IEC wants price hike to buy gas turbines

The Israel Electric Corp. wants electricity users to foot the NIS 100 million bill for five gas turbines to cover shortfalls.

Israel Electric Corporation (IEC) (TASE: ELEC.B22) is taking advantage of the atmosphere of panic over potential power outages in the summer to promote and fast track a tender for the purchase of five turbines for NIS 100 million.

On May 3, IEC published a tender to buy five used mobile gas turbines to supply 25 megawatt each. Tender bidders were given just 14 days to submit offers to supply the turbines that met the long list of requirements attached to the tender documents. An examination found that even with fast track processing there is little chance that the turbines, if shipped, would arrive in time to be linked up to the grid by the summer. In addition to the long shipping time, linking up to the grid requires adaptation and connecting, which would also take a great deal of time.

The budget for buying the turbines has yet to be approved by the Ministry of Finance but the IEC has requested that the purchase be fully financed by electricity consumers by a one- time 0.5% hike in electricity rates. This was contained in a presentation given to the cabinet yesterday by Minister of Energy and Water Resources Uzi Landau.

At the cabinet meeting Deputy Prime Minister Dan Meridor asked IEC chairman Yiftah Ron-Tal why the public had to pay for buying turbines for local shortages that can be overcome by leasing turbines at much lower cost. Ron-Tal responded that IEC wanted to keep the turbines for future use for urgent supply of electricity in emergencies.

Ron-Tal's reply reveals an internal paradox at IEC. If purchasing the turbines is meant to solve an urgent local problem, it would be quicker to lease turbine through an RFI rather than a tender. If the turbines are needed for long term use, then there is no justification for a fast track tender with a timetable that harms the ability of potential suppliers to ready themselves appropriately for the tender and submit their best bids.

Published by Globes [online], Israel business news - - on May 14, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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