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TRANSCRIPT
Israel Electric Corp.
Investor
Presentation
Business update as of 12/31/2018
April 2019
Disclaimer
Investor Relations 2
The Company is a public company, with all it entails, and this information provided to you, all or part of it, may constitute “Inside Information” in
accordance with Israel’s Securities Law, 1968, and making use of this information (including, but not only, by way of carrying out a transaction in a
security of IEC, and/or delivering this information, or an opinion regarding a security of IEC, to any third party who may use this information for
purposes of such transaction) may constitute a criminal offence pursuant to that Law.
Please treat this information as CONFIDENTIAL and do not disclose, publish or deliver all or any part of this information, directly or indirectly, to
any third party, except for your employees, officers and any person acting for you or on your behalf, strictly on a “need to know” basis, and only
after you have notified the person receiving any of this information that the information is confidential and that making use of this information may
constitute a criminal offence as specified above
This Presentation does not constitute or form part of and should not be construed as an offer to sell or issue, or the solicitation of an offer to buy or
acquire, securities of the Company. This Presentation is solely for informational purposes. The information contained in this presentation regarding
the Company's operations is concise and presented for convenience purposes only. To get a complete picture of the Company's operations, please
refer to the reports of the Company to the Israeli Securities authority and the Tel-Aviv Stock Exchange.
This presentation includes forward-looking information, as per its definition in the Securities Law, 1968, including forecasts and other information
whose realization is uncertain and depends on factors that are not under the control of the Company. These factors are based, among other things,
on data that is in the possession of the Company as of this date, internal estimates and expectations of the Company regarding trends in the
Company's fields of activity and regarding the implementation of the company's plans. The Company's forecast and expectations included in this
presentation may not be realized, in whole or in part, or may be realized in a different manner than expected, inter alia due to factors that some of
them are not under the control of the Company, including changes in the market conditions and the Company's business environment, regulatory
changes, or the realization of any of the risk factors of the Company.
The information contained in this presentation is provided as of the date of this presentation. The Company is not under any obligation to
update the information in this presentation or to update the forward-looking statements contained in it.
Executive Summary
3
Gas turbine (internal
combustion) /
Combined-cycle
(internal combustion
and steam)
Steam (dual
purpose)
400 kV lines
161 kV lines
Israel Electric Corp. at a Glance
IEC Power Grid Established in 1923, 95 years of operation, the Israel Electric Corporation Limited (“IEC”) is the
sole vertically integrated electric utility company in Israel and generates, transmits, distributes and
supplies the majority of the electricity used in Israel
IEC is 99.846% owned by the State of Israel
IEC had total assets of NIS 85.9 billion and 11,476 employees as of December 31, 2018
As of December 31, 2018, IEC serves 2.8 million residential, commercial, agricultural and
industrial customers throughout the State of Israel including East Jerusalem and the Palestinian
Authority
Total electricity sales of 52,157 GWh for the period ended December 31, 2018
13.3 GWInstalled capacity
17Power stations
Generation (1)
5,586 kmHigh and ultra-high voltage
transmission grid
213 (2)
Switching stations &sub-stations
Transmission (1)
64,264 kmMedium and low
voltage lines
2.8 mnCustomers
Distribution (1)
2018FY Key Financials Credit Ratings as of December 31, 2018
Revenues
NIS 23.6 billion
EBITDA
NIS 8.0 billion
IEC GlobalBaa2 / BBB
Positive / Stable(Moody’s / S&P)
IEC Local Aa2.il / ilAA+Stable / Stable
(Midroog / Maalot S&P)
State of Israel (3)
A1 / AA- / A+Positive / Stable / Stable
(Moody’s / S&P / Fitch)
Source: IEC Financial Statements for 2018A.1) As of December 31, 2018.2) 52 substations are privately owned.3) A State of Israel guarantee for the existing loans of IEC are negligible compared to the company’s overall financial debt.
Denotes USD figures USD/NIS exchange rate of 3.75 as of December 31, 2018.
