Investor Presentation Investor Presentation 2019F… · Investor Presentation Business update as of...
Transcript of Investor Presentation Investor Presentation 2019F… · Investor Presentation Business update as of...
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Israel Electric Corp.
Investor
Presentation
Business update as of 12/31/2019
April 2020
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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 (hereinafter: “Securities Law”), 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 Securities 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 immediate and timely 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, 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.
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Executive Summary
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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, 97 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 appx. 99.85% owned by the State of Israel
IEC had total assets of NIS 87.5 billion and 11,391 employees as of December 31, 2019
As of December 31, 2019, IEC serves 2.9 million residential, commercial, agricultural and industrial
customers throughout the State of Israel, including East Jerusalem and the Palestinian Authority
Total electricity sales of 53,119 GWh for the period ended December 31, 2019
12.8 GWInstalled capacity
16Power stations
Generation (1)
5,661 kmHigh and ultra-high voltage
transmission grid
215 (2)Switching stations &
sub-stations
Transmission (1)
66,670 kmMedium and low
voltage lines
2.9 mnCustomers
Distribution (1)
2019FY Key Financials Credit Ratings as of December 31, 2019
Revenues
NIS 24.7 billion
EBITDA
NIS 8.1 billion
IEC GlobalBaa2 / BBB
Positive / Stable(Moody’s / S&P)
IEC Local Aa2 / AA+
Positive / 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 2019FY1) As of December 31, 2019.2) 57 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 3.46 as of December 31, 2019.
Investor Relations
$7.1 $2.3
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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 3.46 as of December 31, 2019.
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 60.0
50
55
60
65
70
75
80
2012 2013 2014 2015 2016 2017 2018 2019
(% of GDP)
1.6% 1.8%
-0.2%-1.0%
-0.2%
0.4%
0.8% 0.6%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2012 2013 2014 2015 2016 2017 2018 2019
(YoY Inflation %)
1%-3%
Government
Inflation Target
1.1%
Average inflation in
the last decade
Investor Relations
Key Figures
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$376 bn
$42,508
Aug 2018
S&P upgrade
Israel to AA-
Area 22,072 km2
Population (December 2019) 9.1 million
GDP (2019) NIS 1.3 trillion
GDP per Capita (2019) NIS 147,078
Avg. GDP Growth (2012-2019) 3.6%
Unemployment (December 2019) 3.4%
Foreign Currency LT Debt Ratings
(Moody’s / S&P / Fitch) (1)A1 / AA- / A+
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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
Appx. 99.85% 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 97 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, 2019
Natural gas from Tamar,
Leviathan 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 2019FY.IEC defines “Liquidity” as cash and equivalents, short term investments and available credit facilities.
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Key Strategic Targets
Investor Relations 7
Israel's
Electricity Supplier•Continuing to guarantee reliability of the
electricity supply and maintaining
adequate electricity reserves
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Operational Overview
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Source:1) IEC Financial Statements for 2016FY-2019FY, IEC Statistical Report for 2009FY.2) The Israeli Central Bureau of Statistics.
Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75 & 3.46 for the end of period of 2016FY, 2017FY, 2018FY & 2019FY, respectively.
