IsraelIsrael ElectricElectric CorporationCorporation StrategicStrategic AspectsAspects OverviewOverview
NovemberNovember 20122012 TheThe ElectricityElectricity SectorSector inin IsraelIsrael
2 1919: Water utilization survey in the State of Israel initiated by Pinchas Rutenberg
Pinchas Rutenberg: Founder of the Company
“The sole and only interest of the Israel Electric Company is the economic development of the country based on pure business considerations.” 1926: Concession agreement Pinchas Rutenberg, 1926 from the British Crown
3 IsraelIsrael ElectricElectric CorporationCorporation SelectedSelected DataData
Government company: 99.85% of the Company is owned by the Government.
Installed capacity: 13,248 MW (~500MW self-generation/private).
Peak demand: 11,920 MW on 19.7.2012.
Annual budget: approximately NIS 32B MW(2012).
Total employees: approximately 13,000 (of which some 9,800 have tenure).
Total customers: over 2.5 million.
4 SpecialSpecial CharacteristicsCharacteristics ofof thethe ElectricityElectricity SectorSector
Fast growth rate – which doubled in the last decade. A growth of 3%-4% is expected in the next decade.
Low reserve compared with the electricity sectors in western countries (without the emergency plan and IPPs).
“Electricity Island” – no backup or connection to any other source of electricity supply.
Type of product:
Product that cannot be stored
Fluctuation in consumption and generation
5 TheThe ElectricityElectricity ChainChain
Generation Transmission Distribution 63 Generation 400/161 KV 9 161 KV Approx. 190 High and low 2.52M units in 17 (about 5,246 kms.) Switching (4,386 km. substations voltage lines customers power stations stations ciruits) (about 45,000 kms.)
ultra-high voltage customers
high- voltage customers
6 GeopoliticalGeopolitical Surroundings:Surroundings: NeighboringNeighboring CountriesCountries
Lebanon (2010) Population: 4.1 million Israel (2012) 3,000 MW 732 MW per million 12,760 MW residents
Population: 7.9 million 1,615 MW per million Syria (2010) residents 8,911 MW Population: 22.2 million 401 MW per million residents Jordan (2010) 2,962 MW Population: 6.4 million 463 MW per million residents Egypt (2010) 24,726 MW
Population: 80 million 309 MW per million residents
7 NationalNational InstalledInstalled CapacityCapacity inin MWMW (correct to 30.8.2012)
Orot Rabin Haifa 2,590 1,030 Reading Eshkol 428 1,549 Rutenberg 2,250 Kinnerot 80 Alon Tabor 583 Gezer 1,336 Hagit 1,275 Zafit 580
Ramat Hovav Total 1,021 Total Installed Fuel Capacity Capacity Type in % in MW 36.5 4,840 Coal Natural Coal Units 53.6 7,102 Gas Natural Gas Units Eilat 92 0 0 Fuel Oil Fuel Oil Units 9.9 1,306 Diesel Combined-Cycle Total Installed Capacity: 13,248 MW Units Total Installed Capacity: 13,248 MW 100 13,248 Total in 63 Generation Units Gas Turbine Units
8 Annual Peak Demand Growth 1990-2015 MW Forecast demand in 2013: approx. 12,832 MW
11,920 MW
7.6% per year Approx. 3%-4% per year
3X !!
