Israel Electric Corporation (IEC) (TASE: ELEC.B22) and Électricité de France SA (Euronext: EDF) will jointly build a power station at Ashkelon at an investment of at least $3 billion, according to a memorandum of understanding signed on Wednesday by the companies' heads.
Under the principles agreed, IEC and EDF will establish a joint venture, in which EDF will own 51%. The power station will have a 1,500-megawatt capacity and will be able to operate on both natural gas and coal. In the coming weeks, it will be decided which technology the power station will use and a study of the economic viability and a review of the project's financing options will be carried out. This will be the largest project of its kind in Israel in recent years.
In addition to the financial studies, construction of the project is subject to obtaining permission from the various government agencies, which, among other things, may demand a tender. However, EDF's attorney, Adv. Moshe Shachal, believes that the strategic partnership between IEC and EDF does not require the publishing of a tender. He holds that it will be possible to establish a joint venture, which will initiate construction of the power station and that the contractors will be chosen by tender.
Another possible problem could arise from the Ministry of Finance's demand that the power station should operate economically; in other words, using whichever fuel is cheaper - natural gas or coal - in contrast to demands by environmental groups that the power station should only use polluting coal as fuel in an emergency.
Contacts between IEC and EDF began two years ago, and picked up speed in the past few days, after Minister National Infrastructures Silvan Shalom gave the talks his blessing. Under the agreement between the parties, IEC and EDF will also cooperate in building a smaller power station at Alon Tavor and a smart grid in Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2013
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