Historical Performance
Comparison of Key Metrics
22.723.4 23.6
24.7
0
10
20
2016 2017 2018 2019
NISbn
$6.7 $7.1
IEC Revenues
IEC continues to provide most of Israel’s energy requirements
as the sole vertically integrated electric utility in Israel
Investor Relations
$5.9
9
$6.312/31/2009 12/31/2019%
Change
Population (mn) (2) 7.6 9.1 19.7%
Number of
Customers (mn)2.5 2.9 16.0%
Electricity Sales
(GWh)48,947 53,119 8.5%
National Peak
Demand (MW)10,280 13,568 32.0%
IEC Installed
Capacity (MW)11,824 12,752 7.8%
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Israel Generation Capacity and Demand
Israel Generation Capacity and Demand
Source: IEC’s Financial Statements (2016FY-2019FY) 1) Installed Generation Capacity of Independent Power Producers (“IPPs”)
13,617 13,617 13,335 12,752
3,060 3,199 3,334 4,148
911 946 1,303 2,023
17,588 17,762 17,972
18,923
12,624 12,746 12,921
13,568
5,000
8,000
11,000
14,000
17,000
20,000
2016 2017 2018 2019
(MW)
IEC's Installed Generating Capacity Gas Fired IPPs Renewable Energy IPPs National Peak Demand
Investor Relations 10
(1) (1)
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Demand for Electricity
National Electricity Peak Demand & Total Electricity Produced in the Entire Sector
Trends
Source: IEC’s Annual Financial Statements (1990FY-2019FY), 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
3.0% in peak demand in the
years 2020 to 2050
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Seasonality in Electricity Demand - Average Consumption of Households
0
200
400
600
800
1,000
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
Q1-2019
Q2-2019
Q3-2019
Q4-2019
(KWh)
Base Heating Cooling
54 54 53
58 6064
62 6165
67 6870
73
40
45
50
55
60
65
70
75
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
(TWh)(MW)
Total Electricity Produced in the Sector National Electricity Peak Demand
Multiplied by 3.6 in 29 years
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The IEC Electricity Chain
Source: IEC Financial Statements for 2019FY
Notes
1) 57 substations are privately owned.
Investor Relations 12
Generation DistributionTransmission
2.9Million
Customers
37,981 kmLow Voltage
Lines
28,689 kmMedium
Voltage Lines
204Substations(1)
5,661 kmUltra-High & High
Voltage lines
11Switching Stations
58 Generation Units in 16
Power Stations
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The IEC Generation Segment
IEC Generation Facilities
Fuel Mix by Electricity Generated(4)
Source: IEC’s Financial Statements for 2019FY1) As of December 31, 20192) Units 1-4 at the Orot Rabin Power Station will be transferred to preservation by June 1, 2022.3) In accordance with the Minister of Energy's policy principles, which was published on the Ministry of Energy’s website on November 24,2019, it was decided that units 5-6 at Orot Rabin Power Station and units 1-4 at Rutenberg Power
Station will gradually converse using natural gas in order to stop routine coal use until 2025 and no later than 2026.4) As of December 31, 2019, 25.13% of IEC revenues are associated with IEC's coal fired units located in 2 sites.
Electricity Generation Sites(1)
January 1 - December 31, 2018
Coal45.8%
Diesel oil & Fuel oil1.1%
Natural gas & LNG 53.1%
January 1 - December 31, 2019
Investor Relations
No. of
units
Installed
Capacity (MW)
Steam (dual purpose) (coal and fuel oil) (1;2;3) 10 4,840
Steam (dual-purpose) (natural gas and fuel / diesel oil) 6 1,340
Gas turbine (internal combustion) (industrial gas) 13 1,350
Gas turbine (internal combustion) (jet engine) 16 504
Combined cycle (internal combustion and steam) 13 4,718
Total 58 12,752
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16Power stations
sites
12,752Megawatts 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%
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The IEC Transmission and Distribution Segments(1)
Total Electricity Consumption by Customer Type
Transformation
System
11Switching stations
Power Lines
147Substations
Transmission
57Private substations
769 km400 kV lines
4,850 km161 kV line (includes
underground lines)
42 km115 kV lines
66,670 kmMedium and low
voltage lines
51,203Distribution
Transformers
2.9 mnCustomers
Distribution
Source: IEC’s Financial Statements for 2019FY
Notes
1) As of December 31, 2019
Residential38%
Industrial17%
Public, commercial, East-Jerusalem &
Palestinaian Authority39%
Water pumping
4%
Agriculture2%
(kWh)
Investor Relations
Diversified Customer Base
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IEC’s Human Capital
Streamlining of IEC’s Workforce
Source: IEC’s Financial Statements for 2014FY-2019FY
12,754
12,371
11,908 11,902
11,476 11,391
11,000
11,500
12,000
12,500
13,000
2014 2015 2016 2017 2018 2019
IEC’s employees’
Investor Relations 15
As part of the reform in the electricity sector, an efficiency program is resuming
for the years 2020-2025
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The Sector Reform
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Source : IEC ‘s Financial Statements for 2019FY
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, according to the IEC’s undertaking document, 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 thoseundertakings. On June 3, 2018, the required Government Decision was received, on July 19, 2018 the Knesset approved the Amendment to the Law, and on May 17, 2018, the Principles of the policy of the Minister and the ElectricityAuthority’s Regulation as aforesaid were published. In addition, on November 4, 2018, the Collective Agreement came into effect after all the contingent conditions detailed therein were fulfilled. 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 will not construct, replace, operate, plan, strengthen or engage in development of power stations in Israel, whether by itself or as a contractor for a third party, nor will it engage inelectricity generation, including in the framework of micro-generation or renewable energies in Israel, 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 toconstruct 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
Transfer of the system
Management and
additional units to a
separate 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 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)
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The Sector Reform Timeline(1)
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Source : IEC ‘s Financial Statements for 2019FY
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, according to the IEC’s undertaking document, 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 thoseundertakings. On June 3, 2018, the required Government Decision was received, on July 19, 2018 the Knesset approved the Amendment to the Law, and on May 17, 2018, the Principles of the policy of the Minister and the ElectricityAuthority’s Regulation as aforesaid were published. In addition, on November 4, 2018, the Collective Agreement came into effect after all the contingent conditions detailed therein were fulfilled. 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 estimatethe exact implications of the additional regulations and approvals that have not yet been formulated or received on its financial position and results.
