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Report Date : |
21.08.2014 |
IDENTIFICATION DETAILS
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Name : |
ISRAEL RAILWAYS LTD. |
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Registered Office : |
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Country : |
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Financials (as on) : |
31.12.2013 |
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Date of Incorporation : |
15.01.1998 |
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Legal Form : |
Public Limited Company |
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Line of Business : |
Planning, constructing, developing, management,
maintenance and operation of railways in Israel, for passengers and cargo. |
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No. of Employees : |
2,804 |
RATING & COMMENTS
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MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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Status : |
Satisfactory |
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Payment Behaviour : |
Slow but correct |
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Litigation : |
Clear |
NOTES:
Any query related to this report can be made
on e-mail: infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – June 01, 2014
|
Country Name |
Previous Rating (31.03.2014) |
Current Rating (01.06.2014) |
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Israel |
A2 |
A2 |
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Risk Category |
ECGC Classification |
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Insignificant |
A1 |
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Low Risk |
A2 |
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Moderate Low Risk |
B1 |
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Moderate Risk |
B2 |
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Moderate High Risk |
C1 |
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High Risk |
C2 |
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Very High Risk |
D |
ISRAEL - ECONOMIC OVERVIEW
Israel has a technologically
advanced market economy. Cut diamonds, high-technology equipment, and
pharmaceuticals are among the leading exports. Its major imports include crude oil,
grains, raw materials, and military equipment. Israel usually posts sizable
trade deficits, which are covered by tourism and other service exports, as well
as significant foreign investment inflows. Between 2004 and 2011, growth
averaged nearly 5% per year, led by exports. The global financial crisis of
2008-09 spurred a brief recession in Israel, but the country entered the crisis
with solid fundamentals, following years of prudent fiscal policy and a
resilient banking sector. In 2010, Israel formally acceded to the OECD.
Israel's economy also has weathered the Arab Spring because strong trade ties
outside the Middle East have insulated the economy from spillover effects. The
economy has recovered better than most advanced, comparably sized economies, but
slowing demand domestically and internationally, and a strong shekel, have
reduced forecasts for the next decade to the 3% level. Natural gas fields
discovered off Israel's coast since 2009 have brightened Israel's energy
security outlook. The Tamar and Leviathan fields were some of the world's
largest offshore natural gas finds this past decade. The massive Leviathan
field is not due to come online until 2018, but production from Tamar provided
a one percentage point boost to Israel's GDP in 2013 and is expected to
contribute 0.5% growth in 2014. In mid-2011, public protests arose around
income inequality and rising housing and commodity prices. Israel's income
inequality and poverty rates are among the highest of OECD countries and there
is a broad perception among the public that a small number of
"tycoons" have a cartel-like grip over the major parts of the
economy. The government formed committees to address some of the grievances but
has maintained that it will not engage in deficit spending to satisfy populist
demands. In May 2013 the Israeli government, in a politically difficult
process, passed an austerity budget to reign in the deficit and restore
confidence in the government's fiscal position. Over the long term, Israel
faces structural issues, including low labor participation rates for its
fastest growing social segments - the ultra-orthodox and Arab-Israeli
communities. Also, Israel's progressive, globally competitive, knowledge-based
technology sector employs only 9% of the workforce, with the rest employed in
manufacturing and services - sectors which face downward wage pressures from
global competition.
|
Source
: CIA |
ISRAEL RAILWAYS
LTD.
Telephone 972 3 693 76 93; 693
74 01
Fax 972 3 693 74 80;
693 79 88
P.O. Box 18085
Arlozorov Street
Central Train
Station
TEL Aviv 6118002
Israel
A public limited
company, incorporated as per file No. 52-004361-3 on the 15.01.1998. Status by
law: a governmental company.
Subject remained dormant until the
01.07.2003, when, according to a Government decision, it assumed all railways
assets and activities of PORTS AND RAILWAYS
AUTHORITY ISRAEL (PRA) (established in 1961, which itself assumed all railways activities
that existed many years beforehand).
In April 2012 the
Government approved a reform is subject's structure, which has been delayed due
to several reasons, but finally launched these days - see more below.
Authorized share capital NIS 3,000,000,000.00, divided into –
30,000,000 ordinary shares of NIS 100.00 each, fully issued.
Subject is fully
owned by the State of Israel, under the auspices of the Ministry of
Transportation, headed by the Minister of Transportation, Mr. Israel Katz.
As a governmental
company, it is supervised by the Government Companies Authority (GCA).
1.
Doron Weiss, Chairman,
2.
Binyamin Saba,
3.
Ms. Lena Gershkovitz,
4.
Ms. Naama Kaufman Pas,
5.
Harel Damti,
6.
Husam Jabara.