1990-2011 Annual Peak Demand 2013-2015 Forecast Summer Peak Demand, including IPPs
9 Natural Gas Transmission System
Haifa
Alon Tavor Sites operated by natural gas: Hagit Eshkol – as of February 2004 Orot Rabin Reading – as of July 2006 Gezer – as of July 2008 Reading Hagit – as of May 2009 Gezer Zafit – as of May 2010 Eshkol
Ramat Hovav – as of June 2010 Yam Thetys Rutenberg Alon Tavor – as of August 2011 Zafit Ashkelon Haifa – As of November 2011 EMG
Future pipeline between Gezer and Hagit
Ramat Hovav
10 2.52 Million Consumers
E a a
s g t a J r n i e c d r t u u w h s l e a t a u te P le r A m r p e 87.7% of customers um p in g residential
1.3% of customers
industrial 10.4% of customers
public/commercial
Self-consumption by IEC: approx. 4%
11 InstalledInstalled CapacityCapacity (Economy)(Economy) 19481948--20122012
End of 2012: total of 13,750 MW IEC: 13,250 MW Private producers: approx. 500 MW End of 2011: total of 13,160 MW MW IEC: 12,760 MW Private producers: approx. 400 MW
1948: 69 MW
12 ElectricityElectricity TariffTariff
Distribution according to sectors Distribution according to costs
Distribution Generation Capital Tr an 12% 20% 25% sm is sio 8 % n Fuel
60% Operation Fuel 15% 60%
*הערכות - 2012 13 NumerousNumerous RegulatorsRegulators
ICA - Ministry of Tenders Industrial Army Finance - Ministry Police Cooperation Budget Authority of Division Israel Justice Security Acquisi-Acquisi- Antitrust Acquisi-Acquisi- Authority Agency tionstionstionstions Security Security IsraelIsrael Water AntitrustAntitrust Ministry of Authority Authority Infra- Authority structures
Local WaterWater Electricity Authorities Authority ElectricityElectricity ElectricityElectricitySectorSector SectorSector Ministry of Environ- mental Electricity Protection LicensingLicensing andand Administra- tion ConstructionConstruction CompaniesCompanies CompaniesCompanies Local Authorities Government HumanHumanHuman Companies Planning & Resources Ministry ResourcesResources Ministry of FinancialFinancial Authority Construction EnvironmentEnvironment Israel FinancialFinancial of the EnvironmentEnvironment Environ- MarketMarket Interior mental Accounting MarketMarket Protection Standards Board Israel Securities Wage and Authority Ministry of Government Labor Regional Associations Industry, Companies Accord Government Trade & Labor Authority Unit Local Companies Authorities Authority
14 Development of the 400 kV Transformation System: IPPs/renewable energies/stability of the system Status in 2012 Forecast until 2016
Zvulun
Hagit Yavor East Galilee
Zvulun 2016 Caesaria 2016
Hagit Orot Rabin To Jordan Caesaria
Orot Rabin Petach Tikva Emek Hefer Yarkon Gan Sorek Petach Tikva Ganot Gezer Gan Sorek Gan Sorek 201320112013 Gezer ירושליםEven Sapir Jerusalem To Jordan Zafit Durad Even Sapir Zafit Rutenberg Rutenberg
Parsa Ramat Hovav Ramat Hovav To Jordan Sdom To Egypt
Total connected generation: 5,790 MW; Transmission: 10,150 MVA; Grid Length: 735 km.
15 161161KVKV TransmissionTransmission SystemSystem Distribution of existing lines (in 2011) and future status up to 2016
Ramat Hovav 161 kV lines Haifa Existing
Future Alon Hagit Tavor 2011 2016 Orot Rabin Substations 157 163 Installed 14,855 16,980 transformation capacity (MVA) Reding No. of private 33 38 power stations Gezer Circuit lengths 4,292 4,570 Eshkol (in kms.) Length of 94 115 Rutenberg Zafit underground cables in kms.