2. Part of the area at the Rutenberg power station (that was designated for Project D) will be transferred pursuant to the arrangement agreements as defined in Note 1f in the FY2019 Financial Statements’, by December 3, 2019. Thearea has not yet been transferred, and it is noted that the Ministry of Energy, and Electricity Authority, and the Israel Land Authority intend to make decisions concerning the manner of the area’s transfer, while noting its future intendeduse, clearing various infrastructures from the site, and manner of financing the vacation costs, which the Company is entitled to receive. Following this, an appropriate agreement will be signed between the Company and the State, forthe purpose of transferring the area in accordance with the resolutions made, as aforesaid.
3. The Company is working in coordination with relevant government entities to complete all the activities required to separate and remove the system management activity to the responsibility of the System Management Company. At thesame time, in discussions held with the relevant parties and regulators, it was decided to postpone the separation implementation date and therefore, on December 3, 2019, the Electricity Sector Order (Postponement of SystemManagement Licensing Date) - 2019 was published, according to which the date for issuing the system management licensing to the System Management Company Ltd. was postponed to no later than June 3, 2020 (instead ofDecember 3, 2019, as decided originally). The Company shall be prepared in accordance with the implementation of the said separation at the date set. However, due to the complexity of the process and the need for the activities anddecisions of many Government Agencies, together with the management of the System Management Company, there may be further postponements of this date, although they have not yet been decided upon.
4. On March 31, 2020, an Environmental Impact Report was submitted to the Ministry of Environmental Protection and on April 1, 2020, the program documents were submitted to the Planning Administration and to the Ministry of Energy.
Investor Relations
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Israeli Electricity Sector
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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 12/31/2019,
67% of total generating
capacity
Expected to reach
54.7% by the end of
2020
Generation, Transmission and Distribution
IEC’s Main Regulators IEC’s Fuel Suppliers
The Electricity Authority (EA)
Government Companies Authority (GCA)
Antitrust Authority
Israel Securities Authority
Ministry of Energy
Ministry of Finance
Ministry of Interior
Ministry of Environmental Protection (MoEP)
The Concentration Committee
TASE
Natural Gas - Currently from the Tamar & Leviathan Reservoirs.
