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MIRA
INFORM REPORT
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Report No. : |
490071 |
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Report Date : |
09.02.2018 |
IDENTIFICATION DETAILS
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Name : |
ISRAEL NATURAL GAS LINES COMPANY LTD |
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Registered Office : |
P.O. Box 58177, End of Raul Wallenberg Street, Atidim 8 Bldg., Kiryat Atidim, Ramat Hachayal, Tel Aviv, 6158101 |
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Country : |
Israel |
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Financials (as on) : |
30.09.2017 |
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Date of Incorporation : |
23.07.2003 |
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Legal Form : |
Private Limited Company (Government-Owned) |
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Line of Business : |
Erectors and
operators of Israel's natural gas conduction lines. |
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No. of Employees : |
96 |
RATING & COMMENTS
(Mira Inform has adopted New Rating mechanism w.e.f. 23rd
January 2017)
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MIRA’s Rating : |
A+ |
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Credit Rating |
Explanation |
Rating Comments |
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A+ |
Low Risk |
Business dealings permissible with low risk
of default |
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Status : |
Excellent |
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Payment Behaviour : |
Regular |
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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
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Country Name |
Previous Rating (30.06.2017) |
Current Rating (30.09.2017) |
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Israel |
B1 |
B1 |
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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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Moderately Low Risk |
B1 |
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Moderate Risk |
B2 |
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Moderately 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 free market economy. Cut diamonds, high-technology equipment, and pharmaceuticals are among its leading exports. Its major imports include crude oil, grains, raw materials, and military equipment. Israel usually posts sizable trade deficits, which are offset by tourism and other service exports, as well as significant foreign investment inflows.
Between 2004 and 2013, 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. Israel's economy also weathered the 2011 Arab Spring because strong trade ties outside the Middle East insulated the economy from spillover effects.
Slowing domestic and international demand and decreased investment resulting from Israel’s uncertain security situation reduced GDP growth to an average of roughly 2.8% per year during the period 2014-17. 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 in the last decade. Political and regulatory issues have delayed the development of the massive Leviathan field, but production from Tamar provided a 0.8% boost to Israel's GDP in 2013 and a 0.3% boost in 2014. One of the most carbon intense OECD countries, Israel generates about 57% of its power from coal and only 2.6% from renewable sources.
Income inequality and high housing and commodity prices continue to be a concern for many Israelis. 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. Government officials have called for reforms to boost the housing supply and to increase competition in the banking sector to address these public grievances. Despite calls for reforms, the restricted housing supply continues to impact the well-being of younger Israelis seeking to purchase homes. Tariffs and non-tariff barriers, coupled with guaranteed prices and customs tariffs for farmers kept food prices high in 2016. Private consumption is expected to drive growth through 2018 with consumers benefitting from low inflation and a strong currency.
In the long term, Israel faces structural issues, including low labor participation rates for its fastest growing social segments - the ultraorthodox and Arab-Israeli communities. Also, Israel's progressive, globally competitive, knowledge-based technology sector employs only about 8% of the workforce, with the rest mostly employed in manufacturing and services - sectors which face downward wage pressures from global competition. Expenditures on educational institutions remain low compared to most other OECD countries with similar GDP per capita.
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Source : CIA |
Company name and address
RE: ISRAEL NATURAL GAS LINES COMPANY LTD.
(Known in short as INGL)
Telephone 972
3 627 04 00
Fax 972 3 561 13 20
Email: szobel@ingl.co.il
P.O. Box 58177
End of Raul Wallenberg Street,
Atidim 8 Bldg.
Kiryat Atidim, Ramat Hachayal
TEL AVIV, 6158101, ISRAEL
HISTORY & LEGAL FORMATION
A governmental private limited company (government-owned), incorporated as
per file No. 51-343639-4 on the 23.07.2003.
The company holds
license for erection and operation of natural gas conveying system in Israel
from the State of Israel since 01.08.2004, for 30 years.
SHARE CAPITAL
Authorized share
capital NIS 554,054,000.00, divided into –
554,054,000
ordinary shares of NIS 1.00 each,
of which
518,330,000 shares amounting to NIS 518,330,000.00 were issued.
SHAREHOLDERS
Subject is fully
owned by the State of Israel, under the auspices of the Minister of National
Infrastructures, Energy and Water Resources (Minister: Dr. Yuval Steinitz).
DIRECTORS
1. Eitan Padan, Chairman,
2. Yechezkel Lifshitz,
3. Eli Benshimol,
4. Ms. Pnina Dvorin,
5. Ms. Nurit Nachum,
6. Shay Peminger,
7. Sharabel Shada.
GENERAL MANAGER
Shmuel Turgeman.