Investor Relations
$6.3 $2.1
4
Israel - a Modern Economy
Source: The Israeli Central Bureau of Statistics, Bank of Israel.1) Credit rating refers to long-term foreign currency debt only. A State of Israel guarantee for the existing securities of IEC are negligible compared to the company’s overall Financial debt 2) The Israeli Ministry of Finance and Bank of Israel.
Denotes USD figures USD/NIS exchange rate of 3.75 as of December 31, 2018.
Israel Public Debt to GDP(2)
Israel Rating History(1)
Inflation Environment
1
2
3
2011 2013 2015 2017 2019Moody's S&P Fitch
Nov 2016
Fitch upgrade
Israel to A+
Sep 2011
S&P upgrade
Israel to A+
A2 / A
A1 / A+
Aa3 / AA-
68.567.1
65.863.7
62.160.5 61.0
50
55
60
65
70
75
80
2012 2013 2014 2015 2016 2017 2018
(% of GDP)
1.6% 1.8%
-0.2%-1.0%
-0.2%
0.4%
0.8%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2012 2013 2014 2015 2016 2017 2018
(YoY Inflation %) 1%-3%
Government
Inflation Target
1.4%
Average inflation in
the last decade
Investor Relations
Key Figures
5
$347 bn
$38,513
Aug 2018
S&P upgrade
Israel to AA-
Area 22,072 km2
Population (January 2019) 9 million
GDP (2018) NIS 1.3 trillion
GDP per Capita (2018) NIS 144,425
Avg. GDP Growth (2012-2018) 3.6%
Unemployment (February 2019) 4.1%
Foreign Currency LT Debt
Ratings (Moody’s / S&P / Fitch) (1)A1 / AA- / A+
Essential
Service Provider
Owned by the
State of Israel
Robust Growth in
Electricity Demand
Fully Regulated
Across all Segments
Efficiency and
Reliability
Financial
Robustness
Natural Gas
Fuel
Independence
IEC is an essential service provider of
electricity in Israel and the sole vertically
integrated provider in the electricity chain
99.846% owned by
the State of Israel
(A1/AA-/A+)
Strong electricity demand
growth in the Israeli market
Tariff is based on costs and
return on equity
Set by the Electricity Authority
Continuous improvement of
efficiency & reliability
IEC has over 95 years of experience in
developing and managing the electricity
sector in Israel
Rated investment grade by both S&P
(BBB) and Moody’s (Baa2)
IEC total liquidity(1) of NIS 5.6 bn as of
December 31, 2018
Natural gas from Tamar and
other significant natural gas
discoveries in Israel have paved
the way towards potential fuel
independence
Key Investment Highlights
Investor Relations
1) Source: IEC Financial Statements for 2018A.IEC defines “Liquidity” as cash and equivalents, short term investments and available credit facilities.
6
Key Strategic Targets
Investor Relations 7
Israel's
Electricity Supplier•Continuing to guarantee reliability of the
electricity supply and maintaining
adequate electricity reserves
Operational Overview
8
Source:1) IEC Financial Statements for 2015A-2018A and IEC Statistical Report for 2008A.2) The Israeli Central Bureau of Statistics.
Denotes USD figures at USD/NIS exchange rate of 3.84, 3.85, 3.47 and 3.75 for the end of period of 2015A, 2016A, 2017A and 2018A, respectively.
Historical Performance
Comparison of Key Metrics
23.0 22.723.4 23.6
0
10
20
2015 2016 2017 2018
NISbn
$5.9 $6.3
IEC Revenues
IEC continues to provide most of Israel’s energy requirements
as the sole vertically integrated electric utility in Israel
Investor Relations
$6.0
9
$6.712/31/2008 12/31/2018
%
Change
Population (mn) (2) 7.4 9.0 21.6%
Number of
Customers (mn)2.4 2.8 16.7%
Electricity Sales
(GWh)50,161 52,157 4%
National Peak
Demand (MW)10,200 12,921 26.7%
IEC Installed
Capacity (MW)11,675 13,335 14.2%
Israel Generation Capacity and Demand
Israel Generation Capacity and Demand
Source: IEC’s Annual Financial Statements (2015A-2018A).1) Installed Generation Capacity of Independent Power Producers (“IPPs”).
