Israel Corp. mulls selling Mishor Rotem power station

OPC Rotem owns Israel's largest independent power plant, which came on line in July, after a $500 million investment.

A string of business failures at Israel Corporation (TASE: ILCO), topped by a debt settlement at Zim Integrated Shipping Services Ltd. and the crisis at Oil Refineries Ltd. (TASE:ORL) is forcing Idan Ofer to sell assets to boost the company's cash reserves. Israel Corp. today announced that it was considering the sale of its 80% stake in OPC Rotem Ltd., which owns the independent power station at Mishor Rotem.

Israel Corp. owns the OPC stake through IC Power Ltd. Veolia Environnement SA (Euronext: VE) unit Delkia Israel Ltd. owns the rest of the company.

Israel Corp. is reportedly in preliminary talks with Israeli financial institutions about a sale of OPC. It declined to disclose its asking price for the holding. Israel Corp. had been talks to sell 25% of IC Power to Noy Infrastructure and Energy Investment Fund, which would have given it an indirect 20% stake in OPC, for NIS 250 million, but in April, the company announced that no deal had been reached. Noy apparently had reservations about OPC over regulatory uncertainty the power station.

Now that the Mishor Rotem power station is up and running, the risk has declined, and the value of OPC has presumably risen accordingly. The power station carries a NIS 1.5 billion loan, taken to build it.

Mishor Rotem is Israel's largest independent power station - a natural gas-driven 440-megawatt station, which was hooked up to the national grid in July. It cost $500 million to build, 80% of which was financed by a syndicate led by Bank Leumi (TASE: LUMI). The financial closing was in early 2011, a few months after work on the power station began. For this reason, Israel Corp. initially financed the project from equity, and only later used the loan.

Mishor Rotem is a profitable and tangible asset. The power station has long-term power purchasing agreements (PPA) with several customers, including Azrieli Group Ltd. (TASE: AZRG). In early October Gadot Biochemical Industries Ltd. signed a 10-year NIS 200 million PPA with OPC.

Published by Globes [online], Israel business news - www.globes-online.com - on October 17, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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