Boaz Zafrir
Planning, constructing, developing, management, maintenance and operation
of railways in Israel, for passengers and cargo (in framework of a current
reform, cargo and real estate development activities will move to new subsidiaries).
There are 1,100 km of railway across the country (were
Operating 53 passenger stations, plus some 30 cargo and operations
stations. Operating 451 passenger trains daily, with some 450 passenger carts
(as of June 2014 – see more in CHARACTER) , including double-deck, 62 passenger
locomotives, 41 cargo locomotives and further many cargo carts.
Number of passengers on Israel Rails in 2013 was 45.1 million (4.4 million
in 2012).
In 2011, 6,209.7 million tons of cargo was conveyed by subject (7,021.6
million tons in 2010).
Main customer: Ministry of Defense.
Other clientele: Israel Police, Israel Prison Service.
Trains and locomotive in-use supplied by: ALSTOM (France/Spain), KALMAR
(Sweden), GM (USA), ADTRANZ (Denmark), BOMBARDEIR (Canada), SIEMENS,
BRUNINGHOUS (Germany), etc.
Among local suppliers: SHAPIR Group, SHTROM GROUP, KGM GROUP, PAZ OIL,
M.T.R RAILWAY INDS. ENTERPRISES, AMIT TRANSPORTING, ELECTRONIC
SIGNALLING SERVICES (EES), EMCOL, and many more.
Operating from Head offices of “Israel Railways” in Arlozorov Station, Central Train
Station), Tel Aviv and offices and facilities
countrywide.
Having 2,804 employees (had 2,535 employees as of end of 2012, 2,416
employees in the end of 2011). Also using sub-contractors employees.
2010 turnover was 1,185,023,000, ending with a
net loss of NIS 108,638,000.
Statement
of Income
Year
ended 31.12
NIS
(thousands)
2011 2012 2013
Turnover 1,220,763 1,431,279 1,647,766
Gross loss
(63,336) (60,164) (61,421)
Operating loss
(173,043) (150,552) (175,360)
Net loss
(185,794) (156,229) (155,107)
======== ======== ========
Subject receives government
assistance, as the government subsidy does not cover the amounting operational
costs.
2012 income from passengers was NIS 596 million. Other income:
NIS 136.8 million from cargo hurling and NIS 659.5 million Government
subsidy.
2013 income from passengers was NIS 653.2 million. Other income:
NIS 147.6 million from cargo hurling and NIS 800 million Government
subsidy.
In August 2013 it
was reported that subject is intending to raise NIS 400 million from foreign
banks. We could not establish if the capital was raised.
In April 2014 the
Parliament Finance Committee approved an additional budget for subject in
volume of NIS 11.7 billion for financing a new operation agreement, in view of
the positive change in trend in subject's performance and operations.
B/S shows:
NIS
(thousands)
31.12.2012 31.12.2013
ASSETS
Current assets
Cash and cash equivalents 6,936 8,079
Other financial assets 44,766 46,362
Customers 85,575 77,460
Israel Government 49,019 -
Other debtors 84,660 78,304
Stock 15,406 11,584
286,362 221,789
Investments &
long-term debt 1,334,546 762,569
Fixed assets 16,084,903 18,507,160
Intangible assets 80,666 64,255
17,786,477 19,333,984
========= =========
LIABILITIES
Current
liabilities 1,028,691 1,249,634
Long-term
liabilities 17,379,555 19,083,015
Equity (in
deficit) (621,769) (776,876)
17,786,477 19,555,773
========= =========
During 2013
subject invested NIS 2.86 NIS billion in infrastructure, 3.05 billion in 2012.
According to a
media report from February 2014, a total of NIS 55 billion were invested in
subject since 2010.
In June 2014 it
was reported that subject 2013 advertizing budget was US$ 10 million. To that
date, subject 2014 advertizing expense was US$ 4.7 million.
In 2003 the government approved a 5-years budget for subject of NIS 20
billion (of which NIS 13.5 billion from government allocations). It turned out
that the expenditure was much higher, bringing into a huge deviation of NIS 11
billion.
In April 2006, it was reported that the Israeli government extended the
development budget plan until 2011 (5-years plan) and approved additional funds
to the previous plan, which was reformed to a total of NIS 25-30 billion.
Budget framework submitted to the Parliament approval in June 2009
(based on the accord between subject and the government in August 2008) stands
on NIS 28.55 billion. The budget is planned to be spanned till 2012.
In February 2010 the Government came up with an updated ambitious scheme
to invest in the development of nationwide railway and highways network by 2020
with NIS 27.5 billion investment (on top of NIS 35 billion already approved).
In June 2012 it
was reported that subject's management is consolidating a new NIS 8 billion
development plan (source of funding is not clear, may include recruiting NIS 2
billion from the public through the Stock Exchange).
In May 2012 it was
reported that subject's banks gave them a NIS 245 credit line.