13,617 13,617 13,617 13,335
2,980 3,060 3,199 3,334
754 911 946 1,303
17,351 17,588 17,762 17,972
12,905 12,624 12,746 12,921
5,000
8,000
11,000
14,000
17,000
2015 2016 2017 2018
(MW)
IEC's Installed Generating Capacity Gas Fired IPPs Renewable Energy IPPs National Peak Demand
Investor Relations 10
(1) (1)
Demand for Electricity
National Electricity Peak Demand & Total Electricity Produced in the Entire Sector
Trends
Source: IEC’s Annual Financial Statements (1990-2018). IEC’s Statistical data.
Investor Relations
The demand for electricity in
Israel is growing at a fast and
steady pace
Demand is driven by both
population growth and the
increase in electricity
consumption per household
IEC’s demand forecast,
which is used for long term
planning of the generation
segment, anticipates an
average annual increase of
2.8% in peak demand in the
years 2019 to 2050
11
Seasonality in Electricity Demand - Average Consumption of Households
0
200
400
600
800
1,000
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
Q2-2014
Q3-2014
Q4-2014
Q1-2015
Q2-2015
Q3-2015
Q4-2015
Q1-2016
Q2-2016
Q3-2016
Q4-2016
Q1-2017
Q2-2017
Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
(KWh)
Base Heating Cooling
54 54 53
58 6064
62 6165
67 68 70
40
45
50
55
60
65
70
75
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
(TWh)(MW)
Total Electricity Produced in the Sector National Electricity Peak Demand
Multiplied by 3.4 in 28 years
The IEC Electricity Chain
Source: IEC Financial Statements for 2018A.
Notes
1) 52 substations are privately owned.
Investor Relations 12
Generation DistributionTransmission
2.8Million
Customers
35,924 kmLow Voltage
Lines
28,340 kmMedium
Voltage Lines
202Substations(1)
5,586 kmUltra-High & High
Voltage lines
11Switching Stations
61 Generation Units in 17
Power Stations
The IEC Generation Segment
IEC Generation Facilities(1)
Fuel Mix by Electricity Generated
Source: IEC’s Financial Statements for 2018A.1) As of December 31, 2018.2) Units 1-4 will be transferred to preservation by June 1, 2022.
Electricity Generation Sites(1)
January 1 - December 31, 2018
Coal45.2%
Diesel oil &
Fuel oil1.3%
Natural gas & LNG
53.5%
January 1 - December 31, 2017
Investor Relations
No. of
units
Installed
Capacity (MW)
Steam (dual purpose) (coal and fuel oil) 10 4,840
Steam (dual-purpose) (natural gas and fuel / diesel oil) 6 1,340
Gas turbine (internal combustion) (industrial gas) 15 1,570
Gas turbine (internal combustion) (jet engine) 16 504
Combined cycle (internal combustion and steam) 14 5,081
Total 61 13,335
13
17Power stations
sites
13,335Megawatts of
generation
Orot Rabin(2)
7 units / 2,605 MW
Rutenberg
6 units / 2,290 MW
Eshkol
7 units / 1,693 MW
Haifa
4 units / 828 MW
Gezer
6 units / 1,336 MW
Hagit
4 units / 1,394 MW
- Mainly powered by coal
- Mainly powered by gas
Gas turbine (internal
combustion) /
Combined-cycle
(internal combustion
and steam)
Steam (dual purpose)
Coal43.0%
Diesel oil &
Fuel oil0.5%
Natural gas & LNG
56.5%
The IEC Transmission and Distribution Segments(1)
Total Electricity Consumption by Customer Type
Transformation
System
11Switching stations
Power Lines
150Substations
Transmission
52Private substations
760 km400 kV lines
4,786 km161 kV line (includes
underground lines)
41km115 kV lines
64,264 kmMedium and low
voltage lines
50,418Distribution
Transformers
2.8mnCustomers
Distribution
Source: IEC’s Financial Statements for 2018A.
Notes
1) As of December 31, 2018.
Residential36%
Industrial19%
Public, commercial,
East-Jerusalem
& Palestinaian
Authority39%
Water pumping
4%
Agriculture2%
(kWh)
Investor Relations
Diversified Customer Base
14
IEC’s Human Capital
Streamlining of IEC’s Workforce
Source: IEC’s Financial Statements for 2014A - 2018A.