More reservoirs in the Israeli waters have been discovered
Liquid Natural Gas - Imported from international suppliers
Coal - Imported from international suppliers
IPPs
Source : IEC’s Financial Statements for 2019FY
IEC reached 2.9 million customers
(as of December 31, 2019)
TransmissionGeneration Distribution
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As of 12/31/2019,
33% of total generating
capacity
Expected to reach
45.3% by the end of
2020
158 of 204 Substations are owned &
operated by IEC
(as of December 31, 2019)
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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, The current year's
costs are updated based on
forecasts as well as on previous
years' reckoning - the gap
between the previous year's
forecast components and the
actual costs of the previous year
On November 23, 2019, the EA issued a hearing regarding the
annual 2020 tariff update. According the EA’s decision, the average
household electricity tariff will fall by approximately 4%, as of 1/1/20,
mainly due to:
Decline in the coal prices
Decline of NG price following future entry of Leviathan reservoir
The sale of Alon Tavor Power Station
Egyptian Gas Agreement
The above was partially offset by:
Increased renewable energy consumption
Past cost refunds
Offsetting the excise tax reduction on coal last year
Investor Relations
Recognized costs per segment (e.g. fuel costs, operational
costs, depreciation costs and financial costs). Some of the
recognized costs are also attributed to funding the reform costs+ Fair rate of return on equityper segment
Electricity Tariff
Ongoing Update Annual Update Tariff update as of November 23, 2019
Tariff Structure
Source: IEC’s Financial Statements for 2019FY, Electricity Authority's decision No. 7 (57207) from meeting no. 572 on November 23, 2019 - Annual Update 2020 electricity tariff to IEC’s consumers
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The Electricity Tariff - Cont’d
Source:
1) World Bank Commodity Price Data (Pink Sheet), March 2020; 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 2018.
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
67%
Transmission 5%
Distribution17%
Electricity Grid Administrator + returns to IEC customers 12%
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Financial Overview
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1.7 1.8 1.3 2.9
0.5 0.7 0.9
1.1 1.3 1.3 1.5
1.8 3.49
3.88 3.73
5.94
0
1
2
3
4
5
6
7
2016 2017 2018 2019
NISbn
Generation Transmission System Manager Distribution Supply
$0.9 $1.7
Financial Highlights
Revenues EBITDA(1)
Historical Investments by segments (CAPEX) Net Financial Debt/EBITDA(2)
7.7 8.1 8.0 8.1
0
3
6
9
12
2016 2017 2018 2019
NISbn $2.0 $2.3
22.7 23.4 23.624.7
0
10
20
30
2016 2017 2018 2019
NISbn $6.7 $6.3 $7.1
Source: IEC’s Financial Statements for 2016FY-2019FY1) 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, lease liabilities, 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 andregulatory deferral account assets with respect to linkage differentials).
Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75 & 3.46 for the end of period of 2016FY, 2017FY, 2018FY & 2019FY, respectively
5.1x 5.2x 4.8x 4.4x
0.2x
5.3x 5.2x 4.8x4.4x
0
2
4
6
8
2016 2017 2018 2019State guaranteed Net Financial Debt / EBITDA without State guarantees
Investor Relations
$2.3 $2.1
$1.1 $1.0
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$5.9
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Historical Cash Flow
Source: IEC’s Financial Statements for 2016FY-2019FY
1) Investment activities excluding repayment (or deposits) of bank deposits. Total cash from investment activities figures as reported for 2016FY, 2017FY, 2018FY & 2019FY are NIS (2.8) bn, NIS (2.2) bn, NIS (3.1) bn
and NIS (1.3) 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 3.85, 3.47, 3.75 & 3.46 for the end of period of 2016FY, 2017FY, 2018FY & 2019FY, respectively
6.55.8 5.8
6.5
(2.2) (2.7) (3.1)
(1.3)
(2.7)(3.7) (3.3)
(4.8)
5.76.3
5.6 5.6
(12)
(8)
(4)
0
4
8
12
2016 2017 2018 2019
NIS bn
Operating activities Investment activities, net Financing activities Total Liquidity
$1.7
($1.1)
$1.7
($0.7)
$1.5
($0.8)($1.4)
($0.4)
($0.9)
$1.9
Generating sufficient cash flow from operations enables IEC to decrease debt
Investor Relations
(1)
($0.6) ($0.8)
24
(2)
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51.8
50.0
46.9
44.6
43.2
42.1
38.3
36.1
32
37
42
47
52
2012 2013 2014 2015 2016 2017 2018 2019
NIS, bn
$11.3
$12.1
$11.6
$12.0
$14.4
$10.2
(2)
$10.4
Net Financial Debt (1) Over Time
Source: IEC’s Financial Statements for 2012FY-2019FY
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, lease liabilities, 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).
2) As from 01/01/2019, “net financial debt” also includes lease liabilities.
Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75 & 3.46 for the end of period of 2016FY, 2017FY, 2018FY & 2019FY, respectively.
Investor Relations
Prepared According to
Government Companies
Regulations
IFRS
25
$13.9
-
Fixed93.8%
Floating6.2%
Consolidated Debt Breakdownas of December 31, 2019
Note: The “fifth year and thereafter” blue bar is off the chart.
