
Local bank loans 0.6%
Foreign bank loans
4.3%
25
Coupon Size ($mn) Maturity
5.625%750$Jun-18
7.700%125$Jul-18
7.250%1,000$Jan-19
9.375%500$Jan-20
6.875%650$Jun-23
5.000%1,250$Nov-24
7.875%125$Dec-26
7.750%300$Dec-27
4.250%$1,000Aug-28
8.940%40$Mar-30
8.100%125$Dec-96
Profile of International IEC Bonds(2)
Income Statement(NIS millions)
Source: IEC’s Financial Statements for 3M-2018.
Investor Relations 26
(NIS millions)
For the year:
12/31/2017 03/31/2017 03/31/2018
Revenues 23,370 5,816 5,457
Cost of operating the electricity system
Fuels 8,414 2,141 1,911
Purchases of electricity 3,487 741 760
Operation of the generation system 4,378 1,008 1,075
Operation of the transmission distribution system and others 3,056 769 806
Total costs 19,335 4,659 4,552
Profit from operating the electricity system 4,035 1,157 905
Other Revenues, net (54) - (2)
Sales and marketing expenses 999 235 242
Administrative and general expenses 619 181 164
Income from liabilities to pensioners (49) (27) (25)
Profit from current operations 2,520 768 526
EBITDA 7,437 1,916 1,729
Financial expenses 1,530 274 553
Income before income tax 990 494 (27)
Taxes on income 199 123 (3)
Profit (loss) after income tax 791 371 (24)
Company's share of the loss of asociated companies (18) (5) 0
Income before regulatory deferral accounts 773 366 (24)
Movement in regulatory deferral accounts balances, net of tax 3,967 (50) (43)
Profit for the period 4,740 316 (67)
Loss with respect to cash flow hedging, net of tax (82) (29) (38)
Remeasurement of a defined benefit plan, net of tax (1,415) (433) 659
Other Comprehensive income for the period, net of tax (1,497) (462) 621
Comprehensive income for the period 3,243 (146) 554
For the three months ended:
Balance Sheet(NIS millions)
Source: IEC’s Financial Statements for 3M-2018.
Investor Relations 27
(NIS millions)
Assets 12/31/2017 03/31/2017 03/31/2018 Liabilities and Equity 12/31/2017 03/31/2017 03/31/2018
Current assets Current liabilities
Cash and cash equivalents 3,428 3,124 4,110 Credit from banks and other credit providers 6,110 4,683 8,826
Short term investments 273 929 2,429 Trade payables 1,728 1,893 1,678
Trade receivables for sales of electricity 4,429 4,134 4,146 Other current liabilities 1,520 1,560 1,554
Other current assets 608 710 807 Customer advances, net of work in progress 473 457 504
Inventory - fuel 1,161 934 1,208 Provisions 732 727 739
Inventory - stores 127 124 129 Total current liabilities 10,563 9,320 13,301
Total current assets 10,026 9,955 12,829
Non-current liabilities
Debentures 30,911 32,283 31,148
Non-current assets Liabilities to banks 5,561 5,356 4,872
Inventory - Fuel 1,253 916 1,133 Liabilities with respect to other benefits after employment 2,886 2,754 2,775
Long-term receivables 1,471 1,116 1,315 Deferred taxes, net 5,992 4,965 6,158
Investment in associates 39 52 39 Debentures to the State of Israel 2,511 2,499 2,504
Assets with respect to benefits after employment termination 6,289 7,093 7,351 liability to the State of Israel 1,682 2,021 1,628
Fixed assets, net 59,887 60,826 59,209 Other liabilities 757 784 749
Intangible assets, net 1,231 1,254 1,202 Total non current liabilities 50,300 50,662 49,834
Total non-current assets 70,170 71,257 70,249 Equity 20,793 17,404 21,347
Debit balance of regulatory deferral accounts 4,880 2,471 4,407 Credit balance of regulatory deferral accounts 3,420 6,297 3,003
Total assets and debit balance of regulatory deferral
accounts85,076 83,683 87,485
Total liabilities, equity and credit balance of regulatory
deferral accounts85,076 83,683 87,485
Thank youFor questions or additional information, please contact us:
28
Israel Electric Corp. Investor Relations: [email protected]
Appendices
29
The Structural Change Outline
Note: As the Government's representatives were notified, IEC Board of Directors' resolution dated May 10, 2018 and the compliance with the IEC's undertakings are, without exception, subject to the Israeli Government's decision dated June 3,
2018 (the formulation of which has not yet been published, but to the IEC's understanding is compatible in essence with the understandings and principles described above), and subject to the incorporation of the requisite arrangements in
primary legislation and/or secondary legislation and/or administrative decisions and/or regulations of the Electricity Authority, and in the licenses provided by the competent institutions in Israel, as required by any applicable Law. In case the