12,754
12,371
11,908 11,902
11,476
11,000
11,500
12,000
12,500
13,000
2014 2015 2016 2017 2018
IEC’s employees’
Investor Relations 15
As part of the reform in the electricity sector, an efficiency program is resuming
for the years 2019-2025
The Sector Reform
16
Source : IEC ‘s Financial Statements for 2018A
Notes:1. In accordance with the IEC’s undertakings adopted by the IEC's BOD on May 10, 2018, to the extent that the Government resolutions and/or the legislative amendments and/or the administrative decisions and/or the arrangements of the
Electricity Authority and/or the aforesaid licenses given by the State of Israel, that will correspond to the (insofar as these are needed according to the State of Israel position), or that the collective agreement IEC and the employeesrepresentatives will not be in force, then all IEC’s undertakings will not be in force and the State of Israel will not be able to file claims and/or complain against IEC with respect to those undertakings. For the purpose of implementing the fullstructural change outline, it will be required the approval of the regulatory agencies, decisions and regulations of the Electricity Authority and granting licenses which as of date of approval of the Financial statements have not yet beenreceived and there is no certainty regarding the date of determining the agreements or the granting of such licenses and their final terms. As of the date of the publication of the Financial statements, IEC is unable to reliable estimate theexact implications of the additional regulations and approvals that have not yet been formulated or received on its financial position and results..
2. Except of the above, IEC or its generation subsidiary shall not establish, replace, operate, plan, maintain or engage in the development of power stations in Israel either by itself or as a contractor for a third party, nor shall it engage in theproduction of electricity, during the years of the reform and afterwards. IEC has undertaken to the State of Israel not to act to obtain new generation licenses or to construct new electricity generation stations and replace existing stations,and not to act to obtain permits for the operation of power stations for other parties in Israel
Investor Relations
Sale of generation sites
and increased
competition in the
generation segment
Separation from the
system manager and
additional units to a new
Government company
Opening the supply
segment market to
competition from other
entities
Essential service
provider in the
transmission and
distribution segments
Organizational change,
efficiency plan and
administrative flexibility
Construction &
operation of two
combined cycle gas
turbines at the ‘Orot
Rabin’ site (2)
Assets arrangement
in IEC
Compliance with
financial targets
Strengthening the
financial stability of IEC
Value added services,
installation of smart
meters, construction
and operation of
storage facilities
Main points of the reform (1)
The Sector Reform Timeline
17
Source: IEC ‘s Financial Statements for 2018ANote:In accordance with the IEC’s undertakings adopted by the IEC's BOD on May 10, 2018, to the extent that the Government resolutions and/or the legislative amendments and/or the administrative decisions and/or the arrangements of theElectricity Authority and/or the aforesaid licenses given by the State of Israel, that will correspond to the (insofar as these are needed according to the State of Israel position), or that the collective agreement IEC and the employeesrepresentatives will not be in force, then all IEC’s undertakings will not be in force and the State of Israel will not be able to file claims and/or complain against IEC with respect to those undertakings. For the purpose of implementing the fullstructural change outline, it will be required the approval of the regulatory agencies, decisions and regulations of the Electricity Authority and granting licenses which as of date of approval of the Financial statements have not yet been receivedand there is no certainty regarding the date of determining the agreements or the granting of such licenses and their final terms. As of the date of the publication of the Financial statements, IEC is unable to reliable estimate the exact implicationsof the additional regulations and approvals that have not yet been formulated or received on its financial position and results.
