Israel Electric seeks state guarantee of planned debenture offering

By Angela McDaniels

Tacoma, Wash., March 1 - Israel Electric Corp. Ltd. plans to price an offering of debentures and is negotiating with the Israeli Ministry of Finance about a state guarantee of the issue, according to a company announcement.

The size, terms and structure of the issue and what portion of it will be guaranteed by the state have not yet been determined.

The company estimates that it will not be able to purchase all the fuel it needs without governmental assistance. It blamed the continuing decrease in the volumes of natural gas supplied to the company from the Yam Thetys reservoir, the continuing disruptions in the supply of natural gas from Egypt and the company's need to increase its reserves of fuel as the summer months grow nearer.

The proceeds of the debentures would be used to purchase additional fuels required due to the shortage in natural gas.

Director resigns

Avraham Natan resigned from the board of directors. In a Feb. 28 letter sent to the minister of finance and the minister of energy and water, he described the company as being in crisis and urged the ministers to act immediately.

"For about two years I tried, together with the other members of the board of directors, to create an outline for an action that will stop the deterioration of the [company] in the generation and supply of electricity, improve the equity structure of the company and reduce its liabilities," he said in the letter, which was included in a report filed with the Singapore Exchange.

However, the board ultimately failed to resolve the crisis, he said. Among the reasons, Natan cited the company's "huge debts," which he said exceed NIS 62 billion, and the "additional billions" the company will need to raise in both 2012 and 2013.

"As the person who sees the true reality, I do not believe that the board of directors of the company has the tools and the authority to direct the actions required to extricate the company from its grim situation!" he said in the letter.

Israel Electric is a Haifa, Israel-based publicly controlled utility.

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