The Israel Electric Corporation Ltd.

The Israel Electric Corporation (IEC) is a public and government-owned company, generating and supplying electricity to all sectors; approx. 99.85% of the shares are government-owned. Its activities include the generation, transmission and transformation, distribution, supply, and sale of electricity to customers. IEC owns and operates 15 power stations with 50 generating units, including steam-driven, combined cycle, gas turbines, open and jet streams. Its installed capacity in 2022 was 10,955 MW. IEC supplies reliable high-quality electricity, complies with leading service standards, maintaining economic, commercial, and environmental principles. As of the end of 2022, IEC employs 10,121 employees and provides services for about 3.016 million customers.

Development Activities

Over the last decade, IEC invested approx. $ 10Bn in developing the local electricity sector. Although IEC is government-owned, this capital 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 4,850 km; 115KV lines - 41.5km; and the 400 kV extra-high lines - 805 km. The transformation system includes 11 switching stations and149 substations owned with IEC. By the end of 2022, the installed transmission capacity totaled in approx. 19,486MVA. By the end of 2022, the distribution system included 30,113 km. of high-voltage lines; 53,920 distribution transformers of total capacity 27,425 MVA, and 40,955 km. of low-voltage lines.

Smart Grid and Smart Metering

Smart Grid – a new and advanced concept based on integrating of an advanced electricity network with bilateral communication, controlling and monitoring information systems. The Smart Grid will enable combining manufacturers and demand management, decrease or inversion, and will contribute to energetic efficiency and a decrease of greenhouse gas emissions, improving safety, reliability and flexibility, and to improving customer experience. The main technology is using smart electricity meters. Real-time regional electricity status is supplied on two operational levels: the network and the customer’s meter. managed by the main monitoring system operating from the company’s national meter unit enabling the management of IEC’s larger customers and the residential customers. This technology will greatly benefit Israel’s energy sector and Smart Grid. The goal of the project is to promote the energy sector regarding its various challenges, such as electric car use and regulation regarding private manufacturers (mainly renewing energies), competition in the provision sector etc. The installation of Smart Meters is a central part in the revolution of a smart electrical grid, for which IEC is preparing for. The IEC continued to roll out nationwide smart metering in 2022, through the inclusion of a smart meter in new installations and the replacement of older meters with smart ones, so withing several years every IEC meter would be a smart meter.

Integration of Renewable Energy Sources

The company’s 2030 long term plan adheres to government goals: enlarging electricity production goals with renewable energy to 30% by 2030, including adding technologic means to manage and supervise the renewable energy facilities and maintain the electricity grid’s stability during decentralized production to ensure credibility and quality: the company promotes energy storage projects, supporting the combination capacity of renewable energy sources to large scale electric production – enlarging the production scale with renewable energy enlarges the need to combine storage facilities. The dynamics of entering and exiting the grid of decentralized producers of renewable energy presents the company with challenges of maintaining the frequency in the system’s stability, which is crucial to electric supply credibility. The storage facilities will support the stability of energy facilities’ effect.

Revenue, Capital Raising and Company Rating

In 2022, IEC revenue totaled NIS 23,105. The year ended with a profit of NIS 1,774 million.
Company credit rating overseas (correct to 2022):
1. Moody’s: 2Baa1/ Stable outlook (same as previous year).
2. S&P: BBB+ Global Rating/Stable outlook (rise from earlier year).
Company rating locally (correct to 2022):
1. S&P Maalot: ilAAA+/Stable outlook.
2. Midroog: 2Aa1.il/Stable outlook (same as previous year).

Electricity Demand and Peak Load

A peak demand for 2022 occurred on 26.1.2022 at 11,615MW. During peak demand, IEC supplied 9,216MW. In 2022, 42.6% of electricity was generated by coal; 57% by natural gas & LNG; 0.3% by diesel oil; and 0.2% by fuel oil.

Natural Gas (NG) in the Electricity Sector

As of the end of 2022, IEC maintains three natural gas sources: “Tamar” field, “Leviathan” field, and “Karish” field. As of the end of 2022, approx. 56% of the company’s total installed production is by units which are capable of working on natural gas.