There are no
charges registered on the company’s assets.
Working mainly with:
Bank Hapoalim Ltd., Tel Aviv Central Branch (No. 600), Tel Aviv.
The First International Bank of Israel Ltd.,
Tel Aviv Main Branch (No. 046), Tel Aviv.
Subject's financial problems are detailed along this report.
A State Comptroller's audit from May 2009 exposed severe irregularities
concerning subject’s operations in tenders and purchasing over the past 10
years. It included several occasions of delays in payments to local and foreign
suppliers, though subject’s officials claimed it was due to the Ministry of
Treasury delaying the transfer of money to subject.
Since then, and currently, we did not learn on particular payment
problems (there is a present dispute with a contractor involving payments – see
more below).
During 2010/ 11, several severe safety incidences occurred involving
subject's trains, including a fire that broke out in a cart (with passengers)
and several accidents (in an accident in April 2011 2 double-deck Bombardier
carts were destroyed, plus other damages, and in all estimated damage of
several tens if NIS millions).
These above incidents, together with the constant losses and subject's
inefficiency, have brought the Government to an understanding that a deep
re-organization is needed in subject.
Following the Minister of Transportation direct involvement
(an ultimatum even to shut down activities) in August 2011 a safety program was
accepted and the employees agreed not to strike over safety issues for 10
years.
It should be noted that employee disputes still occur mainly due to tenders
for the maintenance of new locomotive and carts from outside suppliers.
The Government and subject launched a major reform plan, designed to solve
subject's chronic problems. In August 2012 subject's management came up with a
cost-saving plan, including workforce cuts. Also, new subsidy agreement till
end of 2012, to avoid deficits in the coming years. In January 2012 subject's
Board approved an outsourcing agreement with BOMBARDEIR for maintenance
of the new 150 carts already bought and 70 intended to be acquired. This
brought an unprecedented reaction from subject's Workers' Union, which included
halting of the cargo trains and sever disruptions of the passenger trains.
In April 2012 the Minister of Transportation launched a reform for the
splitting of subject into 3 different subsidiary companies:
1. A maintenance company 49% owned by the
State, the rest by an investor. The plan is to outsource 30% of the trains
maintenance.
2. A company for real estate projects
initiation and development of commercial compounds adjacent to subject's some
30 train stations.
3. A cargo company, taking over subject's cargo
segment.
The 2nd
& 3rd subsidiaries are designed to be revenues generators, and
were finally launched by end of February 2014 after political entanglements
were solved. The real estate development activity is expected to generate
annual revenues which will gradually grow from NIS 100 to NIS 400 million.
The Passengers
segment and the Track Development will be held by the State.
On those grounds,
there have been continuous labor disputes by subject's employees, including
intense reactions such as halting all development activities and plans. The
worker's sanctions have already caused to long delays in subject's large
projects and financial losses. It should be noted that the Minister warned in
March 2012 that in case the reform is not approved and strikes endure options
are for closing down subject and re-establishment activities in a different
format. Subject's management is said to be set to absorb outside maintenance
workers if needed.
In July 2014 it was reported that the Government Company Authority approved
the establishment of 2 subsidiaries of subject; one for cargo and the other for
real estate development (for commercial purposes in subject's stations).
As mentioned above
(FINANCIAL DATA), investment in Israel’s railway system has been a pivotal
issue in the framework of the current government strategy for future economic
development, involving tens of NIS billions.
In December 2012 an agreement was signed with the workers union to
approve the reform which included an agreement of industrial peace for the next
3 years. As part of the deal the employees will receive grants in total of some
NIS 100 million.
There are also pending legal cases subject has been involved in, including
suppliers and other claims, amounting to hundred millions (certain deductions were
made for part of the above cases). In addition, there are several motions for
class action lawsuits pending in accumulative volume of several NIS billions. It usually may
take long time for the Court to approve them as class action
lawsuits (some end in compromise), and at this stage damage, if any, could not be
estimated.
Apart from that, nothing unfavorable leaned.
In 2002 subject acquired 5 locomotives from ALSTOM, for a sum of € 14 million and paid € 43 for 2nd-hand carts from the Swedish Trains company.
In 2004 subject acquired 54 “Double Deck” carts from BOMBARDIER, of Canada
for €78 million. Later, the acquisition was expanded to a total of 147 carts.
In 2006 subject signed a contract with SIEMENS for 86 train carts, for a
sum of € 120 million. There was an option for additional hundreds carts (in
framework volume of NIS 4 billion). Delivery was delayed in 2008, therefore
SIEMENS had to pay € 8 - 9 million penalty. In 2009 subject purchased further
31 carts from SIEMENS for € 60 million. Later SIEMENS lost a major tender to
BOMBARDIER for carts (see below) due to reluctance to adhere to State’s Offset
Deals policy. As part of the framework contract SIEMENS another
emergency purchase from subject in the beginning of
2010 for carts in volume of NIS 308 million.
