Bloomberg News

Israel Electric Said to Plan Billion-Shekel Debt Sale

January 16, 2013

Israel Electric Corp. plans to raise as much as 1.5 billion shekels ($403 million) in government- backed debt in March, a person familiar with the matter said, as the state-run utility seeks funds to offset soaring fuel costs.

The energy provider will sell the debt to local investors, said the person, who asked not to be identified because the information isn’t public. Israel Electric secured a government guarantee last month for as much as 2 billion shekels of debt. The company’s dollar-denominated 2020 bonds gained for a fifth day, sending the yield down 10 basis points, or 0.1 percentage point, to a record 5.21 percent at 4:30 p.m. in Tel Aviv, data compiled by Bloomberg show.

Government-imposed limits on tariff increases have prevented Haifa-based Israel Electric from raising prises to confront higher fuel costs that happened as Egypt cut gas supplies to the country. The company posted a 1 billion-shekel loss in the first nine months of 2012, in contrast with a profit of the same amount a year earlier.

Iris Ben-Shahal, a spokeswoman for utility, declined to comment on the debt raising plan. The March sale comes as Israel Electric seeks to raise 11 billion shekels domestically and abroad in 2013, a person familiar with plan said Dec. 16.

Cash Shortage

Israel Electric Corp. seeks to invest in power projects abroad to boost global revenue 25-fold in five years, Executive Vice President Yakov Hain said in a Dec. 12 interview. It raised 8 billion shekels last year to refinance debt and cover operation costs.

The utility, which holds Standard & Poor’s Maalot’s investment-grade ilAA- rating, was put on ratings watch negative in November as it faces funding pressures due to an unexpected rise in fuel costs.

As part of its business pipeline, Israel Electric signed a supply agreement for natural gas from Israel’s offshore Tamar field, expected to start production by the second quarter. The shift to domestic energy sources will result in savings of as much as 1 billion shekels in fuel costs each month, according to the company.

“It is clear that until gas will flow from the Tamar field, the company will need to raise more funds partly via the market to finance its cash-flow gap,” Eyal Klein, chief strategist in Tel Aviv at Israel Brokerage & Investments Ltd., said today by phone.

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net


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