It was the first time we engaged with the company on ESG matters. Our objective was to understand the specific milestones and the cost and capital expenditure implications of the transition plan. We also sought to understand the role of renewable energy sources in its future business strategy.
In order to meet stringent pollution standards, IE has been retrofitting its coal plants with emission reduction technologies such as sulphur scrubbers. It has spent approximately $1.7 billion on such technology to date. Its target is to have all units retrofitted by 2020.
As a way to reduce its coal use, it will mothball and convert existing coal-fired plants. Mothballing refers to a temporary shutdown or hibernation of existing plants that are no longer in continuous operational use. IE targets to mothball four coal-fired units by 2022, and either convert the remaining six units from coal to natural gas by 2025 or mothball them by 2030. We wanted to understand if there are potential cost or supply availability issues that could derail the switch from coal to gas. IE outlined that natural gas would be supplied by three domestic gas reservoirs.
The company has a long-term development plan that addresses the use of renewable energy. It set a target to produce 10% of total electricity from renewables by 2020. It has also disclosed the budget it has invested in the grid infrastructure to be able to handle new sources of power generation. The governmentâ€™s national target is to have 25-30% of electricity supplied by renewable energy by 2030.
Overall, we were satisfied with Israel Electricâ€™s commitments to reduce its coal exposure and the viability of its low-carbon energy transition plans. We will continue to monitor the milestones and targets the company has set over the coming years.