Over the last decade, IEC invested approx. $ 10Bn developing the local electricity sector. Although IEC is government-owned, the capital to finance these investments was raised from independent sources in Israel and overseas. At the end of the year, the 161 KV super-high overhead and underground lines totaled 4,786 km; 115KV lines – 42 km; and the 400 kV extra-high lines – 760 km. The transformation system includes 11 switching stations and 201 substations (52 privately-owned). The transmission capacity in the 400/161 KV switching stations totaled 12,945 MVA. The transmission capacity from extra-high to high-voltage at IEC’s substations expanded to 17,950 MVA, while privately-owned transmission capacity totaled 3,134 MVA.
By the end of 2018, the distribution system included 28,340 km. of high-voltage lines; 50,418 distribution transformers of total capacity 24,745 MVA, and 35,924 km. of low-voltage lines.
In 2018, NIS 1,331M were invested in the development of the distribution section.
Smart Energy – the Smart Grid and Smart Metering Projects
Smart Grid – is a new and advanced concept based on the integration of an advanced electricity network with communication, controlling and monitoring information systems, in order to improve its safety, reliability, efficiency and flexibility; as well as contributing to improve customer experience.
As part of IEC preparations for entering the Smart Grid era, the company held a tender for the replacement of the DMS system (Distribution Management System) in an advanced system (ADMS). In October 2018, GE – Grid Solutions was selected as a conditional supplier to the system.
The main technology of smart metering is the usage of smart electricity meters transmitting over low voltage electricity lines (PLC) transferring consumption data to a national monitoring center. Real-time regional electricity status is supplied on two operational levels: the network and the customer’s meter. This is managed by the main monitoring system operating from the company’s national meter unit enabling the management of IEC’s larger customers, which account for approx. 60% of the total electricity consumption, and the residential customers. The installation of Smart Meters is a central part in the revolution of a smart electrical grid, of which IEC preparing for in the coming years. In 2018, smart meters installation and management systems continued to be developed as part of the tariff trial scheduled for early October 2019.
IPPs – High and Extra-High Voltage
In 2018, new IPPs were continued to be introduced, with the commissioning of the Dead Sea Power Plant (capacity: 221 MV). In March-April 2019, three additional power stations entered into commercial operation: a solar field in Mashabei Sadeh (capacity: 60 MV) and two thermo-solar power stations in Ashalim (capacity: 136 MV each). Technical coordination is being held to establish another 10 IPPs.
Revenue, Capital Raising and Company Rating
In 2018, IEC revenue increased by approx. 0.9% and totaled NIS 23,584M. The year ended with a profit of NIS 4,070M. During 2018, IEC credit outlook rating by Moody’s was raised from stable to positive.
Company rating overseas (correct to 31.12.2018):
1. Moody’s: Baa2/ Positive outlook.
2. S&P: BBB/ Positive outlook.
Company rating locally (correct to 31.12.2018):
1. S&P Maalot: ilAA+/ Stable outlook.
2. Midroog: Aa2.il/ Stable outlook.
During 2018, IEC raised NIS 5.6Bn towards investment in the electricity sector, debt recycling and other ongoing needs.
Debt Redemption: During 2018, IEC paid off a total of NIS 7.5Bn in loans and bonds. In addition, there was a debt reduction of approx. NIS 2.5Bn after redeeming perpetual bonds.
Electricity Demand and Peak Load
Peak demand occurred on 25.7.2018 at 12,921 MW (1.01% more than the previous peak on 26.7.2017). During peak demand, IEC supplied 9,343 MW (72.3%) of Israel’s electricity demand. The overall generation capacity of company units in 2018 was 47.905 GWh. In 2018, 43% of electricity was generated by coal; 56.45% by natural gas; 0.43% by diesel oil; 0.1% by fuel oil; and 0.01% by methanol.
Electricity consumption in 2018 rose by 1.98% compared to 2017.
Natural Gas (NG) in the Electricity Sector
In 2018, IEC utilized two sources of natural gas: the Tamar gas field (83% of the total gas for electricity generation used by IEC) and the LNG carrier, which has the capacity to convert its liquid gas into natural gas (17% of the total gas for electricity generation used by IEC). The Leviathan, Tanin and Karish gas fields are potential gas sources for future use. The generation of electricity by liquid fuels was reduced in 2018 to 0.6% of the total electricity generation by the company (data excludes liquid gas supplied by the LNG carrier). IEC purchase of fuel totaled approx. NIS 8.54Bn. In 2018, electricity generation by IEC totaled 69% of the total electricity generation. IPPs and PV installations generated the remainder.
Promoting Intelligent Use of Electricity and Energy Efficiency
In 2018, IEC continued to guide customers to energy efficiency through advertising in the media and on the company’s website, and presenting information to various audiences. In 2018, 22 energy efficiency projects were carried out at several sites, at a total investment of approx. NIS 1.4M. The annual savings potential for this activity is about 1.17 million kWh.
In 2014-2018, about 60 projects were implemented in 30 different sites, with an overall investment of approx. NIS 4M, and an estimated annual energy savings potential of 3.5M kWh.
Structural Change, Organizational Change and Efficiency Plans
Over the years, discussions have been held between the government and regulatory bodies, teams have been appointed, and a number of possible outlines have been discussed for implementation of the structural change in IEC. On May 10, 2018, the relevant parties reached understandings with respect to the outline of principles related to the structural change for an eight-year period, which was subsequently approved by the company’s BOD. On June 3, 2018, the outline of the reform was approved by the Government of Israel, and on July 19, 2018, the Knesset passed the amendment to the Electricity Market Law.