legislative amendments and/or administrative decisions and/or Electricity Authority regulations and/or the aforesaid State licenses are not consistent with the agreements (insofar as these are required by the Government), or that the collective
agreement between IEC and the employees’ representatives will not be in force, all IEC’s undertakings pursuant to IEC’s letter of undertakings and its appendixes shall not be in effect and the Government shall not make any claims and/or
contentions towards IEC in respect of said undertakings. For the purpose of implementing the structural change, if and to the extent that it is implemented, and granting binding legal effect to the agreed structural change, will require, among
other things, regulatory approval, amendments to the relevant provisions of the Law, the Electricity Authority's provisions and the granting of licenses in connection therewith subject to the Law, that have not been received in full as of the date of
approval of the financial statements. The requisite amendments to the relevant statutory provisions, as well as the Electricity Authority's provisions and the amendments to the terms of the licenses may take some time, and their final terms may
differ from those expected as of this date. If the provisions of the Electricity Sector Law are not amended, IEC may be requi red to implement the provisions of the Electricity Sector Law in its current version, including those regarding a restriction
on the number of licenses.
Investor Relations 30
Principles of The Structural Change Outline as of May 10, 2018
Operating
in the
Electricity
Sector
Generation
Within a period of approximately five years, IEC will sell, in a competitive process, existing gas-operated generation sites to third parties, including the infrastructures and land ofeach site. The total installed capacity of the generation sites to be sold by IEC in accordance with the outline of the structural change as of December 31, 2017, is approximately4,500 megawatts. The last dates for submitting the lease on the sites, which are in effect as long as the required legislation is passed by November 30, 2018, are from the dateof the Government's decision on the reform of the electricity sector, as follows: Alon Tavor and Part of the area at the Rutenberg power station (designated for Project D) (18months),Ramat Hovav(30 months),Reading (36 months), Hagit (The part of the site which includes a type E combined cycle area) (48 months) and Eshkol (60 months).
IEC’s consideration with respect to the sale of the sites will be at the fair value of the asset and in any case will not be less than the value of the sale, plus the value of the land(i.e. the site’s value rate for these purposes, plus any additional cost that will be recognized by the Electricity Authority and which will be created directly due to the sale process,including the evacuation and construction of IEC infrastructures evacuated from said site, the consideration to be paid IEC with respect to sale of the site will be paid in cash onthe date of deliveryof possession thereof - all subject to cost control bythe ElectricityAuthority), as will be determined byan expert in the matter.
Pursuant to the Government’s resolution in this matter, a wholly-owned subsidiary of IEC will be established. Subject to amendment of the Electricity Sector Law and receivinggeneration licenses, the generation subsidiary shall establish 2 generation units operated by natural gas in the Orot Rabin site with combined cycle technology ("CCGT"). Thecombined cycle gas turbines shall be registered as the generation subsidiary’s assets. An agreement shall be signed for the purchase of planning and construction services fromIEC for the construction of the combined cycle gas turbines. After construction of the combined cycle gas turbines, the generation subsidiary will purchase operation andmaintenance services from IEC. The subsidiary will employ up to ten employees. Construction of the first combined cycle gas turbine shall be completed no later than June2022. Construction of the second combined cycle gas turbine will commence after the sale of the Alon Tavor site and publication of a competitive process for the sale of theRamat Hovav site. Both combined cycle gas turbines will be at least H technology with a total installed capacity of approximately 1,200 MW, in accordance with the productscurrentlyon the market (an upwards variance of 5% will notbe considered a deviation from this capacity).