16 ElectricityElectricity –– ProductProduct QualityQuality
Quality
Service
Price
17 ReliabilityReliability ofof SupplySupply Yearly average index of minutes-of-non-supply of electricity per customer, in medium-voltage grids, for 1988-2011
900 839
800 725 700 595 584 600 534 502 463 500 Minutes 348 363 400 352
300 203 207229 183 202 178 179 151 134 145 132 200 135 124 121 100
0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
18 CostCost ofof ElectricityElectricity inin IsraelIsrael (in(in 20122012 prices,prices, inin agorot,agorot, withoutwithout VAT)VAT)
agorot
19 Electricity Price in Israel is among the Lowest in the Western World even after the Natural Gas Crisis
€Cent
Source: Eurostat publication 2011 – for prices abroad
20 OfficialOfficial OECDOECD ReportReport (2011)(2011)
“…the current price (in Israel), in general, appears artificially low… …the price of electricity in the wholesale sector (not including tax) are low in international terms… …the prices are not high enough for a monopolistic supplier to exist (even when taking steps to save costs)…”
Base for exchange rate
It has been 20 years that electricity prices in Israel are a third of the lowest in the western world
Diagram 3.7. Electricity price per home Prices do not include taxes, USD per kWh
21 Price Outlook: Prices in previous years were higher than the current price that was caused by the natural gas crisis Average price per KWh in the residential sector (in 2012 prices*) agorot/kWh
- 7.6% forecast
(*) deducted from the price index per customer (annual average) – 2012 Israel Bank forecast 2.6%
22 QualityQuality ofof ServiceService toto CustomersCustomers
Israel Electric has been chosen for the 15th consecutive time for customer satisfaction for the quality of service in the public sector!
According to the “Test of the Nation” and the Geocartography Institute
23 FuelsFuels
24 IEC: The Pioneer of the Natural Gas Revolution
0 100% 9 12 26 36.6 18 20 33 31.9 80%
60%
79 78 75 40% 71 70 65 64 60 61.5
20%
0% 2003 2004 2005 2006 2007 2008 2009 2010 2011
coal natural gas
25 The Effect of Introducing Natural Gas
Efficiency in HR Electricity Pollution cost reduction reduction
Improved Natural Competition efficiency Gas and IPPs
26 Increase Strategic in number of storage suppliers
Redundancy
Transmission and supply Local redundancy storage
27 Illustration:Illustration:
Tamar Relying on gas on a Haifa broad scale requires an infrastructure suitable for conducting and Hagit storing of gas!
Reding
Eshkol Gezer
Yam Thetys Zafit Ashkelon EMG
Developed Dutch System Undeveloped Israeli System
28 Forecast Changes in the Fuel Basket until 2014
Forecast 2014* 2010 2003
diesel and fuel oil IPPs diesel diesel and fuel oil 0.5 % 0.1 % 4% fuel oil 2.4 % 17%
coal natural gas 38% natural gas coal 36.5% & IPPs 61% coal 61.5% 79%
* The distribution for 2014 is calculated on the basis of data used to prepare the fuel forecast and the electricity generation for financial planning for 2013-2017 (scenario without energetic efficiency). * Generation for 2014 includes about 2,000 MW by IPPs (conventional and self-generating/cogeneration units).
29 Fuels: International Comparisons (planned for 2015)
4.8% USA 3% 16.7% 20.0% In the 33% world
2.4%
64% 41.3% 14.8%
Europe coal natural gas other (OECD ) Japan
LNG Natural gas Sun, wind, other renewed energies nuclear coal hydroelectric
Source: U.S. EIA International Energy Outlook 2011
30 Participation of Units on 31.7.2011 (Summer Peak in 2011)
31 Neighboring Sources of Natural Gas Tamar Israel 240 BCM
Leviathan Israel 450 BCM
Dalit Israel 15 BCM
Mari B + Noa YT 15-20 BCM
Gaza Marin BG 25 BCM
EMG Gas supply from Egypt LNG - Import of has ceased and there is LNG for backup no information as to if it will be renewed Forecast requirements for the electricity sector for the next decade: 6-8 BCM per year
32 DevelopmentDevelopment PlansPlans
33 Problems in the Electricity Reserve
large demand winter of a developing market – 4% per year night Breaking the peak demand record on 19/7/12: Climate Friday 11,920 MW warming
Saturday
Week day Lack of Low cost of certainty in Summer electricity entry of IPPs and encourages in the development demand of IEC