BUSINESS
Erectors and
operators of Israel's natural gas conduction lines. Handles Israel High
Pressure Natural Gas Transmission across over 650Km.
Revenues derive
from one-time connection fees and from conveyance fees (set by the Gas
Committee).
Main recent
projects:
1.
Laying conduction line to Jerusalem; project value
– NIS 219 million.
2.
Laying conduction line from Nesher Cement Plant in
Ramla to Ben Gurion Intl. Airport; project value – NIS 83 million.
3.
A line between Kfar Aviv and-Soreq, project value
NIS 53 million;
4.
A line between Nizanei Oz –Hagit, project value NIS
143 million.
5.
Dovrat-Ziporit pipeline, project value NIS 75
million.
Main completed
project: Loading Buoy facility in front of Hadera seashore - LNG gas reception
terminal for up to 2.5BCM; Project value – NIS 521 million, contractor:
MICOPERI, of Italy. The terminal absorbs the gas from 'Tamar' huge reservoir.
Started supplying the ISRAEL ELECTRIC CORP. in January 2013.
In January 2017
subject completed the erection of the gas line to Jordan.
In April 2017
subject completed the Eastern Line (Nesher-Ben Gurion Airport-Yad Hana) of
51km.
In June 2017
subject completed the Ramla-Elyakim pipeline (2 way pipeline of 90 km), with an
investment of NIS 750 million.
According to
subject's development plan, it intends to increase its conduction lines by 206
km by the end of 2017, with an investment of NIS 1.43 billion.
Subject has
agreements to supply natural gas to over 20 companies (some with several
plants), as well as to 8 ISRAEL ELECTRIC CORP. plants (subject main client, 55%
of revenues in 2016), and has agreements with 4 delivering companies.
Operating 39 PRMS
systems, and additional 8 under construction.
Among other
clientele: DELEK ASHKELON IPP, HADERA PAPER, MASHAV INITIATING &
DEVELOPMENT, DEAD SEA WORKS, OIL REFINERIES, ASHDOD OIL REFINERIES, ADAMA
MAKHTESHIM, ADAMA AGAN, ROTEM AMFERT NEGEV, SUGAT, PHOENICIA FLAT GLASS
INDUSTRIES, OPC, CNG, DORAD, HAIFA CHEMICALS, NBL (for plants in Jordan).
Among local
suppliers: LUDAN ENGINEERING CO., SOLEL BONEH, etc.
Current main
natural gas supplier with whom subject has an agreement: YAM TETHIS (though
reservoir is close to exhaustion).
The 'Tamar'
reservoir is controlled by NOBLE ENERGY of the US and local DELEK GROUP and
ISRAMCO, operational since 2013.
Operating from
rented offices, on an area of 4,000 sq. meters (32nd-33rd
floors), in End of Raul Wallenberg Street, Atidim Tower (Atidim 8 Bldg.),
Kiryat Atidim, Ramat Hachayal Hi-Tech & Business Zone, Tel Aviv.
Website: www.ingl.co.il
Having 96
employees, also using several tens of manpower employees, as of 2017.
Note: current number
of employees expected to be updated with the publication of subject’s 2017
financial statements by the end of March 2018.
MEANS
Subject made its
first capital raise issuing bonds to institutional investors in December 2006 -
NIS 284 million. Later, during 2007 to date, it made further bonds issuances
via the Tel Aviv Stock Exchange to institutional investors. Until January 2012
it raised total of NIS 1.8 billion, including NIS 300 million in December 2010
and NIS 500 million in December 2011. In December 2012 subject raised further
NIS 400 million (latter 3 raisings are expansion of previous bond issuing)
(latest Bonds Rating at Aa1 and AA).
During 2014
subject raised total of NIS 807 million issuing bonds in a private placement to
institutional investors, bonds rating: AA1.
In November 2015
subject raised further NIS 400 million.
B/S shows:
NIS
(thousands)
31.12.2016 30.09.2017
ASSETS
Current assets
Cash and cash equivalent 705,691 651,687
Other financial assets 20,007 91,695
Costumers 23,471 53,351
Other debtors and pre-paid interest 16,227 12,640
765,396 809,373
Fixed assets 10,114 9,985
Intangible assets –
license and PRMS 4,699,703 4,844,995
Other assets 312,166 316,818
5,021,983 5,171,798
5,787,379 5,981,171
======== ========
LIABILITIES
Current liabilities 438,834 513,198
Long-term liabilities 4,520,634 4,575,960
Equity 827,911 892,013
5,787,379 5,981,171
======== ========
There are 8
charges for unlimited amounts registered on the company's assets, in favor of
trustee companies (last 2 charges placed in April 2014).