Promoting Intelligent Use of Electricity and Energy Efficiency

IEC maintains long term cooperation with various parties in the community that corelate to its business core, including safety and intelligent use of electricity, science and technology, sustainability, and energy efficiency. This cooperation is characterized by constant listening to the community’s needs, while maintaining constant dialogue and social responsibility. The company’s educational activity focuses on the company’s core activities, especially safety and social responsibility. The company aims to lead to a correct electric use culture within educational programs, responsible advertising, and lectures, and information regarding safety, recommendations for savings and intelligent electric use and energy efficiency at home. One of the goals is to lead behavioral & awareness related change in the community, as participating pupils serve as ambassadors. In addition, IEC continues to encourage its customers regarding “smart electric use” via media advertising, attachments to electric bills and on the company’s website, and relaying information regarding energy efficiency to various crowds.

Energy efficiency in IEC sites – decreasing electric consumption at company sites

IEC assists the government’s goals regarding energy efficiency and greenhouse gas emissions decreases. In recent years, energy efficiency changes have taken place in the company’s sites, such as: • Improving energy use in existing production units. • Changing old A/C with high energetic ranking new ones. • Changing light sources with advanced energy-saving new sources. The company founded an energy efficiency promotion team that includes all the company’s related parties, to render maximum cooperation possible, promote the employees’ and management’s awareness and enable a unified report to the company’s executives, and according to the company’s systematic approach.

Structural Change, Organizational Change and Efficiency Plans

Discussions between the government and regulatory bodies, and IEC, have taken place, to regulate the sector’s activity for the public’s benefit, based on the Electricity Market Law. On May 10, 2018, understandings regarding the outline of principles related to the structural change for an eight-year period were reached. This outline was subsequently approved by the company’s BOD. On June 3, 2018, the outline was approved by the government, and on July 19, 2018, the Knesset passed the amendment to the Electricity Market Law. including the restructuring outline, the government’s decision regarding the reform, the amendment to the Electricity Market Law, the Energy Minister’s policy principles and the company’s board’s decision. These are the main actions performed within the framework of the implementation of the structural change in the company: In 2019, the sale of “Alon Tavor” was finalized, and a conduction supervision array began working. In 2020, the sale of “Ramat Hovav” was finalized, and a subsidiary was founded – “Nativ HaOr”, which is constructing two gas turbines in a combined cycle. In 2021 the company began to promote the process of selling Eshkol power station (it has not been sold yet), and on Nov. 1st, 2021, the company sold all the activity of the system’s management unit to “Noga” and ceased to act as the manager of the electric system. In 2022 the sale of “Hagit East” was finalized and a draft of the agreement to transfer area D (of the Rotenberg site) to Israel Land Authority was approved. As of 2022, the agreement has yet to be signed. In accordance with the regulation determined by the Electric Authority, the supply section is due to open for competition fully at the beginning of 2024. In addition, the company began promoting the construction of accumulation facilities, and is in an essential process of restructuring and efficiency plans, according to which the company’s employees’ number will decrease.

Service

IEC aspires to provide its customer with value, while incorporating personal, responsible service and technologic innovation. Alongside maintaining regular dialogue in various channels available to customers, we incorporate innovative means to improve the customers’ experience and satisfaction from our service. IEC operates various service channels: * physical reception – at the company’s service centers and at service stations for the “customer-resident”, which were established in 2021 in several local authorities in Israel. * 103 telephone centers – which operate in Hebrew and Arabic, * digital tools – Facebook, LinkedIn, twitter, Instagram, online chat and text messages (during the service centers’ working hours), as well as in hybrid service stations in various locations, in which digital guidance and online service guidance is provided. In addition, the company’s website enables performing self-service actions 24/7 in Hebrew and Arabic. Regarding electric supply, the company is a provider of a necessary service, and provides electricity according to rules and regulations.

Business Development

The Business Development Unit operates to locate and realize business activities in addition and unrelated to the company’s activity as a necessary service provider, in Israel and abroad. The unit’s goals are to expand IEC business in order to maximize use of professional knowledge and resources, improve professional capabilities and increase revenue. Business development activity mainly regards planning and engineering services, cyber security, smart use of infrastructure and company resources, knowledge sale, consulting and engineering services in Israel and abroad, cyber security service sales to critical systems in Israel and abroad, asset based services, antennas, fuel unloading, product unloading, using infrastructure reserves, commodification of by-products produces in electricity production, such as coal, sulfate etc., professional labs, guiding, storage, logistics, the communications field regarding establishing a communication company, business activity regarding innovations and business-based innovative service packages development.