During and after the reform years, IEC or its generation subsidiary shall not establish, replace, operate, plan or engage in the development of power stations in Israel either byitself or as a contractor for a third party, nor shall it engage in the production of electricity in the framework of microgeneration or renewable energy in Israel. This section willapply both during the reform years and subsequently. IEC has undertaken to the State not to act to obtain new generation licenses or to construct new electricity generationstations and replace existing stations, and not to act to obtain permits for the operation of power stations for other parties in Israel. The aforesaid shall not prevent IEC or thegeneration subsidiary from engaging in operation and maintenance of their power stations and the planning required for such operations. IEC’s generation licenses pertaining tothe generationunits thatare not soldas partof the reform will be extendeduntil the end of the engineering life-span ofeach unit.
IEC will cease to operate as the system manager. Within 18 months of obtaining the Government's resolution regarding the reform of the electricity sector, a separategovernment company will begin operations to manage the system. The new company's roles will be defined by the state in a license to be granted by the Electricity Authoritywith the approval of the Minister of Energy. Employees from the System Management Unit, Planning Development Technology Division, the Statistics Department andemployees from additional units, in accordance with the needs of the economy and in a manner that will enable the functioning of the system management company, will betransferred to the system management company, excluding employees or functions that all parties agreed should remain with IEC. The consideration to IEC with respect to theassets that IEC will sell to the system management company within the reform will be at the rate value of the assets, as recognized by the Electricity Authority and subject to costcontrol by the Electricity Authority. The system management company will present the Minister with a development plan for the delivery system. Agreements with privateproducers in the transmission grid will be converted from IEC to the system management company until the operation of the system management company, except for aspectspertaining to the responsibilityof IEC to connect the facilityto the grid and the flow ofenergyfrom the facilitywhich will remainunder the responsibilityof IEC.
Profit Center. IEC will operatein the generation segment in separate audited profit center
The Structural Change Outline - Continued
Note: As the Government's representatives were notified, IEC Board of Directors' resolution dated May 10, 2018 and the compliance with the IEC's undertakings are, without exception, subject to the Israeli Government's decision dated June 3,
2018 (the formulation of which has not yet been published, but to the IEC's understanding is compatible in essence with the understandings and principles described above), and subject to the incorporation of the requisite arrangements in
primary legislation and/or secondary legislation and/or administrative decisions and/or regulations of the Electricity Authority, and in the licenses provided by the competent institutions in Israel, as required by any applicable Law. In case the
legislative amendments and/or administrative decisions and/or Electricity Authority regulations and/or the aforesaid State licenses are not consistent with the agreements (insofar as these are required by the Government), or that the collective
agreement between IEC and the employees’ representatives will not be in force, all IEC’s undertakings pursuant to IEC’s letter of undertakings and its appendixes shall not be in effect and the Government shall not make any claims and/or
contentions towards IEC in respect of said undertakings. For the purpose of implementing the structural change, if and to the extent that it is implemented, and granting binding legal effect to the agreed structural change, will require, among
other things, regulatory approval, amendments to the relevant provisions of the Law, the Electricity Authority's provisions and the granting of licenses in connection therewith subject to the Law, that have not been received in full as of the date of
approval of the financial statements. The requisite amendments to the relevant statutory provisions, as well as the Electricity Authority's provisions and the amendments to the terms of the licenses may take some time, and their final terms may
differ from those expected as of this date. If the provisions of the Electricity Sector Law are not amended, IEC may be requi red to implement the provisions of the Electricity Sector Law in its current version, including those regarding a restriction
on the number of licenses.
Investor Relations 31
Principles of The Structural Change Outline as of May 10, 2018
Operating
in the
Electricity
Sector
Transmission and Distribution. IEC will continue to act as an essential service provider and execute the transmission operation in accordance with the transmissionlicense updated as of this date. The licenses for transmission and distribution will be granted for an extended period as customary in the field of public infrastructures suchas the natural gas and water sectors. The volume of distribution licenses in the sector that are not owned by IEC will not exceed 10% of the annual volume of consumption,plus the rate of increase in annual consumption in the distribution areas of those license holders who will be included in this framework. The types of license holders to beincluded in this framework are: industrial zones that submitted a request for a distribution license or received a distribution license until the date of the Governmentdecision, historical distributors as defined in the criteria and the East Jerusalem Electricity Company Ltd. in the area of the license granted by the Electricity Authority.Insofar as it will be decided to install smart meters for consumers of IEC, the system will be installed by IEC, which will own the meters as part of the distribution segmentand the meters will be open access.
