JNF's strange place in the sun

Investment in a solar energy company looks like a conflict of interests.

At the beginning of January this year, the Jewish National Fund (JNF) carried out one of the strangest deals in its 110-year history. The JNF, since 1901 the land buying arm of the World Zionist Organization, entered a new and attractive area solar energy.

JNF committed to invest up to $3 million in Arava Power Company, which sets up solar power plants in the Arava region. Not only is this a venture into a new area, it is also the first time the JNF has invested in a commercial company controlled by a non-Israeli entity: last August, Siemens of Germany bought 40% of Arava Power for $15 million.

What turns the deal from exceptional to almost mysterious is the fact that JNF has never published an official announcement of it. In August, it was reported that JNF was considering broadening its activity to renewable energy and was examining an investment of NIS 10-15 million in a company in that field. Arava Power was the only company whose name was mentioned in connection with the report; since them, the JNF has announced nothing officially. JNF directors head about the deal for the first time from Globes last week.

Sources in the solar energy industry found it hard to believe that JNF had become a player in the development of solar energy installations. This deal makes no sense at all, they told Globes, JNF is an administrative body that cant do just as it likes. Its as though the Israel Lands Administration were to set up a commercial company tomorrow.

Arava Power, which is considered a pioneer in solar energy power plants based on photo-voltaic technology in Israel, was founded in 2006 by members of Kibbutz Ketura and Jewish investors from the US.

The only official report of the deal so far was sent to the companys shareholders. According to the report, JNF became as second strategic investor in the company, after Siemens. JNF committed to invest $1.8 million immediately, and received an option on investing a further $1.2 million.

The report said that JNF is a powerful entity in Israeli society and a highly influential body in matters concerning land. The shareholders were requested not to divulge details of the transaction, and to enable JNF to report it, because of what were described as internal sensitivities.

JNF was incorporated in 1954 as a private company without share capital, and it is controlled by the World Zionist Organization. However, the fact that JNF controls 13% of the land in the state and that its representatives serve on the board of the Israel Lands Administration make it a dual entity under Israeli law, a private company subject to public norms. Against this background, the Arava Power deal raises many questions. Why, for example, was there no tender, as required in a deal of this size? Why was the deal not approved by the board of directors or shareholders meeting? Does entering a new filed of activity not require a change to the JNFs bylaws? Likewise, investment in a commercial company controlled by a foreign entity?

However, it seems that all these are secondary issues in comparison with the main problem with the deal. Arava Powers activity in developing solar power plants makes it necessary to obtain approval from the Israel Lands Administration for leasing land. JNF representatives sit on the Israel Lands Administration board, and will have six seats on the board of the Land Authority that will replace the Israel Lands Administration as part of the land reform.

In addition, JNF is due to receive from the state about 90,000 dunams (22,500 acres) in the Negev and Galilee in exchange for its lands in city centers. All this puts JNF is a position of conflict of interests as a shareholder in a company that sets up solar energy plants.

Globes approached JNF CEO Yael Shealtieli, who referred us to Menachem Leibovich, one the two vice-chairmen of JNF and responsible for JNFs land assets. Leibovich confirmed that the deal with Arava Power had taken place, but described it as a pilot transaction, and claimed that it had been done in accordance with the law and JNFs bylaws.

He said JNF was formulating criteria for investment in renewable energy, and that these criteria would be published with two-three weeks. Leibovich explained that the reason for entering this field was that the land activity will disappear in the next 50 to 100 years, because the land is being privatized, which means setting out in new directions, and the direction is green. Leibovich added, We have received proposals from many entities that want to enter into partnership with us, but it will take a very long time.

Published by Globes [online], Israel business news - www.globes-online.com - on March 28, 2010

Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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