Investor Relations
Gov’
Decision on
Reform
Completion of
legislation to change
the electricity sector
Sale of the land of ‘Project D’
Deposit in ‘Reading’ site for 2 new
Combined cycle
Separation of the system manager
Sale of ‘Ramat Hovav’ site
Sale of ‘Reading’ site
Completion of the construction of a combined cycle H unit at 'Orot Rabin’ site
Sale of the part which includes a type E combined cycle area at ‘Hagit’ site
Sale of ‘Eskol’ site
Re-examination of the supply section
Sale of ‘Alon Tavor’ site
Israeli Electricity Sector
18
The Israeli Electricity Sector
Investor Relations
Nearly 100% of the Switching
Stations and the Ultra-High & High
Voltage lines are owned & operated
by IEC
As of 12/31/2018,
74% of total generating
capacity
Expected to reach
63.3% by the end of
2019
Generation, Transmission and Distribution
IEC’s Main Regulators IEC’s Fuel Suppliers
The Electricity Authority (EA)
Antitrust Authority
Government Companies Authority (GCA)
Ministry of Energy
Ministry of Finance
Ministry of Interior
Ministry of Environmental Protection (MoEP)
The Concentration Committee
TASE
Natural Gas - Currently solely from the Tamar Reservoir and more
reservoirs in Israeli waters have been discovered
Liquid Natural Gas - Imported from international suppliers
Coal - Imported from international suppliers
IPPs
Source : IEC’s Financial Statements for 2018A.
IEC reached 2.8 million customers
(as of December 31, 2018)
TransmissionGeneration Distribution
19
As of 12/31/2018,
26% of total generating
capacity
Expected to reach
36.7% by the end of
2019
150 of 202 Substations are owned &
operated by IEC
(as of December 31, 2018)
The Electricity Tariff
In accordance with the Electricity Sector Law, the electricity tariff is set by the Electricity Authority (EA) and reformulated from time to time. The outline of the
formula is as follows:
Actual costs are examined every 2 weeks by the EA
(at the time of CPI and fuel prices changes)
Discrepancies between forecasted costs and actual
cost are reconciled on the earlier of:
A difference of 3.5%, provided that 3 months
have passed since the last update
A difference of 5.5%
The Annual Update
Once a year, discrepancies
between the previous year’s
forecasted costs of tariff
components and the previous
year’s actual costs are reconciled
New formula increases the average amount paid per
consumer by 2% primarily because of:
An increase in natural gas and coal prices
A massive entry of renewable energies
For the first time, the tariff includes two charge components:
energy and capacity according to the size of the consumer's
connection to the electricity network
Investor Relations
Forecasted recognized costs
per segment (e.g. fuel, foreign
currency exposure,
depreciation and not
recognizing cross-subsidies)
+ Fair rate of return on equity
per segment -Cost reduction/efficiency co-
efficient (including costs the
EA chooses not to recognize)
(temporarily suspended)
Electricity Tariff
Ongoing Update Annual Update Tariff Reformulation as of January 1, 2019
Tariff Structure
Source: IEC’s Financial Statements for 2018A, Electricity Authority's decision No. 7 (1317) - Annual Update 2019 electricity tariff
20
The Electricity Tariff - Cont’d
Source:
1) World Bank Commodity Price Data (Pink Sheet), March 2019; Calculated as average price of Australia and South Africa coal. Russia is not included in World Bank information, even though it is a significant source of
coal for IEC. The general and Residential Tariffs do not include VAT.
2) The Electricity Authority - Report on State of Electricity Economy Year of 2017.
Tariff vs. Coal Price Development(1)
Investor Relations
0.40
0.45
0.50
0.55
0.60
40
60
80
100
120
140
($/t)
Coal Average General Tariff Residential Tariff
NIS
21
Structure of the Residential Tariff as Divided into Segments(2)
Production and fuel
65%
Transmission 5%
Distribution17%
Electricity Grid Administrator + returns to IEC consumers 13%
Financial Overview
22
1.7 1.7 1.8 1.3
0.8 0.5 0.7 0.9
1.2 1.3 1.3 1.5
3.7 3.5 3.9 3.7
0
1
2
3
4
5
6
2015 2016 2017 2018
NISbn
Generation Transmission Distribution System Manager Supply
$1.0 $1.0
Financial Highlights
Revenues EBITDA(1)
Historical Investments by segments (CAPEX) Net Financial Debt/EBITDA(2)
7.27.7 8.1 8.0
0
3
6
9
12
2015 2016 2017 2018
NISbn $1.9 $2.1
23.1 22.7 23.4 23.6
0
10
20
30
2015 2016 2017 2018
NISbn $6.0 $6.7 $6.3
Source: IEC’s Financial Statements for 2015A-2018A.1) IEC defines “EBITDA” as profit (loss) before income taxes, financial expenses, depreciation and amortization.2) IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions, debentures to the State of Israel and liabilities
to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts and swap transactions, MTM and long-term deposits and regulatory deferral accountassets with respect to linkage differentials).