34 SignificanceSignificance ofof AdvancingAdvancing InvestmentsInvestments inin thethe ElectricityElectricity MarketMarket
Cost of damage Average generation costs to the national economy
~ 5 cent/KWh 25 $/KWh 1:2501:250
35 Generation System Development Plan for 2013-2019, including Project D in 2018/2019 Shut down of Orot Rabin Unit 2 for 5 (correct to 6/2012) months as of 7/2016 - 360 MW
Shutdown of Orot Rabin Unit 1 for 6 months as of 7/2016 - 360 MW
Shutdown of Rutenberg Unit 3 Shutdown of for 6 months as of Rutenberg Unit 5 4/2016 - 550 MW for 6 months as of10/2013 - 575 MW Shutdown of Shutdown of Orot Current projects Rutenberg Unit 1 Rabin Unit 4 fo r 6 15.7.2013 for 6 months as of months as of Emergency-plan projects GT Ramat Hovav 10/2014 - 575 MW Shutdown of 1/2016 - 360 MW 1x115 MW Rutenberg Unit 4 Emission reduction projects in existing coal-fired Shutdown of Orot Shutdown of Orot for 6 months as of power stations; these projects will continue until 15.8.2013 Rabin for 6 Rabin Unit 3 for 6 10/2015 -550 MW the end of 2017 GT Hagit months as of months as of 1x118 MW 4/2014 - 575 MW 1/2016 - 360 MW Shutdown of 1.12.2013 7.2014 Rutenberg Unit 2 7.2016 Project D Project D GT Eshkol GT Alon Tavor for 6 months as of GT Alon Tavor 630 MW 630 MW 1x133 MW 1x263 MW 4/2015 - 575 MW 1x114 MW 20132014 2015 2016 2017 2018 2019 Installed capacity during peak demand in summer (in MW) 13,396 13,910 13,910 14,024 13,883 14,372 15,002 * In addition to this development plan, introduction of new IPPs and implementation of energetic efficiency plans is expected.
36 InvestmentInvestment planplan forfor 20132013--20172017 (in million NIS in 12/2011 prices, including interest capitalization)
12,434
589 12,000 10,232 9,981 9,318 9,573 618 3535 574 10,000 626 684 3551 2635 8,000 2722 3533 1997
In million NIS 6,000 2376 1425 1943 1714 4,000 2669 5848 2992 3528 4339 2,000 1818 465 708 592 58 0 2013 2014 2015 2016 2017
37 BusinessBusiness DevelopmentDevelopment
38 BusinessBusiness DevelopmentDevelopment
39 SmartSmart GridGrid
40 Diverse infrastructures have undergone significant revolutions; now it’s the Electricity Sector’s turn 1950 2009
Telephones
Airplanes
Computers
Electricity
41 41 The Future Electricity Grid: Main Points
Generation Integration of renewable energy sources Consumption .Generation at point of consumption .Smart meters (detour of the transmission grid) .Generation at point of .Efficient use of traditional installations consumption .Advanced load management systems
Transmission .Integration of renewable energy sources .Advanced load management systems .Automatic grid management .Ensuring service standards
42 IsraelIsrael ElectricElectric’’ss CommunicationCommunication VentureVenture
43 43 TheThe EnvironmentEnvironment
44 Main Projects in the Last Decade that Contributed to a Significant Reduction in Emissions
2000 2001 2003 2004 2005 First addition of Operation of Completion of Introduction of Use of special combined cycle in FGDs in conversion to natural gas natural gas to the coal in Orot Rabin Ramat Hovav Rutenberg 2 in Eshkol and Reading electricity sector
NIS 415M NIS 319.3M NIS 393.9M
Alon Tavor Hagit 12/2004, 2/2005 Conversion to natural Emission reduction in gas and water Units 1,2 respectively injection to reduce diesel oil emissions in Units 1-4
45 Main Projects in the Last Decade that Contributed to a Significant Reduction in Emissions (cont.)
2006 11/2006 2010–2009 2011 2017 Haifa Zafit Ramat Hovav Alon Tavor Emission Completion of Emission reduction Conversion to natural Installation of reduction in coal- conversion to project in Units 1,2 gas and water injection natural gas system fired units natural gas in to reduce diesel oil in Unit 3 Unit 3 emission in Units 1-4
Orot Rabin NIS 513.5M Conversion of Units 1-4 to natural gas
Hagit NIS 8,500M Conversion to natural gas and water injection to reduce diesel oil By 2017, the performance of coal-fired units will improve as a result of emission installing devices totaling NIS 8.5 billion (almost equivalent to the construction of another coal-fired power station)!
