Israel Electric looks to expand abroad

Projects in Africa, South America expected to generate NIS 100m.

iec logo 88 (photo credit:)
iec logo 88
(photo credit: )
Israel Electric is seeking to close large contracts for planning power stations in other countries, particularly in Africa and South America, to expand its international activities. The move is expected to generate revenues of more than NIS 100 million in 2008, according to IE. "The current situation in the global energy sector opens up an opportunity for Israeli highly skilled engineers in an environment in which there is a global shortage of engineers, a need to refurbish old power stations built after World War II and demand to transform power stations into ecologically friendly or clean stations," Ya'acov Hain, IE's senior vice president and general manager of engineering projects, told The Jerusalem Post Wednesday in Tel Aviv. "This year we hope to generate more than NIS 100 million from overseas projects, and looking ahead I believe that revenues from international activities could make up 10 to 20 percent of the company's total revenues." Since Hain took up his position a year ago, he has been engaged in expanding IE internationally as a subcontractor in power station projects in other countries. "Israel Electric has not been expanding internationally until recently because of a lack of approvals from the government, which should be in place very soon," Hain said. IE's Engineering Projects Group has a workforce of 1,090 engineers and specialized qualified workers in the construction division and 472 in the engineering division. "I believe that our engineers have the expertise of working with the most advanced technologies," Hain said. "Today engineers can do everything from their computer and thus we don't have to send them abroad for overseas projects such as national development programs for electricity systems." Last week, IE won a contract to plan six coal-fired power stations in South Africa for Alstom Power Stations, which will build them for South Africa's power company Eskom Holdings. The contract is estimated to be worth tens of millions of shekels. In October, IE won its first overseas contract with Metka SA worth NIS 10m. As part of the deal, IE will design a natural gas-driven power station for Metka SA, which won a contract from Greece's Public Power Corp. to build a power station. "At the moment, we are close to hammering out two additional contracts - one in South America with a leading German company, and one in Africa with an Israeli company working in Africa," Hain said. "There are many Israeli entrepreneurs in the field seeking to invest into projects abroad in Africa, South America and Europe, mainly because in Israel profitability is very low." In Israel, IE won three projects last year. In December, the company was awarded a contract with Sugat Sugar Industries for a steam generator, another project was with Israel Oil Refineries for a Rolls Royce turbo-generator and the third was with Israel Chemicals. IE employs some 13,000 workers. It was ordered last August to present an efficiency plan as well as trim costs, including cutting the number of employees, as part of the Public Utilities Authority's decision to allow a 5% rise in electricity rates. IE has plans to seek to "retire" some 1,000 workers by 2010. "This is a problem for us," Hain said. "The workforce should not be cut in parts of the company where money can be made. If I had another 1,000 engineers, I would also have work for them." The embattled company is sitting on a NIS 45 billion debt burden and has been seeking ways to improve its financial standing in an effort to raise money through the placement of bonds. Last week the Maalot rating agency reiterated its "negative" outlook for IE debt due to uncertainty about the company's restructuring. Maalot nevertheless awarded an AA+ rating for the NIS 1.7b. bond issue that IE plans to offer to institutional investors during 2008. Maalot referred to the lack of a clear format and structure for IE's restructuring, in addition to solving its labor problems.