Transmission control. IEC shall establish a new transmission control that will operate the transmission and transformation system in accordance with the instructions ofthe system manager, pursuant to the terms that will be set in the licenses and the law.
Supply. IEC will be the default supplier for the supply segment. The supply of electricity to high voltage and extra high and ultra-high voltage consumers will be opened tofull competition. IEC will not be entitled to operate as a competitive entity. IEC will collect a rate as set by the Electricity Authority. The subject will be reexamined after 5years, inter alia in accordance with the market’s terms of competition, by the Electricity Authority, the Ministry of Energy, the Ministry of Finance, and the Antitrust Authority.The supply of electricity to low-voltage consumers will be opened to competition as determined by authorized government officials and at the time determined. At themarket opening point IEC will not be allowed to act as a competitive factor in this segment. Accordingly, a mechanism will be determined by the Electricity Authority, inaccordance with the policy it shall determine, according to which the state will open the segment to competition gradually so that the market share of IEC is not expected tobe less than 60% of the number of customers in the segment during the period of the reform. In the event that the rate of customers drops below 60%, IEC will be giventhe opportunity to compete in this segment in a fair manner and subject to the Minister’s policy and pursuant to the provisions determined. IEC will supply value addedservices, only as detailed below: (1) Cyber services for all consumers in the ultra-high, extra-high and high voltage supply segments and for its low-voltage consumers. (2)As of the date on which the number of IEC consumers in the low voltage supply segment will decrease below 75% of all consumers in this segment, IEC will be entitled toprovide cyber services to all consumers and "smart home" services and energy efficiency for low voltage consumers only, and the subject will be defined in the supplylicense that will be given to IEC. The "smart home" and "energy efficiency" services for this purpose are services providing information on the characteristics of consumerelectricity consumption of each electrical device/appliance, providing consultation services on the ability to reduce power consumption and the efficiency of their use, aswell as remote control services for home appliances, including byinstallation of appropriate equipmentat the consumer's private facility for control services.
Profit Centers. IEC will operate in the transmission, distribution and supplysegments in separate audited profit centers
The Structural Change Outline - Continued
Note: As the Government's representatives w ere notified, IEC Board of Directors' r esol uti on dated M ay 10, 2018 and the compliance with the IEC's undertakings are, without excepti on, subj ect to the Israeli Government's decision dated June 3, 2018 (the for mulation of
which has not yet been published, but to the IEC's unders tanding is compatibl e in essence with the understandings and princi ples described above), and subj ect to the i ncorporation of the requisite arrangements in pri mary legisl ation and/or secondary l egisl ati on and/or
admi nistr ative decisi ons and/or r egulations of the El ectricity Authority , and in the licenses pr ovided by the competent instituti ons i n Isr ael , as r equired by any applicabl e Law. In case the l egisl ative amendments and/or admi nistr ative decisions and/or Elec tricity Authority
regulations and/or the afor esaid State licenses ar e not consistent with the agreements (i nsofar as these are requir ed by the Gover nment), or that the coll ective agr eement betw een IEC and the empl oyees’ representatives will not be i n force, all IEC’s under taki ngs pursuant
to IEC’s letter of undertakings and its appendixes shall not be in effec t and the Gover nment shall not make any clai ms and/or contenti ons towar ds IEC in r espec t of sai d under taki ngs. For the pur pose of i mplementing the str uctural change, if and to the extent that it is
i mpl emented, and granti ng bi nding l egal effec t to the agreed s truc tur al change, will r equire, among other things, regul atory appr oval, amendments to the r elevant pr ovisi ons of the Law, the Electricity Authority's provisi ons and the gr anting of licenses i n connecti on ther ewith
subj ect to the Law, that have not been received in full as of the date of appr oval of the financial statements . The r equisite amendments to the rel evant statutory pr ovisions, as w ell as the Elec tricity Authority's pr ovisions and the amendments to the ter ms of the licenses may
take some ti me, and their final ter ms may differ fr om those expected as of this date. If the provisions of the Elec tricity Sec tor Law are not amended, IEC may be required to i mpl ement the pr ovisi ons of the El ectricity Sector Law i n its curr ent version, i ncludi ng those
regarding a restriction on the number of licenses.
