The board of directors at Israel Electric Corp. (IEC), the nation’s electricity provider, approved what was hailed as a ‘historic’ reform on Thursday. It related to increased competition in the local electricity market with the aim of creating a more streamlined and efficient company.
The reform envisages the electricity company shed some 1,800 fixed employees over the next eight years, while others will move to alternative roles within new government corporations that will be set up as part of the reform.
Additionally, over the coming five years, the IEC will sell off several gas-fired power stations — in Eshkol, Reading, Alon Tavor, Ramat Hovav and the eastern part of the Hagit site — to third parties, in a bid to increase competition in electricity supply. The corporation will also build two new natural gas operated combined-cycle power turbines, according to a filing with the Tel Aviv Stock Exchange.
As part of the reform the board of the IEC will set up a financial model with targets against which management will be monitored for implementation.
The cabinet will have to approve the reform, estimated to cost some NIS 7 billion ($2 billion) over 10 years.
“The reform in the electricity sector is a historic landmark for every family and business that will now enjoy a stronger, more stable and more competitive electricity company,” the CEO of the IEC, Ofer Bloch, said in a statement as the board debated the reform. The move will help cut debt from the company and increase its financial stability, he said.
The reform has been decades in the making, as it was held up by union demands over the fate of employees. It aims to break the electricity company’s near-monopoly status on producing and supplying electricity. An accord between the finance ministry and the workers reached in December 2017, paved the way for its approval.
Shai Babad, the director-general at Israel’s Ministry of Finance, said that the process has been “complex and unusual” and “one of the most complex tasks I have managed to conduct in my professional life.”
“This is a complex undertaking for the company and also for the employees,” he said in the statement. “When we started the process everyone said there won’t be reform. In the last year and a half, we suffered many ups and downs, but I am happy we succeeded in focusing on a reform that is unanimously supported in the government.”
Successive Israeli governments have been working on the reform since 1996, without making progress because of the power held by the company’s union. A deal was almost signed in 2014 but scrapped at the last minute when employees balked.