"Israel Chemicals sought to avoid a protracted legal battle, which would have created uncertainty for the company for a long time," said Israel Chemicals Ltd. (TASE: ICL) president and CEO Akiva Mozes, explaining why the company agreed to the Ministry of Finance's terms for the salt harvesting at the Dead Sea and higher royalties on potash sales. Yesterday, the company agreed to cover 90% of the NIS 3.8 billion salt harvesting project and to a doubling of royalties on potash sales to 10%.
Mozes said that refusing the terms of the settlement would have delayed implementing the solution to the problem of the water level in the Dead Sea's southern basin, jeopardized Israel Chemicals and Israel's chemicals industry as well as tourism and the environment at the Dead Sea, and threatened the livelihoods of tens of thousands of workers.
In a statement, Israel Chemicals said that its consent to the agreement was based on its wish to achieve certainty for manufacturing operations, tourism, and government at the Dead for many years. "Financing the cost of the salt harvesting and the doubling of the royalties that will be paid to the state, in addition to exempting Israel Chemicals from the Law for the Encouragement of Capital Investments, would result in ICL Fertilizers paying the highest receipts to the state in the global fertilizer industry, which would exceed 60%," said the company.
Israel Chemicals implied that it considered the Ministry of Finance's demands extreme and unjustified. "The government's share in the financing of the salt harvesting totals $30 million, which the government received in 1992 as a one-time dividend as Israel Chemicals' share of the permanent solution for the water level of the Dead Sea. The current value of this dividend means that Israel Chemicals' share of the solution's cost is almost 100%," it added.
Mozes added, "Despite the Ministry of Finance's high and unjustified demands, clouds of uncertainty are scattering at this time, which enables Israel Chemicals to plan its operations and investments for the coming years. The agreement and its implementation will ensure continued cooperation between the industry, tourism, and the government at the Dead Sea for many years, while preserving the area's unique environment."
Israel Corporation (TASE: ILCO) chairman Amir Elstein said that there were no winners or losers in the agreement. "With great effort, we've made an important opportunity to create a common, proper, and balanced future of value for the parties operating in the southern basin of the Dead Sea."
Israel Chemicals' share price fell 0.9% in early trading today to NIS 40.50, giving a market cap of NIS 51.9 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on December 29, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011