Investor Relations 32
Principles of The Structural Change Outline as of May 10, 2018
Financial
Strength, &
Efficiency
Measures &
Other
Aspects
Financial Goals. In accordance w ith the understandings w ith respect to the structural change outline, on May 10, 2018, the Board of Directors of IEC approved a business plan thatconstitutes the basis for the financial model that w as presented to the Board of Directors on the date of approval w hich is based on the pr inciples of the structural change outlineformulated during the reform discussions. The financial model, including the financial goals set and the assumptions that served as its basis, w ere prepared by IEC, presented to theState and discussed in the framew ork of the reform discussions.
Financial Strength. During the reform years, a team composed of Government entit ies headed by the Government Companies Authority Director, w ith the participation of the BudgetCommissioner, the Accountant General and the Director General of the Ministry of Energy or anyone on their behalf, w ill be established in order to monitor and audit, w hile consultingw ith IEC and on the basis of its reports to the team, the compliance w ith the financ ial stability targets and the fulf illment of the assumptions underlying the bus iness plan relating to thereform and the structural change. The monitoring team w ill convene once a year or soon after a signif icant event has occurred that has a direct connection to the implementation ofthe reform, w hich signif icantly affects the IEC's financial stability targets, w hichever is earlier. To the extent that it is agreed that there is an expected mater ial deviation from meetingthe financial stability targets or the assumptions at the base of the business plan relating to the reform and the structural change, the team w ill hold discussions w ith IEC regardingpossible courses of action.
Restrictions and provisions included in the debt raising documents. For the avoidance of doubt, all sale or transfer of assets or liabilit ies by IEC, including to a subsidiary, or thesale of generation sites, w ill be made subject to any Law and subject to the restrictions included in the IEC's debt-raising documents.
Implementation of the outline of principles and other aspects. IEC estimates that the expected costs in connection w ith the structural change, to the extent that it w ill beimplemented in accordance w ith the structural change outline, are at an estimated amount of approximately NIS 7 billion, w hich w ill be spread over ten years from the approval date ofthe structural change outline. Subject to the required regulation and as a condit ion on the part of the Company to implement the reform, the costs due to implementation of the reformoutline w ill be fully recognized for IEC, subject to cost control.
Organizational changes and efficiency program. IEC w ill undergo a signif icant process of organizational change and an efficiency program in w hich the number of employees inIEC w ill be reduced by approximately 1,800 employees over 8 years betw een 2018 and 2025. Follow ing retirement of employees as stated, full-time positions w ill be deleted in thesame number as the number of employees w ho retire from the IEC's employee roster according to the number of early retirements carried out in practice. In addition, it is expectedthat some of the employees w ill move to the system management company and to the companies that w ill purchase the generation units that w ill be sold. The total number of
permanent employees w ill decrease by approximately 2,200 permanent employees. At the end of the reform per iod, the number of permanent employees in IEC w ill not exceed 6,400permanent employees. In addition, from January 1, 2022 and dur ing the remainder of the reform period, the number of temporary employees w ill be betw een 2,600 and 2,900. Insofaras the tasks imposed on IEC require the employment of addit ional temporary employees beyond the said volume of temporary employees, their employment w ill be subject to theapproval of the Director of the Government Companies Authority and the Director General of the Ministry of Energy. That stated in this section pertaining to permanent employees issubject to the removal of the system management activity and sale of the generation sites, as they are defined in the collective agreement, in a full manner and no later than by theend of the reform period, eight years from the date of the Government’s resolution. Furthermore, the outline of the organizational change includes, among other things, an agreedframew ork for updating labor relations and changes in the organizational culture of the Company, the principles of changing the structure of the organization and efficiency and atimetable for achieving an agreement to change the salary structure for new employees that w ill be hired. Moreover, agreements w ere reached regarding payments to permanentemployees w ho w ill remain in IEC and to employees w ho retire as part of the eff iciency plan, the entitlement to w hich w ill be established according to milestones to be agreed upon.