Denotes USD figures at USD/NIS exchange rate of 3.84, 3.85, 3.47 and 3.75 for the end of period of 2015A, 2016A, 2017A and 2018A, respectively.
6.0x5.1x 5.2x 4.8x
0.2x0.2x
6.2x5.3x 5.2x 4.8x
0
2
4
6
8
2015 2016 2017 2018State guaranteed Net Financial Debt / EBITDA without State guarantees
Investor Relations
$5.9 $2.0 $2.3
$0.9 $1.1
23
Historical Cash Flow
Source: IEC’s Financial Statements for 2015A-2018A
1) Investment activities excluding repayment (or deposits) of bank deposits. Total cash from investment activities figures as reported for 2015A, 2016A, 2017A and 2018A are NIS (0.9) bn, NIS (2.8) bn, NIS (2.2) bn and
NIS (3.1) bn, respectively.
2) IEC defines “liquidity” as cash and cash equivalents, short term investments and available credit facilities.
Denotes USD figures at USD/NIS exchange rate of 3.84, 3.85, 3.47, and 3.75 for the end of period of 2015A, 2016A, 2017A and 2018A, respectively.
7.66.5
5.8 5.8
(3.1)(2.2) (2.7) (3.1)
(8.7)
(2.7)(3.7) (3.3)
4.3
5.76.3
5.6
(12)
(8)
(4)
0
4
8
12
2015 2016 2017 2018
NIS bn
Operating activities Investment activities, net Financing activities Total Liquidity
$1.7
($1.1)($0.8)
$2.0
($0.8)
($2.3)
$1.7 $1.5
($0.8)($0.9)
Generating sufficient cash flow from operations enables IEC to decrease debt
Investor Relations
(1)
($0.6)($0.7)
24
(2)
51.8
50.0
46.9
44.6
43.2
42.1
38.3
32
37
42
47
52
2012 2013 2014 2015 2016 2017 2018
NIS, bn
$11.3
$12.1
$11.6
$12.0
$14.4
$10.2
Net Financial Debt (1) Over Time
Source: IEC’s Financial Statements for 2012A, 2013A, 2015A, 2016A, 2017A and 2018A.
1) IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions, debentures to the State of Israel and
liabilities to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts and swap transactions, MTM and long-term deposits and
regulatory deferral account assets with respect to linkage differentials).
Denotes USD figures at USD/NIS exchange rate of 3.73, 3.47, 3.89, 3.84, 3.85, 3.47 and 3.75 for the end of period of 2012A, 2013A, 2014A, 2015A, 2016A, 2017A and 2018A, respectively.
Investor Relations
Prepared According to
Government Companies
Regulations
IFRS
25
$13.9
Fixed94.4%
Floating5.6%
Consolidated Debt Breakdown as of December 31, 2018
Note: The “fifth year and thereafter” blue bar is off the chart.
Source:1) IEC immediate report on the Corporate Liabilities Status.2) IEC Financial data and Bloomberg.3) IEC Financial data, IEC immediate report on the Corporate Liabilities.
