Sources inform ''Globes'' that Ofer Holdings Group has made the strategic decision to boost electricity production by subsidiary Israel Corporation (TASE: ILCO) by up to three-fold, to 800-1,200 megawatts at an investment of more than $1 billion. This will easily make Israel Corp. the country's largest private electricity producer. Israel Corp. currently plans to produce 400 megawatts at private power stations. Power production will be organized through a new subsidiary IC Power Ltd., which will be managed by Shuki Gold, a former VP at Israel Corp. subsidiary Israel Chemicals Ltd. (TASE: ICL).
By becoming a private power company, Israel Corp will be able to help meet the electricity needs of Shay Agassi's electric car venture Better Place LLC, in which it owns a 33% stake. Better Place will reportedly need 2,400 megawatts when its nationwide network of recharging stations is completed. Israel Corp chairman Idan Ofer is also the chairman of Better Place.
The decision also signals new interest in the private electricity market, which has stagnated for the past decade due to bureaucratic obstacles and difficulties in obtaining bank financing for private power stations.
Israel Corp. is following Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG) in making the strategic decision to expand its power production. Delek Group unit Delek Infrastructures Ltd. currently operates a small power plant near the Ashkelon desalination plant, in which Delek Group is a partner through IDE Technologies Ltd., and is in involved in the building of four more.
However, in contrast to Delek Group, Israel Corp. power production expansion faces no regulatory obstacles. The Antitrust Authority is jeopardizing Tshuva's plans on the grounds that they could harm competition because Delek Group is a natural gas producer through Yam Tethys, and in future from the Tamar and Dalit gas fields.
Israel Corp. subsidiary OPC Rotem Ltd. is a party in the construction of the 400-MW power plant at Mishor Rotem, which is due to come on line in 2012. Israel Corp. owns 80% of OPC and Veolia Environnement SA (NYSE: VE; Euronext: VIE) subsidiary Dalkia Israel Ltd. owns 20%. Israel Corp. is also reviewing options to build new power stations at subsidiaries, including a 200-MW plant at Israel Chemicals' Dead Sea Works factory and a 200-400-MW plant at Oil Refineries Ltd. (TASE:ORL) site in Haifa.
For over a year, Israel Corp. has been in talks to procure natural gas for its subsidiaries and power stations with East Mediterranean Gas Co. (EMG) and with the Tamar partners. Israel Corp. needs 2 billion cubic meters of gas a year for the Rotem Power Station, Israel Chemicals plants, and Oil Refineries.
In a related development, natural gas turbine manufacturers Siemens AG (NYSE: SI; XETRA: SIE), Alstom SA (Euronext: ALO), General Electric Company (NYSE: GE), and Mitsubishi Power Systems Ltd. have submitted bids in OPC's $400-500 million engineering, procurement and construction (EPC) for the Mishor Rotem power station.
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2010
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