IEC Flexes Cyber Muscles Abroad

TEL AVIV (Reuters) -

Israel Electric Corp. (IEC), for years unable to turn a profit at home, hopes to use its broad technical knowledge and experience in fighting cyber-attacks to generate business abroad and help chip away at massive debts threatening its future.

To sweeten its appeal, the state-owned utility, which staves off 400,000 hacker attacks a day, is constructing a “cyber-gym” that will teach customers how to keep their power stations safe.

“We need to find foreign projects to help with our financial problems at home,” senior executive vice president Yasha Hain told Reuters in an interview. “Either we raise the price of electricity in Israel, or we bring in money from abroad.”

But for now, raising tariffs is out of the question. A state regulator holds down consumer prices, with electricity in Israel costing less than in most Western countries, so expenses simply outweigh income, Hain said.

He pointed to France’s EDF as an example of a utility that relies heavily on foreign projects. In a similar fashion, IEC’s work overseas could grow to 30 percent of total operations over the next decade, he said, from just 1 percent now.

“We are focusing on Eastern Europe, the former Soviet Union, India and Africa. Those are our preferred markets,” Hain said.

IEC has been responsible for nearly every aspect of electricity in Israel, from running power plants to connecting households, since the country was founded in 1948.

But after a long period of mismanagement, stymied by price regulation and surging fuel costs, the company’s debt has ballooned to more than 71 billion shekels ($19.5bn).

IEC is being kept afloat by repeated bond offerings, many of them state-backed. On Thursday, it completed a $1.1bn offering, without government guarantee, in the United States and Europe. Three weeks ago, the state decided to back yet another offering, of 2.4bn shekels, but no date has been set.

Whether the government will continue to give its guarantee or allow IEC to expand its business abroad depends on the company pushing through long-promised reforms.

Hain said the reforms, which include streamlining the corporate structure and laying off about 2,000 of 13,000 workers, would cost a few billion shekels to set in motion. The financial benefits only come a few years down the road.

Financial troubles aside, IEC stands out among comparable utilities.

On two key benchmarks, availability of generation systems and forced outage ratios, IEC is well above the average among North American and European electricity providers.

And a 2010 World Bank report said IEC’s technical performance compared favorably to the industry.