The Business Development Unit operates to expand IEC business and utilize its professional expertise, skilled human resources, infrastructure, additional resources and other by-products. The ultimate goal is to secure future sources of revenue that can contribute to improving the financial strength and profitability of IEC and expanding its activities. Most of the business development activity is currently directed abroad, mainly towards Africa, Eastern Europe and the former Soviet Union. IEC also sells its professional services locally and to the Palestinian Authority (PA). The Unit’s diverse activities include: design, construction and operation of power stations, other electrical installations and renewable energy installations overseas; sale of expertise, consulting, and engineering services, including in the fields of energy management and energy efficiency; commercialization of by-products from electricity generation; intelligent use and rental of IEC’s infrastructure, means, equipment and other services, such as construction of the PA electricity infrastructure. In 2018, IEC continued to expand its relatively new activities in the fields of total defense to the physical and cyber spaces.
The Communication Venture
IEC is associated with IBC – Israel Broadband Company since its establishment in July 2013 and holds 40% of its share capital. IEC executes all the design and optical cable deployment on electricity infrastructure and grants IBC the exclusive right to use company infrastructure and allotment of broadband on IEC’s optical network. IEC supplied design, optical network deployment and connection to buildings based on the existing electricity infrastructure in several cities as Beer Sheva, Tel Aviv & Ramat Gan. On the basis of this infrastructure, IBC provides domestic and business customers with broadband communications services ranging from 100 Mpbs symmetrical bandwidth. In addition, IEC provides IBC with infrastructures for hosting communications rooms, storage and logistics services.
KARAT – The Technological Incubator
KARAT promotes technological ideas and was established to identify innovative ideas with commercial potential within the scope of IEC activities. The imagineers, entrepreneurs, and inventors joining the incubator are granted funding, professional accompaniment, access to company laboratories and physical infrastructure, and more. To date, 15 start-ups are active in KARAT: 8 are involved in the Smart Grid, 4 in energetic efficiency, 2 in renewable energies, and 1 in environmental protection.
IEC has an environmental vision in light of which it operates out of responsibility for the environment, from a long-term and forward-looking perspective, that contributes to minimizing the environmental implications of its activity. The environmental issue is an integral part of all company activities and subject to a broad regulation, led by the Ministry of Environmental Protection, the Ministry of Health, and the Municipal Association for Environmental Quality. In addition, IEC monitors the development of environmental legislation and technological development in the field.
In 2018, IEC invested approx. NIS 595M in the environmental aspects of the generation sector and another NIS 15M invested in special environmental projects, including the installation of emission-reducing functions at the Orot Rabin (Hadera) and Rutenberg (Ashkelon) power stations. In addition to these investments, IEC spent in 2018, approx. NIS 81M to meet the environmental protection requirements in the generation system (beyond another NIS 1M that are not associated with the generation system).
IEC has been leading community activities for more than 25 years. This is an enterprise rooted in its vision and policy reflecting its social and environmental responsibilities. In the Maala ranking, IEC is rated Platinum+, Grade 91 for the fifth consecutive year. At the second international conference of Maala, IEC won the Dov Lautman Business Diversity Award for 2018 in the category of the employment of people with disabilities. As part of its activities for the community, IEC creates and promotes dialogue with individuals and activates diverse communities around the state in science and technology, sustainability, energy efficiency and issues related to electricity and energy. Approx. 300,000 people were directly and indirectly exposed to these activities.
In 2018, 1,550 schools in 200 local authorities, and 2,000 kindergartens participated in the Netiv Haor program for safety and intelligent electricity use in educational, fun-learning activities. IEC’s employees and pensioners take part in the program voluntarily.
Risk Management and Business Continuity
Risks of various types are an integral part of the business environment, business procedures and management of IEC and are influenced by external and internal factors. IEC operates according to the directives of the Government Companies Authority in Risk Management, and according to the Risk Management Master Plan. In 2016, a comprehensive risk survey was carried out, which dealt, among other things, with identifying the material risks that affect IEC’s ability to achieve its objectives. In addition, the risk indices have been updated and the level of “risk appetite” for the company, which reflects the level of accumulated financial damage as a result of risks that may materialize in a given period, has been determined. Today, risk management is carried out by the various divisions, districts, power stations and projects, and becomes an integral tool for managerial and operational decisions. As part of risk management and ensuring business continuity, IEC continues to prepare, update and practice the response proceedings for extreme scenarios. Once a quarter, the company reports to its BOD on the state of risk management status at the company, including essential events which have materialized, breaches in “risk appetite” statements, and additional information as required.
Preparing for Emergencies/Crises
During 2018, as part of IEC’s preparations for emergency events related to weather and to the electricity sector, the company held two national drills, in which extreme summer and winter scenarios, combined with cyber events and terrorist incidents were incorporated.
Specific drills were also conducted in a number of areas, some of which were headquarters drills and some were field drills. These drills provide a better organization, including the need for continuous functioning of critical processes as required in the overall risk management.
In the passing year, IEC also participated in national activities and drills for various issues in cooperation with the ministry of Public Security and the Ministry of Energy, participated in conventions and seminars on relevant emergency topics, and widely cooperated with government ministries, authorities, the National Security Council, Israel police, and more.
During 2018, IEC continued with the project for armoring critical electricity facilities, increased the emergency fuels reserves for the electricity sector, and trained rescue teams from amongst its employees.
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