46 Next Decade’s Project – Plan for Emission Reduction in Coal-fired Units (2009-2017)
A forecast 8.6 billion NIS to be invested over 8 years for emission reduction
Orot Rabin 5,6 Rutenberg 1,2 Rutenberg 3,4 Orot Rabin 1-4
FGD, SCR, PM FGD, SCR SCR SCR
2014 2015 2016 2016 / 2017
Rutenberg – A reduction of 80% in sulfur oxides and 80% in nitrogen oxides Orot Rabin – A reduction of 90% in sulfur oxides and 90% in nitrogen oxides
47 Reduction of Carbon Dioxide (CO2) Emissions Against Electricity Generation (in 1990 and 2000-2011) 850 60
50 800
40 750 R n e i duc
e ti 30 (in billion kWh/year) s on a d in e n C r a O c 700 m n 2 I e d 20
650 10 Electricity generation Electricity Specific emission (grams//kWh) Specific emission
600 0 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
specific emission (grams/kWh) electricity generation (billionskWh/year)
48 Sulfur Dioxide (SO2) and Nitrogen Oxide (NOx) Emissions Against Electricity Generation (in 1990 and in 2000-2011)
d in deman Increase
Dec rease in SO2 Dec rease in NOx Specific emissions (grams kWh) per Electricity generation (in BillionElectricity kWh per year)
49 Emission Reduction of SO2 and NOx in the Coal-Fired Power Station at the Orot Rabin Site
Emission rate Kg./Hour
8183 9000 7438 6946 8000 5992 7000 5709 Emission Reduction:
6000 4545 SO2: - 93% 5000 NOx: - 93% 4000 3000 2000 569 513 1000 0 Current State Apr-14 Oct-14 2017
SO2 NOx
50 Emission Reduction of SO2 and NOx at the Coal-Fired Rutenberg Power Station
Emission rate Kg./Hour 5924 6000
5000 4024 4000 3505 Emission Reduction: 3001
3000 SO2: - 88% 1977 NOx: - 82% 2000 1353 1085 907 729 729 1000
0 Current State Apr-15 Oct-15 Apr-16 Oct-16
SO2 NOx
51 FinancialFinancial DataData
52 The Difficulties of IEC’s Financial Situation
High leverage
Low Acute shortage profitability: of shortage of cash balance internal sources Cessation of gas flow Depletion of the Yam Thetys from Egypt reservoir Strict limitations on Need for the extensive possibilities of investment in raising capital development in Israel
Low tariff! Lowering the One of the rate abroad lowest among below the Western investment- countries permitting rate
53 TheThe lacklack ofof naturalnatural gasgas resultsresults inin financialfinancial consequencesconsequences ofof anan unprecedentedunprecedented strategicstrategic scopescope
Exp en se s in cre ased by alm ost t hre e ti me s in less than
two ye 2012 ars NIS 24B 2011 NIS 14B 2010 NIS 9B
54 BALANCE - ASSETS
31.12.2011 30.09.2012
(in millions) Assets NIS USD NIS USD Cash and cash equivalents 1,176 308 1,142 308
Short term investments 757 198 80 192 Trade receivables for sales of electricity 3,946 1,033 4,991 1,105 Other current assets 640 167 770 183 Inventury - fuel 2,029 531 3,077 649 Inventury - stores 127 33 125 72
Regulatory assets,net 2,500 654 2,817 495 Total Corrent assets 11,175 2,925 13,002 3,324 Long-term receivables 2,030 531 1,775 483 Long-term regulatory asset 0 0 4,524 1,156 Excess pension plan assets over pension liability 5,820 1,523 4,012 1,026 Funds in trust 2,090 547 1,969 503 Fixed assets in use, net 57,564 15,065 58,068 14,844 Fixed assets under construction 4,870 1,275 4,856 1,241 Intangible assets,net 865 226 867 222 Total Non current assets 73,239 19,167 76,071 19,446 Total assets 84,414 22,092 89,073 22,769
55 BALANCE - CURRENT LIABILITIES
31.12.2011 30.09.2012 CURRENT LIABILITIES NIS USD NIS USD Short term debentures 0 3,904 998 Trade payables 2,068 541 3,038 777 Other current liabilities 1,591 416 1,811 463 Customer advances, net of work in progress 407 107 436 111
