Israel Electric Corporation (IEC) (TASE: ELEC.B22) has asked the government for an immediate solution to its cash distress caused by disruption in natural gas supplies and the need to buy more expensive diesel for electricity production. The Public Utilities Authority (Electricity) has meanwhile warned that electricity rates will soon rise by up to 20%.
In a notice to the TASE, IEC said that it must prepare for summer electricity production using a different and more expensive mix of fuels. An additional factor is the Ministry of Environmental Protection directive that priority be given to diesel over fuel oil, even though diesel costs more than fuel oil although it is less polluting.
IEC said, "In view of the ongoing disruptions in gas deliveries from Egypt and the directive, the company will bear a significant additional expenditure of NIS 3-3.5 billion to buy alternative fuels. This amount exceeds the planned fuel procurement budget for this year. The amount is liable to change depending on changes in the quantities of gas deliveries from Egypt.
"The company currently expects financial difficulty in meeting the additional cost from its own resources, and has therefore asked the Public Utilities Authority (Electricity) to fully recognize the additional cost in electricity rates. However, even if the Public Utilities Authority agrees to the company's request… this will not fully address the immediate cash flow problem expected, because the company will not immediately receive the additional income from the higher rates."
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