REVENUES
Statement
of Income
Year
ended 31.12
NIS
(thousands)
2014 2015 2016
Income 449,943 519,787 531,408
Gross profit 199,804 253,206 261,720
Operating income 180,192 231,886 241,236
Profits before taxes
on income 35,811 124,240 129,630
Net profit 28,516 91,159 108,373
======= ======= =======
Revenues for the first 9 months of 2017 were NIS
415,753,000, making a gross profit of NIS 189,188,000, an operating income of
NIS 173,948,000, and a net income of NIS 64,102,000.
BANKERS
Mizrahi Tefahot Bank Ltd., Main Business
Center Branch (No. 461), Tel Aviv,
account No. 217038.
A check with the Central Banks' database did
not reveal any negative information regarding subject's a/m account.
Bank Hapoalim Ltd., Central Business Branch
(No. 600), Tel Aviv,
Bank Leumi Le'Israel Ltd., Principal Branch Tel Aviv (No. 800), Tel Aviv.
The First
International Bank of Israel Ltd., Main Tel Aviv Branch (No. 46), Tel Aviv.
Israel Discount
Bank Ltd., Main Tel Aviv Branch (No. 10), Tel Aviv.
CHARACTER AND REPUTATION
Currently there
are several legal procedures in courts/ in arbitration/ in Appeals Committee in
which subject is involved in a total of several tens NIS million.
One of these
arbitration procedures is against subject's main client the ISRAEL ELECTRIC
CORP. regarding an agreement between them.
Apart from the
above, nothing unfavorable learned.
Despite our efforts, we were unable to speak with subject's officials,
as they were always unavailable. We left messages which so far remain
unanswered.
Subject was
established by the State of Israel in order to handle all natural gas transport
systems in a total estimated investment of US$ 300-400 million (which will be
mainly used by THE ISRAEL ELECTRIC CORP.).
In April 2004, it
was reported that subject chose P.L.E. of Germany as operator of the natural
gas infrastructure.
In 2005, it was
reported that subject will choose LUDAN ENGINEERING CO. to manage the erection
of a
The project for
the Israel High Pressure Natural Gas Transmission for the southern segment: 1st
phase for 94Km reported to be of over NIS 140 million, carried out from
mid-2005 by Joint Venture SOLEL BONEH – GHIZZONI to handle laying the pipeline
from the YAM THETIS sea reservoir and from gas purchased from Egypt. Phase 1
(Ashdod - Kiryat Gat – Gezer - Ashkelon) was scheduled to be completed in end
of 2006, but reportedly was completed behind the schedule, by May 2007, and
only by May 2008 the pipeline was connected to ISRAEL ELECTRIC CORP. (IEC)
facilities. That caused tens of NIS millions damage according to the report
(although it is mentioned that the fault was also IEC's faults. It is reported
that a major cause for the delays were cracks revealed in the pipeline by an
inspection firm that was hired by GHIZZONI. Also, based on the media report,
there were disagreements between the inspection firm and GHIZZONI. Phase 2
(Kiryat Gat – Sodom line of 135 Km) was completed in November 2009, with cost
of NIS 400 million.
The 3rd
phase is the northern section, conducting the gas to Haifa Bay. This project of
some 68Km encountered administrative problems of population that resists –by
legal means against the State- to laying pipeline in their land. The project
which started in 2008 and was delayed, and subject decided in 2009 to end their
contract with GHIZZONI, because of the high costs of the equipment and staff
staying idle (subject planned to hire a new contractor after solving the
administrative/ legal problems). It was reported that subject compensated
GHIZZONI with NIS 50 million.
In December 2009
subject completed the Southern Segment and started supplying DEAD SEA WORKS.
A major
breakthrough in Israel occurred at the beginning of 2009, where it was
discovered a very large (in global scales) commercial natural gas resource located roughly
A yet another larger reservoir was announced in December 2010, the “Leviathan” block, with potential of 605BCM. This is the largest natural gas reservoir
discovered in the world in the last decade.
A State
Comptroller's audit from May 2009 exposed that subject allowed an additional
pay of NIS 57 million to contractors without authorization.
In November 2010
DORAD, which erects a private natural-gas based power plant in Ashkelon, signed
an agreement with subject, according to which subject will erect a PRMS
facility to connect the station to the natural gas conveying system and be
responsible for the supply of some 800 million cubic of gas per year, for 15
years. Value of the project estimated at NIS 35 million.
