Moody's Investors Service placed Israel Electric’s (IEC) A3 debt ratings of on review for downgrade. The rating action is due to the company's very high debt levels and weak financial profile, which are expected to worsen as the company continues its extensive capital expenditure program to expand generation capacity.
In addition, the Israeli Government has recently directed IEC to develop a natural gas pipeline, which is likely to further raise indebtedness in the medium term. While IEC benefits from a cost-plus tariff structure, this does not prevent debt rising to very high levels in relation to cashflow, and IEC's standalone financial profile may not be consistent with investment grade status.
Moody's review will consider the extent to which the company can improve its cashflow generation; restrain capital expenditure; and the extent of Government support. Moody's will consider actions that the Government might take to improve IEC's financial profile, as well as any implicit support arising from the ownership of IEC by the Government, and the importance of the company to the country.
Israel Electric is the monopoly electricity utility in Israel. It is owned 99.8 percent by the Government, and in 2001 reported a loss of about $11 million. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
