Mekorot accuses rivals of obstructing desalination plant

Mekorot: Ashdod desalination plant losers, Shikun u'Binui and GES, are trying to force the government to buy more water from their own desalination plants.

Mekorot National Water Company accuses Shari Arison-controlled Shikun u'Binui Holdings Ltd. (TASE: SKBN) and Global Environmental Services Ltd. (GES), a unit of David Azrieli-controlled Azrieli Group Ltd. (TASE: AZRG) subsidiary Granite Hacarmel Investments Ltd. (TASE: GRNT), of actively trying to block Mekorot's planned desalination plant at Ashdod, in order to pressure the government to increase purchases of water from their desalination plants. In a statement of defense to a petition filed by BGS, in which Shikun u'Binui and GES are partners, against the results of the tender to build the Ashdod plant.

Shikun u'Binui owns 50% of H2ID Ltd., which operates the Hadera desalination plant, and GES owns 72.1% of Via Maris Ltd., which operates the Palmachim desalination plant.

Mekorot Initiation and Development Ltd. claims that Shikun u'Binui and GES have the same objective in the petition: to delay the construction of its Ashdod desalination plant as much as possible, which would force the government to buy more water from the Hadera and Palmachim desalination plants until the Ashdod plant was built. "In this way, respondents no. 1 and 2 (Shikun u'Binui and GES - A.B.) would reap additional immense profits of tens of millions of shekels."

Shikun u'Binui and GES, along with Baran Group (TASE: BRAN; Pink Sheets:BRANF), and Shafir Civil and Marine Engineering Ltd. are partners in BGS, which, in November 2009, lost the Mekorot tender to build the 100-million cubic meter Ashdod desalination plant to the IVM consortium, comprising of Minrav Holdings Ltd. (TASE: MNRV) unit Minrav Engineering Ltd., and Spain's SADYT.

IVM's bid of NIS 1.6 billion was NIS 200 million less than the bid by BGS. However, construction of the Ashdod desalination plant has since been frozen because Mekorot will not meet the price of desalinated water demanded by the inter-ministerial tenders committee, headed by deputy accountant general Gil Shabtai. The committee is demanding that Mekorot sell the desalinated water at NIS 2.36 per cubit meter, while Mekorot, which based the tender at a price of NIS 2.86 per cubic meter, refuses to go below NIS 2.49.

Mekorot says that if IVM cannot meet this price, than neither can BGS, whose bid to build the plant was even higher.

In January 2010, BGS appealed IVM's win in the tender, on the grounds that it failed to meet the tender's threshold conditions. The Ministry of Finance is quietly supporting BGS's claim, although the ministry is not a party in the petition. The court recently ordered Mekorot's tenders committee to review the winner in the tender, and the company again chose IVM. BGS then filed a new appeal with the court.

Published by Globes [online], Israel business news - www.globes-online.com - on January 23, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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