In April 2011
subject was approved to supply natural gas to the OIL REFINERIES in Haifa. The
gas will be delivered in the Northern Segment, which is intended to supply
natural gas also to other plants in Haifa Bay and Alon Tavor Industrial Zone.
One of subject's
major gas suppliers was the EAST MEDITERRANEAN GAS
(EMG) operating from Egypt, which started supplying gas in 2008. Yet, the political
turmoil in Egypt since the fall of the Mubarak regime in early 2011 brought the
new Egyptian regime to cancel the EMG supply contract with Israel, causing a
severe shortage for the operation of gas-based power plants (only 60% of the
contractual quantity for 2011with ICE -BCM2- was supplied in that year).
In January 2012 it
was reported that subject and EILAT ASHKELON PIPELINE COMPANY LTD. (also
State-owned) filed a request to the government to erect a LNG absorption
facility in Eilat, Israel's southern port, in value of US$ 6 billion.
In March 2012
subject signed an agreement with RAMAT NEGEV ENERGY and ASHDOD ENERGY for gas
conveyance to MAKHTESHIM AGAN plants in Beer Sheva and in Ashdod. The cost for
connection each plant to the grid is NIS 20 million.
In December 2012
subject signed an agreement with NOKSEL (Turkey) and STS (Spain) to supply
piping for the erected lines in volume of € 40 million, as well as additional
piping from BORUSAN MARMMESMANN (Turkey) in volume of € 11 million.
In June 2013
subject signed an agreement to supply gas to 2 power plants (IPP ALON TAVOR and
IPP RAMAT GAVRIEL) generating 50mw each, including providing lines of 1.5 km
and 15 km respectively.
In July 2013
subject signed an agreement to lay the Dovrat-Ziporit pipeline. Project is
valued at NIS 75 million. In February 2015 PHOENICIA FLAT GLASS INDUSTRIES
(operating from Ziporit) was connected to the grid.
In November 2014
subject signed an agreement with NBL EASTERN MEDITERRANEAN MARKETING, to
connect to the Jordanian Grid. NBL will pay subject NIS 82 million.
In 2014, local
demand for natural gas reached 7.6 BCM, expected to increase to 12.1 BCM by 2020.
In January 2018 it
was reported that Dr. Yuval Steinitz, the Minister of National Infrastructures,
is contemplating the participation of subject in the natural gas pipeline from
“Leviathan” reservoir to Europe, a 2,100 km pipeline, project valued at NIS 25
billion.
Subject is part of
Governmental proposition (filed in July 2014) to IPO minority shares in several
governmental companies. So far this scheme has not taken place, however subject
is intending to raise capital via issuing bonds to the public.
On the 02.02.2018
it was reported that the Ministry of National Infrastructures, Energy and Water
Resources is objecting the IPO of subject, due to potential difficulties in
operating subject in national infrastructure projects.
SUMMARY
Good for trade
engagements.
FOREIGN EXCHANGE RATES
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Currency |
Unit
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Indian Rupees |
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US Dollar |
1 |
INR 64.16 |
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1 |
INR 89.19 |
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Euro |
1 |
INR 78.75 |
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ILS |
1 |
INR 18.32 |
Note :
Above are approximate rates obtained from sources believed to be correct
INFORMATION DETAILS
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Analysis Done by
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NIY |
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Report Prepared
by : |
SYL |
RATING EXPLANATIONS
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Credit Rating |
Explanation |
Rating Comments |
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A++ |
Minimum Risk |
Business dealings permissible with minimum
risk of default |
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A+ |
Low Risk |
Business dealings permissible with low
risk of default |
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A |
Acceptable Risk |
Business dealings permissible with
moderate risk of default |
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B |
Medium Risk |
Business dealings permissible on a regular
monitoring basis |
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C |
Medium High Risk |
Business dealings permissible preferably
on secured basis |
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D |
High Risk |
Business dealing not recommended or on
secured terms only |
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NB |
New Business |
No recommendation can be done due to
business in infancy stage |
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NT |
No Trace |
No recommendation can be done as the
business is not traceable |
NB is stated where there is insufficient information to facilitate rating. However, it is not to be considered as unfavourable.
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 are as follows:
·
Financial
condition covering various ratios
·
Company
background and operations size
·
Promoters
/ Management background
·
Payment
record
·
Litigation
against the subject
·
Industry
scenario / competitor analysis
·
Supplier
/ Customer / Banker review (wherever available)
This report is issued at
your request without any risk and responsibility on the part of MIRA INFORM
PRIVATE LIMITED (MIPL) or its officials.