In May 2007, it was reported that subject will purchase from abroad 18
radar systems valued € 7.2 million for identifying obstacles on the railways.
In 2007 local
infrastructure SHAPIR Group won subject's tender in volume of NIS 1.6 billion
for the execution of the fast Tel Aviv-Jerusalem railway "Section C",
including the excavation of 2 tunnels and erection of a bridge that connects
them.
The major project
was launched in 2010 by SHAPIR PIZZAROTTI JOINT VENTURE.
In August 2008 it was reported that MALAM-TEAM, a local leading IT
integrator, will supply ERP system for subject in value of NIS 20 million.
In August 2009 it
was reported that Dutch HTM and local PARETO ENGINEERING won subject’s tender for
monitoring the implementation of subject’s development plan for 3 years, plus 2
years option, in a yearly volume of NIS 10 million.
In June 2010
subject signed transportation contracts with ISRAEL CHEMICALS Concern, Israel’s
largest industrial Group, for cargo from the Dead Sea and Negev Desert until
In October 2010
BOMBARDIER of Canada won subject's major tender to supply train double-deck
carts. The contract signed was for 150 passenger carts for € 247 million, after
including an option for 72 carts, however the additional order for 72 carts was
stalled by the Government in order to re-check its necessity.
A local public
movement submitted a motion to the Jerusalem District Court in July 2011 to
halt the tender due to alleged harm of integrity in the course of the bid
procedures, but eventually the deal came through.
In January 2011
BARAM ADVERTISING won subject's tender, a concession to advertize in the
railways stations for 10 years, paying NIS 7 million per year.
In January 2012
MOTOROLA SOLUTIONS won subject's tender to supply free internet access in all
stations and 620 carts, reportedly valued at NIS 23 million.
In February 2012 a
ministry committee approved the Tel Aviv-Eilat rail track route on a length of 350
km, which will include also adding new stations in the Beer Sheva area. The
project budget is controversial. Although officially it is NIS 7 billion in
practice it is estimated to reach NIS 30 billion or even NIS 40 billion. It
should be noted that the Ministry of Finance is against the project, as well as
environmental organization (claiming the route will cause irreversible damages
to nature). Currently matter is debated at the Parliament.
In April 2012
subject decided to purchase locomotives and carts for its cargo division, in
total value of NIS 100 million. That will increase the cargo carts and
locomotives inventory by 30%, in purpose to doubling the railway's
transportation capacity by 5 years (by then, it is expected to be under the 49%
cargo subsidiary, as noted above, part of subject's reform program). Subject's
cargo division has been facing fierce competition from road haulage companies,
losing market share to the private competitors due to being inefficient. Cargo
transport by train comprises only 8% of total cargo transport today.
In July 2012 the
Finance Ministry approved subject to purchase 9 diesel locomotives from VOSSLOH
of Spain for € 30 million. This is in addition to the latter winning subject's
tender for 15 locomotives in value of € 70 million in January 2012.
In October 2013 it
was reported that ALSTOM won the tender to maintain subject's older
carts (some 30% of subject's total carts), for the next 15 years, valued at up
to NIS 1.5 billion.
In February 2014
it was reported that 13 companies are interested in subject's tender for the
acquisition of 80 electric locomotives and 315 carts, in volume of NIS 3
billion. According to the report, the lines electrifying project is estimated
at NIS 11 billion.
In May 2014 it was
reported that due to delays in the completion of subject's Southern Maintenance
Compound in Beer Sheva, they threaten to replace the contracting company GILI
& YOEL AZARIA. It concerns a NIS 160 million tender.
The contracting company,
in return, claims that the work has been done promptly, and subject owes them
many tens of NIS millions for work the contractor did.
In June started
operating a new schedule, which includes additional 49 daily trains and 500
additional stops.
Notwithstanding a/m financial problems, being a state-owned company,
considered good for trade engagements.
Notes:
1. Subject
may be using other P.O. Boxes for specific divisions, we are informed by
subject's officials on its main P.O. Box 18085 in caption.
2. Since
February 2013 Israel Post has started using a new area code method of 7 digits
(the old method of 5 digits is no longer valid).
FOREIGN EXCHANGE RATES
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Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.60.67 |
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|
1 |
Rs.100.81 |
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Euro |
1 |
Rs.80.73 |
INFORMATION DETAILS
|
Analysis Done by
: |
SUB |
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Report Prepared
by : |
NIT |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
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>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
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11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
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<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
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-- |
NB |
New Business |
-- |
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This score serves as a reference to assess SC’s credit risk and
to set the amount of credit to be extended. It is calculated from a composite
of weighted scores obtained from each of the major sections of this report. The
assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.