Israeli fuel company Paz Oil Company Ltd. (TASE:PZOL), led by CEO Yona Fogel, today published a strategic plan in which the company will split off its real estate activity from its fuel and retail activity. The measure is designed to add hundreds of millions of shekels to the company's value.
Paz's board of directors approved the measure as part of an overall strategic plan under consideration for the company, with advice from international company Boston Consulting Group. The split-off is scheduled for this year, and will not be included in the company's 2018 reports. It will be carried out after external appraisers estimate the value of the company's real estate, including both real estate for investment and real estate for the company's own use.
In the first stage, the company plans to split off real estate space in the 101 filling fueling sites that it owns into a separate company. These spaces do not include existing real estate rights in the land on which the stations are located, in which the company is acting to upgrade and exercise rights amounting to over NIS 100 million. Paz believes that a revised appraisal of the properties will increase its value and shareholders' equity by NIS 300-400 million (net of tax), but will not affect the company's net profit.
Paz's board of directors also decided to enter the electricity production sector in simultaneous instruments: a plan for building a third power station with a capacity of 700 megawatts on the site of the oil refinery in Ashdod at a cost of $700 million and participation in various auctions for buying power stations from Israel Electric Corporation (IEC) (TASE: ELEC.B22).
Paz probably plans to build the power station using $140 million (NIS 520 million) in equity, while financing the rest with a debt issue. The power station will use natural gas, based on combined cycle technology with cogeneration turbines. Paz says that the power station will begin operating in 2023.
The board of directors stated, "The board of directors made two important decisions for implementing an overall strategic plan devised by the company's management and adopted by the board. These decisions will enable Paz to cope with the changes in the business environment and enhance its value, while using the company's capital effectively."
Fogel said, "The plan enables the company to create an arm for new activity that will diversify and increase its revenue, while reducing exposure to fluctuations in its existing power production activity. Continuing implementation of the strategic plan will create new growth engines based on the company's good assets and proven capabilities."
Published by Globes, Israel business news - en.globes.co.il - on February 6, 2019
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