Annual Debt Maturities (Principal in NIS billions)(1)
0.281.03
0.3 0.3 0.61.66
3.24
2.5 2.0
26.8
1.9
4.3
2.82.3
0
3
6
9
First year Second year Third year Forth year Fifth year and thereafter
(NIS bn)
Loans from local and foreign banks Local bonds, private bonds and non-bank loans
Debt by Currency(3) Type of Instrument(3) Source of Debt(3)
NIS46.6%
Euro2.4%
USD44.4%
Other6.6%
State guaranteed
0.9%
Non-guaranteed
by state 99.1%
27.4
Interest Rate Exposure(3)
Investor Relations
Local public bonds26.0%
Private bonds and non-bank
loans 67.7%
Local bank loans 2.0%
Foreign bank loans
4.3%
26
Coupon Outstanding
Amount ($mn) Maturity
7.250%$400Jan-19
9.375%500$Jan-20
6.875%650$Jun-23
5.000%1,250$Nov-24
7.875%125$Dec-26
7.750%300$Dec-27
4.250%$1,000Aug-28
8.940%40$Mar-30
8.100%125$Dec-96
Profile of International IEC $ Bonds(2)
Income Statement(NIS millions)
Source: IEC’s Financial Statements for 2018A
Investor Relations 27
(NIS millions)
For the years:
12/31/2016 12/31/2017 12/31/2018
Revenues 22,690 23,370 23,584
Cost of operating the electricity system
Fuels 7,496 8,414 8,540
Purchases of electricity 3,235 3,487 3,591
Operation of the generation system 4,214 4,378 4,375
Operation of the transmission and distribution system and others 3,066 3,056 3,018
Total costs 18,011 19,335 19,524
Profit from operating the electricity system 4,679 4,035 4,060
Other expenses (revenues), net (9) (54) 23
Sales and marketing expenses 884 999 935
Administrative and general expenses 730 619 734
Expenses (income) from liabilities to pensioners 286 (49) (100)
Reform agreement's results 0 0 4,249
Profit (loss) from current operations 2,788 2,520 (1,781)
Assets arrangement results, net 0 (2,627)
EBITDA 7,742 8,056 7,959
Financial expenses, net 2,277 1,530 1,792
Profit (loss) before income taxes 511 990 (946)
Taxes on income (658) 199 (597)
Profit (loss) after income tax 1,169 791 (349)
Company's share of the loss of asociated companies (26) (18) (5)
Income (loss) before regulatory deferral accounts 1,143 773 (354)
Movement in regulatory deferral accounts balances, net of tax 38 3,967 4,424
Profit for the year 1,181 4,740 4,070
Profit (loss) with respect to cash flow hedging, net of tax (85) (82) 123
Remeasurement of a defined benefit plan, net of tax (240) (1,415) (143)
Other Comprehensive loss for the year, net of tax (325) (1,497) (20)
Comprehensive income for the year 856 3,243 4,050
Balance Sheet(NIS millions)
Source: IEC’s Financial Statements for 2018A
Investor Relations 28
Assets 12/31/2017 12/31/2018 Liabilities and Equity 12/31/2017 12/31/2018
Current assets Current liabilities
Cash and cash equivalents 3,428 2,806 Credit from banks and other credit providers 6,110 2,626
Short term investments 273 477 Trade payables 1,728 2,256
Trade receivables for sales of electricity 4,429 4,364 Other current liabilities 1,520 1,432
Other current assets 608 526 Customer advances, net of work in progress 473 437
Inventory - fuel 1,161 1,241 Provisions 732 681
Inventory - stores 127 142 Liabillities of disposal groups classified as held for sale - 307
Assets of disposal groups classified as held for sale - 947 Total current liabilities 10,563 7,739
Total current assets 10,026 10,503
Non-current liabilities
Non-current assets Debentures 30,911 33,673
Inventory - fuel 1,253 1,463 Liabilities to banks 5,561 4,668
Long-term receivables 1,471 1,228 Liabilities with respect to other benefits after employment termination 2,886 5,097
Investment in associates 39 34 Deferred taxes, net 5,992 5,769
Assets with respect to benefits after employment termination 6,289 5,968 Debentures to the State of Israel 2,511 -
Fixed assets, net 59,887 57,667 Liability to the State of Israel 1,682 1,788
Intangible assets, net 1,231 1,200 Other liabilities 757 635
Total non-current assets 70,170 67,560 Total non current liabilities 50,300 51,630
Debit balance of regulatory deferral accounts 4,880 7,873 Equity 20,793 24,843
Credit balances of regulatory deferral accounts and deferred taxes with
respect to regulatory deferral accounts 3,420 1,724
Total assets and debit balance of regulatory deferral accounts 85,076 85,936 Total liabilities, equity and credit balance of regulatory deferral accounts 85,076 85,936
Thank youFor questions or additional information, please contact us:
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Israel Electric Corp. Investor Relations: [email protected]
Appendices
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The Reform in the Generation Segment (Selected generation sites)
Investor Relations 31
Steam - dual purpose: coal and fuel oil
Steam - dual purpose: natural gas and fuel / diesel oil