Provisions 805 211 759 194 Total Current liabilities 9,569 2,504 14,993 3,833 Debentures 31,948 8,361 33,472 8,556 Liabilities to banks 5,150 1,348 4,592 1,174 Liabilities with respect to other benefits after employment termination 2,698 706 2,783 711 Regulatory liabilities, net 2,845 745 2,512 642 Provision for refunding amounts to consumers 2,305 603 2,389 611 Deferred taxes, net 5,607 1,467 5,281 1,350 Debentures to the State of Israel 2,505 656 2,505 640 Liability to the State of Israel 3,764 985 3,576 914 Other liabilities 393 103 375 96 Total Non current liabilities 57,215 14,974 57,485 14,695 Shareholders equity 17,630 4,614 16,595 4,242 Total liabilities 84,414 22,092 89,073 22,769
56 Consolidated Statements of Operation and Comprehensive Income
NIS,in Millions
31/12/2011 30/09/2011 30/09/2012 Revenues 25,052 18,763 21,382 :Cost of operating the electricity system wages 1,719 1,288 1,613 fuel 12,977 9,002 16,157 Transfer of fuel to regulatory assets 0 0 (4,509) Purchases of electricity 479 329 667 Transfer of purchases of electricity to regulatory assets (from assets) 0 0 (56) Operation of the generation system 769 552 554 Operation of the transmission and distribution system 367 268 228 Depreciation and amortization 4,277 3,143 3,262 Provision (release) with respect to non-recognition of fixed assets construction costs (128) (116) 1 Total costs 20,460 14,466 17,917 Profit from operating the electricity system 4,592 4,297 3,465 Sales and marketing expenses 898 643 723 Administrative and general expenses 729 562 607 Expenses from liabilities to pensioners, net 149 143 1,540 Income from current operations 2,816 2,949 595 :Financial expences,net Financial expenses 2,708 1,918 2,092 Capitalization of financial expenses (204) (151) (198) Transfer of financial income (expenses) to a regulatory liability (274) (183) 53 Financial expenses, net 2,230 1,584 1,947 Income (loss) before income taxes 586 1,365 (1,352) :Income taxes Other deferred taxes 156 281 (317) Expenses (income) from adjustments of deferred tax balances arising from changes in future tax rates 1,232 (30) 0 Net Income (loss) (802) 1,114 (1,035)
57 IEC Consolidated Debt Breakdown (as of September 30, 2012)
• Diversified debt portfolio • Foreign currency exposure substantially mitigated through the tariff structure1 and utilizing hedging transactions • No maturity spike in the coming four years
₪ 30,011 10,000 ₪ 8,598 8,000 Annual Debt Maturities as of 6,000 ₪ 4,781 ₪ 4,669 September 20122 6,507.3 4,000 ₪ 890 2,682.9 (Principal in NIS millions) 3,876.4 2,000 621.6 2,090.7 2,098.3 792.8 0 268.4 Q4 2012 2013 2014 2015 2016 and thereafter Loans from financial institutions and from the State of Israel Private and public debt offerings
Debt by Currency Type of Instrument Interest Rate Exposure Loans in JPY EUR NIS Floating 7% 6% 5% Loans in Internatio 9% NIS not USD foreign nal bonds linked 32% 5% currency 30% 14%
NIS Domestic linked to bonds CPI 50% Fixed 51% 91%
Source: IEC and IEC’s filings. 1. The hedging through tariff mechanism will be eliminated by April 2013. 2. In November 2012 the IEC has issued : tradable CPI linked debentures in a total amount of NIS 1.0 billion guaranteed by the State of Israel; non tradable CPI linked debentures in a total amount of NIS 0.2 billion and non tradable unlinked debentures in a total amount of NIS 0.8 billion. 58 StructuralStructural ChangeChange
59 In the last decade many reforms have occurred in government companies in Israel, but no reform has dealt with a company of IEC’s scale Selected reforms in leading companies Reform in Israel Electric
Israel National Bezeq Zim El-Al Oil Refineries Israel Ports IEC Roads Company Completed Structural Structural Converted to Privatized Privatized Privatized Description government privatization changes changes (2005) (2004) (2007) company (2005) (2003) (2005) (2009) No. of Employees* 700 8,000 1,100 3,200 900 2,300 12,200 NIS 0.35 NIS 17.3 NIS 5.5 NIS 1.5 NIS 9 billion NIS 3.5 billion NIS 70 billion Assets* billion billion billion billion