Assets
Arrangement
On January 3, 2018, IEC, the State of Israel, the Israel Land Authority and the Tel Aviv-Jaffa Municipality entered into tw o agreements w ith respect to the Assets ArrangementOutline. The implementation of the agreements is subject to the fulf illment of a number of preconditions w hich are time limited, inc luding the approvals of various State entit ies, as w ellas a legislative amendment
In accordance w ith IEC understanding, IEC and State of Israel representatives continue to act to promote the assets arrangement, regardless of the progress of the Structural change It should be noted that the approval of the IEC’s Board of Directors and the performance of IEC's liabilities in the framew ork of the understandings is subject to the fulf illment of all the
preconditions for the execution of the outline of the assets arrangement in accordance w ith the arrangement agreements of January 3, 2018. For the avoidance of doubt, theexecution of the arrangement of the assets arrangement as specif ied in the financial statements of IEC is not dependent on progress or implementation of the structural changeAccording to understandings
Environment, sustainability and corporate governance (ESG) (1)
Investor Relations
1) Source: IEC's Corporate Sustainability Report for 2017, Maala's rating for IEC for 2017.
2) Maala is the non-profit CSR standards-setting organization in Israel who serves the needs of some 110 members, comprised of Israel’s large and mid-size companies, committed to
excellence in corporate citizenship. The criteria in the rankings are determined by an independent public committee composed of content experts, academics, heads of social
environmental organizations and representatives of the business sector.
33
IEC earned the highest ranking in the Maala(2) 2017 Index: Platinum+ (for the third consecutive year)
Ethical Aspects
of Business Conduct
Responsible
Supply Chain
Implementation of Corporate
Governance Code
Effectiveness of the work of the Board of Directors policy
Prevention of conflicts of interests, corruption and
embezzlement
A published code of ethics
adapted to IEC’s f ields of
operations
Reference to ethical
aspects w ith stakeholders
Internal communications
on ethics issues
Organizational culture that
respects employee rights
Promotion of health and ensuring w orker safety
Retention and development of human resources
Work-life balance and
fostering an open culture
Engagements mainly through public tenders or
other competitive procedures. Setting fair rules
and providing equal opportunity to suppliers
Improving dialogue and deepening cooperation
w ith Israeli industrial enterprises
Securing subcontracted workers' payment terms
and conditions
Diversity of suppliers
Diversif ied and
humanitarian employment
Diversif ied employees in managerial positions
Women in managerial roles
Accessibility for people w ith
disabilities
Social activity policy
Promotion of regular and
one-off volunteering by w orkers and pensioners
in the community
Environmental violations
screening
Environmental policy & management system
Measurement and setting objectives: air, energy, w aste,
w ater and sewage
Employee health,
Wellbeing and working relations
EnvironmentEmployee
Volunteering
Diversity &
Inclusion
Corporate
Governance
Government and IEC Cooperated to Bridge the Natural Gas Shortage (2011-2012)
The Government and the Electricity Authority acknowledged the short-term liquidity shortfall caused by the natural
gas shortage in 2011-2012 and together with IEC planned and executed a series of temporary support measures to
help bridge the gap
Delayed
Deposits to Designated
Account
Gradual Tariff
IncreaseRegulatory
Changes toFuel Mix
Government
Guarantees for Local
Debt
Natural Gas
Shortage
• Disruptions to the
natural gas supply
from Egypt
• Expedited depletion of
the Yam Tethys
reserve
• As a result, IEC
shifted to more
expensive back-up
liquid fuels
Long-Term
Solution
• Sufficient supply of
natural gas (Tamar
online since March
2013 and LNG
terminal)
• Higher costs of
alternative fuels were
ultimately reflected in
the tariff
Temporary
Diesel Oil Purchase Tax
Reduction
2011 2014Short-Term
Liquidity Shortage
Return to Normal
Operations
Government Support
Investor Relations 34
Fuel Expenses
Source: IEC’s Financial Statements for 2010-2017 and for 3M-2018.