Gas turbine (internal combustion)
Combined cycle (internal combustion and steam)
A power station planned to be sold during the reform
Hagit: will be sold units with a
capacity of 670 megawatts
Source: IEC ‘s Financial Statements for 2018ANote:In accordance with the IEC’s undertakings adopted by the IEC's BOD on May 10, 2018, to the extent that the Government resolutions and/or the legislative amendments and/or the administrative decisions and/or the arrangements of theElectricity Authority and/or the aforesaid licenses given by the State of Israel, that will correspond to the (insofar as these are needed according to the State of Israel position), or that the collective agreement IEC and the employeesrepresentatives will not be in force, then all IEC’s undertakings will not be in force and the State of Israel will not be able to file claims and/or complain against IEC with respect to those undertakings. For the purpose of implementing the fullstructural change outline, it will be required the approval of the regulatory agencies, decisions and regulations of the Electricity Authority and granting licenses which as of date of approval of the Financial statements have not yet been receivedand there is no certainty regarding the date of determining the agreements or the granting of such licenses and their final terms. As of the date of the publication of the Financial statements, IEC is unable to reliable estimate the exact implicationsof the additional regulations and approvals that have not yet been formulated or received on its financial position and results.
Environment, sustainability and corporate governance (ESG) (1)
Investor Relations
1) Source: IEC's Corporate Sustainability Report for 2017, Maala's rating for IEC for 2018.
2) Maala is the non-profit CSR standards-setting organization in Israel who serves the needs of some 110 members, comprised of Israel’s large and mid-size companies, committed to
excellence in corporate citizenship. The criteria in the rankings are determined by an independent public committee composed of content experts, academics, heads of social
environmental organizations and representatives of the business sector.
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IEC earned the highest ranking in the Maala(2) 2018 Index: Platinum+ (for the fourth consecutive year)
Ethical Aspects
of Business
Conduct
Responsible
Supply Chain
Implementation of Corporate
Governance Code
Effectiveness of the work of
the Board of Directors policy
Prevention of conflicts of
interests, corruption and
embezzlement
A published code of ethics
adapted to IEC’s fields of
operations
Reference to ethical
aspects with stakeholders
Internal communications
on ethics issues
Organizational culture that
respects employee rights
Promotion of health and
ensuring worker safety
Retention and development
of human resources
Work-life balance and
fostering an open culture
Engagements mainly through public tenders or
other competitive procedures. Setting fair rules
and providing equal opportunity to suppliers
Improving dialogue and deepening cooperation
with Israeli industrial enterprises
Securing subcontracted workers' payment terms
and conditions
Diversity of suppliers
Diversified and
humanitarian employment
Diversified employees in
managerial positions
Women in managerial roles
Accessibility for people with
disabilities
Social activity policy
Promotion of regular and
one-off volunteering by
workers and pensioners
in the community
Environmental violations
screening
Environmental policy &
management system
Measurement and setting
objectives: air, energy, waste,
water and sewage
Employee health,
Wellbeing and
working relations
EnvironmentEmployee
Volunteering
Diversity &
Inclusion
Corporate
Governance
Sources of Natural Gas in Israeli Waters
Introduction of LNG by
a regasification ship
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Tamar is only
active site
Tariff Comparison to European Countries
The electricity rate in Israel is lower than most European peers
Source:Eurostat, Electricity prices for domestic consumers – bi-annual data, as of 03/11/2019. Israel rate is based on the last tariff update that does not include VAT (01/01/2019) and converted EUR/NIS exchange rate of 4.29 as of 01/02/2019.1) Average national price in Euro per kWh without taxes for medium size household consumers (annual consumption between 2,500 and 5,000 kWh).
Average Price per KWh(1)
Investor Relations
19.0 18.7 18.5
14.5 14.1 13.812.9 12.9 12.6 12.5 12.3
11.911.3 11.3 11.1 11.0 10.7
10.4 10.2 10.1 10.1 9.9 9.99.4 9.3
8.98.2
7.77.3
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