Source:1) IEC immediate report on the Corporate Liabilities Status.2) IEC Financial data and Bloomberg.3) IEC Financial data, IEC immediate report on the Corporate Liabilities.
Annual Debt Maturities (Principal in NIS billions)(1)
1.56
0.09 0.09 0.09 0.22
3.48
2.522.03
3.63
21.41
5.04
2.612.12
3.72
0
2
4
6
First year Second year Third year Forth year Fifth year and thereafter
(NIS bn)
Loans from local and foreign banks Local bonds, private bonds and non-bank loans
Debt by Currency(3) Type of Instrument(3) Debt by linkage(3)
NIS52.1%
Euro2.0%
USD40.9%
Other5.0%
NIS CPI linked41.1%
NIS non-linked11.1%
Foreign currency47.9%
21.63
Interest Rate Exposure(3)
Investor Relations
Local public bonds29.1%
Private bonds and non-bank
loans 65.1%
Local bank loans 2.2%
Foreign bank loans
3.6%
26
Coupon Outstanding
Amount ($mn) Maturity
9.375%500$Jan-20
(paid)
6.875%650$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 2019FY
Investor Relations 27
(NIS millions)
12/31/2017 31/12/2018 31/12/2019
Revenues 23,370 23,584 24,660
Cost of operating the electricity system
Fuels 8,414 8,540 8,302
Purchases of electricity 3,487 3,591 4,193
Operation of the generation system 4,378 4,375 4,352
Operation of the transmission and distribution system and others 3,056 3,018 2,524
Total costs 19,335 19,524 19,371
Profit from operating the electricity system 4,035 4,060 5,289
Other expenses (revenues), net (54) 23 (2,477)
Sales and marketing expenses 999 935 869
Administrative and general expenses 619 734 638
Income from liabilities to pensioners (49) (100) (39)
Reform agreement's results - 4,249 761
Profit (loss) from current operations 2,520 (1,781) 5,537
Assets arrangement's results, net - (2,627) -
Financial expenses, net 1,530 1,792 1,368
Income (loss) before income taxes 990 (946) 4,169
Expenses (income) from taxes on income 199 (597) 917
Income (loss) after income taxes 791 (349) 3,252
Company's share of the loss of asociated companies (18) (5) (15)
Income (loss) before regulatory deferral accounts 773 (354) 3,237
Movement in regulatory deferral accounts balances, net of tax 3,967 4,424 (1,421)
Profit for the year 4,740 4,070 1,816
Profit (loss) with respect to cash flow hedging, net of tax (82) 123 (148)
Remeasurement of a defined benefit plan, net of tax (1,415) (143) (1,939)
Movement in balances of regulatory deferral accounts balances, net of tax - 78
Other Comprehensive loss for the year, net of tax (1,497) (20) (2,009)
Comprehensive income (loss) for the year 3,243 4,050 (193)
For the years:
-
Balance Sheet(NIS millions)
Source: IEC’s Financial Statements for 2019FY
Investor Relations 28
(NIS millions)
Assets 31/12/2018 31/12/2019 Liabilities and Equity 31/12/2018 31/12/2019
Current assets Current liabilities
Cash and cash equivalents 2,806 3,190 Credit from banks and other credit providers 2,626 6,110
Short term investments 477 427 Trade payables 2,256 2,127
Trade receivables for sales of electricity 4,364 4,384 Other current liabilities 1,432 1,157
Other current assets 526 702 Customer advances, net of work in progress 437 440
Inventory - fuel 1,241 671 Provisions 681 658
Inventory - stores 142 151 Liabillities of disposal groups classified as held for sale 307 340
Assets of disposal groups classified as held for sale 947 1,903 Total current liabilities 7,739 10,832
Total current assets 10,503 11,428
Non-current liabilities
Debentures 33,673 28,469
Non-current assets Liabilities to banks 4,668 3,887
Inventory - fuel 1,463 1,753 Liabilities with respect to other benefits after employment
termination
5,097 6,354
Long-term receivables 1,228 2,315 Deferred taxes, net 5,769 6,003
Investment in associates 34 19 Liability to the State of Israel 1,788 1,783
Assets with respect to benefits after employment
termination
5,968 4,825Lease liabilities
- 845
Fixed assets, net 57,667 57,620 Other liabilities 635 588
Intangible assets, net 1,200 1,241 Total non current liabilities 51,630 47,929
Total non-current assets 67,560 67,773 Equity 24,843 24,650
Debit balance of regulatory deferral accounts 7,873 8,338
Credit balances of regulatory deferral accounts and
deferred taxes with respect to regulatory deferral
accounts 1,724 4,128
Total assets and debit balance of regulatory
deferral accounts85,936 87,539
Total liabilities, equity and credit balance of
regulatory deferral accounts85,936 87,539
-
