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 MillionMillion ConsumersConsumers 11 a gr 87.7% of customers 2.522.52 ic u residential ltu re East Jerusalem and the PA ping r pum wate 10.4% of customers public/commercial 1.3% of customers industrial Self-consumption by IEC: approx. 4% 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%