The Israel Electric Corporation Ltd. :Registered Office: P.O.B. 10, Haifa, Israel, Fax 972-4-8184710/1: פקס

Website: http://www.israel-electric.co.il

The Israel Electric Corporation Ltd.

Immediate Report

A notification is hereby given by the Israel Electric Corporation Ltd. (the Company) that on

August 8, 2011, the Public Utilities Authority – Electricity (PUA) has decided to update the

recognized costs for the Company within the framework of the annual update of the

electricity tariff and the recognized costs of purchasing electricity from IPPs (Independent

Private Producers) as well as the costs incurred by the Company as a result of various

agreements in the electricity sector applicable to it, retroactively as of April 1, 2011.

As a result of these updates, the average electricity tariff for the consumer will increase by

9.89% in comparison to the tariff which came into force on March 22, 2011, as detailed

below:

1. The recognized cost for the Company has increased by 9.95% and contributed a

9.68% increase in the electricity tariff.

2. The costs of purchasing electricity from IPPs and the costs of the agreements in the

electricity sector has increased by 7.62% and contributed a 0.2% increase in the

electricity tariff.

The fuels basket recognized within the framework of the PUA's decision takes into account

supply of natural gas from Egypt at a rate of 24% of the contractual quantity.

The PUA decided not to apply the incentive to use natural gas in the fuels basket for the

year 2011, which if applied would have resulted in an additional increase of the electricity

tariff. The Company included an asset in the financial statements for the first quarter of

2011 in a sum of approximately NIS 96 million for the gas incentive, which it will have to

erase due to the PUA's decision.

Furthermore, the PUA did not approve the Company to use money accumulated in a

designated account (which is intended to be used for the construction of power plants

The Israel Electric Corporation Ltd. :Registered Office: P.O.B. 10, Haifa, Israel, Fax 972-4-8184710/1: פקס

Website: http://www.israel-electric.co.il

within the framework of the emergency plan in the electricity sector) for the purchase of

diesel oil during the summer.

The updated tariff will come into force on August 14, 2011.

The updated tariff represents a more moderate increase in the tariff in comparison to the

tariff published in July by the PUA for public hearing, which represented an increase of

19.1% in the electricity tariff - this primarily due to the decrease in the purchase tax on

diesel oil, retroactively as of February 1, 2011 (see immediate report dated August 8,

2011).

The Company continues to examine the PUA's decision and its implications on the

Company, and will further report as required.