Thank youFor questions or additional information, please contact us:
29
Israel Electric Corp. Investor Relations: [email protected]
-
Appendices
30
-
IEC has taken significant steps to reduce emissions
Nitrogen Oxides NOX Sulfur Dioxide SO2
Carbon Dioxide CO2 Particulate Matter PM
1.80
0.88
0.0
0.5
1.0
1.5
2.0
2012 2018
Gra
m /
KW
h p
rod
uced
Source: IEC Environmental report for the years 2017 – 2018 and IEC Financial Statements for 2019FY1) The emissions reduction cost does not include interest during the construction period
Investor Relations 31
-51%1.68
0.63
0.0
0.5
1.0
1.5
2.0
2012 2018G
ram
/ K
Wh
pro
du
ced -63%
754
605
0
200
400
600
800
2012 2018
Gra
m /
KW
h p
rod
uced
0.056
0.032
0.00
0.03
0.06
2012 2018
Gra
m /
KW
h p
rod
uced
-20% -43%
The State of Israel signed the Paris Agreement in
2016 and has significantly limited the usage of coal
for electricity generation
An emissions reduction project in the larger coal
units was executed at a significant cost of NIS 7.1
billion (1)
Older coal units will be mothballed
Newer and larger coal units are expected to be
converted to Natural gas
Government target of Israel is to be “coal free” by
2030. Minister of Energy expect target to move
forward to 2025
IEC is financially protected from change in fuel mix
by the electricity tariff
Implementing Government policies
-
The Reform in the Generation Segment(Selected generation sites)
Investor Relations 32
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
A power station which was
sold during the reform
Hagit: will be sold units with a
capacity of 670 megawatts
Source: IEC ‘s Financial Statements for 2019FYNote: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, according to the IEC’s undertaking document, 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 thoseundertakings. On June 3, 2018, the required Government Decision was received, on July 19, 2018 the Knesset approved the Amendment to the Law, and on May 17, 2018, the Principles of the policy of the Minister and the ElectricityAuthority’s Regulation as aforesaid were published. In addition, on November 4, 2018, the Collective Agreement came into effect after all the contingent conditions detailed therein were fulfilled. 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 estimatethe exact implications of 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 2018, Maala's rating for IEC for 2019.
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.
33
IEC earned the highest ranking in the Maala(2) 2019 Index: Platinum+ (for the fifth 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
34
As of the Financial
Statements'
publication date,
Tamar & Leviathan
reservoirs are the
only active sites
-
Tariff Comparison to European Countries
Source:Eurostat, Electricity prices for domestic consumers – bi-annual data, as of 02/24/2020. Israel rate is based on the last tariff update that does not include VAT (01/01/2020) and converted EUR/NIS exchange rate of 3.72 as of 02/24/2020.1) 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
20.319.5
18.9
17.6
14.7 14.5 14.3 14.313.6 13.6 13.2 13.0
12.1 11.7 11.4 11.4 11.4 11.3 11.0 10.810.3 9.8 9.8 9.6 9.5
8.8 8.88.3
6.8
0
5
10
15
20
25
Irela
nd
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Cyp
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Germ
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Unite
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Cze
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Italy
Norw
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Neth
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Au
stria
Sw
eden
Isra
el (J
anuary
2020)
Fin
lan
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Gre
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Fra
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Latv
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Slo
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Po
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Denm
ark
Cro
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Rom
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Esto
nia
Slo
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Lith
uania
Po
lan
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Hungary
Bu
lga
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Tu
rkey
(€ cents equivalent)
35