Bethel Finance: Gov't allows IEC to raise $500m overseas

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Bethel Finance news:
The government today gave permission for Israel Electric Corporation (IEC) (TASE: ELEC.B22) to raise $500 million in debt overseas, which will increase the utility's debt to NIS 63 billion. As first reported by "Globes", IEC - Israel's debt champion - will raise the debt as the final part of the $2 billion bond offering, which the government approved in 2008. The offerings come on top of IEC's plan to raise NIS 3.5 billion this year.

IEC will use the proceeds to buy fuel for generating electricity, the cost of which has increased because of the halt in Egyptian natural gas deliveries, instead of the original purpose to finance the construction of power stations.

"IEC will decide on the bonds' duration and interest rate later, depending on market conditions. IEC has already raised $1.5 billion in two foreign bond offerings, but due to the poor timing of the offering and the utility's dismal financial condition, it was forced to pay an interest rate of 7-9%" according with Mr. Peres Sailam (Bethel Finance Ltd).

IEC confirmed "Globes" original report, saying in a notice to the TASE in November, "International capital markets are highly volatile, due to the ongoing debt crisis in Europe, and the economic problems in the US. Nonetheless, IEC believes that it has access to international capital markets, which will allow it to raise capital under the current circumstances, on the basis of indications from leading investment banks in the world."

Raising debt abroad is one of IEC's ways to fill the shortfall in its cash flow caused by the disruptions of gas deliveries from Egypt, and its need to buy more expensive diesel to generate electricity.