Income cycle* NIS 1.5 billion NIS 4.7 billion NIS 8.9 billion NIS 1.2 billion NIS 16.7 billion NIS 1.6 billion NIS 23 billion
NIS 3 billion 0 NIS 9 billion NIS 0.8 billion NIS 2 billion 0 NIS 44 billion Foreign capital* (estimated)
Partial substitution Refines 80% of the Full substitution High substitution by High substitution 99% of exports pass Product during reform fuels in the economy. through the ports; no Unreplaceable by hiring new foreign shipping by foreign air sensitivity (mobile phones, Partial substitution by substitution is product workers companies companies cable) import possible Complexity
Reform60 in IEC is compared with a number of reforms in the large companies simultaneously, due to the number of employees and financial scope
Source: Companies Authority Reports, Privatization Forecasts. Analysis: TASC. * On the date of privatization/structural changes. ** Includes parameters by average linear weight 60 In relation to IEC. Where will stopping the reform process lead to?
Non‐ performance of reform
Low electricity reserves Damage to There will be IEC no new employees investments by IEC
Damage to the electricity Reduction in the sector, to IEC IEC market Broad and employees regulatory restrictions Large investments Constant as deterioration an incentive of IEC’s for IPPs financial state
Low yields/ returns on capital (IEC)
Non‐execution of the reform in IEC will cause ever increasing damage to the Company, its employess, and the country
61 Structural change
Workers’ rights Efficiency
Financial Organizational strength change
62 GoalGoal StructureStructure forfor thethe ReformReform Extracting the National Dispatch from IEC IEC as a united company National Transmission & Dispatch organizational change and efficiency plan Distribution Central Profit services & Centers cancellation IPP of EPC ban IPP Generation: regional power stations IPP as profit centers IPP Removal vs. system head of ban to build & rotation stations and nuclear station EPC IPP (equal or equivalent IPP to 2020) Ramat Hovav Alon Tavor Project D 1150 MW 380 MW 1300 MW 100% Continued 100% 51% private/ private/ private introduction of IPPs government government
63 Caring About the Environment
64 Organization Structure: Divisions, Sub-Divisions and Districts
Board of Directors General Counsel & Company Secretary President & CEO Internal Auditor & Ombudsman SVP Regulation, Government Deputy CEO * SVP Human Head of the Relations & Resources Restructure Communications Process *** Company Spokeswoman Mass Media & Advertising
Public Relations Legend Organization, Engineering Logistics, Finance & Strategic Projects and Generation & Board of Directors Security Economics Resources Business Customers Transmission* Board of Directors & Emergency Development President & CEO Information Supply & Accounting & Systems & Construction marketing Generation Stores Division/Deputy CEO Economics Communication Northern District Transmission & Logistics & Planning, Engineering Transformation SVP-Special Appointment Real Estate Development Southern Finance & Technology District Organization, Jerusalem Sub-Division/District Quality & Safety District National Dispatch CEO Unit Economics, Business Dan District Central Financial Development Fuel Security Planning, & Tariffs SVP Unit Haifa District Administration * SVP Generation & Transmission also serves as Deputy CEO ** SVP Human Resources functions as Head of HR Division *** Head of the Restructure Process is also the Senior Assistant to the President & CEO 65