Sources inform ''Globes'' that Prime Minister's Office director general Eyal Gabai will advise the government to cancel the contract with Mekorot National Water Company to build the Ashdod desalination plant. Construction of the plant, which was supposed to have begun a year ago, has been frozen at the order of the Ministry of Finance tenders committee.
Cancelation of the tender and publication of a new one is liable to delay the facility by years. The facility is intended to supply drinking water for one million people.
Mekorot chairman Alex Wiznitzer told "Globes" in response that if the threat was realized, it would be "a gross violation of the agreement signed between Mekorot and the state. We regret that director general of the Prime Minister's Office will recommend violating a cabinet decision. This is a dismal act that will worsen Israel's water crisis, in view of the years of drought."
Mekorot said, "We regret that instead of dealing with the severe water crisis, all the powers that be are ganging together to prevent the construction of a desalination plant by the national water company in order to hand the project over to private hands."
Cancellation of Mekorot's contract exposes the state to lawsuits by Mekorot and Minrav Holdings Ltd. (TASE: MNRV). In November 2009, the IVM consortium of Minrav and Spain's Sadyt won the tender to build the plant. Construction was supposed to begin in April 2010, but the inter-ministerial tenders committee headed by Deputy Accountant General Gil Shabtai froze the project in December. The Ministry of Finance is demanding that Mekorot should supply water at NIS 2.39 per cubic meter. Mekorot, whose plan was originally based on a price of NIS 2.86 per cubic meter, gradually lowered the price to NIS 2.49, but this price was also rejected by the ministry.
In April 2010, Prime Minister Benjamin Netanyahu ordered the Ministry of Finance, the Ministry of National Infrastructures and Mekorot to solve the problem within 30 days. He said at the time, "It is unacceptable that a desalination plant has been stuck for years because of bureaucracy, and it is unacceptable that the public should be an exorbitant price."
In meetings in the past few days, Gabai supported the Ministry of Finance's proposal to cancel Mekorot's contract and to publish a new international tender. The Ministry of Finance claims that Mekorot cannot implement the project, and that IVM does not meet the threshold conditions required of the contractor.
The Ashdod desalination plant will supply 100 million cubic meters of water a year, enough for one million people. Due to the urgent need for the plant, an especially tight timetable was set for its construction, a timetable that was called "impossible" by desalination companies.
IDE Technologies Ltd., which bid against Mekorot Initiative and Development Ltd. to build the plant, withdrew when its estimated construction time of 30 months was rejected.
The Ministry of Finance claims that the difference in price amounts to NIS 400 million over 25 years, and that legal proceedings against IVM will probably go on for months. The Ministry of Finance position, as presented by Gabai, is that nine months will be needed between cancelation of Mekorot's contract and the selection of a franchisee.
IVM today warned Netanyahu, Minister of Finance Yuval Steinitz and Minister of National Infrastructures Uzi Landau that if the project was cancelled, it would petition the courts for an injunction. IVM said, "For a year, there has been nothing to prevent the start of the project because the court petitioned by the losing consortium dismissed the request for an injunction. Construction of the project is delayed only because of the Ministry of Finance's refusal to accept the price set by Mekorot."
Published by Globes [online], Israel business news - www.globes-online.com - on January 5, 2011
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