The Communication Venture

IEC is associated with IBC – Israel Broadband Company since its establishment in July 2013. Since 1.8.19, IEC holds 30% of IBC’s shares and a partnership of Cellcom and IIF-HOT (50%-50%) holds 70%. IEC executes design and optical cable deployment on electricity infrastructure and grants IBC exclusive rights to use company infrastructure and allotment of broadband on IEC’s optical network. IEC supplies design, optical network deployment and connection to buildings based on existing overhead and underground electricity infrastructures in numerous cities. IBC provides domestic and business customers with broadband communications services ranging from 100 Mpbs symmetrical bandwidth. Moreover, IEC provides IBC with infrastructures for hosting communications rooms, storage and logistics services.

Innovation

The company’s innovation unit founded in 2020, includes a research & development budget & comprises of two main fields: open innovation. i.e. joint work with startups in technological pilots, as IEC provides the program’s platform & specialty (meaning the infrastructure & electric network unique to the energy and electric market to examine new technologies), while the startup provides its technology. The second field is inter-organizational entrepreneurship via various platforms, from social platforms, through seminars & courses and up to an inter-organizational entrepreneurship greenhouse, the first of which has ended & its products are due to be commercialized within the next years. Regarding research and development, cooperation with leading universities has been agreed upon, such as joining the national energy center at Bar Ilan University, advertising call for proposal to the academia and signing first agreements with R&D providers to build solutions to the electric companies’ challenges.

Environment Protection

IEC is responsible & committed to act to protect the environment & reduce damage along the electric chain, & works according to a sustainable, long term & future-oriented environmental vision, reducing the environmental repercussions stemming from its activities in order to prevent damage. The company adopts advanced environmental measures, for smart use of raw materials reduction of pollutants emission. Moreover, the company works according to international environmental treaties, such as the “Barcelona Treaty” to prevent pollution of the Mediterranean Sea from land sources, enhances cooperation with environmental entities & maintains a dialogue with relevant stakeholders. The company works according to the environmental protection principles policy affirmed in 1997 & its updates. The total investment in environmental facilities in 2022 was NIS467 million, NIS435 million of which invested in environmental aspects of the production section, & in NIS32 million in conduction sectors, distribution and special projects. The company works to reduce environmental effects & is part of the climate crisis struggle. Therefore, it drafted long-term ESG goals that include measurable quantity goals regarding the IEC’s main environmental effect fields; preservation of coal production units 1-4 at “Rabin Lights” powerhouse; foundation of efficient production units; conversion of coal to gas production units; environmental investments; promoting the smart meter project; development for integrating renewable energy within the grid; accumulation; electric transportation; stakeholders’ dialogue etc.

Community Involvement

Since IEC is a national infrastructure company, its activity presents a strategic tool for creating “communal value”: social or environmental value for stakeholders for the business side, while reflecting the company’s core values & its commitment to act in corporate responsibility. IEC maintains long term cooperation with various parties in the community that corelate to its business core, including safety & intelligent use of electricity, science & technology, sustainability & energy efficiency. This cooperation is characterized by listening to the community’s needs, while maintaining constant dialogue and social responsibility. The company’s educational activity focuses on the company’s core activities, especially safety & social responsibility. The company aims to lead to a correct electric use culture within educational programs, responsible advertising, & lectures, and information regarding safety, recommendations for savings & intelligent electric use & energy efficiency at home. One of the goals is to lead behavioral & awareness related change in the community, as participating pupils serve as ambassadors.

Risk Management and Business Continuity

IEC operates according to the directives of the Government Companies Authority in Risk Management, & to the Risk Management Master Plan. Risk management is performed by the various divisions, districts, power stations & projects, & is an integral tool for managerial & operational decisions. As part of risk management & ensuring business continuity, IEC continues to prepare, & practice response proceedings for extreme scenarios. Once a quarter, the company reports to its BOD regarding state of risk management status at the company, including essential events which have materialized, breaches in “risk appetite” statements, etc.

Preparing for Emergencies/Crises

During 2022, IEC worked on various additional matters regarding its preparation for emergencies: A project for armoring critical electricity facilities, increased the emergency fuels reserves for the electricity sector, trained rescue teams from amongst its employees, developed control & command systems for better preparation & management of emergencies, etc.