1) Excluding changes in fuel cost regulatory asset.
2) Revenues include sale of purchased electricity from IPPs.
Denotes USD figures at USD/NIS exchange rate of 3.55, 3.82, 3.73, 3.47, 3.89, 3.90, 3.85, 3.47, 3.63 & 3.51 for the end of period of 2010A, 2011A, 2012A, 2013A, 2014A, 2015A,
2016A, 2017A, 3M-2017 and 3M-2018, respectively.
IEC Fuel Expenses Development
5.0 6.7 7.0
4.8 4.0 3.6 2.7 3.2
0.8 0.8
2.9
2.8 1.6 4.7
3.8 4.3 4.5
4.6
1.2 1.1
1.5
3.8
11.5
1.6
0.2 0.5 0.3
0.6
9.4
13.3
20.1
11.1
8.0 8.4 7.5
8.4
2.1 1.9
45.9%
52.4%
70.9%
40.2%
31.9%
36.6% 33.0%
36.0% 36.8% 35.0%
-40%
-20%
0%
20%
40%
60%
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017 3M-2017 3M-2018
(NIS, bn)
Coal Nat Gas & LNG Diesel & Fuel Oil as % of revenues
$2.1 $2.2$2.0
$2.4$2.6
$3.5
$5.4
$3.2
$0.6 $0.5
(2)
(1)
(1)
IEC’s fuel expenses have decreased due to the availability
of natural gas from Tamar and as a result of a decrease in coal prices
IFRSPrepared according to Government Companies Regulations
(1)
Investor Relations
Tamar online:
Return to
normal operations
Gas shortage:
Expenses more than
doubled in two y ears
35
Coal(1) Prices
Source: World Bank Commodity Price Data (Pink Sheet), March 2018. Russia is not included in World Bank information, even though it is a significant source of coal for IEC.
Notes
1) IEC’s coal sources are more limited due to environmental constraints.
2) Calculated as average price of Australia, Colombia and South Africa coal.
Coal Price Development (International)
Investor Relations
40
50
60
70
80
90
100
110
120
130
140
150
Jan-1
4
Mar-1
4
May-1
4
Jul-1
4
Sep-14
Nov-14
Jan-1
5
Mar-1
5
May-1
5
Jul-1
5
Sep-15
Nov-15
Jan-1
6
Mar-1
6
May-1
6
Jul-1
6
Sep-16
Nov-16
Jan-1
7
Mar-1
7
May-1
7
Jul-1
7
Sep-17
Nov-17
Jan-1
8
Mar-1
8
($/t)
Coal, Average(2)
36
Sources of Natural Gas in Israeli Waters
Introduction of LNG by a regasification ship
37
Tamar is only
active site
Tariff Comparison to European Countries
The electricity rate in Israel is lower than most European peers
Source:Eurostat, Electricity prices for domestic consumers – bi-annual data, as of 11/22/2017. Israel rate is based on the last tariff update (01/15/18) and converted EUR/NIS exchange rate of 4.17 as of 01/15/2018.1) Average national price in Euro per kWh without taxes for medium size household consumers(annual consumption between 2,500 and 5,000 kWh).
Average Price per KWh(1)
Investor Relations
18.7 18.518.1
14.513.9
13.4 13.312.6
12.211.8 11.6 11.5 11.4 11.3 11.1 11.0 11.0 10.9
10.5 10.410.1 10.0
9.38.9 8.7 8.5 8.3
8.0 7.8
0
2
4
6
8
10
12
14
16
18
20
Belg
ium
Ireland
Spain
Cyp
rus
Germ
any
Unite
d K
ingdom
Italy
Sw
eden
Austria
Cze
ch R
epublic
Norw
ay
Neth
erlands
Gre
ece
Israel (Ja
nuary
2017)
Portu
gal
Slo
venia
Pola
nd
Fra
nce
Fin
land
Latvia
Cro
atia
Denm
ark
Esto
nia
Hungary
Rom
ania
Turke
y
Slo
vakia
Bulg
aria
Lith
uania
(€ cents equivalent)
38
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